Court Opinion

ID: 8414247
Source: CourtListenerOpinion
Date Created: 2022-11-02 20:53:20.10517+00
Date Added: 2024-06-11T16:48:07.678137
License: Public Domain

HAMILTON, Circuit Judge,
concurring in part and dissenting in part.
I agree with my colleagues that the dismissal of Presser’s claims alleging fraudulent use of billing codes must be reversed. Judge Ripple’s opinion explains why Presser alleged sufficiently that the defendants presented the allegedly false claims to the federal and state governments for payment and why those allegations are sufficiently specific for purposes of Rule 9(b) regarding the improper billing codes.
However, I respectfully part company on the dismissal of Presser’s other fraud claims based on the unnecessary four-person evaluation process, mandatory drug screenings, and policies on prescription refills and appointments. I would allow those claims to go forward as pleaded. In any event, the district court will need to exercise its sound discretion in deciding whether to allow further amendments to revive these other claims.
On these other claims, Presser alleged the “circumstances” of the fraud with particularity as required by Rule 9(b) by providing “the who, what, when, where, and how, the first paragraph of any newspaper story.” U.S. ex rel. Hanna v. City of Chicago, 834 F.3d 775, 778-79 (7th Cir. 2016), quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). She has identified the defendants’ practices that led to much higher billings to the government. The majority does not disagree. In addition, Presser has alleged fraudulent intent adequately as to all of her claims. The majority acknowledges as much in footnote 29, which also reminds us that Rule 9(b) allows fraudulent intent to be alleged “generally.”
Yet the majority concludes on pages 779 to 781 that Presser failed to allege something else essential, apparently some additional factual basis to support her contention that these other challenged practices are in fact fraudulent rather than innocent. That discussion is in tension with note 29 and more broadly with our case law interpreting Rule 9(b) and the ability to plead fraudulent intent generally.
The majority tells us that what is missing is “an ascertainable standard or more context,” and the majority suggests that a reference to a professional standard might provide the missing allegations. Ante at 780. The majority is concerned that plaintiff has not identified anything other than her own experience and judgment as a basis for saying that defendant was billing the federal and state governments for unnecessary care. The majority also speculates about possible innocent .explanations for the allegedly fraudulent practices. Ante at 780.
With respect, the majority’s insistence on an external standard or “context” goes beyond the requirements of Rule 9(b). The circumstances of the alleged fraud have been alleged with particularity here. We have long rejected demands for more than the “who, what, when, where, and how” under Rule 9(b). E.g., Hefferman v. Bass, 467 F.3d 596, 602 (7th Cir. 2006) (reversing dismissal of fraud claim); Fidelity Nat’l Title Ins. Co. v. Intercounty Nat’l Title Ins. Co., 412 F.3d 745, 749 (7th Cir. 2005) (same); General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, *7831078 (7th Cir. 1997) (affirming denial of dismissal under Rule 9(b)); Midwest Commerce Banking Co. v. Elkhart City Centre, 4 F.3d 521, 524 (7th Cir. 1993) (error to dismiss under Rule 9(b)); Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992) (plaintiff need not “plead facts showing that the representation is indeed false”); accord, Windy City Metal Fabricators & Supply, Inc. v. CIT Technology Financing Services, Inc., 536 F.3d 663, 668-69 (7th Cir. 2008) (complaint need not plead evidence of fraud). The majority seems to demand that the relator plead evidence or in essence prove her case in the complaint.
In fact, the majority here comes close to applying the special pleading standard from the Private Securities Litigation Reform Act, which requires a securities fraud plaintiff to “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2); see also Tellabs v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319-20, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (explaining how PSLRA requirement for pleading fraudulent scienter goes beyond Rule 9(b)). That standard does not apply here, but by suggesting innocent explanations for the challenged practices and criticizing the relator’s failure to negate them in her complaint, the majority applies something very close to the “strong inference” standard from the PSLRA.
To justify this unusually demanding interpretation of Rule 9(b), with its amorphous requirement for pleading “context,” the majority highlights one of the policy concerns reflected in Rule 9(b): the danger that a defendant’s reputation might be tarnished unfairly by conclusory allegations of fraud. That is one important policy at stake here, but so too are the liberal pleading policies reflected in Rules 8 and 9(b). We and other courts try to strike the right balance, guided by the rules’ texts and purposes, by insisting that the “circumstances” of alleged fraud be stated with particularity while allowing general pleading of fraudulent intent. That balance does not include the majority’s uncertain requirement for pleading “context” or for facts refuting the majority’s suggested innocent explanations for the allegedly fraudulent practices. These additional claims may fail later on for lack of evidence, but it seems to me, for now at least, that they have been pleaded sufficiently.
This case will return to the district court for discovery and further proceedings. It is possible the relator Presser may seek to amend her complaint to meet the newly articulated requirement for “context” or “external standards,” or at least for more factual details supporting the other fraud claims. The majority says at page 781 that the decision on any further amendment of the complaint “is entirely within the discretion of the district court.” It should go without saying that discretion must be exercised according to law. Rule 15(a)(2) provides that the “court should freely give leave when justice so requires.” If a further amendment is sought here, the case for allowing it would be very strong because of a mistake the district court made at the outset of the case.
When the defense filed its original motion to dismiss, the district judge told the relator that she would have only one chance to amend her complaint. Such a rigid ruling at the outset of most cases would be an abuse of discretion. See Runnion v. Girl Scouts of Greater Chicago, 786 F.3d 510, 522 (7th Cir. 2015) (2009 amendment to Rule 15(a) “did not impose on plaintiffs choice of pleading a regime of ‘one-and-done’ ”). In this case, the “one- and-done” ruling was an abuse of discretion since it was based on the judge’s own clear legal mistake. He wrote that the complaint failed to state a claim under the *784Falsé Claims Act because it asserted a claim under “31 U.S.C. § 3729(a)(2).” See U.S ex rel. Presser v. Acacia Mental Health Clinic, LLC, 2014 WL 3530747, at *1 (E.D. Wis. July 15, 2014) (summarizing earlier order). The flaw that prompted the “last chance” warning, was merely a problem with a citation, which was not even necessary.
The original complaint quoted the correct language from the False Claims Act— “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim.” The problem was that the original complaint cited - the pre-2009 version, 31 U.S.C. § 3729(a)(2), rather than the post-2009 version in which that same language appears in § 3729(a)(1)(B). The complaint was not required to include a legal theory, let alone a correct citation. E.g., Doe v. Smith, 429 F.3d 706, 708 (7th Cir. 2005); Bartholet v. Reishauer A.G., 953 F.2d 1073 (7th Cir. 1992). Such a minor citation error should not be fatal, nor should it shut the door to any further needed amendments, keeping in mind the “when justice so requires” standard of Rule 15(a)(2).
More generally, in the post-/g6ai-and-Twombly world of civil pleading, it is difficult for any plaintiff to know what a particular district judge will require by way of details in a complaint. Variations among district judges and appellate panels can be substantial, suggesting that the Iqbal and Twombly project is leading not to more clarity and less litigation, but to less clarity and more litigation. The majority acknowledges this problem, noting accurately that “the precise details that must be included in a complaint ‘may vary on the facts of a given case.’ ” Ante at 776, quoting. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 442 (7th Cir. 2011); accord, In re Healthcare Compare Corp. Securities Litig., 75 F.3d 276, 284-85 (7th Cir. 1996) (Ripple, J., dissenting) (“Reasonable minds can — and will — differ on the adequacy of the factual specificity in an allegation of fraud.”). To emphasize the uncertainty, Pi-relli noted that the plaintiff in that case may have provided too much detail. 631 F.3d at 439 n.1.
Too much? Too little? More “context”? What is a plaintiff to do? The best approach is to let the plaintiff try her best, and then to be liberal in allowing amendments (“when justice so requires”) once the court has indicated what is necessary. E.g., Runnion v. Girl Scouts of Greater Chicago, 786 F.3d 510, 519-20 (7th Cir. 2015) (reversing dismissal). We should not decide cases, or invite district judges to decide cases, based on a plaintiffs incorrect prediction about just how much detail a particular district judge or appellate panel might require. See Fed. R. Civ. P. 8(e) (“Pleadings must be construed so as to do justice.”). Such decisions about amending pleadings are left to district judges’ sound discretion, not to their whims, and certainly not to their impatience based on their own legal mistakes, as occurred in this case.