Court Opinion

ID: 3051534
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:36:15.232326+00
Date Added: 2024-06-11T11:49:26.017349
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MARIE BERNADETTE MENDIONDO,            
a/k/a Seal 3,
                Plaintiff-Appellant,
                                            No. 06-55981
                 v.
CENTINELA HOSPITAL MEDICAL                   D.C. No.
                                           CV-03-05757-TJH
CENTER, a/k/a Seal A; TENET
                                              OPINION
HEALTHCARE CORPORATION, aka
Seal 3
              Defendants-Appellees.
                                       
        Appeal from the United States District Court
           for the Central District of California
         Terry J. Hatter, District Judge, Presiding

                   Argued and Submitted
          February 15, 2008—Pasadena, California

                     Filed April 1, 2008

      Before: Stephen S. Trott, Richard R. Clifton, and
           Consuelo M. Callahan, Circuit Judges.

                 Opinion by Judge Callahan

                            3343
3346          MENDIONDO v. CENTINELA HOSPITAL

                        COUNSEL

Gerald M. Serlin (briefed and argued), Douglas G. Benedon
(briefed); Marcus A. Mancini (briefed), Sherman Oaks and
Woodland Hills, California, for the appellant.

Jennifer Blair (briefed); Susan S. Azad (briefed and argued),
Los Angeles, California, for the appellees.

                         OPINION

CALLAHAN, Circuit Judge:

  Marie Bernadette Mendiondo appeals from the district
court’s order dismissing her complaint. Mendiondo worked as
                 MENDIONDO v. CENTINELA HOSPITAL                     3347
a nurse at Centinela Hospital Medical Center (“CHMC”) and
alleged that, following her complaints regarding false billing
and reimbursement practices and substandard patient care, she
was wrongfully terminated in violation of the Federal False
Claims Act (“FCA”) (31 U.S.C. § 3730(h)), the California
False Claims Act (“CFCA”) (California Government Code
§ 12653(b)), California Health and Safety Code § 1278.5, and
the public policies embodied by these laws.

   This appeal requires that we decide whether a claim for
wrongful termination under the FCA and CFCA, brought in
federal court, must meet the notice pleading standard in Fed-
eral Rule of Civil Procedure 8(a) or the heightened pleading
standard in Rule 9(b). We hold that the Rule 8(a) standard
applies. Because Mendiondo’s complaint, though inartfully
drafted, meets the Rule 8(a) notice pleading standard with
respect to all of her claims, we reverse and remand.

I.       BACKGROUND

     A.   Factual History1

   Mendiondo began her nursing career in 1975 and special-
ized in critical care. In 2000, she accepted a nursing position
in the cardiovascular department at CHMC. Mendiondo
detected certain practices at CHMC that were intended to
inflate Medicare reimbursements and alleges that she was
investigating these practices. She alleges, for example, that
one of the doctors at CHMC ordered and performed numerous
unnecessary cardiac catheterizations, including repeat cathe-
terizations on the same patients. Additionally, Mendiondo
claims that the hospital insisted on implanting single ventricu-
lar pacemakers, even when patients needed biventricular
pacemakers, because the single pacemakers resulted in higher
     1
   The following facts are taken from Mendiondo’s complaint. In review-
ing a motion to dismiss, we accept the alleged facts as true. Kutasi v. Las
Virgenes Unified Sch. Dist., 494 F.3d 1162, 1164 n.1 (9th Cir. 2007).
3348           MENDIONDO v. CENTINELA HOSPITAL
Medicare reimbursements. Mendiondo asserts that CHMC
also obtained reimbursement for more catheterization and
radiologic procedures than were actually performed by having
billing personnel manually change the billing records. Fur-
ther, Mendiondo alleges the hospital manipulated the length
of time it kept patients on observation status or as inpatients
in order to maximize Medicare reimbursements, without
regard to the medical necessities and in violation of Medicare
reimbursement guidelines.

   Mendiondo further alleges that from the time she started
working there, CHMC pressured her to cut costs and reduce
services. For example, she asserts that CHMC refused to use
the safest drug for heart attacks because of cost reasons and
used outdated cardiac equipment.

   In 2001, Mendiondo informed the Chief Executive Officer
(“CEO”) of CHMC, Harry Koening, that her supervisors
expected her to engage in actions that were below the stan-
dard of care, would put her nursing license in jeopardy, and
could lead to civil and criminal violations. In November 2001,
Mendiondo started reporting to a new supervisor, Ziporah
Frankel, who demanded that Mendiondo cut costs or be fired.
When Mendiondo objected that the cost-cutting measures
would jeopardize patient care, Frankel instructed her to follow
the measures regardless.

   On August 19, 2002, CHMC terminated Mendiondo.
CHMC explained that the termination was the result of Men-
diondo’s inadequate job performance. Mendiondo believes
CHMC terminated her because she demanded that minimum
state and federal standards of health care be maintained, and
because of her investigation into facts relating to CHMC’s
submission of false claims and false records to the govern-
ment.
                   MENDIONDO v. CENTINELA HOSPITAL         3349
  B.      Procedural History

   On August 13, 2003, Mendiondo and two colleagues filed
this action against CHMC, Tenet Healthcare Corporation
(“Tenet”), and three other associated health care groups.2 The
complaint alleged causes of action for (1) violations of the
FCA and CFCA; (2) retaliation in violation of the whistle-
blower provisions in the FCA and CFCA; (3) retaliation in
violation of the California Health and Safety Code Section
1278.5; and (4) wrongful termination in violation of the pub-
lic policies embodied in these laws.

   Pursuant to 31 U.S.C. § 3730(b), which governs private
actions under the FCA, plaintiffs filed the complaint under
seal and served a copy on the federal government. The gov-
ernment declined to intervene, the court unsealed the com-
plaint, and plaintiffs served CHMC and Tenet.

   Plaintiffs stipulated to dismiss with prejudice the FCA and
CFCA violation claims, leaving their retaliation and wrongful
termination claims. CHMC then moved to dismiss the action
under Federal Rules of Civil Procedure 8(e), 9(b), and/or
12(b)(6). In their opposition, plaintiffs argued that they had
properly pleaded all of their remaining claims, and, in the
alternative, requested leave to amend any pleading deficien-
cies. The district court granted the motion to dismiss without
discussion and without indicating whether Mendiondo had
leave to amend. Mendiondo filed a timely notice of appeal
from the order. A judgment, however, was never entered.

II.     STANDARD OF REVIEW

  We review de novo a dismissal for failure to state a claim
pursuant to Rule 12(b)(6) and for failure to allege fraud with
particularity pursuant to Rule 9(b). United States ex rel. Lee
  2
      Mendiondo’s colleagues do not join in this appeal.
3350           MENDIONDO v. CENTINELA HOSPITAL
v. Smithkline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir.
2001).

III.   JURISDICTION

   [1] We have jurisdiction over appeals from “all final deci-
sions” of the district court. 28 U.S.C. § 1291. The district
court granted defendants’ motion to dismiss, disposing of all
the claims in plaintiffs’ complaint, and did not address plain-
tiffs’ request for leave to amend. The court, however, did not
enter final judgment. An order dismissing all of the claims in
a complaint, but not the action itself, is not a final, appealable
order. Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d
979, 983 (9th Cir. 2000). “However, if it appears that the dis-
trict court intended the dismissal to dispose of the action, it
may be considered final and appealable.” Id. (internal cita-
tions and quotation marks omitted). We must decide whether
the court intended its order to be final.

   [2] By not addressing plaintiffs’ request for leave to amend,
the district court’s order “necessarily entailed a denial of the
[request] and a determination . . . that the pleading could not
possibly be cured by the allegation of other facts.” Id. (inter-
nal citation and quotation marks omitted). Accordingly, we
infer that the district court intended to make the dismissal
final for purposes of § 1291. Id.

  The district court entered the order of dismissal on June 28,
2006, and Mendiondo filed a notice of appeal on July 13,
2006, within the 30-day period for filing as prescribed by
Federal Rule of Appellate Procedure 4(a)(1)(A). Accordingly,
Mendiondo filed a timely notice of appeal.

  Thus, we conclude that this Court has jurisdiction over the
appeal.
                  MENDIONDO v. CENTINELA HOSPITAL                      3351
IV.    DISCUSSION

A.    Rule 8(a) Notice Pleading Applies to FCA Retaliation
      Claims3

   [3] The parties dispute whether a FCA retaliation claim
must meet the notice pleading standard in Rule 8(a) or the
heightened pleading standard in Rule 9(b). Rule 8(a) requires
that a pleading contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2). Rule 8(a) applies to all civil claims except
those containing averments of “fraud or mistake,” which must
be pleaded with particularity under Rule 9(b). Fed. R. Civ. P.
8, 9. The Supreme Court has narrowly construed Rule 9(b) to
apply only to the types of actions enumerated in the rule—
those alleging fraud or mistake—and has not extended the
heightened pleading standard to other legal theories. See
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002)
(declining to apply Rule 9(b) to claims for violations of 42
U.S.C. § 1983 or employment discrimination claims).

   [4] Because the FCA is an anti-fraud statute and requires
fraud allegations, complaints alleging a FCA violation must
   3
     We assume for purposes of this appeal that the same analysis applies
to the FCA and CFCA claims. The parties argued below and on appeal
that the same analysis applies to both claims because the CFCA is pat-
terned after the FCA. See, e.g., California v. Altus Fin., S.A., 116 P.3d
1175, 1184 (Cal. 2005). We note, however, that the CFCA appears limited
to false claims submitted to the State of California and might not include
the types of federal Medicare claims alleged by Mendiondo. See Cal.
Gov’t. Code § 12653(b) (prohibiting retaliation against an employee
investigating or disclosing a false claim); id. § 12650(b)(1) (defining false
“claim” as a demand for money from the state or a political subdivision).
Because the parties have not raised this issue, we do not address it here.
See Harik v. Cal. Teachers Ass’n., 326 F.3d 1042, 1052 (9th Cir. 2003)
(noting that “we do not ordinarily consider on appeal issues not raised
below”); Greenwood v. FAA, 28 F.3d 971, 977 (9th Cir. 1994) (“We
review only issues which are argued specifically and distinctly in a party’s
opening brief.”) (citation omitted).
3352            MENDIONDO v. CENTINELA HOSPITAL
fulfill the requirements of Rule 9(b). Bly-Magee v. California,
236 F.3d 1014, 1018 (9th Cir. 2001). In this case, however,
we are presented only with Mendiondo’s FCA retaliation
claim, not a FCA violation claim. In the only federal appellate
decision addressing the pleading standard for a FCA retalia-
tion claim, the First Circuit concluded that, unlike a FCA vio-
lation claim, a FCA retaliation claim “does not require a
showing of fraud and therefore need not meet the heightened
pleading requirements of Rule 9(b).” United States ex rel.
Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 238 n.23
(1st Cir. 2004). We agree.

   The elements differ for a FCA violation claim and a FCA
retaliation claim. To state a claim for a FCA violation, a
plaintiff must allege that the defendant actually violated the
FCA by knowingly submitting a false claim or providing
faulty goods to the government. See 31 U.S.C. § 3729(a)
(describing acts that constitute violations of the FCA). In con-
trast, to state a FCA retaliation claim, a plaintiff must show
that he or she suspected that the defendant submitted a false
claim—not that the defendant actually submitted one. See
Graham County Soil & Water Conservation Dist. v. United
States ex rel. Wilson, 545 U.S. 409, 416-17 (2005).

   A plaintiff alleging a FCA retaliation claim must show
three elements: (1) that he or she engaged in activity protected
under the statute; (2) that the employer knew the plaintiff
engaged in protected activity; and (3) that the employer dis-
criminated against the plaintiff because he or she engaged in
protected activity. Moore v. Cal. Inst. of Tech. Jet Propulsion
Lab., 275 F.3d 838, 845 (9th Cir. 2002); United States ex rel.
Hopper v. Anton, 91 F.3d 1261, 1269 (9th Cir. 1996). As is
clear from the elements of the claim, an employer does not
face liability for the suspected or actual fraud; it faces liability
for a retaliatory act against the investigating employee. The
emphasis of the claim is on the employee’s protected action
and whether the employer retaliated against the employee
because of that action. The fact that the claim arises from an
               MENDIONDO v. CENTINELA HOSPITAL              3353
investigation of potential fraud does not alter its nature as a
retaliation claim.

   [5] Accordingly, we hold that the heightened pleading
requirements of Rule 9(b) do not apply to FCA retaliation
claims. Instead, a FCA retaliation claim must meet the Rule
8(a) notice pleading standard.

  B.     Mendiondo Has Stated Claims for Retaliation
         Under the FCA and CFCA, Retaliation in Violation
         of California Health and Safety Code Section
         1278.5, and Wrongful Termination in Violation of
         Public Policy

    Where, as here, the heightened pleading standard of Rule
9(b) does not apply, the complaint “need only satisfy the Rule
8(a) notice pleading standard . . . to survive a Rule 12(b)(6)
dismissal.” Edwards v. Marin Park, Inc., 356 F.3d 1058, 1062
(9th Cir. 2004). The complaint need not contain detailed fac-
tual allegations, but it must provide more than “a formulaic
recitation of the elements of a cause of action.” Bell Atl. Corp.
v. Twombly, 127 S. Ct. 1955, 1965 (2007). Under Rule 8(a),
the plaintiff must “give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.” Id. at 1964
(internal citation and quotation marks omitted). Dismissal
under Rule 12(b)(6) is appropriate only where the complaint
lacks a cognizable legal theory or sufficient facts to support
a cognizable legal theory. Balistreri v. Pacifica Police Dep’t.,
901 F.2d 696, 699 (9th Cir. 1990).

    1.    FCA and CFCA Retaliation Claims

   [6] As noted, Mendiondo’s claims for retaliation under the
FCA and CFCA must allege that (1) she was engaged in pro-
tected conduct; (2) CHMC knew she engaged in such con-
duct; and (3) CHMC retaliated against her because of the
conduct. See Moore, 275 F.3d at 845; Hopper, 91 F.3d at
1269.
3354           MENDIONDO v. CENTINELA HOSPITAL
   [7] For purposes of the first element, Mendiondo engaged
in protected activity if she reasonably believed that CHMC
was possibly committing fraud against the government, and
she investigated the possible fraud. See Moore, 275 F.3d at
845; Hopper, 91 F.3d at 1269. Mendiondo alleges that she
investigated “facts relating to Tenet and CHMC’s submission
of false claims and false records to the government.” The
complaint contains examples of practices at CHMC that Men-
diondo and her co-plaintiffs suspected to be fraudulent
attempts to inflate Medicare reimbursements: one doctor
allegedly performed numerous unnecessary catheterizations;
CHMC implanted single ventricular pacemakers, even when
patients needed biventricular pacemakers; and CHMC kept
patients on observation status or as inpatients, without regard
to medical need and in violation of Medicare reimbursement
guidelines. Mendiondo also alleges that CHMC obtained
reimbursement for more radiologic and catheterization proce-
dures than were actually performed by having billing person-
nel manually change the billing records. Although far from a
model of clarity, Mendiondo’s allegations provide CHMC
with notice of the potentially fraudulent practices that Men-
diondo believes led to false claims.

   [8] For the second element of her FCA and CFCA retalia-
tion claims, Mendiondo alleges she complained to CHMC’s
CEO, Harry Koening, about possible “civil and criminal vio-
lations.” Although vague, the reference to “civil violations”
can be construed to include the suspected Medicare fraud
described above. Because Mendiondo complained to Koening
about the suspected civil violations, CHMC was informed of
Mendiondo’s protected activity.

   [9] Finally, for the third element of her FCA and CFCA
retaliation claims, Mendiondo alleges that CHMC terminated
her “because of her investigation into facts relating to Tenet
and CHMC’s submission of false claims and false records to
the government.” It suffices at this pleading stage for Men-
diondo to simply give notice that she believes CHMC termi-
               MENDIONDO v. CENTINELA HOSPITAL             3355
nated her because of her investigation into the practices she
specified in the complaint. See Edwards, 356 F.3d at 1061
(noting that discovery is “often necessary to uncover a trail of
evidence regarding the defendants’ intent in undertaking
allegedly discriminatory action”).

  [10] Although the complaint may be inartfully drawn, it
nonetheless contains sufficient facts under the applicable
notice pleading standards of 8(a) to survive dismissal under
Rule 12(b)(6).

    2.   Claim for Retaliation in Violation of California
         Health and Safety Code Section 1278.5

   Section 1278.5 of the California Health and Safety Code is
intended to encourage medical staff and patients to notify
government entities of “suspected unsafe patient care and
conditions.” Cal. Health & Safety Code § 1278.5(a). The stat-
ute prohibits retaliation against any employee who complains
to an employer or a government agency about unsafe patient
care or conditions. Id. § 1278.5(b)(1)(A), (g).

   [11] In the complaint, Mendiondo identifies practices that
allegedly compromised patient care, including unnecessary
catheterizations, implanting single instead of biventricular
pacemakers, refusing to use the safest drug for heart attacks
because of cost reasons, and using outdated cardiac equip-
ment. Mendiondo alleges she complained to CHMC’s CEO
and her supervisor about substandard patient care. Finally,
Mendiondo alleges that CHMC terminated her “because she
demanded that minimum state and federal standards of health
care be maintained.” The allegations contain sufficient facts
under Rule 8(a) to survive dismissal under Rule 12(b)(6).
3356             MENDIONDO v. CENTINELA HOSPITAL
     3.   Wrongful Termination in Violation of Public
          Policy

   [12] To establish her claim for wrongful termination in vio-
lation of the public policies embodied in the FCA, CFCA, and
California Health and Safety Code Section 1278.5, Men-
diondo must allege facts similar to her retaliation claims: that
she was terminated based on her complaints about potentially
false billing practices and/or substandard patient care. See
Haney v. Aramark Unif. Serv., Inc., 17 Cal. Rptr. 3d 336, 348-
49 (Cal. Ct. App. 2004). As detailed above, Mendiondo
alleged sufficient facts to support her retaliation claims. The
same allegations support her claim for wrongful termination
in violation of public policy. Accordingly, her claim should
not have been dismissed.4

V.     CONCLUSION

   We hold that the notice pleading standard in Federal Rule
of Civil Procedure 8(a) applies to claims for wrongful termi-
nation under the FCA and CFCA. Mendiondo’s complaint
meets the Rule 8(a) standard because it contains examples of
potentially false billing and reimbursement practices and sub-
standard patient care; it indicates that Mendiondo complained
to CHMC’s CEO and her supervisor about these issues; and
it explains that CHMC terminated her because of these com-
plaints. These allegations sufficiently notify defendants of the
   4
     In its motion to dismiss, CHMC argued the entire complaint is subject
to dismissal because the allegations are not “simple, concise, and direct,”
as required by Rule 8(e) (amended 2007). Dismissal for failure to meet the
standards in Rule 8(e) is appropriate only in limited circumstances where
a complaint proves patently verbose, confusing, and rambling. See Nevijel
v. N. Coast Life Ins. Co., 651 F.2d 671, 674 (9th Cir. 1981); McHenry v.
Renne, 84 F.3d 1172, 1180 (9th Cir. 1996). Here, despite the inclusion of
extraneous details, the complaint provides fair notice of the wrongs alleg-
edly committed by defendants and does not qualify as overly verbose, con-
fusing, or rambling. Thus, to the extent that the district court relied on
Rule 8(e), dismissal was also in error.
              MENDIONDO v. CENTINELA HOSPITAL          3357
factual basis for each of Mendiondo’s retaliation and wrong-
ful termination claims.

  REVERSED AND REMANDED.