Opinion ID: 3047737
Heading Depth: 2
Heading Rank: 2

Heading: Count I: False Certification of Compliance

Text: In order to state a cause of action, a FCA relator must allege: (1) a false record or statement; (2) the defendant’s knowledge of the falsity; (3) that the defendant made, used, or caused to be made or used a false statement or record; (4) for the purpose to conceal, avoid, or decrease an obligation to pay money to 11 The FCA defines “knowingly” as when a person “(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information . . . .” 31 U.S.C. § 3729(b). 13 the government, and; (5) the materiality of the misrepresentation. See 31 U.S.C. § 3729(a)(7); see also Bourseau, 531 F.3d at 1164–70. Here, the remaining elements at issue are whether there was a Certification of Compliance, and if so, whether it was false and material. A. Existence and Submission of the Certification of Compliance The district court found Relators failed to allege a basis of knowledge of the contents of the Defendants’ Certification of Compliance. The Defendants argue this basis of knowledge must be personal knowledge of the actual certification or its submission and that only employees in the compliance department could obtain such knowledge. According to Defendants, without such knowledge, the allegation that a Certification of Compliance actually existed or was submitted is conclusory. We conclude the Complaint alleges with particularity the actual existence and submission of the Certification and thus, is not conclusory.12 In order to plead the submission of a false claim with particularity, a relator 12 We note that for a reverse false claim action, presentment of a false claim is not at issue and presentment of a false statement is not required by the statute and thus, does not need to be pled. See 31 U.S.C. § 3729(a)(7); c.f. Hopper, 588 F.3d at 1327 (holding the absence of a presentment clause in § 3729(a)(2) means relators do not have to plead the actual presentment of a false claim). When the false statement is alleged to be a Certification of Compliance, however, submission to the government may be one way to demonstrate how the Certification was material to the concealment of an obligation. Thus, we will consider whether the Certification was submitted to the government, not, as Defendants allege, because our precedent requires it, but because submission may be necessary to demonstrate materiality. See Neder v. United States, 527 US 1, 16 (1999) (defining materiality as having the “natural tendency to influence . . . the decisionmaking body to which it was addressed”) (citations omitted). 14 must identify the particular document and statement alleged to be false, who made or used it, when the statement was made, how the statement was false, and what the defendants obtained as a result. See Hopper, 588 F.3d at 1324 (citing Clausen, 290 F.3d at 1310). Here, the Complaint contains factual allegations relating directly to the submission of the Certification of Compliance. Relators state exactly which documents (the annual report of 2008), exactly which sentence and its substance (“PolyMedica is in compliance with all of the requirements of this CIA”), who was responsible (Compliance Officer Kim Ramey under the direction of Defendants Dolan and Perazella), when the Certification was submitted (2008 reporting period), how the statement misled the government (false assurance of compliance), and what the Defendants gained as a result ($69 million). This is not a case like Clausen and its progeny, in which the complaint failed to allege any factual specifics identifying the existence or submission of an actual claim. See e.g., Corsello, 428 F.3d at 1013–14 (holding complaint failed to satisfy Rule 9 when it failed to allege the who, what, when, where, and how of the fraudulent submissions); United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1358 (11th Cir. 2006) (holding complaint failed to allege with particularity the actual submission of a false claim); Clausen, 290 F.3d at 1312 (holding relator’s failure to allege if or when any actual improper claims were submitted was fatal to 15 complaint). Here, Relators pled specifics relating to the submission of a specific statement in a specific document, submitted by a specific person during a specific review, as required by a particular government contract. Because these allegations are well-pled, we may accept them as true and conclude that a Certification was actually submitted. Relators do not need to further support their well-pled factual allegations with some other “factual basis,” such as personal knowledge of the submission or employment in the compliance department. See Clausen, 290 F.3d at 1312–14 (noting corporate outsiders may have a harder time gathering the factual specifics necessary to plead a claim but noting the same pleading standard applies regardless of the relator’s status). Even if Relators did need to allege some level of personal knowledge or insider status, they have done so. In addition to Relator Matheny’s involvement in the April 2006 meeting in which Overpayments were identified, Relator Matheny alleges subsequent involvement in the discussions and operation of the datafix. For example, in a meeting on April 21, 2008, Compliance Officer Kim Ramey allegedly asked Relator Matheny what happened to all of the unbatched cash and Relator Matheny reported the datafix scheme. Relator Matheny also met with Assistance Vice President of Compliance Nancy Gregory on or about April 23, 2008 to discuss the use of the datafix and cash Overpayments. These allegations 16 demonstrate that Relator Matheny, despite not technically a member of the compliance department, was involved and personally aware of the process he now claims to be fraudulent. Personal involvement with the funds, direct conversations with Defendants regarding the Overpayments, and personal knowledge of the account procedures and CIA requirements further support Relators’ allegations. See United States ex rel. Walker v. R&F Properties of Lake Cnty. Inc., 433 F.3d 1349, 1360 (11th Cir. 2005) (noting that allegations of personal knowledge resulting from employment and conversations with billing employees can provide support to a FCA complaint). Thus, Relators established the existence and submission of a Certification of Compliance by Defendants. We now turn to whether this Certification was false. B. False Statement In order to establish that the Certification of Compliance was a false statement, Relators must allege with particularity how Defendants violated the CIA. The district court held and the Defendants argue that the Complaint failed to allege a factual basis to show that the funds identified in the Complaint were actually Overpayments.13 We conclude Relators have pled with particularity the 13 The district court found the failure to show the obligation was not repaid was fatal to the Complaint. In order to show the Certification of Compliance was false, Relators must allege that at the time of Certification the CIA had been violated, regardless of whether it was later (continued...) 17 existence of Overpayments that were not repaid according to the CIA instructions and thus, have established a violation of the CIA. In order to plead with particularity, Relators must allege the time, place, and substance of the Defendants’ violation of the CIA, specifically, the details of the what constituted the violation, when it occurred, and who engaged in it. See Hopper, 588 F.3d at 1324. Here, Relators allege that in April 2006 and again in March 2008, Defendants Perazella and Dolan identified $62 million in Overpayments resulting from insufficient documentation and $7 million in Overpayments resulting from duplicate billings or other errors. These Overpayments remained in the Defendants’ accounts for more than thirty days until Defendants eliminated the Overpayments from their records, or applied the Overpayments to fictitious patient accounts or unrelated patient accounts. Because the CIA required Defendants to remit all Overpayments within thirty days of identification, and the identified Overpayments remained in the Defendants’ accounts for two years, the Complaint alleges that the Defendants did not comply with the CIA requirements. 13 (...continued) repaid. Moreover, Relators allege the obligation was not merely to remit Overpayments, but to do so within thirty days of identification with the Overpayment Request Form. The failure to use that process within the thirty day deadline is itself a violation of the CIA, regardless of whether Overpayments were eventually repaid. Thus, whether the Defendants violated the CIA does not turn on repayment of the Overpayments. 18 Relators supply particularized facts to support these allegations. Relators allege the date of the meeting in which Overpayments were identified, specify the employees in attendance by name and title, and identify some of the accounts discussed in the meeting by account number and amount. Attached as exhibits to the Compliant are several spreadsheet identifying the accounts discussed at the April 2006 meeting by patient or account number, the Medicare or Medicaid claim invoice number or reimbursement check number, the line item number of the invoice, the carrier, fiscal intermediary or insurance company code, the amount of Overpayment, and how long the Overpayment remained in each patient account. Although the Complaint’s exhibits include details on only a portion of the accounts alleged to contain Overpayments, the inclusion of some records for some of the accounts is sufficient. Atkins, 470 F.3d at 1358–59 (noting that while dates, amounts, and account numbers can provide particularity, Rule 9(b) does not mandate all of that information for each alleged claim, only “some of the information for at least some of the claims”) (quoting Clausen, 290 F.3d at 1312 n.21). Relators further support their allegation of the existence of Overpayments with personal knowledge of the identification. Relator Matheny alleges he was present at the meeting when the accounts were identified by a Compliance Officer 19 as Overpayments. He also alleges that he discussed the existence of Overpayments with Compliance Officer Ramey and the appropriateness of the datafix scheme. Such conversations and direct knowledge relating to how the Defendants identified Overpayments further supports Relators allegations. See Clausen, 290 F.3d at 1306 (searching the complaint for allegations of billing practices or second-hand information about billing practices); see also Walker, 433 F.3d at 1360 (holding at least one personal discussion regarding defendants billing practices and being told how the defendants bill the government sufficient to support an allegation of a fraudulent claim). Here, Relator Matheny’s personal knowledge and discussions relating to how, when, and who identified the existence of Overpayments lends support to the allegation that Overpayments existed, were identified by the defendants, and can be found in the attached accounts. Thus, Relators’ allegations are particular because they establish exactly how the Defendants violated the CIA, including when the violations occurred, who directed and performed the violations, how and which accounts were affected, and what the Defendants gained as a result. Defendants argue these allegations fail to satisfy the particularity requirement because the Complaint does not show the funds identified in the Complaint were received from federal payors or that they were in excess of the 20 amount due and payable to Defendants. Contrary to Defendants’ first argument, the Complaint contains detailed allegations that the Overpayments were received from Medicare, Medicaid, or other federally funded healthcare programs. The Complaint specifies the Medicare or Medicaid invoice number or reimbursement check and the “carrier, fiscal intermediary and/or insurance company code” for accounts alleged to contain Overpayments. The exhibits also identify the Medicare or Medicaid claim invoice number for the claim originally submitted to the government or the government reimbursement check number. By providing the specific amount, invoice number, and carrier code, the Relators have alleged the existence of federal funds with particularity. Defendants’ second argument, relating to the definition of “due and payable,” is equally without merit. The Complaint alleges $62 million in Overpayments resulted from the lack of sufficient documentation to match the payments to specific patient accounts. As described above, Relators allege in detail, and with support of the CIA, how amounts not “due or payable” include payments for which Defendants cannot provide sufficient documentation to match the payment to a patient. Relators support their allegations with exhibits that identify the specific fictitious patient account numbers used to hold the unmatched payments. The exhibits also show accounts that have positive balances after all 21 debits, credits, and payments, which suggest the government paid Defendants more than Defendants requested to cover the cost of the particular patient. Although Defendants dispute the interpretation of the CIA to include payments that lack sufficient documentation, such an argument goes to the merits of the case and does not affect the sufficiency of the Complaint’s allegations at the pleading stage.14 Relators have therefore pled with particularity that Defendants identified Overpayments but failed to report or remit the funds as the CIA required. Because Relators have established a violation of the CIA, the Certification of Compliance submitted by Defendants constituted a false statement. We now turn to whether 14 Defendants argue Relators’ definition of Overpayments to include payments with insufficient documentation is based on CIA provisions taken out context. Specifically, Defendants argue the definition relied on by Relators applies only for purposes of the annual “Claims Review” and if such a definition applied to Overpayments in other situations, a definition for only this purpose would not be needed. We cannot and do not conclude whether Defendants have a viable defense to Relators’ allegations based on the interpretation of the CIA. At the pleading stage, we are limited to concluding whether Relators’ Complaint alleges a plausible claim for relief that has been pled with particularity. In addition to the definition disputed by Defendants, Relators allege that the Overpayment Refund Form required Defendants to specify why the refunded money was an Overpayment and that one of the available definitions was “insufficient documentation.” Relators also allege that federal law prohibits Defendants from transferring payments designated for one patient to a different patient account. It seems plausible that if the Defendants lacked the documentation necessary to determine to which patient the payment applied, the payment was not “due and payable” because the Defendants could not apply that payment to the correct patient account. Moreover, even if the definition of Overpayments does not include payments with insufficient documentation, Relators allege that $7 million in Overpayments resulted from duplicate billings or payments billed in error. Thus, even if Defendant’s interpretation of the CIA is correct, this merely decreases the damage to the government and does not destroy Relators’ plausible claim for relief. 22 that Certification of Compliance had a material affect on the government’s decision-making. C. Material The district court held Relators failed to show how the Defendants used or caused to be used, the Certification of Compliance to conceal, avoid, or decrease an obligation to the government.15 Defendants do not specifically address Relators’ challenge in this regard. We hold that because the CIA required the Defendants to provide an accurate account of any excess government property in the Defendants’ possession, and the Certification of Compliance misrepresented the value of the property in the Defendants’ possession, the submission of the Certification played a material role in the concealment and avoidance of an obligation. To be material, a misrepresentation must have the ability to influence the government’s decision-making. See Neder, 527 U.S. at 16 (defining materiality as 15 The FCA requires a showing that the defendants “makes, uses, or cause to be made or used” a false statement with the purpose to conceal an obligation. 31 U.S.C. § 3729(a)(7). In Astra, on which the district court based its conclusion, it was undisputed that the defendants did not make the certifications, and thus, relators needed to show that the defendants “used” the certifications. United States ex rel. Cullins v. Astra, Inc., 2010 WL 625279, at  (S.D. Fla. 2010). To the extent the district court found the Complaint did not allege the Defendants “make, use, or cause to be made or used” a Certification of Compliance, we refer to our above discussion which concluded Relators adequately pled the existence and submission of a Certification. To the extent the district court concluded Relators failed to show how the Certification played a role in the concealment of the obligation, we characterize the issue as materiality of the misrepresentation and refer to the following discussion. 23 having the “natural tendency to influence . . . the decisionmaking body to which it was addressed”). When the government relies on the defendant to identify and report the value of government property in the defendant’s possession, and the defendant misrepresents the value of that property, the misrepresentation is material. See Pemco, 195 F.3d at 1235 (holding complaint alleged the required elements of a reverse false claim cause of action). In Pemco, the defendant’s contract required the defendant “upon determining that it possessed excess government property . . . [to identify] the excess property and to dispose of that property in accordance with the government’s instructions.” Id. at 1237. The defendant corporation in Pemco identified excess government aircraft wings in its possession but mis-reported to the government the type of aircraft wing. Id. at 1236. As a result, the government agreed to sell the excess property to the defendants at a significant discount. Id. at 1236–37. Here, Relators have similarly alleged a contractual arrangement whereby the government relies on the Defendants to identify and report excess government property in the Defendants’ possession. Once the Defendants identified excess payments, they had the obligation to report and remit the full value according to the CIA instructions. Although the Defendants identified Overpayments as early as April 2006 and continued to identify millions of dollars in Overpayments 24 through 2008, the Defendants assured the government, through the Certification, that they did not possess any unreported Overpayments. By certifying that they did not owe the government any additional money, the Defendants concealed the true value of the government property in its possession. We conclude the misrepresentation was material because, as a result of the Certification of Compliance, the government was unable to identify and recover excess government payments. Thus, Relators have sufficiently pled each element of a reverse false claim for the Certification of Compliance and the district court’s dismissal of Count I is reversed.