Summary
holding that Government's contract and unjust enrichment claims accrued as of date of submission of claims
Summary of this case from In re Cardiac Devices Qui Tam LitigationOpinion
02-CV-0305E(Sr)
October 30, 2002
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
The United States filed this action against the Erie County Medical Center ("ECMC") April 22, 2002 asserting claims for alleged violations of the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"), and, in the alternative, claims for fraud, breach of contract, unjust enrichment and payment under mistake of fact. An Amended Complaint was filed August 23, 2002. ECMC filed a motion to dismiss September 12, 2002, which was argued and submitted October 4, 2002. For the reasons stated hereinbelow, such motion will be granted in part and denied in part.
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("FRCvP"), this Court must "accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor" — Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.), cert. denied, 513 U.S. 836 (1994) — and cannot dismiss the complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Accordingly, this Court must not consider whether the claims will ultimately be successful, but merely "assess the legal feasibility of the complaint." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998).
ECMC has an agreement with the plaintiff that permits it to treat Medicare patients and to obtain reimbursement for such services. Plaintiff alleges, inter alia, that ECMC submitted fraudulent Medicare claims for reimbursement of monies expended for drugs and biologicals through Part A of Medicare in an amount of $121,915.58. Plaintiff further alleges that such expenditures for drugs and biologicals are not covered by Medicare. Medicare Part A is a federally subsidized program that provides eligible recipients coverage for inpatient services such as hospitalization, skilled nursing facilities, hospice care and home health services ("Part A"). The federal government contracts with fiscal intermediaries to administer Medicare. Such fiscal intermediaries use federal funds to pay claims submitted by health care providers. Empire Medicare Services ("Empire") is the Part A fiscal intermediary for, among others, New York State.
42 U.S.C. § 1395 et seq. is commonly and generally known as Medicare. See Greater New York Hosp. Ass'n v. United States, 1999 WL 1021561, at *1 (S.D.N.Y. 1999) ("The Medicare Act, Title XVIII of the Social Security Act of 1935, creates a federally subsidized medical program that reimburses doctors for medical services provided to qualified elderly and disabled persons. Medicare Part A covers Medicare patients' inpatient care, see 42 U.S.C. § 1395c-1395i-2, and Medicare Part B covers Medicare patients' professional medical care, such as diagnostic and ambulatory services, see 42 U.S.C. § 1395j-1395w."). Medicare reimbursement is "an exceedingly complex legislative and administrative scheme." Huntington Hosp. v. Thompson, ___ F.3d ___, 2002 WL 31258021, at *1 (2d Cir. 2002).
See footnote 2, supra.
Medicare Part B provides coverage for outpatient services.
In addition to Part A and Part B, there is a third type of claim known as the Part B of A claim ("Ancillary Claim"), which covers inpatient ancillary services. Ancillary Claims are a class of Part B claims processed through the Part A fiscal intermediary because of the inpatient's stay. Ancillary Claims are a limited class of expressly covered claims rendered during an ineligible inpatient visit. Ancillary claims in this case are (1) certain immuno-suppressive drugs, (2) Hepatitis B vaccination, (3) Pneumococcal pneumonia vaccinations and (4) Influenza Virus vaccinations. Am. Compl., at ¶ 12. Ancillary Claims are also referred to as UB-92 claims. Plaintiff alleges that ECMC submitted 76 fraudulent Ancillary Claims with respect to non-covered pharmacy items between May 11, 1990 and August 26, 1994.
Part A coverage may not apply to inpatient services where (1) a patient's Part A benefits are exhausted, (2) the services are unreasonable or unnecessary or (3) the patient is ineligible for Medicare.
F/k/a UB-82.
ECMC contends that it is non sui juris on the ground that it does not have a legal existence separate from that of Erie County. FRCvP 17(b) provides in relevant part that "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." See also Yonkers Comm'n on Human Rights v. City of Yonkers, 654 F. Supp. 544, 551 (S.D.N.Y. 1987) (applying FRCvP 17(b)). Indeed, "[a]s creatures of statute, arms or departments of the municipal government have only those powers which are expressly granted by statute and those powers which are necessary to implement the expressed powers." Ibid. (citing People ex rel. Municipal Gas Co. v. Pub. Serv. Comm'n, 224 N.Y. 156, 165 (1918)). Accordingly, this Court must consult the Erie County Charter to determine which powers were granted to ECMC.
See also 26 N.Y.Jur.2d § 679 (2001) ("Governmental agencies have only those powers which are conferred expressly or by necessary implication; power is not to be inferred, and the principle of strict construction should be applied in interpreting statutory grants of power.").
Section 1602(C) of the Erie County Charter provides in relevant part:
"The board of managers [of ECMC] shall have and exercise all the powers and duties of a board of managers of a public general hospital under New York statutes not inconsistent with the provisions of this section of the Erie county charter, and shall also have and exercise those powers and duties conferred or imposed on the board by the Erie county charter, the administrative code, and subsequent local law. Except as otherwise specifically provided, this section shall supercede all other provisions of the Erie county charter and administrative code as to matters herein contained, and in accordance therewith, the board shall exclusively have and exercise the following powers and duties:
7. The board may institute actions at law and in equity for the collection of claims and obligations due to the medical center from any and all causes ***." (Emphasis added).
The first sentence of section 1602(C) incorporates by reference the general powers and duties accorded ECMC under the County Charter, whereas the second sentence enumerates certain power and duties that are exclusively held by ECMC.
All public general hospitals established pursuant to the Public Authorities Law expressly permit such entities to "sue or be sued." See N.Y. Pub. Auth. Law § 3305 (Westchester County Medical Center), § 3404 (Nassau County Medical Center), § 3605 (Clifton-Fine Hospital); cf. N.Y. Pub. Auth. Law § 3554 (Roswell Park Cancer Institute). Section 1602(C) incorporates by reference the "sue or be sued" provision of such sections. Accordingly, ECMC may sue or be sued under the express — albeit incorporated by reference — provisions of the Erie County Charter.
See also N.Y. Pub. Auth. Law § 3301(1) ("Westchester County Medical Center is a 4public hospital ***").
The Court does not address whether the capacity to be sued constitutes a power "necessary to implement the expressed powers" possessed by ECMC. Yonkers Comm'n, at 551.
Furthermore, the power to "sue or be sued" is not inconsistent with the other provisions of section 1602(C). At first blush, one may argue that section 1602(C)(7) — which permits ECMC to, inter alia, "institute actions at law and in equity for the collection of claims and obligations" — is inconsistent with the power to sue or be sued. In other words, if ECMC was given the general power to sue or be sued, it would be redundant to grant it the power to sue for the collection of claims. Such an argument, however, would overlook the second sentence of section 1602(C), which enumerates the powers that are exclusively held by ECMC — as opposed to powers that may be concurrently held with the County. The first sentence of section 1602(C) — which incorporates by reference the power to sue or be sued — is not inconsistent with section 1602(C)(7). Accordingly, ECMC is sui juris.
This Court's interpretation of section 1602(C) is further supported by equitable considerations. It would be inequitable to find that ECMC, on the strength of section 1602(C)(7), could sue but not be sued with respect to the collection of claims. Likewise, it would be an odd result if ECMC could enter into contracts, but could not be sued for the breach of such contracts.
The Erie County Charter incorporates by reference the power to sue or be sued. Accordingly, the cases cited by ECMC are distinguishable. See e.g., Gonzalez v. City of New York, 1999 WL 549016, at *1 (S.D.N.Y. 1999) (finding that the district attorney's office did not have an existence separate from the district attorney). Moreover, U.S. ex rel. Chandler v. Hektoen Institute, 35 F. Supp.2d 1078, 1086 (N.D.Ill. 1999) is not applicable because it does not involve New York law. Indeed, courts that have found municipal entities non sui jurist have based such decisions on the capacity to sue or be sued. See Hall v. City of White Plains, 185 F. Supp.2d 293, 303 (S.D.N.Y. 2002) (holding that the White Plains Department of Public Safety was non sui juris because it was merely an administrative arm of the city that could not sue or be sued); Davis v. Lynbrook Police Dep't, 2002 WL 31059277, at *11 (E.D.N.Y. 2002) (citing Hall and finding police department non sui juris); Baker v. Cty. Agency for Children's Servs., 1999 WL 260948, at *2 (E.D.N.Y. 1999) (finding Administration for Children Services non sui juris because neither state nor municipal law conferred upon it the power to sue or be sued); cf. Foster Wheeler Broome Cty. Inc. v. Cty. of Broome, 275 A.D.2d 592, 595 (3d Dep't 2000) (finding that public benefit corporation was "separate, distinct and independent" from the county because it was delegated the power to, inter alia, sue or be sued).
ECMC also contends that municipalities are not subject to the FCA on the ground that such imposes punitive damages. This Court must first determine whether the FCA's definition of "person" in section 3729(a) includes municipal entities. For the following reasons, this Court concludes that it does not. Section 3729(a) provides, inter alia, that:
"Any person who —
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government *** a false or fraudulent claim for payment or approval *** is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person ***."
Although section 3729(a) defines "knowing," "knowingly" and "claim," it does not define "person." See 31 U.S.C. § 3729(b) and (c); United States ex rel. Chandler v. Cook Cty., 277 F.3d 969, 974 (7th Cir.), cert. granted, ___ U.S. ___, 122 S.Ct. 2657 (2002). Whatever its meaning, "person" — for purposes of section 3729(a) has not been substantively altered since 1863. See Vermont Agency Of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 783 fn. 12 (2000) (noting that "the term `person' has remained in the statute unchanged since 1863").
See also Anna M. Piazza, Select Recent Court Decisions, 28 AM. J. L. MED. 132 (2002) (discussing Chandler).
Accordingly, what Congress intended "person" to mean when it enacted the FCA in 1863 governs how that word is used in section 3729(a).
There is scant evidence as to Congress's legislative intent with respect to the meaning of "person" as originally used in the FCA and any attempt to divine such is parlous. Although "person" presumptively included corporations by 1844 — see Louisville R.R. v. Letson, 43 U.S. 497, 555-558 (1844) — it did not presumptively include municipal corporations until 1868. See Cowles v. Mercer Cty, 74 U.S. 118, 121-122 (1868). Chandler erroneously states that "[t]he Supreme Court has noted that, by 1844, both private and municipal corporations were presumptively included within the meaning of `person.'" Chandler, at 974 (emphasis added) (citing Monell v. Dep't of Soc. Serv., 436 U.S. 658, 685-689 (1978)). A closer reading of Monell and the cases cited therein, however, indicates that Monell noted that the Letson presumption had not been extended to municipal corporations until 1868 (i.e., Cowles) — not in 1844 when Letson was decided. Monell, at 687-688. Consequently, although Congress may have intended that "person" as used in the FCA included municipal entities in 1863 — such is far from clear. Subsequent to the FCA's enactment, Congress intended "person" to include municipal entities. See Monell, at 687-690 (discussing the Civil Rights Act of 1871 and finding that "person" includes municipal corporations within the meaning of 42 U.S.C § 1983). What Congress intended in 1871, however, does not shed any light on what it intended in 1863 when it enacted the FCA. See Wright v. West, 505 U.S. 277, 295 fn. 9 (1992) ("the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.") (citations omitted). Indeed, in light of the Supreme Court's decision in Cowles in 1868 — the meaning of "person" may have expanded after the FCA's enactment in 1863 but before enactment of the Civil Rights Act in 1871. In any event, there is no evidence that Congress intended to subject municipalities to the FCA. See Graber, at 352. Consequently, post-1863 events do not constitute reliable evidence of Congress's legislative intent with respect to the FCA as originally enacted.
See United States ex rel. Graber v. City of New York, 8 F. Supp.2d 343, 352 (S.D.N.Y. 1998); United States ex rel. Dunleavy v. Cty. of Delaware, 279 F.3d 219, 224 (3d Cir. 2002); United States ex rel. Garibaldi v. Orleans Parish Sch. Bd., 244 F.3d 486, 494 (5th Cir. 2001).
The persuasiveness of Chandler is therefore somewhat diminished. Additionally, Chandler states that:
"[i]n discussing the whistleblower provision, the Committee report defines `employers' to `include public as well as private sector entities.' Unless municipalities are subject to suit under the FCA, Congress would have no reason to be concerned that municipalities might retaliate against their employees for bringing FCA claims. Given that states are excluded from the definition of "person" within the FCA, the only public entities remaining are municipal corporations and other political subdivisions of states which are not arms or agencies of state government." Chandler, at 975 (citation omitted).
This Court respectfully disagrees because it is possible for a municipality to be liable under 31 U.S.C. § 3730(h), the whistleblower provision of the FCA, without being liable under section 3729(a). For example, if a relator brought a qui tam action against a private corporation that formerly employed him, but, at the behest of the private company, was discharged by a municipality that currently employed him, the municipality could be subject to section 3730(h) without being subject to section 3729(a). Cf. Nguyen v. City of Cleveland, 121 F. Supp.2d 643, 648-649 (N.D.Ohio. 2000).
Unlike the FCA's legislative history, it is beyond cavil that Congress, in enacting the Civil Rights Act of 1871, intended to subject states and municipalities to suit for constitutional deprivations made under color of law. Monell, at 683-691.
See footnote 12.
See e.g., Garibaldi, — see footnote 12 — at 490 fn. 3 (finding "post-enactment legislative history" to be "`utterly irrelevant' to determining the meaning of the term person in the liability portions of the [FCA]"); cf. United States ex. rel. Rosales v. San Francisco Housing Auth., 173 F. Supp.2d 987, 1014 (N.D.Cal. 2001) ("the intent of Congress in 1986 (arguably to enhance the punitive aspects of the FCA) should not be confused with the antecedent question of whether Congress in 1863 intended local governments and their agencies to be `persons' under the Act.").
Moreover, other considerations suggest that Congress did not intend to include municipal corporations within the term "person" when it enacted the FCA. First, the FCA's legislative history indicates that "the FCA was enacted in 1863 with the principal goal `of stopping the massive frauds perpetrated by large [private] contractors during the Civil War." Vermont Agency, at 781 (citation omitted).
See also Vermont Agency, at 781 fn. 10 (noting that the FCA was intended to reach all types of fraud, but not all types of "fraudsters").
Accordingly, "Congress in 1863 did not contemplate that states and cities would be defendants in False Claims Act suits, nor did it intend that they should be so subjected to False Claims Act liability." Graber, at 352. Second, the original FCA did not use the simple term "person," but rather imposed liability on a "person not in the military or naval forces of the United States ***." Vermont Agency, at 782 (quoting Act of Mar. 2, 1863, ch. 67, § 3, 12 Stat. 698). It seems odd that Congress would contemplate the inclusion of municipalities when it drafted such phraseology. See Graber, at 352 fn. 10; cf. United States ex rel. Long v. SCS Bus. Tech. Inst., 173 F.3d 870, 875 (D.C. Cir. 1999), cert. denied, 530 U.S. 1202 (2000). Although the same can be said of non-municipal corporations, such had been presumed to be "persons" under Letson in 1844, whereas the Letson presumption was not extended to municipal corporations until Cowles in 1868 — five years after the FCA had been enacted. See Monell, at 687-688. Accordingly, this Court finds that municipal corporations were not "persons" within the meaning of the FCA as originally enacted. Moreover, as noted above, Congress did not substantively alter "person" subsequent to the FCA's enactment in 1863. See Vermont Agency, at 783 fn. 12.
See also Vermont Agency, at 782 (noting that the FCA "did not even make clear that private corporations were" covered by the language "any person not in the military or naval forces of the United States ***" — especially in light of the criminal penalties including imprisonment).
But see United States ex rel. Wilson v. Graham Cty. Soil Water Conserv. Dist., 2002 WL 487162, at *9 (W.D.N.C. 2002) (finding that municipalities are "persons" within the meaning of the FCA but finding that municipalities are immune from FCA liability); United States ex rel Satalich v. City of Los Angeles, 160 F. Supp.2d 1092, 1105 (C.D.Cal. 2001) (noting that "person" presumptively included municipalities when the FCA was enacted but finding that municipalities are immune from FCA liability); Rosales — see footnote 16 ___, at 1008-1010 (finding that municipalities are "persons" within the meaning of the FCA); United States ex rel. Giles v. Sardie, 191 F. Supp.2d 1117, 1123-1124 (C.D.Cal. 2000) (same). These decisions may be distinguished by the uniformly erroneous assumption that "person" included municipalities in 1863 because it did so in 1871 — as well as the uniform failure to address the Supreme Court's decision in Cowles, which extended the Letson presumption to municipal corporations. See Monell, at 687-688.
Inasmuch as the parties did not address the issue, this Court assumes arguendo that section 3729(a)'s definition of "person" is the same for actions brought by relators as it is for qui tam actions commenced by the United States under section 3730(b) — a question left open by Vermont Agency. See Vermont Agency, at 787 fn. 18 ("Although the dissent concludes that States can be `persons' for purposes of commencing an FCA qui tam action under § 3730(b) ***, we need not resolve that question here, and therefore leave it open.") (citation omitted); but see United States v. Univ. Hosp. at Stony Brook, 2001 WL 1548797, at *3 (E.D.N.Y. 2001) (holding that "in an action by the United States against a state, claiming a violation of the False Claims Act, the state is a `person.'").
A majority of the courts that have addressed this issue "have concluded that municipalities, like states, are immune from FCA claims brought by qui tam relators." Satalich, at 1101; see also United States ex rel. Mills v. State of New York, 2002 WL 31045940, at *8 fn. 11 (S.D.N.Y. 2002) (collecting cases addressing the applicability of the FCA to municipalities). In so finding, many courts have relied extensively on City of Newport v. Fact Concerts, 453 U.S. 247 (1981), in finding that municipalities are immune from FCA liability because its remedies are "punitive in nature." See e.g., United States ex rel. Harrington v. Sisters of Providence in Oregon, 209 F. Supp.2d 1085, 1087-1088 (D.Ore. 2002) (collecting cases and citing Vermont Agency). Inasmuch as the FCA was not deemed "punitive" when it was enacted in 1863, the 1986 amendment of the FCA — which Vermont Agency held to be "punitive in nature" — does not alter what Congress intended "person" to mean in 1863 — which, as noted above, has not been subsequently altered. Consequently, this Court need not address whether municipalities are immune from FCA liability under City of Newport.
See footnote 19.
City of Newport holds that municipalities one immune from punitive damages under 42 U.S.C. § 1983. Id. at 271.
Harrington states that Graber was impliedly overruled by the Second Circuit Court of Appeals in U.S. v. State of Vermont Agency of Natural Resources, 162 F.3d 195, 207 (2d Cir. 1998). Id. at 1087; see also Rosale — see footnote 16 ___, at 1008 (finding that the Second Circuit Court of Appeals's decision in Vermont Agency overruled Graber's holding that municipalities are not "persons" within the meaning of the FCA — despite its finding that Vermont Agency did not address the issue of municipalities). Inasmuch as the Court of Appeals was reversed by the Supreme Court in Vermont Agency, the assumption that Graber was impliedly overruled is no longer valid; Graber is good law.
See Vermont Agency, at 784-785 (citing United States v. Bornstein, 423 U.S. 303, 315 (1981)).
Although the 1986 amendments to the FCA did not alter "person" within the meaning of the FCA, they nonetheless support the conclusion that "person" does not include municipalities. Vermont Agency held that states were not "persons" within the meaning of section 3729(a) because section 3733 (which allows the Attorney General to issue civil investigative demands) defines "person" — "[f]or purposes of this section" — to include States. See Vermont Agency, at 783-784 (emphasis added). The Supreme Court reasoned that a comparison of the definition of "person" in section 3733, which included States, with the term "person" in section 3729(a) "suggests that States are not `persons' for purposes of qui tam liability under § 3729." Id. at 784. This reasoning applies with equal force here. See Graber, at 351-352.
Section 3733 defines "person" to include "any natural person, partnership, corporation, association, or other legal entity, including any State or political subdivision of a State." 31 U.S.C. § 3733(1)(4). Municipalities fall under the rubric of "other legal entity," which includes "any *** political subdivision of a State." Ibid. Accordingly, the reasoning of Vermont Agency suggests that municipalities "are not `persons' for purposes of qui tam liability under section 3729." Vermont Agency, at 784.
See BLACK'S LAW DICTIONARY 1179 (7th ed. 1999) (defining "political subdivision" as a "division of a state that exists primarily to discharge some function of local government.").
If Congress believed that "person" standing alone (i.e., section 3729(a)) included municipalities, then there would be no need to define "person" to explicitly include municipalities in section 3733. See Vermont Agency, at 784 fn. 14. Although section 3733's definition also explicitly includes, inter alia, corporations, such were presumed to be included in the term "person," whereas, as noted above, this presumption did not extend to municipal corporations when the FCA was enacted.
This Court's interpretation of "person" as used in section 3729(a) is further supported by reference to the Program Fraud Civil Remedies Act of 1986 ("PFCRA"). Vermont Agency characterized the PFCRA as "a sister scheme creating administrative remedies for false claims." Id. at 786. The PFCRA defines "person" as "any individual, partnership, corporation, association, or private organization." 31 U.S.C. § 3801(a)(6). This definition of "person" — enacted within several weeks of the FCA's amendments — does not include States or municipalities. Accordingly, adopting the reasoning of Vermont Agency, it would be surprising for Congress to subject municipalities to "treble damages and civil penalties in qui tam actions under the FCA, but exempt them from the relatively smaller damages provided under the PFCRA." Vermont Agency, at 786; see also Long, at 877 (same). Indeed, the different definitions of "person" adopted by Congress in 1986 when it enacted the PFCRA and amended the FCA are entirely consistent. See Graber, at 355-356. A broad use of "person" in section 3733 applies to the use of civil investigative demands, whereas Congress adopted a narrower definition of "person" for purposes of imposing liability under the PFCRA a definition that expressly mirrored section 3729(a)'s implicit or presumed definition of "person."
It is certainly conceivable that municipalities may be the subject of civil investigative demands (i.e., discovery requests) without being the target of the FCA investigation. Cf. Nguyen — see footnote 13 ___, at 648-649.
That Congress made explicit in the PFCRA what it believed to be implicitly contained in section 3729(a) appears to be the most reasonable interpretation of the FCA and the PFCRA. Indeed, when Congress intended to refer to States and political subdivisions thereof, it knew how to do so. See Graber, at 351 fn. 8 (collecting statutes that explicitly define "person" to include States and political subdivisions). It is worth noting that a 1986 Senate Committee Report, in reporting Congress's understanding of the pre-amendment FCA, stated that "the term `person' is used in its broad sense to include *** States and political subdivisions thereof." The Supreme Court, however, dismissed this Senate Report, which it found to be "setting forth a Senate Committee's (erroneous) understanding of the meaning of the statutory term enacted some 123 years earlier." Vermont Agency, at 783 fn. 12; see also Graber, at 352-355 (discussing the erroneous legal conclusions contained in this Senate Report and finding it to be "insufficient evidence of congressional intent").
For the foregoing reasons, ECMC is not a "person" within the meaning of section 3729(a). Accordingly, the plaintiff's FCA claims against ECMC will be dismissed and this Court will not address ECMC's other arguments relating to the FCA. Nonetheless, common law remedies remain available to the United States. See Graber, at 356.
ECMC also contends that some of the plaintiff's common law claims are time-barred. The relevant statutes of limitation are found in 28 U.S.C. § 2415. The plaintiff's fraud claims are governed by the three-year statute of limitation in 28 U.S.C. § 2415(b). A cause of action for fraud accrues when the claim could have been sued upon. See Blusal Meats, Inc. v. United States, 638 F. Supp. 824, 832 (S.D.N.Y. 1986) (applying section 2415(b) where store was alleged to have improperly redeemed food stamps), aff'd, 817 F.2d 1007 (2d Cir. 1987). The plaintiff's fraud claims accrued when the plaintiff suffered a loss, rather than when the fraud was allegedly committed. See Asbeka Indus. v. Travelers Indemnity Co., 831 F. Supp. 74, 80-81 (E.D.N.Y. 1993). The plaintiff suffered loss when it paid the allegedly false claims. Cf. United States ex rel. Kreindler Kreindler v. United Tech. Corp., 985 F.2d 1148, 1157 (2d Cir. 1993) (holding that the statute of limitations with respect to FCA claims "begins to run on the date the claim is made, or, if the claim is paid, on the date of payment") (citation omitted).
See Ibid. ("It is also well settled that a cause of action for fraud does not accrue when the fraudulent act is committed, but rather when the plaintiff suffers a loss, i.e., `when a plaintiff with assumed knowledge of the fraudulent wrong may assert a claim for relief.'") (citations omitted).
Accordingly, the plaintiff's fraud claims are time-barred to the extent that they involve Ancillary Claims paid more than three years before the date of the tolling agreement between the plaintiff and ECMC dated June 21, 1999.
Inasmuch as the plaintiff does not argue that any of its claims are tolled pursuant to 28 U.S.C. § 2416, the Court does not address such — which appears inapplicable in any event.
The plaintiff's breach of contract claims are governed by the six-year statute of limitation in 28 U.S.C. § 2415(a). A cause of action for breach of contract accrues "at the time of the breach." See Ely-Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399, 402 (1993). The plaintiff alleges that "ECMC submitted false and fraudulent UB-92 and 2552 claims for non-covered drugs and biologicals, thereby materially breaching its participation agreement with Medicare ***." Am. Compl., at ¶ 38. Accordingly, the plaintiff's breach of contract claims are time-barred to the extent that they involve Ancillary Claims submitted by ECMC more than six years before the date of the tolling agreement between the plaintiff and ECMC dated June 21, 1999.
The plaintiff's unjust enrichment claims are governed by the six-year statute of limitation in 28 U.S.C. § 2415(a). See Blusal Meats, at 831. The Second Circuit Court of Appeals has held that "an unjust enrichment claim accrues upon occurrence of the wrongful act giving rise to the duty of restitution." See Golden Pac. Bancorp. v. F.D.I.C., 273 F.3d 509, 519 (2d Cir. 2001) (quoting Plitman v. Leibowitz, 990 F. Supp. 336, 337 (S.D.N.Y. 1998)). The plaintiff alleges that "ECMC has been unjustly enriched with federal monies which in good conscience it should not be allowed to retain based on its claim submissions and receipts for noncovered drugs and biologicals ***." Am. Compl., at ¶ 41. Accordingly, the plaintiff's unjust enrichment claims are time-barred to the extent that they involve Ancillary Claims submitted by ECMC more than six years before the date of the tolling agreement between the plaintiff and ECMC dated June 21, 1999.
The plaintiff's mistake of fact claims — which are quasi-contractual in nature are governed by the six-year statute of limitation in 28 U.S.C. § 2415(a). See United States v. Stella Perez, 956 F. Supp. 1046, 1050-1051 (D.P.R. 1997).
"It is, of course, well established that parties receiving monies from the Government under a mistake of fact or law are liable ex aequo et bono to refund them, and that no specific statutory authorization upon which to base a claimed right of set-off or an affirmative action for the recovery of these monies is necessary." DiSilvestro v. United States, 405 F.2d 150, 155 (2d Cir. 1968) (citing United States v. Wurts, 303 U.S. 414, 415 (1938)).
In order to establish its mistake of fact claims, the plaintiff "need only show that it made payments under an erroneous belief that was material to its decision to pay." United States v. Electro-Therapeutics, Inc., 1996 WL 137687, at *3 (S.D.N.Y. 1996) (discussing federal government's mistake of fact claim with respect to alleged Medicare overpayments). Accordingly, the plaintiff's mistake of fact claims are time-barred to the extent that they involve Ancillary Claims paid more than six years before the date of the tolling agreement between the plaintiff and ECMC dated June 21, 1999.
Finally, ECMC contends that the Amended Complaint fails to plead fraud with particularity as required by FRCvP 9(b). Although FRCvP 9(b) is applicable to FCA claims — Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-1477 (2d Cir. 1995) ___, there is no need to review the plaintiff's FCA claim inasmuch as such will be dismissed as discussed above. Consequently, this Court reviews the plaintiff's fraud claims only in light of FRCvP 9(b).
Inasmuch as FRCvP 9(b) applies with equal force to FCA claims and fraud claims, case law applying FRCvP 9(b) to FCA claims is nonetheless instructive.
FRCvP 9(b) provides that, "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." To satisfy FRCvP 9(b), the Amended Complaint must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." United States ex rel. Phipps v. Comprehensive Community, 152 F. Supp.2d 443, 454 (S.D.N.Y. 2001) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)).
See also United States ex rel. Barmak v. Sutter Corp., 2002 WL 987109, at *5 (S.D.N.Y. 2002) (holding that plaintiff must plead "the who, what, when and where" of his FCA allegations).
The Amended Complaint fails to satisfy FRCvP 9(b) by, inter alia, not explaining why ECMC's Ancillary Claims are fraudulent. Indeed, the Amended Complaint alleges in relevant part:
The Amended Complaint also fails to identify the individual(s) at ECMC who submitted the Ancillary Claims. Nonetheless, the Court assumes arguendo for purposes of this motion that the plaintiff need only identify ECMC — and that additional information may be obtained through discovery. But see United States ex rel. DeCarlo v. Kiewit Enters., 937 F. Supp. 1039, 1050-1051 (S.D.N.Y. 1996) (holding that FCA complaint failed to satisfy FRCvP 9(b) because it failed to, inter alia, "refer to specific employees who may have been involved in submitting false claims" where the complaint referred only to "`Kiewit' without identifying the individuals involved in the alleged fraud"); United States ex rel. Vallejo v. Investronica, Inc., 2 F. Supp.2d 330, 336-337 (W.D.N.Y. 1998) (same).
"ECMC engaged in a pattern and practice of submitting false or fraudulent UB-92 (f/k/a/ UB-82) claims for payment to Medicare, through Empire, with dates of service between May 11, 1990 to August 26, 1994, knowing such claims were false or fraudulent. The false or fraudulent acts of ECMC consisted of the following conduct:
"b. ECMC submitted at least 76 false or fraudulent UB-92 claims for noncovered pharmacy items
"c. The false or fraudulent UB-92 claims are described in the chart attached as Exhibit C. The chart identifies the beneficiary by name *** the date(s) of service *** the total patient bill, and damages due to the false or fraudulent claim submission.
"d. The false or fraudulent claims are further described in Exhibits D-1 to D-76. The attached exhibits are copies of the original UB-92 claim forms submitted by ECMC to Medicare through Empire for the noncovered pharmacy items.
"g. Medicare repeatedly and unambiguously promulgated billing instruction [sic] for allowable drugs and biologicals billed under part B of A for hospital inpatient [sic]. See Exhibits E to H. The 1985 regulatory authority revealed coverage extended to Pneumonia and Hepatitis B vaccinations. See Exhibit E. The 1994 regulatory authority demonstrates coverage was expanded during the relevant period to include certain immunosuppressive drugs and the influenza virus vaccine. See Exhibit H.
"h. ECMC submitted false or fraudulent UB-92 claims for noncovered pharmacy items based on a review of pharmacy logs maintained by ECMC for the beneficiaries identified in the 76 UB-92 claim forms compared to the preceding Medicare regulatory authority that identifies covered pharmacy items. See
Exhibit C. ECMC recklessly submitted claims for pharmacy items other than the covered drugs of biologicals identified in Exhibits E to H." Am. Compl., at ¶ 13 (emphasis added).
The Amended Complaint, however, does not indicate what constitutes a "noncovered pharmacy item." Rather, it incorporates by reference attachments that purportedly set forth several covered items and implicitly suggests that ECMC's Ancillary Claims involve non-covered items — without indicating what drugs and biologicals are not covered or for which pharmacy items ECMC submitted claims. Indeed, Exhibit C fails to indicate what drugs were involved and Exhibits D-1 to D-76 merely describe the pharmacy items as "revenue code 250" with a description of "pharmacy." Accordingly, inasmuch as the Amended Complaint fails to explain why ECMC's Ancillary Claims were false or fraudulent as required by FRCvP 9(b), the plaintiff's remaining fraud claims will be dismissed without prejudice. Cf. Phipps, at 454-455 (dismissing complaint without prejudice because the complaint failed to specify, inter alia,"the dates on which the purported false statements and transactions were made and does not provide specific details regarding any alleged false vouchers or statements").
The Court assumes — although the parties do not make clear — that the covered items listed in Exhibits E-H do not constitute the universe of covered pharmacy items.
Additionally, the Amended Complaint states that the "specific and expressly covered ancillary claims in this case involve the following covered pharmacy items *** 1) certain immuno-suppressive drugs; 2) Hepatitis B vaccination; 3) Pneumococcal pneumonia vaccinations; and 4) Influenza Virus Vaccine." Am. Compl., at ¶ 12 (emphasis added). It is unclear, however, how these items can be the "covered ancillary claims in this case" if the Ancillary Claims did not involve these items. In other words, if ECMC submitted ancillary claims for noncovered items, the covered items enumerated above would appear irrelevant.
For example, in order to satisfy FRCvP 9(b) on this point, the plaintiff would have to allege (1) that ECMC submitted Ancillary Claims for X and (2) that X is not covered by Medicare. Alternatively, using the back door approach employed in the Amended Complaint, the plaintiff would have to allege that (1) A-D constitute the universe of covered drugs and biologicals and (2) ECMC submitted claims for X.
Moreover, the Amended Complaint alleges, "[u]pon information and belief, ECMC included claims for noncovered pharmacy items in the 1990 to 1994 cost reports." Am. Compl., at ¶ 18. Such pleading, however, fails to satisfy FRCvP 9(b). See Segal v. Gordon, 467 F.2d 602, 608 (2d Cir. 1972) (applying the "general rule that Rule 9(b) pleadings cannot be based `on information and belief.'"); Phipps, at 455; DeCarlo, at 1049-1050 (citing Segal).
See footnote 34.
Accordingly, it is hereby ORDERED that defendant's motion to dismiss is granted in part, that (1) plaintiff's FCA claims under 31 U.S.C. § 3729 et seq. are dismissed, (2) plaintiff's fraud claims involving Ancillary Claims paid more than three years before June 21, 1999 are dismissed, (3) plaintiff's breach of contract claims involving Ancillary Claims submitted by ECMC more than six years before June 21, 1999 are dismissed, (4) plaintiff's unjust enrichment claims involving Ancillary Claims submitted by ECMC more than six years before June 21, 1999 are dismissed, (5) plaintiff's mistake of fact claims involving Ancillary Claims paid more than six years before June 21, 1999 are dismissed and (6) plaintiff's remaining fraud claims are dismissed without prejudice, but that defendant's motion is denied in all other respects.