Court Opinion

ID: 4236498
Source: CourtListenerOpinion
Date Created: 2018-01-12 21:00:26.681984+00
Date Added: 2024-06-11T14:43:15.501695
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                             JAN 12 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

UNITED STATES ex rel. DAVID                      No.   16-55406
VATAN, M.D.,
                                                 D.C. No.
              Plaintiff-Appellant,               2:14-cv-08961-PA-SS

 v.
                                                 MEMORANDUM*
QTC MEDICAL SERVICES, INC.;
LOCKHEED-MARTIN CORPORATION,

              Defendants-Appellees.

                    Appeal from the United States District Court
                       for the Central District of California
                     Percy Anderson, District Judge, Presiding

                     Argued and Submitted December 6, 2017
                              Pasadena, California

Before: CANBY and REINHARDT, Circuit Judges, and BLOCK,** District Judge.

      David Vatan appeals the district court’s dismissal of two of the three claims

in his second amended complaint and its denial of leave to amend that complaint.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

      **     The Honorable Frederic Block, United States District Judge for the
Eastern District of New York, sitting by designation.
In these two claims, Vatan alleges that defendants presented false or fraudulent

claims for payment, in violation of 31 U.S.C. § 3729(a)(1)(A), and made, used, or

caused to be made or used false records material to false or fraudulent claims, in

violation of § 3729(a)(1)(B). The district court dismissed for failure to state a claim

under Fed. R. Civ. P. 8(a) and 9(b). We reverse the dismissal and accordingly do

not reach the denial of leave to amend.

      1. Neither Rule 8(a) nor Rule 9(b) requires that Vatan plead the specific

terms of QTC’s contract with the VA. Vatan’s second amended complaint pleads

the contents of that contract pursuant to information and belief and adduces the

factual basis for that belief. Where, as here, the relevant information is within the

defendant’s exclusive possession and control, such pleading is sufficient to satisfy

Rule 9(b)’s particularity requirement. Moore v. Kayport Package Exp., Inc., 885
F.2d 531, 540 (9th Cir. 1989) (affirming that Rule 9(b)’s particularity requirements

“may be relaxed as to matters within the opposing party’s knowledge”); Concha v.

London, 62 F.3d 1493, 1503 (9th Cir. 1995) (“Rule 9(b) . . . requires that plaintiffs

specifically plead those facts surrounding alleged acts of fraud to which they can

reasonably be expected to have access” (emphasis added)); Sanford v.

MemberWorks, Inc., 625 F.3d 550, 558-59 (9th Cir. 2010) (requiring particularity

only where “it is not unreasonable to expect . . . personal knowledge of the relevant

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facts”). The district court’s requirement to the contrary would vitiate the False

Claims Act, by excluding many whistle-blowers who—as here—allege insider

knowledge of wrongdoing that few others would be positioned to reveal and solely

lack access to the corporate documents outlining the precise nature of the

company’s obligations. See United States ex rel. Presser v. Acacia Mental Health

Clinic, LLC, 836 F.3d 770, 778 (7th Cir. 2016).

      Nor does Rule 8(a) require greater specificity. The district court’s hypothesis

that the contract may contain some sort of error rate proffers a defense for QTC,

which it is free to assert—but that speculation does not prevent Vatan from

asserting a claim, based on information and belief, sufficient to withstand a motion

to dismiss. Vatan’s allegation that QTC submitted claims to the VA with

knowledge or in reckless disregard or deliberate ignorance “of [QTC’s] actual

performance of the contractual requirements,” supported by his pleading as to the

nature of that contract, is sufficiently “plausible” to withstand a motion to dismiss

under a theory of implied false certification. See Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009). Contrary to the district court’s assertion, the specific contractual

language and any contemplated error rate in the contract are immaterial to whether

this claim is adequately pled. Vatan alleges that QTC essentially lied to the

government as to whether the files were reviewed. That is a material

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misrepresentation, for purposes of factually false certification, irrespective of any

error rate built into the contract.

       2. Vatan’s complaint otherwise meets Rule 9(b)’s heightened pleading

standard. Vatan has “allege[d] the who, what, when, where, and how of the

misconduct charged, including what is false or misleading . . . and why it is false.”

United States v. United Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016)

(citation and internal quotation marks omitted). The allegations are “specific

enough to give defendants notice of the particular [alleged] misconduct . . . so that

they can defend against the charge.” Id. (quoting Bly-Magee v. Cal., 236 F.3d
1014, 1019 (9th Cir. 2001)).

       QTC’s argument that Vatan has failed to adequately plead “who” was

responsible for the misconduct is incorrect. Vatan has proffered the names of

individuals allegedly involved in perpetuating the purported fraud. He has also

alleged “with specificity how the company itself institutionalized and enforced its

fraudulent scheme.” United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 125

(D.C. Cir. 2015). We have previously found that such allegations sufficiently

identify “who” was involved, such that the defendant has the requisite notice to

“defend against the charge.” United Healthcare, 848 F.3d at 1180-81 (finding

similar allegations sufficient under Rule 9(b)). The same is true here.

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      3. Vatan’s claims satisfy Rule 8(a). Vatan has alleged the requisite

elements of False Claims Act claims under theories of both factually false and

implied false certification. Universal Health Servs., Inc. v. United States ex rel.

Escobar, 136 S. Ct. 1989, 1999 (2016); United States ex rel. Campie v. Gilead

Sciences, Inc., 862 F.3d 890, 898-99 (9th Cir. 2017). Regarding factually false

certification, he alleges that QTC instructed analysts to always answer yes to

question six on the VA checklist, “was the entire claims folder reviewed,”

irrespective of whether that answer was true. He provides specific examples of VA

review in which the answer was, allegedly, not true. He therefore successfully

alleges that QTC “misrepresent[ed] what goods or services . . . it provided to the

government.” Campie, 862 F.3d at 900.

      As to implied false certification, Vatan alleges, in essence, that QTC charged

the government for worthless services and concealed the worthlessness of those

services. That concealment allegedly took the form of misrepresentations on the

checklists that the files had been reviewed, while “omitting critical information”

regarding the extraordinarily cursory—in some cases, as alleged by Vatan, nearly

non-existent—nature of that review. See Campie, 862 F.3d at 903. The claims that

Vatan alleges that QTC made here, like the claims in Universal Health Services,

“fall squarely within the rule that half-truths—representations that state the truth

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only so far as it goes, while omitting critical qualifying information—can be

actionable misrepresentations.” 136 S. Ct. at 2000.

      We REVERSE and REMAND for further proceedings consistent with this

disposition.

      REVERSED and REMANDED.

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