“patients who were ambulatory and whose condition would not otherwise qualify for
reimbursement by Medicare.” (First Am. Cmplt § 16), Bantsolas identified two of those
“standing order patients” by first name and surname initial. (Although the cumulative
implication of his allegations is that Superior submitted false claims to Medicare for the transport
of those two patients, as well as the other “ambulatory” patients whom he transporled, Bantsolas
never explicitly makes that allegation.)°

‘The first amended complaint does not contain any details regarding the transactions
forming or serving the alleged scheme. Bantsolas does not identify any specific instances of the
fraudulent billing. Moreover, he makes no allegations regarding the dates of the non-medically
necessary transports at issuc, the dates of the submissions of the corresponding false claims, any
false statements made in connection with the submission of the false claims, the other contents of
the false claims, efe. Further, Bantsolas has not provided any documents evidencing or relating
to the alleged scheme,

Based on the above facts, Bantsolas alleges that defendants made false claims for
payment to the federal government (Count I) and made false statements to the federal
government to get their false claims approved and paid by the federal government (Count II), in
violation of the FCA. Bantsolas further alleges that defendants are liable to the State of Ilinois

under the Whistleblower Act for the false claims for payment that they submitted on behalf of

* Bantsolas’ allegations regarding Hill’s involvement in the scheme are similarly vague. He
contends that Hill concealed “material facts” from the government in connection with Superior’s seeking
and receipt of Medicare reimbursement and “promoted or allowed an atmosphere to exist at Superior
wherein ‘standing order’ patients were improperly transported.” (First Am. Cmplt ¥ 17).

-4-


action.

Defendants’ federal constitutional arguments do not persuade this court. Indeed, other
courts within this circuit have already squarely rejected the precise arguments advanced by
defendants in this case. See, ¢.g., United States ex rel. Sharp y, Consolidated Medical Transport,
No. 96 € 6502, 200] U.S. Dist, LEXIS 13923, at *33 (N.D. TIL Aug. 31, 2001) (noting “great
weight of authority” against constitutional challenges to gui tam suits and declining to dismiss
qui tam suit on grounds of alleged constitutional impediments thercto); United States ex rel.
Chandler v. Hektoen Institute, 35 F. Supp.2d 1078, 1081-82 (N.D, TUL, 1999) (holding that gui
tain provisions of FCA do not violate the Take Care Clause or the Appointments Clause); United
States ex rel. Robinson vy, Northrap Corp., 824 ', Supp. 830, 833-38 (N.D. IL. 1993) (denying
motion to dismiss and holding that gui tam provisions of FCA do not violate Articles TT or IH, or
the separation of powers principle, of the U.S. Constitution). Defendants’ arguments have also
been rejected by courts of appeals that have had the occasion to consider them. See, e.g, Riley v.
St. Luke's Episcopal Hosp., 252 ¥ 3d. 749 (5' Cir, 2001) (holding that gui tam suits brought
under the FCA do not violate the Appointments Clause or the Take Care Clause of Article II of
the U.S. Constitution), United States ex rel. Taxpayers Against Fraud v. General Electric, 4\
F.3d 1032, 1041 (6" Cir. 1994) (same). See alse Vermont A gency of Natural Resources v. United
States ex rel, Stevens, 529 U.S. 765, 778 n.8, 120 S. CL. 1838 (2000) (“express[ing] no view on
the question whether qui ¢am suits violate Article IT, in particular the Appointments Clause of § 2
and the “Take Care” Clause of § 3"), Defendants did not cite a single case in this circuit or any
other embracing the specific result they urge. The court denies defendants’ motion to dismiss (o

the extent that it is premised on the alleged unconsitutionality of the qui tam provisions of the

9.


referrals and false certification of Medicare claims’ compliance with federal law, granting motion
to dismiss for failure to plead “representative examples” listing the identity of the underlying
claims, patients, and probative documents forming basis for claims); Obert-Llong, 2001 U.S.
Dist. LEXIS 3767, at *5-8 (in FCA action alleging illegal kickbacks for referrals, granting
motion to dismiss for failure to plead specific instances of fraud and details thereof, such as the
identities of participants, specific dates of fraudulent claims or actions, or specific documents;
complaint instead contained only “conclusory allegations” and “general methodology of a
scheme”); see also Garst, 2002 U.S. Dist. LEXIS 14307, at *6-10 (in FCA action alleging filing
of false claims for payment on contract for government agency, granting motion to dismiss for
failure to plead specific false claims for payment or false statements made to obtain payment,
connection of specific statements to specific false claims, identity of who made statements, to
whom and when statements were made; and brief explanation of why those claims or statements
were false). Cf, Uniroyal Goodrich Tire Co. vy. Mutual Trading Corp., 749 F. Supp. 869, 872
(ND. Ill. 1990) (denying motion to dismiss fraud claims in civi] Racketeer Influenced and
Corrupt Organizations Act case; complaint “need only set forth a bricf sketch of how the
fraudulent scheme operated, when and where it occurred, and the participants”) (internal
quotations and citation omitted).

Here, Bantsolas has described defendants’ alleged scheme in only very general, vague
terms. [e has not pointed to any specific instances of the alleged fraud, Iet alone provided any
details thereof. Although Bantsolas has partially named two individuals for whom there was a
“standing order” for transport, he has not even alleged that their transports were not “medically

necessary” and/or that defendants submitted claims to Medicare therefor. Bantsolas has not cited

6.


Medicaid’ patients (Count IIL).
ll. Analysis

A The First Amended Complaint Must Be Dismissed for Failure to Comply
with Fed. R. Civ. P. Rule 9(b).

Ted. R. Civ. P. Rule 9(b) requires that, “in all averments of fraud . . . , the circumstances
constituting fraud . . . shall be stated with particularity.” “Particularity” means “the who, what,
when, where and how: the first paragraph of any newspaper story.” DiLeo v. Ernst & Young, 901
F.2d 624, 627 (7" Cir. 1990), The Rule’s three chief purposes are: “(1) protecting a defendant’s
reputation from harm; (2) minimizing ‘strike suits’ and ‘fishing expeditions’; and (3) providing
notice of the claim to the adverse party.” Jepson, Inc. v, Makita Corp., 34 F.3d 1321, 1327 (7"
Cir, 1994) (internal quotations and citation omitted).

Rule 9(b) applies to claims brought under the FCA. See generally Peterson, et al. v.
Community General Hosp. No. 01-CV-50356, 2003 U.S. Dist. LEXIS 1783 (N.D. LU. Feb. 7,
2003); United States ex rel. Garst v. Lockheed-Martin Corp., No, 98 C 5072, 2002 U.S. Dist.
LEXIS 14307 (N.D. TIL. Aug. 2, 2002), aff'd, United States ex rel. Garst v. Lockheed-Martin
Corp,, 328 F.3d 374 (7" Cir. 2003); United States ex rel. Obert-Hong v. Advocate Health Care,
No. 99 € 5806, 2001 U.S. Dist. LEXIS 3767 (N.D, Ill. Mar. 28, 2001); see also United States ex
rel. Clausen v. Laboratory Corp, of Am., Inc., 290 V.3d 1301, 1308-09 & n.16 (11" Cir. 2002)
(collecting cases), cert. den., 537 U.S. 1105, 123 8. Ct. 870 (2003). Accordingly, an FCA
claimant must allege the “who, what, when, where and how” of his claims, See, e.g., Peterson,

2003 U.S, Dist. LEXIS 1783, at *5 (in FCA action alleging financial remuneration for Medicare

* See footnote 2.


court will embrace the sound approach adopied by courts within this district and beyond that
requires the pleading of “representative examples of the fraud which detail the specilies of who,
where and when.” Obert-Hong, 2001 U.S. Dist. LEXIS 3767, at *7 (quoting United States ex
rel. Minnesota Ass'n of Nurse Anesthetists v, Allina Health Syst. Corp., No. 4-96-734, 1997 0.8.
Dist, LEXIS 21402, at *33 (D. Minn. Mar. 3, 1997)). See also Peterson, 2003 U.S. Dist. LEXIS
1783, at *6 (requiring pleading of “representative examples”).

Because of Bantsolas’ failure to comport with the pleading requirements of Rule 9(b),
Counts I and II are dismissed without prejudice. Moreover, although defendants have not
explicitly argued that Rule 9(b) applies to Bantsolas’ claim under the Whistleblower Act (Count
IL), the viability of that claim is clearly dependent upon the sustainability of the FCA claims sct
forth in Counts [ and JI. (Aside from alleging that the scheme upon which Counts I and II are
premised also affected Illinois, Bantsolas did not allege any additional facts in support of the
claim asserted in Count Ll.) Thus, Count {Il is dismissed without prejudice, as well.

The court grants Bantsolas 30 days from the date of this order to file a second amended
complaint consistent with this opinion.

B. The Alleged Unconstitutionality of the Qui Tam Provisions of the FCA and

the Whistleblower Act (Under the United States and Elinois Constitutions,
Respectively) Do Not Provide a Basis tor Dismissing the First Amended
Complaint.

Defendants allege that the qui fam provisions of the FAC violate the Appointments
Clause and the Take Care Clause of Article II, Sections 2 and 3 (respectively), of the Uniled
States Constitution, They also allege that the qui tam provisions of the Whistleblower Act

violate the Illinois Constitution. On these grounds, defendants seek the dismissal of Bantsolas”

~8-



Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge David IL Coar Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 01 C 6168 DATE 3/18/2004
CASE .
TITLE Bantsolas v. Superior Air and Ground Ambulance ‘Transport, Inc., et al.

{In the following box (a) indicate the parly filiny the motion, ¢.g,, plaintiff, defendant, 3rd purty plaintiff, and (b) state briefly the nature

of the motion being presented,}
MOTION: .

Delendants’ Motion to Dismiss

DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) oO Brief in support of motion due

(3) o Answer bricl to motion due » Reply to answer brief duc _

(4) QO Ruling/Iearing on set for _ at

6 a Status hearing|held/continued to] [set for/re-set for] on set for at

(6) o Pretrial conferencefheld/continued to] [set for/re-set for] on setfor at

(7) i) ‘Trial[sct for/reesct for] on at

(8) o [Bench/Jury trial] [Hearing] held/continued to at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) = Olocal Rule41.t OFRCP41(a\(1) OO FROP4I(a)(2).

a) a _| [Other docket entry] For the reasons set forth in the attached Memorandum Opinion and Order,
defendants’ motion to dismiss the complaint (Doc. # 22) is granted in part and denied in part. ‘Ihe first
amended complaint is dismissed in its entirety, without prejudice, for its failure to comply with Rule 9(b).
The court grants Bantsolas 30 days from the date of this order to file a second amended complaint
consistent with this opinion. Defendants’ motion to dismiss Is vise denied.

}

(1) {For further detail see order attached to the original minute order.]

No notices required, advised in open court. > Documeiit

: . ‘Number’
No notices required, : iain

umber of notioes

Notices mailed by judge's staff,

Notified counsel by telephone, MAR, 2,2, 2004

w | Docketing to mail notices, . 5 (
Mail AQ 450 form. (

Hoel Kepuy initials

Copy to judge/magistrate judge.

ate mailed voice
cqurtrogm,

aeddle deputy’s
initiats

Date/time received in

central Clerk's Office, ‘sailings deputy initials



false claim and State funds or property to state claim under Whistleblower Act), Defendants

contend that Count IIT is deficient because it does not allege that defendants took any steps to
defraud Illinois or that state funds were imperiled (ie., that there is an absence of the required
nexus between a request or demand for payment and state funds).

The court finds that Bantsolas’ allegations, while inartfully pled, are sufficient to state a
claim under the Whistleblower Act. In Klaczak and Sharp ex rel. United States and Hlinois v.
Consolidated Medical Transport, No. 96 C 6502, 2002 U.S. Dist. LEXIS 16824, *14-15 (ND.
Ill, Sept. 9, 2002), the district court found the required nexus in the allegation that, “[b]y reason
of the false claims presented or caused to be presented by Defendant CoMed the State of Llinois
has incurred damages to be proven at trial.” ‘Lhe court noted that, with that allegation, it was
“alleged, or at least implied, that false claims were submitted to the State of Ilinois which caused
the State to be damaged.” Kiaczak, 2002 U.S, Dist. LEXIS 16824, at *14-15, In the present
case, Bantsolas alleges: “|b]y reason of the false claims presented or caused to be presented by
Defendants, the State of Iinois has incurred damages to be proven at trial.” (First Am. Cmplt §
31). Bantsolas thus echoes nearly verbatim the allegation that, alone, rendered the relator’s claim
sufficient to withstand a motion to dismiss in Klaczak.

Bantsolas also alleges: “The claims presented by Superior to Medicaid for services
provided on behalf of Medicaid recipients for whom ambulance transport was not a medical
necessity are false and iraudulent. Under the law, Defendants, and cach of them, are liable to the
State of Minois for the false claims presented.” (First Am Cmplt { 32). As background lor his
claim, he has further alleged that Mlinois operates a Medicaid program and that the federal

government reimburses Ilinois for some of its Medicaid expenditures. Finally, he has alleged

-11-


FCA.

Defendants’ contentions regarding the purported conflict between the Whistleblower Act
and the Ilinois Constitution are supported by citation only to a single inapposite case. The court
also denies defendant's motion to dismiss to the extent that it is premised on the alleged
unconstitutionality of the qui sam provisions of the Whistlcblower Act.

C. The Alleged Absence of a Nexus Between Defendants’ Fraudulent Acts and

Illinois State Funds Does Not Provide a Basis for Dismissing Count Il of the
First Amended Complaint.

Noting that the Whistleblower Act creates liability for a number of acts. all of which
require the making of a false representation or claim to the State of Mlinois, defendants contend
that Count II] of the amended complaint fails (o state a claim for relief. See 740 ILCS 175/3(a).
Under Hed, R. Civ. P, 8(a), a complaint need only sct forth a short and plain statement of
the claim showing that the pleader is entitled to relict. Leatherman v. Tarrant County Narcotics
Unit, 507 U.S. 163, 168, 113 8. Ct. 1160 (1993), In reviewing a motion to dismiss for failure to
state a claim, the court accepts as true all well-pleaded facts in the complaint and draws all
reasonable inferences in favor of the plaintiff. See Ameritech Corp, v. McCann, 297 P.3d 582,
385 (7" Cir. 2002). A complaint should be dismissed only if there is no set of facts in support of
the claim that would entitle the plaintiff to relief. See Ledford v, Sullivan, 105 F.3d 354, 356 (TM"
Cir. 1997).

In pertinent part, the Whistleblower Act has been construed to cover false claims that bear
some nexus with the State’s funds or property (regardless of whether the claims are submitted to
the State and/or directly or wholly paid by the State), See Peaple ex rel, Levenstein v, Salafsky,

338 ILL. App. 3d 936, 943, 789 N.E.2d 844, 850 (2d Dist. 2003) (requiring a “nexus” between

-10-


any specific false claims, let alone alleged why or how certain claims were false (¢.g,, what the

beneficiary’s medical condition was, why transport in his/her case was nol medically necessary,
ete.). Likewise, he has not identified any false statements made in support of those false claims.
Moreover, Bantsolas has not made any allegations concerning where or when such transports and
resulting falsc claims were made (beyond alleging that the scheme was underway during his
slightly less than two years of employment with Superior), Finally, Bantsolas has not cited or
provided any documents probative of the alleged scheme or any part thereof, As such, he has
failed to satisfy the heightened pleading requirements of Rule %(b). See supra Peterson, 2003
U.S. Dist. LEXIS 1783, at *5; Obert-Llong, 2001 U.S. Dist. LEXIS 3767, al *5-8; Crarst, 2002
U.S. Dist. LEXIS 14307, at *6-10.

As Bantsolas correctly notes, Rule 9(b)’s particularity requirement may be relaxed “when
the details are within the defendant’s exclusive knowledge.” Jepson, 34 F.3d at 1328. Tlowever,
that exception is inapplicable here. The crux of Bantsolas’ claims is that defendants submitted
false claims to the federal government. By the terms of Bantsolas* own claims, then, the details
of the false claims are nor solely within defendants’ knowledge, and relaxation of Rule 9(b)'s
standards would be unwarranted. /d; see also Peterson, 2003 US, Dist. LEXIS 1783, at *6
(declining to relax Rule 9(b)’s particularity requirement where “the claims at issue were
submitted to the government” and thus were not within the defendants’ sole possession).

In light of the nature and scope of the scheme alleged by Bantsolas (7.¢., a long-running
scheme involving the routine filing of fraudulent claims for payment with Medicare over the
course of at least approximately two years). this court would not require Bantsolas to identify

and/or detail each and every fraudulent transaction undertaken as part of the scheme. Rather, the

-7-



of the pick-up and destination, the bencficiary’s physical condition, any medical services
performed while the beneficiary was in the ambulance, and the reason that an ambulance
transport was needed.

Bantsolas alleges, albeit obliquely, that the transports of most beneficiaries are paid
under Medicare, but that the transports of hospitalized bencficiaries are paid under Medicaid.
Relatedly, he also alleges that Illinois has established a Medicaid program pursuant to which it
pays the medical costs of indigent citizens who have qualified to receive benefits under
Medicaid, He contends that fifty percent of the funds expended by Illinois in that regard are
reimbursed by (he federal government.’

B. Bantsolas’ allegations of wrongdoing on the part of Superior and Hill

Bantsolas alleges in his amended complaint that defendants violated the FCA by
submitting claims to Medicare, through its appointed private insurance carriers, that falsely
represented that certain transports were “medically necessary.” Bantsolas contends that Hill
directed this fraudulent scheme.

As outlined by Bantsolas, Superior’s scheme involved the routine transport of “standing
order” patients for whom ambulance transport was not medically necessary and the concomitant
submission of false claims to Medicare for those transports (i.¢., claims that falsely alleged
medical necessity). Bantsolas contends that defendants’ fraudulent conduct in this regard
oceurred throughout the time of his cmployment with Superior, from October 1999 through June

2001. During that time, he alleges that he personally and routinely transported by ambulance

? Bantsolas’ allegations in this regard are confusing, and the purpose and/or meaning (if any) of

his alternating references to “Medicare” v. “Medicaid” is unclear.



I. Background!

A The parties

Relator Bantsolas is employed as a certified emergency medical technician. Defendant
Superior is a medical transport company that utilizes ambulances, medicars, and service cars and
operates in the State of Illinois. Defendant Hill is an owner and operator of Superior. Bantsolas
worked for Superior from approximately Oclober 1999 through Junc 2001.

The federal government administers Medicare through the Center for Medicare and
Medicaid Services (“Center”). Within JIlinois, the Center administers Medicare bencfits through
a privale insurance carrier. Superior is a qualified Medicare “provider,” meaning that it is
authorized to participate in Medicare.

Medicare pays for standard medical and health care services and procedures only in the
event that they are “medically necessary” (as defined by Medicare). In the context of medical
transports, this standard means that Medicare pays only when other means of transportation
would endanger the beneficiary’s health. In the absence of such medical necessity, medical
transport service is not covered by Medicare,

As a Medicare provider, Superior submits claims for payment to the private insurance

carrier that administers Medicare in Illinois. ‘The claims must include certain information,
including the type of services provided, the date and price of such services, and a certification
that such services were “medically necessary.” Moreover, ambulance service providers like

Superior are requited to maintain wri(ten records documenting cach transport of a Medicare

beneficiary. ‘The forms, which are to be completed at the time of transport, include the location

"The following facts are taken from Bantsolas’ first amended complaint.

.2-



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TLLINOIS
EASTERN DIVISION

NATHAN BANTSOLAS, INDIVIDUALLY
AND EX REL. UNITED STATES OF
AMERICA, and THE STATE OF
ILLINOIS,

MAR ?

)
)
)
)
)
Relator, )
) No. 01 C 6168
vy. )
) HONORABLE DAVID ff, COAR
SUPERIOR AIR AND GROUND )
AMBULANCE TRANSPORT, INC, AND )
DAVID HILL, )
)
Defendants. )
MEMORANDUM OPINION AND ORDER

Relator Nicholas Bantsolas filed a three-count amended complaint against defendants
Superior Air and Ground Ambulance Transport, Inc, and David Hill, alleging violations of the
False Claims Act (“FCA”), 31 U.S.C. § 3729, ef seg. (Counts I and [1) and the State of Ilinois
Whistleblower Reward and Protection Act (“Whistleblower Act”), 740 ILCS 175/3 (Count Ill).
Defendants’ motion to dismiss is now before this court.

For the reasons set forth below, the motion is granted in part and denied in part.
Specifically, Counts I, Tl, and TI of the complaint are dismissed without prejudice or their failure
to comply with the heightened pleading requirements for fraud under Fed. R. Civ. P. Rule 9(b).
The court otherwise denies defendants’ motion to dismiss (7.¢., to the extent that it is premised on

the alleged unconstitutionality of the gui tam provisions of the FCA and the Whistleblower Act

and the alleged lack of'a nexus between defendants’ fraudulent acts and Illinois state funds).



that the federal government provides reimbursement for medically necessary transports of
Medicare beneficiaries who are admitted to hospitals through Medicaid.

The foregoing allegations, however inartfully pled and whatever their merits, are
sufficient to state a claim for relicf under the Whistleblower Act. Bantsolas has alleged a nexus
between defendants’ false claims and Illinois state funds.”

Ill, Conclusion

In sum, defendants’ motion to dismiss is granted in part and denied in part. The first
amended complaint is dismissed in its entirety without prejudice for its failure to comply with
Rule 9(b). The court grants Bantsolas 30 days from the date of this order to file a second
amended complaint consistent with this opinion, Defendants’ motion to dismiss is otherwise

denied.

Enter:

David H. Coar
United States District Judge

Dated: March 18, 2004

> Reading Bantsolas’ complaint (o allege a nexus between defendants’ scheme and Illinois funds
is also supported by one of the most basic and fundamental features of Medicare’s statutory and
regulatory scheme: Medicaid and Medicare are funded by both federal and state dollars, See 42
1396, et seg.; Wisconsin Dep't of Health and Family Servs, v. Blumer, 534 U.S. 473, 479, 122 S, Ct. 962

(2002)).

.§

~12-