2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-6-2014

Thomas Foglia v. Renal Ventures Management

Precedential or Non-Precedential: Precedential

Docket No. 12-4050

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Recommended Citation

"Thomas Foglia v. Renal Ventures Management" (2014). 2014 Decisions. Paper 543.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________

No. 12-4050

_________

THOMAS FOGLIA,

In the Name of the United States Government pursuant to the 

False Claims Act, 31 U.S.C. Section 3730; the State of New 

Jersey False Claims Act, Title 2A of the New Jersey Statutes 

and Amending 3 P.L. 1968, C. 413; The State of Texas 

pursuant to TEX.HUM.RES.CODE Sect. 36.001-26.117 and 

individually pursuant to the New Jersey Conscientious 

Employee Protection Act, N.J.S.A. 34:19-1 et Seq.,

 Appellant

v.

RENAL VENTURES MANAGEMENT, LLC

________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 1-09-cv-01552

District Judge: Honorable Noel L. Hillman

_______

Argued: September 11, 2013

Before: MCKEE, CHIEF JUDGE, SMITH, and SLOVITER, Circuit Judges

(Opinion Filed: June 6, 2014)
2

Ross Begelman, Esquire (Argued)

Marc M. Orlow, Esquire

Begelman, Orlow & Melletz

411 Route 70 East

Suite 245

Cherry Hill, NJ 08034

Counsel for Appellant

R. James Kravitz, Esquire 

Barry J. Muller, Esquire (Argued)

Fox Rothchild

997 Lenox Drive

Princeton Pike Corporate Center, Building 3

Lawrenceville, NJ 08648

Counsel for Appellee
3

______________

O P I N I O N

_______________

SLOVITER, Circuit Judge.

Thomas Foglia appeals the District Court’s order

dismissing his qui tam claim brought under the False Claims 

Act, 31 U.S.C. § 3729 et. seq. Foglia’s complaint arises out 

of claims submitted or presented to Medicare by Defendant 

Renal Ventures (“Renal”) that Foglia alleges are fraudulent. 

The District Court dismissed on the ground that the complaint 

failed to state a claim.1

I.

 1 The District Court had jurisdiction over Relator Foglia’s 

federal claims pursuant to 28 U.S.C. § 1331, and over 

Relator’s related state law claim under 28 U.S.C. § 1367. We 

have jurisdiction pursuant to 28 U.S.C. § 1291. We review de 

novo a district court’s grant of a motion to dismiss for failure 

to state a claim under Federal Rule of Civil Procedure 

12(b)(6). See Jordan v. Fox, Rothschild, O’Brien & Frankel, 

20 F.3d 1250, 1261 (3d Cir. 1994). We “are required to 

accept as true all allegations in the complaint and all 

reasonable inferences that can be drawn from them after 

construing them in the light most favorable to the nonmovant.” Id. (citations omitted).
4

Foglia is a registered nurse who was employed with 

Renal starting on March 13, 2007, and was terminated around 

November 7, 2008. (App. 34) Renal is a dialysis care 

services company. (App. 34) Foglia filed a qui tam 

complaint against Renal on behalf of himself as a relator and 

on behalf of the United States under the False Claims Act

(“FCA”) in April 2009. (App. 25) The United States chose 

not to intervene. (App. 25) Foglia filed an amended 

complaint, and the District Court granted Renal’s motion for 

judgment on the pleadings and gave Foglia twenty days to file 

a second amended complaint. (App. 67, 29) It was Foglia’s 

second amended complaint (“SAC”) that was before the 

District Court in the proceeding below. (App. 33) 

In the argument before us, counsel for Foglia described 

his claim as in two parts; one was certification and the other 

was retaliation.2 He claimed that Renal violated the FCA by

falsely certifying that it was in compliance with state 

regulations regarding quality of care, by falsely submitting 

claims for reimbursement for the drug Zemplar, and by

reusing single-use Zemplar vials. (App. 50-56) The District 

Court granted Renal’s Motion to Dismiss the FCA complaint 

under Federal Rule of Civil Procedure 12(b)(6) because it 

 2

 The retaliation claim was not considered by the District 

Court and is not relevant to this appeal. Foglia also sued 

under the New Jersey False Claims Act for the same 

violations and brought suit under the New Jersey 

Conscientious Employee Protection Act. (App. 56-58) 

Because Renal had not moved to dismiss Foglia’s state law 

claims, the District Court chose not to exercise supplemental 

jurisdiction over these claims and dismissed them without 

prejudice. We therefore need not consider them here. 
5

determined that Foglia had failed to state his claim with the 

heightened level of particularity required by Federal Rule of 

Civil Procedure 9(b) for fraud claims. (App. 12-13) In 

particular, the District Court focused on Foglia’s failure to 

provide a “representative sample” (App. 12) or to “identify 

representative examples of specific false claims made to the 

Government.” (App. 16) The District Court also determined 

that even if Foglia’s claim had met the requirement of Rule 

9(b), Foglia “provided no authority under an express or 

implied false certification theory that the claims submitted by 

defendant violated a rule or statute establishing compliance as 

a condition of payment.” (App. 16) The District Court 

dismissed the SAC with prejudice, stating that it did so in 

light of the fact that Foglia had twice amended his complaint 

and had engaged in initial discovery. (App. 22) Foglia here 

appeals the dismissal of his claim in relation to over-billing 

on Zemplar. 

II.

Before we are able to decide whether Foglia has met 

the higher pleading requirements set by Federal Rule of Civil 

Procedure 9(b), and so whether he has stated a claim under 

Federal Rule of Civil Procedure 12(b)(6), we must first 

determine what Rule 9(b) requires of an FCA claimant, an 

issue this court has not had occasion to rule on specifically. 

Rule 9(b) states, “[i]n alleging fraud or mistake, a party must 

state with particularity the circumstances constituting fraud or 

mistake. Malice, intent, knowledge, and other conditions of a 

person’s mind may be alleged generally.” Fed. R. Civ. P. 

9(b). However, the various Circuits disagree as to what a 

plaintiff, such as Foglia, must show at the pleading stage to 
6

satisfy the “particularity” requirement of Rule 9(b) in the 

context of a claim under the FCA.

The Fourth, Sixth, Eighth, and Eleventh Circuits have 

held that a plaintiff must show “representative samples” of 

the alleged fraudulent conduct, specifying the time, place, and 

content of the acts and the identity of the actors. See United 

States ex rel. Noah Nathan v. Takeda Pharm. N. Am., Inc., 

707 F.3d 451, 455-56 (4th Cir. 2013), cert. denied, 2014 WL 

1271321 (U.S. Mar. 31, 2014) (No. 12-1349); United States 

ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 510 

(6th Cir. 2007); United States ex rel. Joshi v. St. Luke's Hosp., 

Inc., 441 F.3d 552, 557 (8th Cir. 2006); United States ex rel. 

Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1308,

1312 (11th Cir. 2002). The First,3 Fifth, and Ninth Circuits, 

however, have taken a more nuanced reading of the 

heightened pleading requirements of Rule 9(b), holding that it 

is sufficient for a plaintiff to allege “particular details of a 

scheme to submit false claims paired with reliable indicia that 

lead to a strong inference that claims were actually 

submitted.” United States ex rel. Grubbs v. Kanneganti, 565 

F.3d 180, 190 (5th Cir. 2009); see also Ebeid ex rel. United 

States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010). 

In United States ex Rel. Wilkins v. United Health 

Group, Inc., 659 F.3d 295, 308 (3d Cir. 2011), we noted that 

 3

 The First Circuit previously held the more restrictive view. 

See United States ex rel. Karvelas v. Melrose-Wakefield 

Hosp., 360 F.3d 220, 226 (1st Cir. 2004), but has recently 

moved to a more relaxed approach much closer to that 

followed by the Fifth Circuit. See United States ex rel. 

Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st 

Cir. 2009).
7

we had never “held that a plaintiff must identify a specific 

claim for payment at the pleading stage of the case to state a 

claim for relief.” (Emphasis in the original, citation omitted). 

While that conclusion does not itself commit us to the more 

nuanced standards favored by the First, Fifth, and Ninth 

Circuits, it is hard to reconcile the text of the FCA, which 

does not require that the exact content of the false claims in 

question be shown, with the “representative samples” 

standard favored by the Fourth, Sixth, Eighth, and Eleventh 

Circuits. As the Fifth Circuit has stated, requiring this sort of 

detail at the pleading stage would be “one small step shy of 

requiring production of actual documentation with the 

complaint, a level of proof not demanded to win at trial and 

significantly more than any federal pleading rule 

contemplates.” Grubb, 565 F.3d at 190 (citations and 

footnote omitted). 

Furthermore, in a recent brief for the United States as 

amicus curiae, filed in relation to the petition for a writ of 

certiorari in United States ex rel. Noah Nathan, 707 F.3d 451,

a case presenting a factual situation similar to that presented 

here, the Solicitor General indicated that the United States 

also believes that the heightened or “rigid” pleading standard 

required by the Fourth, Sixth, Eighth, and Eleventh Circuits is 

“unsupported by Rule 9(b) and undermines the FCA’s 

effectiveness as a tool to combat fraud against the United 

States.” The Solicitor General’s brief further states that 

“pleading the details of a specific false claim presented to the 

government is not an indispensable requirement of a viable 

FCA complaint.” Brief for the United States as Amicus 

Curiae at 10-11, United States ex rel Noah Nathan v. Takeda 

Pharm. N. Am., Inc., 2014 WL 1271321 (U.S. Mar. 31, 2014) 

(No. 12-1249), denying cert. to 707 F.3d 451. The Solicitor 
8

General also noted that even the Circuits which purport to 

follow the “rigid understanding of Rule 9(b)” have “not 

consistently adhered” to it, id. at 13, providing a further 

ground for doubting whether the “rigid” understanding of 

Rule 9(b) could be the correct one. 4

 Insofar as the purpose of 

Rule 9(b) is to “provide[] defendants with fair notice of the 

plaintiffs’ claims,” id., the more “nuanced”5 approach 

followed by the First, Fifth, and Eleventh Circuits will

suffice. That standard is also compatible with our earlier 

ruling in Wilkins, and we will use that standard in this case. 

 

III.

We thus turn to the question of whether Foglia has met 

the requirements of Rule 9(b) as set out above. Although not 

presented as clearly as it might be, Foglia’s “overfill” claim is 

best understood as a “factually false” claim. “A claim is 

factually false when the claimant misrepresents what goods or 

services that it provided to the Government.” Wilkins, 659 

F.3d at 305. Foglia contends that Renal over-charged the 

government for Zemplar, a prescription drug used for the 

prevention and treatment of secondary hyperparathyroidism 

associated with chronic kidney disease. Zemplar comes in 

vials of three sizes, but Renal only uses 5 microgram (“mcg”) 

 4 For reasons unrelated to the proper pleading standard 

required by Rule 9(b) in a FCA case, the Solicitor General did 

not recommend granting certiorari in United States ex rel. 

Noah Nathan, even though the Solicitor General argued that 

the incorrect standard had been applied by the Fourth Circuit. 

Id. 5 The Solicitor General’s brief uses this construction, and we 

find it appropriate.
9

vials. The vials were originally designed to be single-use 

only, with any unused medicine (characterized, somewhat 

misleadingly, as “overfill” by Foglia6

) discarded. When

Zemplar vials are used in this single-use fashion, Medicare is 

charged for the full content of the vial, no matter how much 

of the content is actually used. Foglia contends that Renal 

charged Medicare as if Renal were using the 5 mcg vials in 

the recommended “single use” fashion, when in fact it 

harvested unused portions from vials and used this harvested 

amount on other patients. (App. 47-48)

Originally, the Department of Health and Human 

Services (“HSS”) required that Zemplar always be used in a 

single use fashion. However, in September of 2002 (several

years before the alleged false claim in this case), HSS issued 

a memorandum allowing for the multiple use of individual

Zemplar vials and other injectable medicines if six conditions 

were followed, so as to ensure the safe use of the medicine. 

(App. 60)

7

 Foglia contends that Renal “continued multiple 

 6

 Put most accurately, “overfill” is the “extra” amount of a 

medicine in a vial which is always included so as to ensure 

that a full dose of the labeled amount for the vial is possible, 

despite any incidental waste. For example, when, only 2 

mcgs of a 5 mcg vial are used, the remaining 3 mcgs are not 

strictly “overfill.” The name used here is not important, 

however. What matters is the claim that Renal was 

harvesting “extra” Zemplar from already-used vials to 

administer to patients. 

7

 Foglia, in his brief and in his SAC, styles these conditions 

as “express ‘conditions for receiving payment’.” (App. 46) 

Though we have not directly ruled on the issue, it is highly 

doubtful these conditions for safe use are properly 
10

use of single use vials of injectable medications such as 

Zemplar consistently without regard to complying with the 

conditions set forth by HHS.” (App. 47) Because we are at 

the complaint stage in the proceedings we must accept as true 

all allegations in the complaint, and therefore must accept the 

allegation that Renal did not, in fact, comply with the

required recommendations by HHS for the safe re-use of 

Zemplar vials. 

In order for Foglia to satisfy the standards of Rule 

9(b), as we have adopted them here, he must provide 

“particular details of a scheme to submit false claims paired 

with reliable indicia that lead to a strong inference that claims 

were actually submitted.” See Grubbs, 565 F.3d at 190. 

Describing a mere opportunity for fraud will not suffice. 

Sufficient facts to establish “a plausible ground for relief” 

must be alleged. Fowler v. UPMC Shadyside, 578 F.3d 203, 

211 (3d Cir. 2009) (internal citation omitted). While not 

presented as clearly as it might be, the essentials of Foglia’s 

factually false claim argument seem to be as follows. 

Inventory logs maintained by Renal show that, during the 

month of October 2008, Renal used from 29 to 35 vials of 

Zemplar per day. (App. 75-6) Because Renal orders Zemplar 

 

“conditions for receiving payment.” Cf. Mikes v. Straus, 274 

F.3d 687, 699 (2d Cir. 2001) (“the False Claims Act was not 

designed for use as a blunt instrument to enforce compliance 

with all medical regulations—but rather only those 

regulations that are a precondition of payment.”) However, 

while this would be relevant for a “legally false” claim 

argument, Foglia seems to have abandoned this argument, 

and the “conditions for receiving payment” aspect is not 

directly relevant for a “factually false” claim argument. 
11

in only 5 mcg vials (App. 48), it would have needed 50 vials 

of Zemplar each of the days in question for the number of 

patients actually seen each day, if the 5 mcg vials were used 

in the single use fashion. (App. 76) Foglia contends that

because renal was using only 29-35 vials of Zemplar per day, 

it must have been harvesting unused Zemplar from previously 

used vials. However, these allegations are not enough to 

establish a “strong inference” that false claims were 

submitted, as the use of harvested “extra” Zemplar is 

permitted if the HHS recommendations noted above are 

followed, and it is therefore possible that Renal was not overcharging. 

We are therefore faced with two possible scenarios. 

Either, as Foglia alleges, Renal was charging the government 

as if it were using vials of Zemplar in the single use fashion 

while actually harvesting and using “extra” Zemplar from the 

vials, or Renal was using the “extra” Zemplar from bottles 

and only charging the government for the actual volume of 

Zemplar used, despite not being in compliance with the 

regulations for using Zemplar in this fashion. While both 

scenarios are possible, it is unclear what would motivate the 

second, as it would expose Renal to possible sanctions for 

failure to comply with required procedures, and would not 

provide any financial incentive. 

This is a close case as to meeting the requirements of 

Rule 9(b). Accepting the factual assertions made by Foglia as 

true, we have patient logs that show that less Zemplar was 

used than would be required if it were used in the single use 

fashion. We know that Medicare will reimburse for the full 

vial of Zemplar, regardless of whether all of the Zemplar is 

used, and that this provides an opportunity for the sort of 
12

fraud alleged by Foglia. At this point we must assume that 

Foglia is correct in alleging that Renal did not follow the 

procedures that it should have followed if it was to harvest the 

“extra” Zemplar from the used vials. Although we recognize 

that this hypothesis could be challenged, it certainly suffices 

to give Renal notice of the charges against it, as is required by 

Rule 9(b). This conclusion is further supported by the fact 

that Renal, and only Renal, has access to the documents that 

could easily prove the claim one way or another—the full 

billing records from the time under consideration. Under 

these circumstances, Foglia has provided sufficient facts to 

meet the requirements under Rule 9(b), and has therefore also 

met the requirements to state a claim under 12(b)(6). 

IV.

For the foregoing reasons, we will reverse the 

dismissal of the factually false claim portion of Foglia’s SAC

and remand to the District Court for further appropriate 

proceedings in accordance with this opinion.