Summary
holding that plaintiff's amended complaint fails to identify a specific false claim made by any of the defendants named
Summary of this case from United States ex rel. Clausen v. Laboratory Corp. of America, Inc.Opinion
No. C-96-0704 DLJ.
November 10, 1997
ORDER
On October 1, 1997, the Court heard arguments on defendant Alpha Therapeutic's motion to dismiss plaintiff Michael K. Riley's complaint. Having considered the arguments of counsel, the papers submitted, the applicable law, and the record in this case, the Court hereby GRANTS defendant's motion to dismiss plaintiff's complaint without leave to amend.
I. BACKGROUND
A. Factual Background and Procedural History
This is a qui tam action filed under seal on February 26, 1996 pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq. The United States filed a notice of decision not to intervene on December 10, 1996, and the complaint was unsealed and ordered served on the defendants on December 12, 1996. Of the defendants named in the complaint, only Alpha Therapeutic Corporation has been served.
Plaintiff Michael K. Riley is a former employee of defendant, which specializes in providing in-home infusion services for hemophiliacs and others requiring frequent medical care. Riley previously filed a state law wrongful termination action against Alpha in the Los Angeles County Superior Court.Riley v. Alpha Therapeutic Corp., et al., No. BC 097516 (1994). Alpha was granted summary judgment on all claims on February 8, 1995. A final judgment was entered, and Riley's appeal to the California Court of Appeal was rejected.
Riley's original complaint in this Court alleged that Alpha submitted false Medicare claims, violated the anti-kickback provisions of the Medicare Act ( 42 U.S.C. § 1320 et seq.), and terminated him for bringing the actions complained of to the attention of his supervisors. On March 31, 1997, defendant Alpha moved to dismiss the complaint on a number of grounds. Defendant argued that plaintiff had failed to comply with the requirements of Federal Rule of Civil Procedure 9(b); that plaintiff's allegations, even if properly pled, would not give rise to a cause of action; that the case was improperly brought in this district; and that plaintiff's allegation of wrongful termination is barred by the doctrine of res judicata.
Without considering the merits of the claims, the Court dismissed the original complaint, finding that the particularity requirement of Rule 9(b) had not been satisfied. Plaintiff was given leave to amend, and on August 5, 1997 he filed an amended complaint with the Court. In his amended complaint, plaintiff brings a cause of action for a violation of the False Claims Act. Plaintiff alleges that Alpha defendant knowingly and intentionally submitted fraudulent claims related to medicare and medicaid programs, that Alpha defendant violated the anti-kickback provisions of the Medicare Act ( 42 U.S.C. § 1320 et seq.), and that Alpha terminated Riley in retaliation for bringing the actions complained of to the attention of his supervisors. Amended Complaint ¶¶ 13, 20, 28.
Defendant moves to dismiss the amended complaint on a number of grounds. Plaintiff has responded, and the United States has asked the Court to reconsider the amicus brief it filed in opposition to defendant's original motion to dismiss. Defendant then filed a reply brief in support of its motion, and the motion is now before the Court.
B. Legal Standard
1. Federal Rule of Civil Procedure 9(b)
Rule 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." The Ninth Circuit has held that Rule 9(b) is satisfied if the time, place and content of the allegedly fraudulent representation and the identity of the person engaged in the fraud are specified.See, e.g., Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987). Furthermore, in order to survive a motion to dismiss, a plaintiff must also allege specific facts showing how and why a statement was false or misleading at the time it was made. In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548-49 (9th Cir. 1994) (en banc).
2. Federal Rule of Civil Procedure 12(b)(6)
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. The question presented by a motion to dismiss is not whether a plaintiff will prevail in the action, but whether she is entitled to offer evidence in support of her claim. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).
In answering this question, the Court must assume that plaintiff's allegations are true and must draw all reasonable inferences in plaintiff's favor. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). Even if the face of the pleadings suggests that the chance of recovery is remote, the Court must allow plaintiff to develop her case at this stage of the proceedings. United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981).
If the Court chooses to dismiss the complaint, it must then decide whether to grant leave to amend. In general, leave to amend is only denied if it is clear that amendment would be futile and that "the deficiencies of the complaint could not be cured by amendment." Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987) (quoting Broughton v. Cutter Laboratories, 622 F.2d 458, 460 (9th Cir. 1980) (per curiam)); see Poling v. Morgan, 829 F.2d 882, 886 (9th Cir. 1987) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)) (futility is basis for denying amendment under Rule 15). However, in its July 8, 1997 Order, the Court granted plaintiff leave to amend with a warning that unless he could satisfy the pleading requirements of Rule 9(b), his amended complaint would be dismissed without leave to amend. July 8, 1997 Order at 6.
II. DISCUSSION
A. Plaintiff's Pleading
1. False Claims Violations
Defendant's first ground for dismissal is its claim that plaintiff's amended complaint again fails to comply with Federal Rule of Civil Procedure 9(b). It is clear that, because the False Claims Act was designed to sanction and prevent frauds perpetrated against the United States, the particularity requirements of Rule 9(b) apply to a cause of action brought under the False Claims Act. See, e.g., Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2nd Cir. 1995) (citing cases); Cooper v. Blue Cross Blue Shield, Inc., 19 F.3d 562, 568 (11th Cir. 1994).
In its July 8, 1997 Order, the Court found that plaintiff "failed to state the identity of the person or persons allegedly engaged in the fraud." July 8, 1997 Order at 5. The Court further found that plaintiff failed to allege facts supporting an inference that defendant's statements allegedly constituting fraud were false. Id. at 5. Specifically, the Court instructed plaintiff to amend his original complaint to allege specific instances of fraud, and to plead facts sufficient to establish when the fraudulent statements were made, what those statements contained, who submitted the statements and in what way they were fraudulent. Id. at 6. The Court warned plaintiff that without this particularity, the amended complaint would be dismissed without leave to amend. Id.
Plaintiff amended his complaint to allege that "Nancy Ball, E. Edward Matveld, and Pete Dehart submitted or caused to be submitted, false claims for pharmaceuticals including Venoglobulin to the United States of America." Amended Complaint ¶ 11. These specific names were added in an effort to satisfy the Court's earlier finding that plaintiff failed to state the identity of the person or persons allegedly engaged in the fraud. Plaintiff's amended complaint, however, still fails to identify a specific false claim made by any of the named persons.
Plaintiff also included doctors' names, locations, and patient treatment dates in his amended complaint. These additional facts set forth in the amended complaint establish that named doctors treated patients with defendant's products on specific occasions. Plaintiff contends that these facts further establish that the named doctors received kickbacks for treating patients with defendant's products and that these kickbacks led to the fraudulent overcharging of the government. The inclusion of doctors' names, locations, and patient treatment dates, however, does not remedy any of the inadequacies identified in the original complaint. The fact that unnamed patients were treated by certain doctors on specified dates is insufficient by itself to establish that there was a violation of the Medicare Act's anti-kickback provisions let alone to establish that such treatment was part of a fraudulent scheme.
Also in an attempt to plead facts sufficient to establish fraudulent activity, plaintiff attached Exhibit "A" to his amended complaint, a partially redacted list of Dr. Victor Cohen's patients who were treated with defendant's products. Amended Complaint ¶ 15. This list of patients, however, fails to support plaintiff's general allegation of fraud. The fact that Dr. Cohen prescribes defendant's products in treating his patients fails to establish that any fraudulent claim was filed, when such a fraudulent claim might have been filed, who might have filed the fraudulent claim, and any specific statements made which might be false. Accordingly, Exhibit "A" fails to remedy the inadequacies identified in the original complaint.
In the amended complaint, plaintiff makes the conclusory allegation that Nancy Ball, E. Edward Matveld, and Pete Dehart submitted false claims to the government. For the reasons already stated, plaintiff's false claims pleading is plainly insufficient to meet the requirements of Rule 9(b).
The Court finds the amended complaint once again simply fails to allege the existence of any false claim, let alone to meet the heightened pleading standards of Wool v. Tandem Computers, Inc. and In re GlenFed, Inc. Sec. Litig. as set forth above. Accordingly, the Court finds that plaintiff has failed to plead his amended complaint with the particularity required under Rule 9(b). As plaintiff has been given leave to comply with the Court's Order and has failed to do so, the Court finds that plaintiff's allegations must be dismissed without leave to amend.
In response, plaintiff again cites district court decisions in other circuits finding that Rule 9(b) does not require a plaintiff to state the time, place and content of allegedly false statements in order to survive a motion to dismiss. In so doing, plaintiff relator ignores the long standing interpretation given to Rule 9(b) in this Circuit.
Plaintiff also argues that he should be able to amend his complaint after discovery has revealed the particulars necessary for Rule 9(b) pleading. This is, of course, directly contrary to the purpose of Rule 9(b), namely that plaintiffs show that there is some substance to their claim of fraud before a defendant will be subjected to the rigors of the discovery process.
2. Kickback and Wrongful Termination Allegations
Plaintiff contends that Alpha defendant violated the antikickback provisions of the Medicare Act ( 42 U.S.C. § 1320et seq.) and wrongfully terminated him in retaliation for complaining to his supervisors. Defendant maintains that plaintiff fails to allege with particularity the factual basis for his kickback allegations. Further, defendant maintains that plaintiff's allegation of wrongful termination, contained at ¶ 28 of his amended complaint, is barred by the doctrine of res judicata, as similar claims have already been dismissed by the state court. However, plaintiff did not bring separate causes of action for kickback violations and wrongful termination; instead the allegations are made within his cause of action under the False Claims Act. As the Court has concluded, plaintiff's cause of action under the False Claims Act fails because it was not pled with the required specificity. Therefore, plaintiff's allegations of wrongful termination and kickback violations fail alongside the cause of action under the False Claims Act.
III. CONCLUSION
For the foregoing reasons, the Court hereby GRANTS defendant's motion to dismiss without leave to amend.
IT IS SO ORDERED.
JUDGMENT
Pursuant to this Court's Order of November 10 1997, the Court hereby enters judgment in favor of defendant ALPHA THERAPEUTIC CORPORATION and against plaintiff UNITED STATES OF AMERICA ex rel. MICHAEL K. RILEY.
IT IS SO ADJUDGED.