Court Opinion

ID: 857184
Source: CourtListenerOpinion
Date Created: 2013-04-03 23:15:33.249604+00
Date Added: 2024-06-11T15:06:38.302227
License: Public Domain

Case: 12-30656       Document: 00512196376         Page: 1     Date Filed: 04/03/2013

           IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                                            FILED
                                                                            April 3, 2013

                                     No. 12-30656                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

UNITED STATES OF AMERICA, ex rel; DENT. T. NUNNALLY,

                                                  Plaintiff - Appellant
v.

WEST CALCASIEU CAMERON HOSPITAL,

                                                  Defendant - Appellee

                   Appeal from the United States District Court
                      for the Western District of Louisiana
                            U.S.D.C. No. 2:08-CV-0371

Before JONES, DENNIS, and HAYNES, Circuit Judges.
PER CURIAM:*
       This is an appeal from a 12(b)(6) dismissal of a qui tam action under the
False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. and the Anti-Kickback Statute
(“AKS”), 42 U.S.C. § 1320a–7b(b). Relator James Dent Nunnally brought this
action against his former employer, West Calcasieu Cameron Hospital
(“WCCH”). The district court found that the complaint lacked sufficient detail
regarding the false claims actually presented to the Government and dismissed

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
     Case: 12-30656        Document: 00512196376          Page: 2     Date Filed: 04/03/2013

                                        No. 12-30656

for failure to plead fraud with particularity as required by FED. R. CIV. P. 9(b).
For the reasons stated herein, we AFFIRM.
       Nunnally filed suit in March 2008 under the qui tam provisions of the
FCA.1 The Government investigated Nunnally’s allegations over a three-year
period and eventually declined to intervene. Pursuant to qui tam procedure, the
complaint was then unsealed and available for WCCH’s review.
       Nunnally alleges that WCCH violated the FCA and the AKS by
implementing a scheme to defraud the Government whereby the hospital
charged reduced test fees to physicians in return for the physician referring to
WCCH all patients in need of laboratory tests, particularly those covered by
Medicare. He alleges WCCH then would charge Medicare significantly higher
fees than charged to non-Medicare patients for the same tests, thereby resulting
in the Government paying thousands of “false claims” generated by the illegal
inducements. WCCH moved to dismiss for failure to state a claim on which
relief may be granted under Rule 12(b)(6), and for failure to plead fraud with the
requisite particularity under Rule 9(b). The district court granted WCCH’s
motion.
       We review a motion to dismiss under Rule 9(b) and Rule 12(b)(6) de novo,
applying the same standards as the district court. See Frank v. Delta Airlines,
Inc., 314 F.3d 195, 197 (5th Cir. 2002) (Rule 12(b)(6)); Shushany v. Allwaste, Inc.,
992 F.2d 517, 520 (5th Cir. 1993) (Rule 9(b)). Rule 12(b)(6) allows dismissal if
a plaintiff fails “to state a claim upon which relief can be granted.” FED. R. CIV.
P. 12(b)(6). To withstand a Rule 12(b)(6) motion, a complaint must contain
“enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic

       1
         The FCA’s qui tam provisions permit a private individual, as a relator, to sue on the
United States’ behalf to recover for false claims for payment submitted to the Government. 31
U.S.C. § 3730; United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 453
(5th Cir. 2005).

                                               2
     Case: 12-30656        Document: 00512196376          Page: 3     Date Filed: 04/03/2013

                                        No. 12-30656

Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id.
       Claims brought under the FCA are fraud claims that must also comply
with the supplemental pleading requirements of Rule 9(b), demanding that “a
party must state with particularity the circumstances constituting fraud or
mistake.”2 FED. R. CIV. P. 9(b); see United States ex rel. Longhi v. Lithium Power
Techs., Inc., 575 F.3d 458, 468 (5th Cir. 2009). Traditionally, we have held that
pleading fraud with particularity requires that “[a]t a minimum . . . a plaintiff
[must] set forth the ‘who, what, when, where, and how’ of the alleged fraud.”
United States ex. rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d
899, 903 (5th Cir. 1997) (internal citation omitted). In the context of the FCA,
we have explained that Rule 9(b) is “context specific and flexible,” and noted that
a plaintiff may sufficiently state a claim with particularity “without including
all the details of any single court-articulated standard—it depends on the
elements of the claim in hand.” Grubbs, 565 F.3d at 189-90.3
       Nunnally argues that our decision in Grubbs absolves qui tam relators of
the heightened pleading requirements under Rule 9(b) and in the FCA itself. To

       2
        Rule 9(b)’s requirement for pleading with particularity provides a “screening function”
to ensure that the case has not been brought for frivolous reasons. United States ex rel.
Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009). The heightened pleading standard
for fraud claims supplies defendants with the information they need to prepare responses,
prevents discovery intended as a mere fishing expedition, and protects the defendants’
reputations from baseless allegations. Id.
       3
         In Grubbs, we noted that the oft-quoted “time, place, contents, and identity” standard
originated in common-law fraud and securities fraud cases, where that application of Rule 9(b)
directly tracks the elements of those claims. 565 F.3d at 188. Given that the FCA does not
include elements of reliance and damages, “the statute is remedial and exposes even
unsuccessful false claims to liability.” Id. at 189. Therefore, “a claim under the [FCA] and a
claim under common law or securities fraud are not on the same plane in meeting the
requirement of ‘stat[ing] with particularity’ the contents of the fraudulent misrepresentation.’”
Id. (emphasis added). Nonetheless, the pleading standard for FCA claims remains higher than
what is required under Rule 8 alone.

                                               3
      Case: 12-30656      Document: 00512196376         Page: 4     Date Filed: 04/03/2013

                                       No. 12-30656

the contrary, Grubbs reaffirms the importance of Rule 9(b) in FCA claims, while
explaining that a relator may demonstrate a strong inference of fraud without
necessitating that the relator detail the particular bill. See 565 F.3d at 190. We
established that a relator could, in some circumstances, satisfy Rule 9(b) by
providing factual or statistical evidence to strengthen the inference of fraud
beyond mere possibility, without necessarily providing details as to each false
claim. Id. This standard nonetheless requires the relator to provide other
reliable indications of fraud and to plead a level of detail that demonstrates that
an alleged scheme likely resulted in bills submitted for government payment.
Id.   Significantly, the complaint in Grubbs rested on the relator’s actual
description of a solicitation by two of the defendants to the relator to participate
in an elaborate scheme to defraud the government, the particulars of which were
there alleged.
       Nunnally’s complaint, by contrast, is broad and sweeping, providing no
indicia of any actual knowledge of any FCA-violating fraud.4 A generous reading
of his complaint discloses an allegation that WCCH engaged in a practice of
making false certifications of compliance with the AKS. The AKS is a criminal
statute prohibiting the knowing or willful offering to pay, or soliciting, any
remuneration to induce the referral of an individual for items or services that

       4
          The applicable version of the FCA provides, in relevant part, that:
        . . . [A]ny person who–
        (1) knowingly presents, or causes to be presented, to an officer or employee of
        the United States Government or a member of the Armed Forces of the United
        States a false or fraudulent claim for payment or approval;
        (2) knowingly makes, uses, or causes to be made or used, a false record or
        statement to get a false or fraudulent claim paid or approved by the
        Government;
        [. . .] is liable to the United States Government . . . .
31 U.S.C. § 3729(a)(1–3) (1994), amended by 31 U.S.C. § 3729(a)(1)(A–B). Portions of the FCA
were amended by the Fraud Enforcement Recovery Act (“FERA”) of 2009. Pub. L. No. 111–21,
§ 386, 123 Stat. 1617 (2009). The district court properly applied the pre-FERA version because
Nunnally filed this suit in March 2008, before the date of FERA’s enactment. See United
States ex rel. Bennett v. Medtronic, Inc., 747 F. Supp. 2d 745, 762–63 (S.D. Tex. 2010).

                                              4
     Case: 12-30656       Document: 00512196376          Page: 5     Date Filed: 04/03/2013

                                       No. 12-30656

may be paid for by a federal health care program.                          See 42 U.S.C.
§ 1320a–7b(b)(1–2); Thompson, 125 F.3d at 901. A violation of the AKS can
serve as the basis for a FCA claim when the Government has conditioned
payment of a claim upon the claimant’s certification of compliance with the
statute, and the claimant falsely certifies compliance.5 See Thompson, 125 F.3d
at 902.
       Nunnally alleges WCCH violated the AKS by inducing physicians to
provide improper referrals for lab services. The elements of the AKS violation
must also be pleaded with particularity under Rule 9(b), because they are
brought as a FCA claim.           See Bennett, 747 F. Supp. 2d at 760, 783–785.
Nunnally’s complaint merely offers sweeping and conclusory allegations of
“verbal agreements” between WCCH and “various physicians,” without a shred
of detail or particularity. We are given no information on the contents of those
agreements, the identity of any physicians, actual inducements, or improper
referrals. The sole “specificity” in the complaint is an “example” of an agreement
to charge physicians $3.60 for a blood test, while later charging Medicare $10.60
for the same test. This “example” is insufficient because it does not allege, nor
reliably indicate, that the two differing pay scales constitute “remuneration” to
the physicians. It does not even indicate that these amounts are real rather
than hypothetical. The complaint does not specify who in particular was
involved in this “agreement,” or how it constituted an illegal kickback.
       Moreover, actual inducement is an element of the AKS violation, see 42
U.S.C. § 1320a–7b(b)(1–2), and Nunnally must provide reliable indicia that there
was a kickback provided in turn for the referral of patients. This requires
pleading that WCCH knowingly paid remuneration to specific physicians in
exchange for referrals. Nunnally’s complaint fails to allege any particular

       5
        The AKS provides no private right of action; therefore, a private plaintiff may not sue
a health care provider under the AKS alone. See 42 U.S.C. § 1320a–7b(b)(1–2).

                                              5
     Case: 12-30656       Document: 00512196376           Page: 6    Date Filed: 04/03/2013

                                       No. 12-30656

details of any actual referral by a physician who entered an agreement with
WCCH, or even to offer a time period more distinguishing than “[s]ince
approximately 1992 and continuing to date.” The complaint merely states that
“[r]elator estimates that during [sic] past six years [WCCH] has submitted
thousands of such overstated claims . . . causing Medicare to pay in excess of
$4,000,000,000.”
       Finally, Nunnally fails to allege with particularity an actual certification
to the Government that was a prerequisite to obtaining the government benefit.
See Thompson, 125 F.3d at 902. According to Nunnally’s complaint, WCCH
violated the AKS by “periodically either certif[ying] in writing or impliedly
certif[ying] to the Medicare program that it complied with all of Medicare’s
program rules, regulations and laws applicable thereto.” Nunnally’s complaint
does not identify a single claim submitted by WCCH for services rendered
pursuant to an illegal referral, let alone one for which WCCH expressly certified
its compliance with federal law.6 Thus, even if we assume that Nunnally’s
allegations of remuneration are sufficient, Nunnally has pleaded no facts
regarding actual Medicare referrals or the billing and payment services provided
to any Medicare patient. There is no basis to infer from the complaint that
WCCH expressly certified compliance with the AKS as a part of submitting

       6
         Nunnally concedes in his brief that he has no knowledge of any expressed certification
by WCCH, but maintains that his complaint establishes “implied” certification. The theory
of implied certification “is that where the government pays funds to a party, and would not
have paid those funds had it known of a violation of a law or regulation, the claim submitted
for those funds contain[s] an implied certification of compliance with the law or regulation and
[is] fraudulent.” United States ex rel. Pogue v. Diabetes Treatment Cntrs. of Am., Inc., 238 F.
Supp. 2d 258, 264 (D.D.C. 2002) (citation omitted). Our circuit has never adopted implied
certification as a theory of FCA liability. See United States ex rel. Marcy v. Rowan Cos., 520
F.3d 384, 389 (5th Cir. 2008) (citing United States ex rel. Willard v. Humana Health Plan of
Tex., Inc., 336 F.3d 375, 381–82 (5th Cir. 2003)); United States v. Southland Mgmt. Corp., 326
F.3d 669, 679 (5th Cir. 2003) (en banc) (Jones, J. concurring).

                                               6
    Case: 12-30656        Document: 00512196376         Page: 7    Date Filed: 04/03/2013

                                       No. 12-30656

claims to the Government.           Nunnally’s pleadings of an AKS violation are
deficient and cannot serve as a basis for FCA liability.
      Additionally, to the extent Nunnally brings separate claims under the FCA
premised on presenting false claims, § 3729(a)(1), or making false records,
§ 3729(a)(2), separate from the alleged AKS violation, he again has failed to
plead with the requisite particularity as required by Grubbs.7
      Nunnally’s wholly generalized allegations of false claims presented to the
Government do not “alleg[e] particular details of a scheme” (emphasis added)
and are not “paired with reliable indicia that lead to a strong inference that
[false] claims were actually submitted.” See Grubbs, 565 F.3d at 190. We held
in Grubbs that the contents of a false claim need not always be presented under
this subsection because, given that the Government need not rely on or be
damaged by the false claim, “the contents of the bill are less significant.” Id. at
189. This does not absolve Nunnally of the burden of otherwise sufficiently
pleading the time, place, or identity details of the traditional standard, in order
to effectuate Rule 9(b)’s function of fair notice and protection from frivolous
suits. See id. at 190. Nunnally’s allegations of a scheme to submit fraudulent
claims are entirely conclusory, do not offer factual information with sufficient
indicia of reliability, and do not demonstrate a strong inference that the claims
were presented to the Government in violation of § 3729(a)(1).
      Further, § 3729(a)(2) “requires [] that a defendant made a false record or
statement for the purpose of getting a false or fraudulent claim paid by the
Government.” Id. at 192. “[T]he recording of a false record, when it is made with
the requisite intent, is enough to satisfy the statute.” Id. In Grubbs, the relator
alleged several specific incidents where doctors admitted to “writ[ing] notes”
concerning physician visits that did not actually take place. Id. Nunnally’s

      7
          Nunnally failed to invoke a particular subsection of the FCA in his complaint.

                                              7
    Case: 12-30656    Document: 00512196376    Page: 8   Date Filed: 04/03/2013

                                No. 12-30656

complaint does not contain any detail of comparable particularity. He merely
alleges there was “written and/or implied certification to the Medicare program
that it was in compliance with all of the Medicare’s program rules.” He points
to no specific instance of such a record or statement. As Nunnally has not met
his burden under Rule 9(b), his claim was properly dismissed.
      For the reasons stated above, we AFFIRM.

                                      8