Opinion ID: 3047737
Heading Depth: 2
Heading Rank: 3

Heading: Count II: False Discovery Sample

Text: The district court does not explicitly address Count II, but seems to have dismissed it for failure to establish the existence of an obligation that was not repaid. Defendants argue the dismissal of Count II should be affirmed because the Complaint does not plead with particularity that a Discovery Sample was actually submitted. Specifically, Defendants argue the Complaint does not allege when such samples were submitted, to whom they were submitted, who submitted them, or what exactly the submission contained. Defendants argue Relator Matheny’s personal involvement is insufficient to support his allegations because he could 25 have been working on the creation of a sample for Defendants’ internal use only and not for submission to the government. Because we concluded above that Relators adequately alleged an obligation, we address only the Defendants’ argument. Here, the Complaint alleges that the Defendants made a false Discovery Sample in October of 2005, 2006, 2007, and 2008. The Complaint alleges that the Defendants submitted the Discovery Samples to the IRO auditor during the annual review in November of the same years. The Complaint alleges in detail who made the Discovery Samples (LMS Business Analyst employee Bob Swiatek), who approved and directed the process (Defendants Perazella and Dolan), and how various employees, including Relator Matheny, altered the patient accounts to produce a false Discovery Sample. Thus, the Complaint alleges what statement was false (the Discovery Sample), in what documents (the annual review documents), when it was submitted (between October and November of each year), to whom it was submitted (IRO auditor), what the statement did and did not contain (Paid Claims with no evidence of Overpayments), who approved the process, and who was responsible for developing the Discovery Samples. The Complaint does not however, specify by name or title the person who actually pushed the send button and transmitted the Discovery Sample to the IRO auditor. 26 We do not conclude the exclusion of this detail is fatal to Relators’ Complaint. As Defendants recognize, we are more tolerant toward complaints that leave out some particularities of the submissions of a false claim if the complaint also alleges personal knowledge or participation in the fraudulent conduct. See Walker, 433 F.3d at 1360 (holding discussions with billing employee regarding the fraudulent practices and participation in the process that led to false claims sufficient to satisfy Rule 9(b)). Relator Matheny alleges personal involvement in not only the process that lead to a false Discovery Sample, but the creation of the actual Discovery Sample that was submitted. We recognized that Relator Matheny’s personal involvement does not relate to the actual submission of the Discovery Sample, but we conclude Matheny’s detailed allegations of the accounting records, his position at the company, and his involvement with the patient accounts provide sufficient support to Relator Matheny’s allegation that he was working on the records used to populate the Discovery Sample and the Discovery Sample itself, and not merely an internal sample. See Walker, 433 F.3d at 1360 (holding explanations as to why relator believed false claims were submitted sufficient when relator had personal knowledge of the scheme). Second, this is not a case, such as Clausen, where the presentment of a false statement is an element of the cause of action and the sin qua non of liability. See 27 Clausen, 290 F.3d at 1311. Instead, the submission is relevant only to the extent necessary to show a material effect on the government’s decision-making. To that end, Relators provide additional factual support to show the Discovery Sample was submitted to the IRO auditor. According to the Complaint, once the Defendants submitted a Discovery Sample, the IRO would review the sample accounts for Overpayments or other errors. If the Discovery Sample resulted in greater than a 5% error rate, a full audit of the Defendants’ accounts would occur. For each year between 2005 and 2008, the IRO reviewed the Discovery Sample and found a 0% error rate. If a Discovery Sample had never been submitted, the IRO could not have performed a review or determined an error rate. Moreover, the Complaint alleges the CIA required a Discovery Sample to be submitted every year as part of the larger annual review and supports that allegation with express contract language.16 The use of the Discovery Sample to determine whether the IRO conducted an entire audit of the Defendants’ accounts and the existence of a 16 Defendants argue that the CIA required the IRO to select the random sample and therefore, the Defendants never submitted anything to the IRO. Assuming the IRO selects the random sample itself, the IRO must still be made aware of the total population of Defendants’ accounts in order to select a sample. Thus, even under the Defendants’ interpretation, the Defendants had to alert the IRO of the accounts in some way. While such conduct may not be sufficient to establish presentment for an (a)(1) claim, it is sufficient to establish a material link between the manipulated records and the government’s actions. Moreover, if Defendants manipulated the total population of accounts, as alleged, and the IRO selected a random sample, Defendants caused the IRO to use or make a false (i.e. not random) record. See 31 U.S.C. 3729(a)(2) (imposing liability of a person who “makes, uses, or causes to be made or used” a false statement). 28 contractual obligation to submit the Discovery Sample lends support to Relators’ allegations. We conclude Relators have pled all the remaining elements for a reverse false claim for the Discovery Samples and thus, the district court’s dismissal of Count II is reversed.