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United States ex rel. Wagner v. Care Plus Home Health Care, Inc.

United States District Court, N.D. Oklahoma

December 11, 2017

UNITED STATES OF AMERICA, ex rel. SANDRA WAGNER, Plaintiff,
v.
CARE PLUS HOME HEALTH CARE, INC.; PRASAD ITTY; and KUMAR GOVIND, Defendants.

          OPINION AND ORDER

          GREGORY K. FRIZZELL, JUDGE.

         Before the court is the Motion to Dismiss for Failure to State a Claim [Doc. #39] of defendants Care Plus Home Health Care, Inc., Prasad Itty, and Kumar Govind (collectively, “defendants”). For the reasons set forth herein, the motion is granted in part and denied in part.

         I. Factual Background

         Defendant Care Plus Home Health Care, Inc. is a certified home health agency purportedly owned and operated by individual defendants Prasad Itty and Kumar Govind. Plaintiff Sandra Wagner was formerly employed by Care Plus, first as an independent contractor registered nurse from May 2006 to January 2013, and then as the Office Director of Nursing from January 2013 until her termination in February 2015.

         While employed as the Office Director of Nursing, Wagner alleges that she “determined that Defendants' business practices were designed to fraudulently maximize billing, primarily to Medicare.” [Doc. #2, ¶ 28]. Specifically, Wagner asserts that she witnessed two types of fraudulent conduct by defendants: (1) continuing to provide services to patients who were not eligible for home health services under the Medicare guidelines, and billing Medicare for such unnecessary and/or ineligible services; and (2) falsifying required documentation and medical records to increase Medicare billings and avoid reimbursement of Medicare overpayments. Wagner estimates that defendants' alleged scheme has been ongoing since 2010, and resulted in losses to the United States in the amount of approximately $1, 490, 000 per year. [Doc. #2, ¶ 133].

         Wagner initiated this qui tam action against defendants on behalf of the United States pursuant to False Claims Act, 31 U.S.C. §§ 3729 et seq.[1] The Complaint asserts three causes of action: (1) presentation of false claims in violation of 31 U.S.C. § 3729(a)(1)(A); (2) making or using a false record or statement to cause a false or fraudulent claim to be paid in violation of 31 U.S.C. § 3729(a)(1)(B); and (3) making or using a false record or statement to avoid an obligation to pay (refund) money to the government in violation of 31 U.S.C. § 3729(a)(1)(G). See [Doc. #2].

         Defendants move to dismiss count I pursuant to Fed.R.Civ.P. 12(b)(6) and all counts pursuant to Fed.R.Civ.P. 9(b). See generally [Doc. #39].

         II. Standard for Motion to Dismiss

         A. Fed.R.Civ.P. 12(b)(6)

         In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court must determine whether the plaintiff has stated a claim upon which relief can be granted. A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plausibility requirement “does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence” of the conduct necessary to make out the claim. Id. at 556. “[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (quotations omitted). The court “must determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Lane v. Simon, 495 F.3d 1182, 1186 (10th Cir. 2007) (quoting Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007)).

         B. Fed.R.Civ.P. 9(b)

         In addition to Fed.R.Civ.P. 12(b)(6), because liability under the False Claims Act requires a false or fraudulent claim, the requirements of Fed.R.Civ.P. 9(b) must also be satisfied. See U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir. 2006). Pursuant to Fed.R.Civ.P. 9(b), “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”

         The parties disagree as to the level of particularity required by Fed.R.Civ.P. 9(b) relative to claims under the False Claims Act. Citing Sikkenga, defendants argue that Wagner's first two causes of action-presentation of false claims in violation of 31 U.S.C. § 3729(a)(1)(A) and making or using a false record or statement to cause a false or fraudulent claim to be paid in violation of 31 U.S.C. § 3729(a)(1)(B)-require identification of specific false claims actually submitted to the government. [Doc. #39, pp. 9-10; Doc. #44, pp. 1-3]. In opposition, Wagner cites a more recent Tenth Circuit decision, U.S. ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163 (10th Cir. 2010), for the proposition that billing details are not always necessary to satisfy Fed.R.Civ.P. 9(b), as the Rule requires only that FCA claimants allege “the specifics of a fraudulent scheme and provide an adequate basis for a reasonable inference that false claims were submitted as part of that scheme.” [Doc. #42, p. 5 (emphasis omitted) (quoting Lemmon, 614 F.3d at 1172)]. Thus, it is necessary for the court to examine the Tenth Circuit's discussion of Rule 9(b) in both Sikkenga and Lemmon.

         In Sikkenga, the court considered whether a relator had adequately pled a FCA cause of action alleging that the Medicare carrier for the State of Utah obtained unmerited renewals of its contract with Medicare by fraudulently manipulating its Contractor Performance Evaluation Program scores, resulting in every claim made for administrative costs under the contracts being fraudulent. Sikkenga, 472 F.3d at 707. The district court dismissed the FCA claim on the basis that the relator “failed to identify particular claims that were allegedly false under Federal Rule of Civil Procedure 9(b), ” and the relator appealed. Id. at 726.

         In reviewing the district court's dismissal of the FCA cause of action, the Tenth Circuit first noted that “[Fed. R. Civ. P. 9(b)'s] heightened pleading requirements apply to actions under the FCA, ” and generally stated of the rule's heightened requirements: “[a]t a minimum, Rule 9(b) requires that a plaintiff set forth the ‘who, what, when, where and how' of the alleged fraud.” Id. at 726-27 (quoting Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)). Thus, to satisfy the general pleading requirements of Rule 9(b), a pleading must “set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Id. at 727 (quoting Koch v. Koch Indus., 203 F.3d 1202, 1236 (10th Cir. 2000)).

         Specific to claims under the False Claims Act, the Tenth Circuit articulated the Rule 9(b) pleading requirement as follows:

“Underlying schemes and other wrongful activities that result in the submission of fraudulent claims are included in the ‘circumstances constituting fraud and mistake' that must be pled with particularity under Rule 9(b).” United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004). However, unless such pleadings are “linked to allegations, stated with particularity, of the actual false claims submitted to the government, ” id., they do not meet the particularity requirements of Rule 9(b). We agree with our sibling circuit, that:
Rule 9(b)'s directive that ‘the circumstances constituting fraud and mistake shall be stated with particularity' does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reason for his belief that claims requesting illegal payment must have been submitted, were likely submitted or should have been submitted to the Government. United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002).

Id. at 727 (alteration to citations). Thus, in Sikkenga, the Tenth Circuit concluded:

We conclude that [relator's] complaint falls woefully short of adequately pleading that false or fraudulent claims were submitted by [defendant]. As stated by the First Circuit, to satisfy Rule 9(b)'s requirements:
[A] relator must provide details that identify particular false claims for payment that were submitted to the government. In a case such as this, details concerning the dates of the claims, the content of the forms or the bills submitted, their identification numbers, the amount of money charged to the government, the particular goods and services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices are the types of information that may help a relator to state his or her claims with particularity. These details do not constitute a checklist of mandatory requirements that must be satisfied for each allegation included in a complaint. However, like the Eleventh Circuit, we believe that “some of this information, for at least some of the claims must be pleaded in order to satisfy Rule 9(b).”

Id. at 727-28 (alteration in original) (quoting Karvelas, 360 F.3d at 232-33 (footnotes omitted)).

         In Lemmon, the Tenth Circuit again reviewed a district court's dismissal of False Claims Act causes of action on the basis that the relator “failed to ‘[t]ie those allegations to an identifiable, plausible ‘false claim' within the meaning of the False Claims Act.” Lemmon, 614 F.3d at 1167 (alteration in original). To determine whether the relator's complaint satisfied Rule 9(b), the court applied the following standard:

Rule 9(b) supplements 8(a) in setting forth the pleading requirements under the FCA. Rule 9(b) states that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Our pre-Twombly cases required plaintiffs pursuing claims under the FCA to plead the “who, what, when, where and how of the alleged [claim].” Sikkenga, 472 F.3d at 727. This language has been read to require plaintiffs to identify the time, place, content, and consequences of the fraudulent conduct. See, e.g., Koch, 203 F.3d at 1236 (quoting Lawrence Nat'l Bank v. Edmonds, 924 F.2d 176, 180 (10th Cir. 1991)). Though Twombly and Iqbal clarified 9(b)'s requirements, the Rule's purpose remains unaltered. Namely, “to afford defendant fair notice of plaintiff's claims and the factual ground upon which [they] are based . . . .” Id. (quoting Farlow v. Peat, Marwick, Mitchell & Co., 956 F.2d 982, 987 (10th Cir. 1992)); see also 5A Wright & Miller § 1298 (collecting cases in support of the proposition that “the most basic consideration for a federal court in making a judgment as to the sufficiency of a pleading for purposes of Rule 9(b) . . . is the determination of how much detail is necessary to give adequate notice to an adverse party and enable that party to prepare a responsive pleading.”). Thus, claims under the FCA need only show the specifics of a fraudulent scheme and provide an adequate basis for a reasonable inference that false claims were submitted as part of that scheme. See, e.g., United States ex rel. Duxbury v. Ortho Biotech Prods., 579 F.3d 13, 29 (1st Cir. 2009); United States ex rel. Lusby v. Rolls-Royce Corp., 470 F.3d 849, 854-55 (7th Cir. 2009); United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009).

Lemmon, 614 F.3d at 1171-1172 (alterations in original) (emphasis added).

         The court is not blind to the apparent tension observed by some between Sikkenga and Lemmon. See U.S. ex rel. Polukoff v. St. Mark's Hosp., No. 16-cv-00304-JNP-EFJ, 2017 WL 237615, at *5 (D. Utah Jan. 19, 2017) (“The standard adopted in Lemmon is not compatible with some of the language found in Sikkenga. . . . Thus, Lemmon tacitly overruled language from Sikkenga requiring specific allegations regarding the bills submitted to the government.”); Brief for the United States as Amicus Curiae at 10 and 14, U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 134 S.Ct. 1759 (2014) (No. 12-1349), 2014 WL 709660 (although recognizing dispute was not “clearly defined, ” noting “[t]here is, however, at least some continuing uncertainty as to whether a qui tam complaint satisfies Rule 9(b) if it contains detailed allegations giving rise to a reasonable inference that false claims were submitted to the government, but does not identify specific requests for payment”).

         However, the court is persuaded by decisions adopting a more nuanced approach. See U.S. ex rel. Chorches v. Am. Med. Response, 865 F.3d 71 (2d Cir. 2017); U.S. ex rel. Prather v. Brookdale Senior Living Cmtys. Inc., 838 F.3d 750 (6th Cir. 2016). In Prather, citing Sikkegna, the Sixth Circuit counted the Tenth Circuit among those circuit courts applying a “heightened pleading standard” to FCA claims which generally required allegations of the actual submission of a specific request for payment to the government. Prather, 838 F.3d at 768-69 and 772. The Sixth Circuit cited Lemmon, however, as evidence of the Tenth Circuit's ...


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