Opinion ID: 185649
Heading Depth: 2
Heading Rank: 2

Heading: Allowing Totten to Amend his Complaint

Text: 35 This legal conclusion does not, however, mean that Totten's complaint, at least in its current form, actually states a valid claim under the False Claims Act. Indeed, as suggested above, there are several ways in which his present complaint is deficient. First, Totten has alleged merely that the Contractors knowingly presented or caused to be presented equipment to an officer or employees of the National Railroad Passenger Corporation, that was knowingly substandard or noncompliant with engineering specifications for the Superliner II Contract to obtain payments from the National Railroad Passenger Corporation ... Complaint, at ¶ 22; see also id. at ¶¶ 27, 57. However, the bare assertion that defendants delivered goods that did not conform to contractual specifications is not enough to state a violation of the FCA. Instead, in the sections relevant here, the statute proscribes only false claims — that is, actual demands for money or property, see 31 U.S.C. §§ 3729(a)(1), (a)(3); § 3729(c) — and false records or statements used to induce such claims, see § 3729(a)(2). The FCA, in other words, attaches liability, not to underlying fraudulent activity, but to the `claim for payment.' United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir.1996) (quoting United States v. Rivera, 55 F.3d 703, 709 (1st Cir.1995)). And, to date, Totten has simply made no allegation that the Contractors actually made false demands or submitted false records, whether to Amtrak or to anyone else. 36 The second problem with the present complaint is that Totten has provided no basis for concluding that, even if the defendants did present claims to Amtrak, those would be claims within the meaning of § 3729(c). This provision defines claim to include a request for payment made to: 37 a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. 38 Thus, in order to satisfy Rule 12(b)(6), Totten would at least have to plead that the federal government provided some portion of the money requested by the Contractors, or that the government reimbursed Amtrak for what it paid out to improve the toilet systems on its trains. Though he has not yet done so, it appears that Totten is aware of this requirement, and that he informed the District Court that he was prepared to amend his complaint to allege that federal money was implicated in the specific projects at issue. See Br. for the United States of America as Amicus Curiae Supporting Appellant 14. 39 A third difficulty with the complaint as it stands is that it does not appear to satisfy Rule 9(b) of the Federal Rules of Civil Procedure. This rule requires that [i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Totten does not argue that his complaint satisfies this standard, but instead that the rule does not apply to him because he has not alleged that defendants made fraudulent claims, but merely false ones. He suggests that because false claims are actionable under the FCA even without proof of specific intent to defraud, § 3729(b)(3), there is no averment of fraud within the meaning of Rule 9(b). We disagree. 40 Every circuit to consider the issue has held that, because the False Claims Act is self-evidently an anti-fraud statute, complaints brought under it must comply with Rule 9(b). See Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir.2001); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir.1997); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir.1995). Totten cites no authority whatsoever for the hairsplitting distinction he seeks to draw between fraudulent and false claims under 9(b). And we can see no reason to recognize such a distinction. 41 The difference between the two categories of claims is simply the degree of scienter involved. See United States v. TDC Mgmt. Corp., 24 F.3d 292, 297 (D.C.Cir.1994) (distinction turns on whether the defendant acted with an intent to deceive). But this difference is entirely insignificant in the context of Rule 9(b)'s pleading requirements. Indeed, the rule specifically allows allegations of intent, knowledge, and other condition of mind to be averred generally. See Gold, 68 F.3d at 1477. In contrast, the circumstances that must be pleaded with specificity are matters such as the time, place, and contents of the false representations, such representations being the element of fraud about which the rule is chiefly concerned. See 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1297 (2d ed.1990) (emphasis added). Therefore, in order to satisfy Rule 9(b), Totten must set forth an adequate factual basis for his allegations that the Contractors submitted false claims (or false statements in order to get false claims paid), including a more detailed description of the specific falsehoods that are the basis for his suit. See Bly-Magee, 236 F.3d at 1018-19; Columbia/HCA, 125 F.3d at 903.
42 The Contractors argue that the flaws in the complaint are fatal, because Totten waived his right to amend his complaint by not seeking leave to do so pursuant to Rule 15(a). Instead, they point out, Totten merely indicated in his Opposition to defendants' motion to dismiss that he stood ready to amend his complaint if the District Court identified any pleading deficiencies. As authority for their position, the Contractors cite Government of Guam v. American President Lines, 28 F.3d 142, 149-51 (D.C.Cir.1994), in which we held that plaintiffs whose complaint had been dismissed (for lack of subject matter jurisdiction) had waived their right to amend by failing to make a Rule 15(a) motion, either before or after the District Court granted their opponent's dismissal motion. 43 The present case, however, is quite different. In President Lines, we denied plaintiffs an opportunity to amend only after upholding the trial court's decision to dismiss the complaint. In other words, that litigation was over unless we allowed the plaintiffs to reopen it, and we found that their interest in doing so did not outweigh the general rules favoring the finality of judgments and the expeditious resolution of litigation. Id. at 151. Totten's situation presents no such countervailing finality concerns, in light of our conclusion that the District Court was wrong to dismiss the complaint on the only ground it actually gave for doing so. The waiver rule relied upon in President Lines is therefore not similarly applicable where the court of appeals reverses the trial court's dismissal order. See The Dartmouth Review v. Dartmouth College, 889 F.2d 13, 23 (1st Cir.1989) (stating the general rule that where the pleader has stood upon his pleading and appealed from a judgment of dismissal, amendment will not ordinarily be permitted ... if the order of dismissal is affirmed ) (emphasis added) (quoting Rivera-Gomez v. de Castro, 843 F.2d 631, 635-36 (1st Cir.1988) (allowing amendment, even after affirming dismissal, where it is in the interest of justice)). 44 As for Totten's failure to seek leave to amend his complaint after the Contractors' Motion to Dismiss was granted, a factor on which President Lines relied in finding a waiver, see 28 F.3d at 151, the District Court made clear in the present case that such a request would have been futile. See Bombardier, 139 F.Supp.2d at 52 n. 1 (In other circumstances Totten would be permitted an opportunity to amend his complaint, but, as the remainder of this Opinion demonstrates, such an opportunity is not warranted in this case.). Given that the District Court expressly indicated that it would have allowed Totten to amend had it not viewed the Reform Act as posing an insurmountable obstacle to his suit — regardless of how that suit was packaged — we see no reason, having reversed the court's legal mistake, to forbid what would have been permitted in the absence of that error. Therefore, we will remand the case with instructions that Totten be granted leave to amend his complaint. 45 In so doing, however, we express no opinion on the question left open by this court's decision in Yesudian : whether an FCA plaintiff may prevail against a defendant who submits a false claim to a federal grantee (such as Amtrak), without presenting evidence that the claim was ever actually submitted to the U.S. government. See 153 F.3d at 737-39. Depending on how Totten crafts his amended complaint, this issue of statutory interpretation may be avoided altogether. We therefore leave it for another day.