Jackson et al v. Depaul Health System et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

E.D. Pa.March 31, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA __________________________________________ : UNITED STATES OF AMERICA, : ex rel. TERRY JACKSON, : CIVIL ACTION : Plaintiffs, : CASE NO. 15-00020 : v. : : BAKER’S BAY NURSING HOME : ASSOCIATES, LP, d/b/a RIVER’S EDGE : and DEPAUL HEALTHCARE, LP, : : Defendants. : __________________________________________: DEFENDANTS’ MOTION TO DISMISS ALL COUNTS OF RELATOR’S FIRST AMENDED COMPLAINT For the reasons set forth in the accompanying Memorandum of Law, Defendants Baker’s Bay Nursing Home Associates, LP, doing business as River’s Edge, and DePaul Healthcare, LP, hereby move pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure to dismiss with prejudice all counts of Relator’s First Amended Complaint. Dismissal is warranted because the First Amended Complaint fails to plausibly allege a claim against Defendants for violations of the federal False Claims Act that Relator purports to invoke, and the First Amended Complaint fails to plead the alleged fraudulent conduct with sufficient particularity. Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 1 of 32 -2- Respectfully submitted, Richard J. Zack (ID No. 77142) Abigail A. Hazlett (ID No. 313387) Brian M. Nichilo (ID No. 313786) PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103-2799 Tele.: 215-981-4000 Fax: 215-981-4750 Attorneys for Defendants Dated: March 31, 2017 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 2 of 32 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA __________________________________________ : UNITED STATES OF AMERICA, : ex rel. TERRY JACKSON, : CIVIL ACTION : Plaintiffs, : CASE NO. 15-00020 : v. : : BAKER’S BAY NURSING HOME : ASSOCIATES, LP, d/b/a RIVER’S EDGE : and DEPAUL HEALTHCARE, LP, : : : Defendants. : __________________________________________: MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS ALL COUNTS OF RELATOR’S FIRST AMENDED COMPLAINT Richard J. Zack (ID No. 77142) Abigail A. Hazlett (ID No. 313387) Brian M. Nichilo (ID No. 313786) PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103-2799 (215) 981-4000 Attorneys for Defendants Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 3 of 32 -i- TABLE OF CONTENTS Page I. INTRODUCTION .............................................................................................................. 1 II. RELEVANT BACKGROUND .......................................................................................... 2 III. LEGAL STANDARDS ...................................................................................................... 5 IV. ARGUMENT ...................................................................................................................... 6 A. Relator Has Failed to Plead a Factually False Theory of Liability. ........................ 7 B. Relator Has Failed to Adequately Plead a Legally False Theory of Liability. ................................................................................................................ 10 1. General Certifications of Compliance are Not Sufficient for an Express Certification Theory of Liability. ................................................ 11 2. Relator Has Not Adequately Pled an Implied Certification Theory of Liability. ............................................................................................... 12 C. Relator Has Failed to Plead with Particularity. ..................................................... 17 D. Relator Has Failed to Plead a Retaliation Claim. ................................................. 20 V. CONCLUSION ................................................................................................................. 22 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 4 of 32 -ii- TABLE OF AUTHORITIES Page(s) CASES Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................5 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .....................................................................5 Dookeran v. Mercy Hosp. of Pittsburgh, 281 F.3d 105 (3d Cir. 2002) .........................................21 Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993 (9th Cir. 2010) .........................................12 Finkelman v. NFL, 810 F.3d 187 (3d Cir. 2016) .............................................................................2 Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153 (3d Cir. 2014) ........................................6, 18 Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009) ........................................................5, 14 Frederico v. Home Depot, 507 F.3d 188 (3d Cir. 2007) ...............................................................18 In re Genesis Health Ventures, Inc., 112 F. App'x 140 (3d Cir. 2004) ...........................................7 GMC v. New A.C. Chevrolet, 263 F.3d 296 (3d Cir. 2001) .............................................................2 Hutchins v. Wilentz, 253 F.3d 176 (3d Cir. 2001) .........................................................6, 20, 21, 22 Indianapolis Life Ins. Co. v. Hentz, No. 06-2152, 2008 U.S. Dist. LEXIS 76821, (M.D. Pa. Sept. 30, 2008) ........................................................................................................19 Knudsen v. Sprint Communs. Co., No. C13-04476, 2016 U.S. Dist. LEXIS 118438 (N.D. Cal. Sept. 1, 2016) ............................................................................................16 Lewis v. Chrysler Corp., 949 F.2d 644 (3d Cir. 1991) ....................................................................6 Naporano Iron & Metal Co. v. Am. Crane Corp., 79 F. Supp. 2d 494 (D.N.J. 1999) ........................................................................................................................................19 Negron v. Progressive Cas. Ins. Co., No. 14-577, 2016 U.S. Dist. LEXIS 24994, (D.N.J. Mar. 1, 2016) ...............................................................................................................18 Poling v. K. Hovnanian Enters., 99 F. Supp. 2d 502 (D.N.J. 2000) ................................................6 In re Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198 (3d Cir. 2002) ......................................5, 18 U.S. Dept. of Transp. ex rel. Arnold v. CMC Eng'g, Inc., 947 F. Supp. 2d 537 (W.D. Pa. 2013), aff'd, 567 F. App'x 166 (3d Cir. 2014).........................................................19 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 5 of 32 Page(s) -iii- United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (7th Cir. 2014) ...............................................................................................................8, 10 United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) ........................................................................................................................................19 United States ex rel. Colucci v. Beth Israel Med. Ctr., 785 F. Supp. 2d 303 (S.D.N.Y. 2011), aff’d, 531 F. App’x 118 (2d Cir. 2013) .......................................................11 United States ex rel. Cooper v. Gentiva Health Servs, No. 01-508, 2003 U.S. Dist. LEXIS 20690 (W.D. Pa. Nov. 4, 2003) .....................................................................................8 United States ex rel. Digiovann v. St. Joseph’s/Candler Health Sys., No. 404-190, 2008 U.S. Dist. LEXIS 9935 (S.D. Ga. Feb. 8, 2008) .............................................................10 United States ex rel. Gage v. Davis S.R. Aviation, L.L.C., No. 15-51086, 2016 U.S. App. LEXIS 13537 (5th Cir. July 25, 2016) ....................................................................13 United States ex rel. Garzione v. PAE Gov’t Servs., No. 16-1349, 2016 U.S. App. LEXIS 19814 (4th Cir. Nov. 3, 2016) .....................................................................................13 United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220 (1st Cir. 2004) ........................................................................................................................................19 United States ex rel. Kolchinsky v. Moody’s Corp., No. 12-1399, 2017 U.S. Dist. LEXIS 29714 (S.D.N.Y. Mar. 2, 2017) ...................................................................................10 United States ex rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), overruled on other grounds, Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) ..................................................................................................................8, 9 United States ex rel. Pilecki-Simko v. Chubb Inst., No. 06-3562, 2010 U.S. Dist. LEXIS 27187 (D.N.J. Mar. 22, 2010)......................................................................................12 United States ex rel. Portilla v. Riverview Post Acute Care Ctr., No. 12-1842, 2014 U.S. Dist. LEXIS 44002 (D.N.J. Mar. 31, 2014) ................................................10, 18, 19 United States ex rel. S.E. Carpenters Reg’l Council v. Fulton Cnty., No. 14-4071, 2016 U.S. Dist. LEXIS 103054 (N.D. Ga. Aug. 5, 2016) .......................................................13 United States ex rel. Scharff v. Camelot Counseling, No. 13-3791, 2016 U.S. Dist. LEXIS 133292 (S.D.N.Y. Sept. 28, 2016).........................................................................14, 19 United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235 (3d Cir. 2004) .............................5, 18 United States ex rel. Schmidt v. Zimmer, Inc., No. 00-1044, 2005 U.S. Dist. LEXIS 15648 (E.D. Pa. July 29, 2005)..............................................................................11, 19 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 6 of 32 Page(s) -iv- United States ex rel. Swan v. Covenant Care, Inc., 279 F. Supp. 2d 1212 (E.D. Cal. 2002) ...................................................................................................................................8 United States ex rel. Voss v. Monaco Enters., No. 12-46, 2016 U.S. Dist. LEXIS 86254 (E.D. Wash. July 1, 2016) .............................................................................................12 United States ex rel. Waris v. Staff Builders, Inc., No. 96-1969, 1999 U.S. Dist. LEXIS 2998 (E.D. Pa. Mar. 5, 1999).........................................................................................4 United States ex rel. Whatley v. Eastwick Coll., 657 F. App’x 89 (3d Cir. 2016) .....................6, 12 United States ex. rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011) ..............................................................................................................6, 7, 11, 13, 17, 18 United States v. Dialysis Clinic, Inc., No. 09-00710, 2011 U.S. Dist. LEXIS 4862, (N.D.N.Y. Jan. 19, 2011) ...........................................................................................................8 United States v. Sanford-Brown, Ltd., 840 F.3d 445 (7th Cir. 2016) ............................................17 Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) ............... passim Va. Sur. Co. v. Macedo, No. 08-5586, 2009 U.S. Dist. LEXIS 90603 (D.N.J. Sept. 30, 2009) ....................................................................................................................................6 Zahodnick v. IBM, 135 F.3d 911 (4th Cir. 1997) ...........................................................................21 STATUTES 35 Pa. Cons. Stat. § 448.806 ............................................................................................................9 35 Pa. Cons. Stat. § 448.806d ..........................................................................................................9 35 Pa. Cons. Stat. § 448.808 ............................................................................................................9 35 Pa. Cons. Stat. § 448.809 ............................................................................................................9 35 Pa. Cons. Stat. § 448.811 ............................................................................................................9 31 U.S.C. § 3729(a)(1)(A), (B) .......................................................................................................6 31 U.S.C. § 3730(b)(4)(B) ..............................................................................................................5 31 U.S.C. § 3730(h) ......................................................................................................................20 42 U.S.C. § 1395c ............................................................................................................................3 42 U.S.C. § 1396 ..............................................................................................................................3 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 7 of 32 Page(s) -v- REGULATIONS 42 C.F.R. § 413.335 ...................................................................................................................3, 10 42 C.F.R. § 413.337(b)(2) ..............................................................................................................10 42 C.F.R. § 483 ................................................................................................................................8 42 C.F.R. § 483.1 ...........................................................................................................................17 42 C.F.R. § 483.30 .........................................................................................................................16 42 C.F.R. § 483.75 ...........................................................................................................................9 28 Pa. Code § 211.12 ...............................................................................................................15, 16 55 Pa. Code §§ 1187.95 .................................................................................................................10 55 Pa. Code §§ 1187.96 .................................................................................................................10 55 Pa. Code § 1187.96(e) .................................................................................................................3 OTHER AUTHORITIES Federal Rule of Civil Procedure 8(a) ...............................................................................................5 Federal Rule of Civil Procedure 9(b) ...............................................................1, 5, 6, 17, 18, 19, 20 Federal Rule of Civil Procedure 12(b)(6) ....................................................................................1, 5 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 8 of 32 I. INTRODUCTION Relator Terry Jackson alleges that Defendants Bakers Bay Nursing Home Associates, LP,1 doing business as River’s Edge, and DePaul Healthcare, LP (collectively, “River’s Edge”), are liable under the False Claims Act for fraudulently billing Medicare and Medicaid for patient services that were factually false because services provided were worthless, and legally false because Defendants failed to comply with certain regulations such as state staffing requirements. Relator further alleges Defendants retaliated against her in violation of the False Claims Act for reporting problems to her supervisors. The First Amended Complaint should be dismissed in its entirety as legally deficient under Federal Rules of Civil Procedure 12(b)(6) and 9(b). First, Relator has failed to allege a factually false theory of liability. For River’s Edge patients insured through Medicare or Medicaid, claims for the cost of their care seek reimbursement on a per diem-not a per service-basis. That is, a claim is submitted for reimbursement for the total services the patient received on any given day, and not the specific services he or she was provided. Thus, Relator has not alleged-because she cannot-that a claim was submitted for a particular service that was not provided. Rather, Relator has unsuccessfully attempted to plead a “worthless services” theory of liability under the False Claims Act. A “worthless service” is one that is “so deficient” that it has essentially no value at all. The First Amended Complaint alleges that patients at River’s Edge were provided services, but that, in Relator’s view, the services did not live up to the quality of care standards imposed by federal and Pennsylvania law. This does not suffice under a “worthless services” theory of liability. 1 The case caption refers to this Defendant as “Baker’s Bay.” “Bakers Bay” is used, at times, in the body of the First Amended Complaint. E.g., Am. Compl. ¶ 16. For consistency, this memorandum will refer to Defendant as “Bakers Bay.” Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 9 of 32 -2- Second, Relator has failed to allege a legally false theory of liability. The First Amended Complaint alleges that River’s Edge failed to comply with certain federal and state nursing facility regulations, including regulations related to staffing. The False Claims Act is not, however, concerned with all regulatory violations or even potential medical malpractice claims-it is concerned with fraud-and Relator has not shown how any of the certifications were expressly connected to the submission of claims or how the alleged violations were material to the Government’s decision to pay for patients’ care. Third, Relator has failed to allege with particularity how these supposed regulatory violations and alleged patient health issues relate to any “claim” presented to the Government for payment or how Bakers Bay Nursing Home Associates and DePaul Healthcare each participated in the alleged fraud. Fourth, Relator has failed to adequately plead that she was the subject of retaliation in violation of the False Claims Act. The First Amended Complaint fails to allege that Relator raised any complaints of fraud or violations of the False Claims Act to her supervisors, or that Bakers Bay Nursing Home Associates or DePaul Healthcare were on notice of the “distinct possibility” of False Claims Act litigation prior to her termination. II. RELEVANT BACKGROUND The following background draws from the factual allegations in the First Amended Complaint. Although the Court must, for purposes of this motion, accept well-pleaded allegations, “[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” GMC v. New A.C. Chevrolet, 263 F.3d 296, 333 (3d Cir. 2001); see also Finkelman v. NFL, 810 F.3d 187, 194 n.55 (3d Cir. 2016) (“[A] court need not credit a complaint’s ‘bald assertions’ . . . when deciding a motion to dismiss.”) (internal quotation marks and citation omitted). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 10 of 32 -3- Relator alleges that Defendants Bakers Bay Nursing Home and DePaul Healthcare operate and manage staffing, respectively, at River’s Edge, which Relator describes as a 120-bed skilled nursing facility that houses elderly and disabled residents in Philadelphia, Pennsylvania. Am. Compl. ¶¶ 16-19. For patients at River’s Edge insured through Medicare or Medicaid, an elaborate regulatory framework governs reimbursement for their care. See, e.g., Am. Compl. ¶¶ 20 - 23. The Medicare Program, established by Title XVIII of the Social Security Act, is a health insurance plan for people ages 65 and older, and for certain people with disabilities. 42 U.S.C. § 1395c. For those insured through Medicare, care and treatment at skilled nursing facilities are reimbursed under Medicare Part A on a per diem-not per service-basis. See 42 C.F.R. § 413.335; Am. Compl. ¶ 17. Medicaid, a joint federal and state program funded under Title XIX of the Social Security Act, is a health insurance plan for the poor. See 42 U.S.C. § 1396. Like with Medicare, for those insured through Medicaid, care and treatment at skilled nursing facilities are reimbursed on a per diem-not per service-basis. See, e.g., 55 Pa. Code § 1187.96(e); Am. Compl. ¶ 17. Relator, Terry Jackson, was a part-time employee at River’s Edge from February 1999 through November 2014. Am. Compl. ¶ 14. Relator alleges that Defendants, Bakers Bay Nursing Home and DePaul Healthcare, violated the False Claims Act by: (1) submitting claims for payment to the Medicare and Medicaid programs for services that were worthless; (2) falsely certifying compliance with certain government regulations; and (3) unlawfully retaliating against her when she reported certain issues to her supervisor. See Am. Compl. ¶¶ 49 - 60 (alleging worthless services and false certification theories of False Claims Act liability); id. ¶¶ 213 - 219 (Count I - False Claims Act); id. ¶¶ 220 - 225 (Count II - False Claims Act Unlawful Retaliation). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 11 of 32 -4- Relator alleges that residents received services that were worthless because River’s Edge was inadequately staffed, had inadequate supplies, and failed to properly refer residents to a specialist during a scabies incident. Am. Compl. ¶ 53. As a result of these alleged inadequacies, Relator claims that River’s Edge falsely certified compliance with federal and state requirements that apply to skilled nursing facilities when it presumably submitted certain Medicare and Medicaid forms to the federal government. Am. Compl. ¶¶ 25 - 45, 55. More specifically, Relator claims that River’s Edge was inadequately staffed because it did not comply with Pennsylvania requirements regarding the number of direct nursing-care hours that should be provided to each of River’s Edge’s residents. Am. Compl. ¶¶ 64 - 76. According to Relator, Defendants falsified internal documents and increased staffing during state inspections so that the staffing shortage would not be discovered. Am. Compl. ¶¶ 77 - 84. River’s Edge also did not provide staff with adequate supplies, such as towels, to properly care for residents. Am. Compl. ¶¶ 90 - 93. Relator also claims that Defendants failed to properly treat and report a 2014 scabies outbreak. Am. Compl. ¶¶ 94 - 111, 192. River’s Edge residents were supposedly injured or harmed due to the purported staffing shortages, inadequate supplies, and improper treatment of scabies. Am. Compl. ¶¶ 114 - 176. Additionally, Relator claims that she “complained to River’s Edge management” about “staffing,” “inadequate care,” and River’s Edge’s response to a scabies outbreak. Am. Compl. ¶¶ 207 - 212. According to Relator, “[a]s a direct result and in retaliation” for “her repeated complaints,” she was terminated. Am. Compl. ¶ 212. After investigating the allegations in the Complaint, the United States (the plaintiff and true party of interest in False Claims Act cases) filed a notice with this Court that it is “not intervening in this qui tam action at this time.” Dkt. No. 19; see United States ex rel. Waris v. Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 12 of 32 -5- Staff Builders, Inc., No. 96-1969, 1999 U.S. Dist. LEXIS 2998, at *10 (E.D. Pa. Mar. 5, 1999) (“The Government . . . is the real party-in-interest in a qui tam suit . . . .”). Nor has the United States chosen to intervene after the filing of the First Amended Complaint. The Relator nevertheless chose to pursue this action in the name of the United States. See 31 U.S.C. § 3730(b)(4)(B). III. LEGAL STANDARDS To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must comply with Rule 8(a) by alleging sufficient facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Facial plausibility requires a complaint to do more than raise “a mere possibility of misconduct.” See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (“[A] complaint must do more than allege the plaintiff’s entitlement to relief. A complaint has to ‘show’ such an entitlement with its facts.”); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“Factual allegations must be enough to raise a right to relief above the speculative level. . . .”). While the court must accept all well-pleaded allegations, “labels and conclusions” and “formulaic recitation(s) of the elements of a cause of action” will not suffice. Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). Because Relator alleges violations of the federal False Claims Act, the Complaint also must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 n.9 (3d Cir. 2004). Rule 9(b) provides that “a party must state with particularity the circumstances constituting fraud or mistake.” To plead with sufficient particularity under Rule 9(b), a plaintiff must advance the “who, what, when, where and how” of the alleged fraud. In re Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 217 (3d Cir. 2002). General or conclusory allegations of fraud-or Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 13 of 32 -6- “[d]escribing a mere opportunity for fraud”-will not do. Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 158 (3d Cir. 2014); see also Lewis v. Chrysler Corp., 949 F.2d 644, 653 (3d Cir. 1991). Moreover, in a case involving multiple defendants, the complaint must inform each defendant of the nature of its alleged participation in the fraud. Poling v. K. Hovnanian Enters., 99 F. Supp. 2d 502, 508 (D.N.J. 2000) (“[A]llegations that generally allege fraud as against multiple defendants, without informing each defendant as to the specific fraudulent acts he or she is alleged to have committed do not satisfy Rule 9(b).”); see also Va. Sur. Co. v. Macedo, No. 08-5586, 2009 U.S. Dist. LEXIS 90603, at *28 (D.N.J. Sept. 30, 2009) (explaining “vague allegations of fraud against multiple defendants are insufficient to satisfy Rule 9(b)”). IV. ARGUMENT The False Claims Act imposes liability on any person who knowingly presents or causes to be presented a false or fraudulent claim to the government, or makes or causes to be made a false record that is material to a false or fraudulent claim to the government. 31 U.S.C. § 3729(a)(1)(A), (B). Plaintiff must prove the following elements to establish a prima facie case under the False Claims Act: (1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent. United States ex. rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 304-305 (3d Cir. 2011). Moreover, the falsity or fraud must be material to the Government’s decision-making process. See Hutchins v. Wilentz, 253 F.3d 176, 184 (3d Cir. 2001). There are two types of False Claims Act claims: those that are factually false and those that are legally false. Wilkins, 659 F.3d at 305; see also United States ex rel. Whatley v. Eastwick Coll., 657 F. App’x 89, 94 (3d Cir. 2016) (same). A claim is factually false when the Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 14 of 32 -7- claimant knowingly “misrepresents what goods or services that it provided to the Government.” Wilkins, 659 F.3d at 305. A claim is legally false “when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment.” Id. Moreover, the regulation allegedly violated “must be material to the Government’s payment decision in order to be actionable.” Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002 (2016).2 Under the legally false theory, there is liability for either an express or implied false certification. In an express false certification case, the claimant expressly and falsely certifies compliance with a regulation that is a prerequisite for Government payment. Wilkins, 659 F.3d at 305 . An implied false certification “seeks and makes a claim for payment from the Government without disclosing that it violated regulations that affected its eligibility for payment.” Id. Thus, a plaintiff must allege “that if the Government had been aware of the defendant’s violations of the Medicare laws and regulations that are the bases of a plaintiff’s FCA claims, it would not have paid the defendant’s claims.” Id. A. Relator Has Failed to Plead a Factually False Theory of Liability. Relator alleges that false claims were submitted when River’s Edge sought payment for “worthless” services. Am. Compl. ¶¶ 50 - 54. “Worthless services” are ones that “literally are not provided or the service is so substandard as to be tantamount to no service at all.” In re 2 In Escobar, the Supreme Court upheld the implied false certification theory of liability, but rejected the standard in some circuits (but not the Third) that the implied false certification theory liability is actionable only if the claimant violated a statutory, regulatory, or contractual requirement that was expressly designated to be a condition of payment. 136 S. Ct. at 1996. The Supreme Court instead held that the relevant inquiry is whether a statutory, regulatory, or contractual provision is material to the government’s decision to pay the claim, which it characterized as a “demanding” standard. Id. at 2003. Whether a statute, regulation, or contract provision is a condition of payment is, however, still relevant to the materiality analysis according to Escobar. Id. at 2001. Because the Third Circuit has never held that a statutory or regulatory condition of payment must be expressly labeled as such, the Third Circuit’s decision in Wilkins, which adopted the implied false certification theory, and its progeny, are not inconsistent with the Escobar decision. Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 15 of 32 -8- Genesis Health Ventures, Inc., 112 F. App'x 140, 143 (3d Cir. 2004). But “[i]t is not enough to offer evidence that the defendant provided services that are worth some amount less than the services paid for.” United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 710 (7th Cir. 2014). A “diminished value” of services theory is not sufficient to support liability under a factually false theory. Id. Here, Relator does not allege that River’s Edge failed to provide any services to its patients. Rather, Relator challenges the quality of care, arguing that River’s Edge’s services did not conform with the guidelines set forth in 42 C.F.R. § 483. See, e.g., Am. Compl. ¶ 123 (alleging “lack” of clean linens); id. ¶ 142 (claiming staff did not “quickly” help a fallen resident); id. ¶ 196 (alleging not “enough” towels). These allegations are not the “‘equivalent of no performance at all’” and therefore do “not fit within the worthless services category.” See United States v. Dialysis Clinic, Inc., No. 09-00710, 2011 U.S. Dist. LEXIS 4862, at *62 (N.D.N.Y. Jan. 19, 2011) (quoting United States ex rel. Mikes v. Straus, 274 F.3d 687, 703 (2d Cir. 2001), overruled on other grounds, Escobar, 136 S. Ct. at 1989); see also United States ex rel. Cooper v. Gentiva Health Servs, No. 01-508, 2003 U.S. Dist. LEXIS 20690, at *39 (W.D. Pa. Nov. 4, 2003) (citing United States ex rel. Swan v. Covenant Care, Inc., 279 F. Supp. 2d 1212, 1221 (E.D. Cal. 2002) (rejecting a “worthless services” claim against a nursing home because the relator “only challenged the level of care and the amount of services” provided as result of alleged under-staffing but not failure to provide any services at all)). Relator’s attempts to turn allegations of what, in her view, was substandard care, into an actionable worthless services claim under the FCA are unavailing. Courts have cautioned against such attempts to federalize quality of care claims using the False Claims Act. See, e.g., Escobar, 136 S. Ct. at 2004 (emphasizing the False Claims Act is not a “medical malpractice” Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 16 of 32 -9- statute); Mikes, 274 F.3d at 700 (allowing relators to assert quality of care claims would “promote federalization of medical malpractice” by replacing “aggrieved” patients with relators or the government as plaintiffs). Even assuming for purposes of this motion to dismiss that Relator’s allegations regarding the residents described in the First Amended Complaint are true, there are no allegations that those patients were given no services whatsoever-they were residing at River’s Edge and receiving services during their residency. Indeed, Relator’s own allegations belie this conclusory assertion by detailing the services provided at River’s Edge, including those that she personally provided. See, e.g., Am. Compl. ¶ 18 (describing facility and treatment of certain residents); id. ¶ 72 (estimating size of nursing staff); id. ¶ 144 (noting the “years” of care Relator personally provided to a specific resident that kept the resident “in mint condition”). Moreover, a claim of “worthless services” cannot withstand a motion to dismiss where, as here, River’s Edge was under regular scrutiny by government inspectors.3 Relator concedes that River’s Edge was regularly monitored by the Pennsylvania Department of Health (“DoH”). E.g., Am. Compl. ¶¶ 22, 86. However, Relator has not pled any facts indicating that River’s Edge was ever sanctioned by DoH for violations of health care regulations, nor that DoH ever made any findings of actual patient harm in any of its surveys. Thus, any claim that the services rendered by the nursing facility were “truly or effectively ‘worthless’. . . . would be absurd in light of the undisputed fact that [the nursing facility] was allowed to continue operating and 3 To ensure all applicable health standards are met, the federal government mandates that state regulators frequently monitor nursing facilities. See 42 C.F.R. § 483.75. In Pennsylvania, the Department of Health is responsible for ensuring that nursing facilities have complied with appropriate standards for participation in the Medicare and Medicaid programs. See 35 Pa. Cons. Stat. § 448.806 (requiring health care facilities to obtain state license); id. § 448.808 (explaining licenses are only issued to facilities that have satisfactorily shown “that the health care facility provides safe and efficient services” and “there is substantial compliance with the rules and regulations”); id. § 448.811 (noting that licenses may be suspended or revoked for regulatory violations). The Pennsylvania Department of Health’s oversight and monitoring includes regular inspections. See id. §§ 448.806d, 809. Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 17 of 32 -10- rendering services of some value despite regular visits by government surveyors.” Absher, 764 F.3d at 710. Even assuming, as Relator claims, River’s Edge “artificially” increased staffing levels during these unannounced state inspections, Am. Compl. ¶ 80, it is not plausible that these state inspectors failed to notice a total lack of patient care. See Absher, 764 F.3d at 710 (“The [government] surveyors would certainly have noticed if [the nursing facility] was providing no or effectively no care to its residents.”).4 B. Relator Has Failed to Adequately Plead a Legally False Theory of Liability. Relator also alleges that River’s Edge submitted false claims when it certified compliance with certain federal and state laws or regulations despite supposedly substandard conditions of care at the facility. E.g., Am. Compl. ¶¶ 55 - 60. But not every regulatory or statutory violation can be the basis of a “false” claim. “[T]he False Claims Act is not a means of imposing treble damages and other penalties for insignificant regulatory or contractual violations.” Escobar, 136 S. Ct. at 2004. Rather, False Claims Act cases must center on “allegations of fraud, not medical malpractice.” Escobar, 136 S. Ct. at 2004; see also United States ex rel. Kolchinsky v. Moody’s Corp., No. 12-1399, 2017 U.S. Dist. LEXIS 29714, at *14 (S.D.N.Y. Mar. 2, 2017) (“‘[T]he 4 At times, Relator alleges in conclusory fashion that River’s Edge submitted false claims for services that were not provided. See, e.g., Am. Compl. ¶ 5. Relator’s claims that Defendants violated the False Claims Act are not, however, based such allegations, but even if they were, they would nevertheless fail. See Am. Compl. ¶ 49 (describing only “two ways”-worthless services and false certification-that Defendants supposedly violated the FCA). By way of background, nursing facilities such as River’s Edge bill Medicare or Medicaid using per diem, per patient rates, that are set using market-based data and other factors. See, e.g., 42 C.F.R. § 413.335 (nursing facilities “receive a per diem payment of a predetermined rate for inpatient services furnished to Medicare beneficiaries”); 42 C.F.R. § 413.337(b)(2) (requiring use of market-based data in overall calculation); 55 Pa. Code §§ 1187.95-96 (Pennsylvania rate and price setting for nursing facility services); see also Am. Compl. ¶¶ 17, 177 (noting “Defendants” billed Medicare and Medicaid for “approximately $8000.00 per month on a per diem basis”). Medicare and Medicaid are not billed for each service that is provided to a covered patient at a nursing facility, but instead for the day the patient spent at the facility, irrespective of what services he or she may have received on that day. Thus, Relator has not-because she cannot-claimed that River’s Edge submitted a claim for reimbursement for a service that was not provided. See United States ex rel. Portilla v. Riverview Post Acute Care Ctr., No. 12- 1842, 2014 U.S. Dist. LEXIS 44002, at *42-44 (D.N.J. Mar. 31, 2014) (holding allegations that certain services were not provided to patients under a per diem billing scheme were insufficient to plead factual falsity); United States ex rel. Digiovann v. St. Joseph’s/Candler Health Sys., No. 404-190, 2008 U.S. Dist. LEXIS 9935, at *16-18 (S.D. Ga. Feb. 8, 2008) (finding complaint failed to adequately plead a FCA claim where “itemized costs” had “no effect on the amount of reimbursement” because reimbursements were based on pre-determined rates). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 18 of 32 -11- FCA was not intended to police general regulatory noncompliance . . . .’”) (citation omitted). Thus, to adequately plead a claim under a false certification theory, either express or implied, a plaintiff must show that compliance with the regulation which the defendant allegedly violated was a material condition in the Government’s payment decision. See Wilkins, 659 F.3d at 309; see also Escobar, 136 S. Ct. at 2002. 1. General Certifications of Compliance are Not Sufficient for an Express Certification Theory of Liability. Relator claims that River’s Edge falsely certified compliance with applicable laws and regulations required under CMS Form 855A (Medicare Enrollment Application for Institutional Providers), CMS Form 1561 (Health Insurance Benefit Agreement), and the MDS Form (Minimum Data Set for Nursing Home Resident Assessment and Care Screening). Am. Compl. ¶ 55.5 These forms require providers to generally certify compliance with a broad array of laws and regulations governing the Medicare and Medicaid programs at times separate and apart from any particular claim for services. See, e.g., Am. Compl. ¶ 25 (quoting CMS Form 855A requirement that a provider “agrees to abide by the Medicare laws, regulations and program instructions”); id. ¶ 39 (noting CMS Form 1561 requires compliance with 42 C.F.R.). Express certification liability, however, cannot be based on such broad certifications of compliance with laws and regulations. See United States ex rel. Colucci v. Beth Israel Med. Ctr., 785 F. Supp. 2d 303, 315 (S.D.N.Y. 2011), aff’d, 531 F. App’x 118 (2d Cir. 2013) (holding that “[g]eneral 5 Relator also references CMS Form 671, which she claims requires the “accurate submission” of “information” related to “staffing.” Am. Compl. ¶¶ 34 - 36. But Relator provides no details on the required information, nor alleges any facts demonstrating inaccuracies on this form. Similarly, Relator quotes language purportedly from Medicare billing paper (CMS Form 1450) and electronic (837I) forms requiring providers to certify that “billing information . . . is true, accurate, and complete.” Am. Compl. ¶ 26. Yet Relator provides no details about River’s Edge’s bills or billing process, much less any information about inaccuracies contained within those bills. Thus, Relator’s references to CMS Form 671 and the Medicare billing forms appear to be simply a subtle, but ultimately unsuccessful, effort to suggest that River’s Edge submitted actual false claims to the Government for payment. See United States ex rel. Schmidt v. Zimmer, Inc., No. 00-1044, 2005 U.S. Dist. LEXIS 15648, at *5 (E.D. Pa. July 29, 2005) (“[T]he sine qua non of an FCA violation is the submission of a false claim.”). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 19 of 32 -12- certifications of compliance with the law are insufficient” for claims of express false certification). Nor does an express certification theory encompass initial program enrollment applications or agreements, such as CMS Form 855A and 1561, where, as here, such forms have not been in any way connected to the actual claim submission process. See United States ex rel. Pilecki-Simko v. Chubb Inst., No. 06-3562, 2010 U.S. Dist. LEXIS 27187, at *7 n.7 (D.N.J. Mar. 22, 2010) (“[A]n express false certification . . . occurs when a participating institution falsely certifies, usually on the claim for payment itself, that it is currently in compliance with the applicable regulations.”); United States ex rel. Voss v. Monaco Enters., No. 12-46, 2016 U.S. Dist. LEXIS 86254, at *15 (E.D. Wash. July 1, 2016) (citing Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (“An express false certification occurs when a defendant certifies compliance with a law, rule, or regulation as part of the process through which the claim for payment is submitted.”) . 2. Relator Has Not Adequately Pled an Implied Certification Theory of Liability. Further, under a theory of implied certification, Relator has failed to sufficiently allege that River’s Edge failed to comply with a statute or regulation that was material to the Government’s decision to pay claims. In Escobar, the Supreme Court set forth two requirements for an implied false certification claim: “first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” 136 S. Ct. at 2001; Whatley, 657 F. App’x at 94 (quoting Escobar, 136 S. Ct. at 2001) (same). Additionally, “a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 20 of 32 -13- be material to the Government’s payment decision in order to be actionable.” Escobar, 136 S. Ct. at 2002. The “materiality standard is demanding,” and thus Escobar emphasized that the False Claims Act is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations.” Id. at 2003.6 Similarly, the Third Circuit has instructed district courts that the implied false certification theory of liability “should not be applied expansively, particularly when advanced on the basis of FCA allegations arising from the Government’s payment of claims under federally funded healthcare programs.” See Wilkins, 659 F.3d at 307. Here, Relator sets out a list of federal and state statutes and regulations that she maintains were violated by River’s Edge because of inadequate staffing, insufficient supplies, and failure to refer residents to a specialist during a scabies incident. Yet she fails to allege that any River’s Edge claim made “specific representations about the goods or services provided” as described in Escobar. For example, Relator frequently cites CMS Form 1561, which is simply the standard Health Insurance Benefit Agreement between providers and the Secretary of Health and Human Services. See, e.g., Am. Compl. ¶¶ 133, 153, 164, 175, 182. Relator does not, however, provide details linking any of the so-called substandard services provided to any representations about actual claims submitted to the Government. 6 A district court can determine at the motion to dismiss phase whether this demanding standard has been met. See Escobar, 136 S. Ct. at 2004 n.6 (expressly “reject[ing] . . . [the] assertion that materiality is too fact intensive for courts to dismiss False Claims Act cases on a motion to dismiss”); United States ex rel. Garzione v. PAE Gov’t Servs., No. 16-1349, 2016 U.S. App. LEXIS 19814, at *2-4 (4th Cir. Nov. 3, 2016) (affirming district court’s dismissal of a relator’s complaint for failure to state a FCA claim under the implied false certification theory); United States ex rel. Gage v. Davis S.R. Aviation, L.L.C., No. 15-51086, 2016 U.S. App. LEXIS 13537, at *4-5 (5th Cir. July 25, 2016) (same); United States ex rel. S.E. Carpenters Reg’l Council v. Fulton Cnty., No. 14- 4071, 2016 U.S. Dist. LEXIS 103054, at *22 (N.D. Ga. Aug. 5, 2016) (dismissing complaint for failure to satisfy materiality standard because relators had “not shown that [d]efendants misrepresented matters ‘so central’ to the [c]ontract that the government ‘would not have paid [defendants’] claims had it known of these violations’”). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 21 of 32 -14- Further, she does not show that the violation of any one of those statutes or regulations would be material to the Government’s decision whether to pay a claim for reimbursement. See Escobar, 136 S. Ct. at 2003 (explaining “proof of materiality can include . . . evidence that defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement”); see also United States ex rel. Scharff v. Camelot Counseling, No. 13-3791, 2016 U.S. Dist. LEXIS 133292, at *24 - 25 (S.D.N.Y. Sept. 28, 2016) (finding materiality requirement not satisfied where complaint failed to allege government’s refusal to reimburse substance abuse treatment centers that engaged in conduct similar to defendant’s). For example, Relator does not allege that a failure to timely report the scabies incident, Am. Compl. ¶ 192, or that an undefined “delay[ ]” in referring residents to a dermatologist for treatment of scabies, id. ¶ 105, were material to the Government’s decision whether to pay for a given resident’s per diem care. See also Am. Compl. ¶¶ 94 - 111 (describing alleged problems with handling a scabies “outbreak” that supposedly occurred less than three months before the Complaint was filed). Nor does Relator allege that, in the few instances where, in her opinion, River’s Edge staff lacked certain supplies or residents received inadequate care, the supposed inadequacies would have been material to the Government’s decision whether to pay a claim See, e.g., Am. Compl. ¶ 91 (nondescript reference to staff’s use of “pillow cases as towels”); id. ¶ 140 (noting a single instance where an elderly resident had fallen); id. ¶ 147 (alleging three residents “fell” without any description of the cause or staff’s response). These purported examples of what Relator describes as substandard care only raise at best “a mere possibility of misconduct,” see Fowler, 578 F.3d at 211, and are certainly not sufficient to support Relator’s sweeping accusation that Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 22 of 32 -15- “Defendants have submitted . . . false claims since at least February 1999 until the present.” See Am. Compl. ¶ 203. Likewise, Relator has made River’s Edge’s alleged understaffing the centerpiece of her First Amended Complaint, yet Relator’s claim that River’s Edge was understaffed fails to satisfy the materiality standard. See, e.g., Am. Compl. ¶¶ 61 - 89, 123, 140, 168, 185, 198. Despite the constant refrain, Relator has not demonstrated that the purported understaffing, which Relator alleges was caused because River’s Edge employed forty nurses, covering 24 hours per day, for 110 residents, id. ¶¶ 69 - 72, was material to the Government’s payment of claims. Indeed, Relator’s claim of inadequate staffing is based not on facts but a selective reading of a Pennsylvania regulation and a mathematical sleight of hand. The Pennsylvania Code, specifically 28 Pa. Code § 211.12 cited by Relator, sets forth various requirements for facilities providing nursing services. To ensure the needs of residents are met, the regulation mandates, among other requirements, that a facility employ a director of nursing services, have one registered nurse on duty at facilities with 150 residents or less during the day, evening, and night shifts, and that at least one member of the nursing staff is on site per twenty residents. Id. § 211.12(b), (f), (g). According to the First Amended Complaint, River’s Edge would have satisfied all these conditions. See Am. Compl. ¶ 85 (identifying director of nursing); id. ¶¶ 69, 72 (noting at least 110 residents with 40 nursing staff at the facility each day). Relator focuses, however, on the requirement that “a minimum of 2.7 hours of direct resident care for each resident” be provided for “each 24-hour period.” 28 Pa. Code § 211.12(i); Am. Compl. ¶ 67. According to the First Amended Complaint, given 40 nursing staff working 7-hour shifts with 110 residents present at the facility, River’s Edge was “at all times in violation” of this regulation because it fell 17 hours short of the 297 hours required. Am. Compl. ¶¶ 69, 72 - Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 23 of 32 -16- 75. Relator alleges that each shift was eight hours in length, but, because she was allegedly required to take a thirty minute lunch break and two fifteen minutes breaks during each shift, she subtracts one hour for all staff without providing any authority for this method of calculation. See Am. Compl. ¶¶ 72 - 73. Based on this contrived and unsupported calculation, Relator alleges more than a decade of inadequate staffing. But Relator was only able to reach this result by decreeing that all staff worked 7-hour shifts. The Pennsylvania regulation itself does not provide any guidance on what may be properly included in the calculation of hours. In fact, CMS Form 671, which Relator references elsewhere in the First Amended Complaint, only requires excluding meal breaks thirty minutes or greater when recording hours worked. See CMS Form 671 at 2 (general instructions). More importantly, Relator does not provide any facts showing how River’s Edge handled the requirement. Had Relator, for example, performed her calculation using an 8-hour shift, or even a 7.5-hour shift, River’s Edge would have exceeded the requirements of 28 Pa. Code § 211.12(i).7 Given such shaky assumptions, Relator has not provided sufficient facts to show that River’s Edge “fail[ed] to disclose noncompliance,” and therefore any representations River’s Edge may have made to the Government cannot plausibly have been the material “misleading half-truths” necessary to adequately plead a False Claims Act violation. See Escobar, 136 S. Ct. at 2001; see also Knudsen v. Sprint Communs. Co., No. C13-04476, 2016 U.S. Dist. LEXIS 118438, at *43 - 44 (N.D. Cal. Sept. 1, 2016) (finding a “single, conclusory paragraph” merely citing regulations was not sufficient to show that noncompliance with those regulations was material to the government’s decision-making process). 7 Moreover, Relator makes no allegation that River’s Edge was operated in violation of the federal nurse staffing regulations, which do not require a specific number of nursing hours per resident per day. See 42 C.F.R. § 483.30 This further undermines the possibility that the Relator’s understaffing allegation, as pled, would be material to the Government’s payment decision. Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 24 of 32 -17- Finally, it is relevant to, but not determinative of, the materiality analysis whether the Government has deemed the statutory or regulatory requirement at issue a condition of participation or a condition of payment. See Escobar, 136 S. Ct. at 2003. Conditions of participation “are enforced through administrative mechanisms, and the ultimate sanction for violation of such conditions is removal from the government program.” Wilkins, 659 F.3d at 309 (internal quotations omitted). Whereas, conditions of payment are “those which, if the government knew they were not being followed, might cause it to actually refuse payment.” Id. In this case, Relator alleges Defendants violated key standard-of-care regulations. E.g., Am. Compl. ¶ 59 (citing 42 C.F.R. § 483.1). The text of these cited regulations clearly sets forth conditions of participation for the Medicare and Medicaid programs. See 42 C.F.R. § 483.1(b) (“The provisions of this part contain the requirements that an institution must meet in order to qualify to participate as a Skilled Nursing Facility . . . .”) (emphasis added). Thus, Relator’s reliance on the alleged violation of these specific regulations further undermines her blanket assertion that each statute and regulation she claims was violated rendered a claim for reimbursement “false.”8 See United States v. Sanford-Brown, Ltd., 840 F.3d 445, 448 (7th Cir. 2016) (showing “noncompliance and misrepresentations would have entitled the government to decline payment” is “not enough” to satisfy the materiality standard under Escobar). C. Relator Has Failed to Plead with Particularity. Nor has Relator satisfied the heightened pleading requirements under Federal Rule of Civil Procedure 9(b). Regardless of whether a plaintiff alleges a violation of the federal False 8 Relator claims the standard-of-care regulations, 42 C.F.R. § 483 et seq., are actually conditions of payment based on language contained within a generic Health Insurance Benefit Agreement (CMS Form 1561). See, e.g., Am. Compl. ¶ 39 (providers agree to “conform” with “42 CFR” to “receive payment”). But such a broad reading of this form would essentially convert the entire set of standard-of-care regulations into conditions of payment-not a likely outcome under False Claims Act law. See Escobar, 136 S. Ct. at 2003 (“The False Claims Act is not ‘an all-purpose antifraud statute,’ or a vehicle for punishing garden-variety . . . regulatory violations.”) (internal citation omitted). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 25 of 32 -18- Claims Act under a factually false or legally false theory of liability, the complaint must satisfy the heightened pleading requirements of Rule 9(b). Schmidt, 386 F.3d at 242 n.9. To satisfy Rule 9(b), a relator must plead “the circumstances” of the alleged fraud with sufficient particularity, and ordinarily must advance the “who, what, when, where and how” of the alleged fraud. In re Rockefeller Ctr. Props. Sec. Litig., 311 F.3d at 217; see also Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (“To satisfy [the pleading standard of 9(b)], the plaintiff must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation.”); Wilkins, 659 F.3d at 301 n.9 (“[P]laintiffs must plead FCA claims with particularity in accordance with Rule 9(b).”). The First Amended Complaint is focused on allegations regarding what the Relator believes to be substandard care-not fraud. The First Amended Complaint contains no allegations that sufficiently connect the so-called substandard care to a claim that was submitted to the government. See Negron v. Progressive Cas. Ins. Co., No. 14-577, 2016 U.S. Dist. LEXIS 24994, at *13 (D.N.J. Mar. 1, 2016) (quoting Foglia, 754 F.3d at 158) (“[A] plaintiff asserting claims under the FCA ‘must provide particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.’”). For example, with regard to patient “W.M.” there are no allegations regarding when his per diem services were billed or how any claims were submitted. See Am. Compl. ¶¶ 83 - 92, 117. In fact, Relator does not provide any details on the claims she presumes were submitted to the government-only bald assertions that it occurred- for care of the patients identified in the First Amended Complaint. See, e.g., Am. Compl. ¶¶ 116, 139; see also Portilla, 2014 U.S. Dist. LEXIS 44002, at *37-38 (finding that a complaint failed to satisfy Rule 9(b) where it “provides ample detail about the resident’s incident without a bed alarm . . . but then simply asserts that Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 26 of 32 -19- [the nursing facility] ‘billed Medicaid for an alarm as well as for resident X’s daily rate during his stay, despite its failure to provide appropriate services’”). In fact, Relator does not even provide any particulars about Defendants’ actual billing process. See Scharff, 2016 U.S. Dist. LEXIS 133292, at *21 (dismissing complaint that did not include any “‘information about [the] defendant’s standard billing practice’ or describe ‘a custom of submitting claims’”) (citation omitted). Such a lack of details is not sufficient under Rule 9(b) to adequately plead an alleged violation of the False Claims Act . See Schmidt, 2005 U.S. Dist. LEXIS 15648, at *12 (dismissing complaint under Rule 9(b) because relator had “failed to identify with particularity” any “nexus” between the allegedly illegal scheme and the FCA); see also Portilla, 2014 U.S. Dist. LEXIS 44002, at *38 (“Allegations that would help to describe these submissions or billing practices with precision are absent outside of the general overview of the statutory and regulatory framework provided in the amended complaint’s opening paragraphs.”).9 Additionally, the First Amended Complaint fails to adequately differentiate among the “Defendants” in violation of the particularity requirements under Rule 9(b). Relator cannot lump Bakers Bay Nursing Home Associates and DePaul Healthcare together; Rule 9(b) requires particularized allegations for each individual Defendant. See Indianapolis Life Ins. Co. v. Hentz, No. 06-2152, 2008 U.S. Dist. LEXIS 76821, at *35 (M.D. Pa. Sept. 30, 2008) (“Though it may be convenient to lump defendants together for ease of reference . . . it is a luxury that the plaintiff should avoid when alleging acts of fraud in a complaint.”); Naporano Iron & Metal Co. v. Am. 9 Other Circuits have reached similar conclusions. See, e.g., United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002) (explaining that a relator cannot “allege simply and without any stated reason for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government”); United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004) (holding that “pleadings invariably are inadequate unless they are linked to allegations, stated with particularity, of the actual false claims submitted to the government”). And the Third Circuit has “striven for consistency with other circuits on the interpretation of the FCA generally.” U.S. Dept. of Transp. ex rel. Arnold v. CMC Eng'g, Inc., 947 F. Supp. 2d 537, 545 (W.D. Pa. 2013), aff'd, 567 F. App'x 166 (3d Cir. 2014). Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 27 of 32 -20- Crane Corp., 79 F. Supp. 2d 494, 511 (D.N.J. 1999) (“Pleadings containing collectivized allegations against ‘defendants’ do not suffice.”). Here, Relator often groups Bakers Bay Nursing Home Associates and DePaul Healthcare together, referring repeatedly to “Defendants” without differentiating among them, and without identifying the actions each Defendant took in furtherance of the alleged fraud. See, e.g., Am. Compl. ¶ 3 (“Defendants’ management team deliberately operated the facility . . . .“); id. ¶ 4 (“Defendants submitted claims . . . .”); id. ¶ 6 (“Defendants also failed to comply with federal and state statutes and regulations . . . .”); id. ¶ 216 (“Defendants violated” the FCA). Relator also makes inconsistent claims in the few instances where she does attempt to differentiate among them. Compare, e.g., Am. Compl. ¶¶ 19 (DePaul Healthcare “manages all aspects of staffing” at River’s Edge), 52 (“Defendant DePaul’s decisions on staffing, supplies and medical referrals” caused substandard care), with id. ¶ 64 (“Defendants failed to provide the minimal staff required by Pennsylvania law.”), ¶ 85 (“Defendants failed and/or refused to maintain sufficient permanent additional staff . . . .”). This she cannot do. Accordingly, all claims against Bakers Bay Nursing Home Association and DePaul Healthcare should be dismissed for failure to satisfy the particularity requirement of Rule 9(b). D. Relator Has Failed to Plead a Retaliation Claim. Relator also claims that she was terminated from her position at River’s Edge in November 2014 as “a direct result and in retaliation” for her complaints to management about resident care and the scabies “outbreak” the month before. Am. Compl. ¶¶ 207 - 212. In order to state a claim under the False Claims Act for retaliation, a plaintiff must allege that (1) she engaged in protected conduct, that is, acts done in furtherance of a False Claims Act action, and (2) she was discriminated against because of her protected conduct. Hutchins v. Wilentz, 253 F.3d 176, 186 (3d Cir. 2001) (citing 31 U.S.C. § 3730(h)). To sufficiently plead that the Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 28 of 32 -21- discrimination was “because of” protected conduct requires a plaintiff to show that (1) her employer had “knowledge” she was “engaged in ‘protected conduct,’” and (2) that her “employer’s retaliation was motivated, at least in part, by the employee’s engaging in ‘protected conduct.’” Id. Here, the First Amended Complaint merely alleges that Relator complained “to management” of “inadequate care,” an “inadequate response” to a scabies incident, and that the alleged “lack of staffing” was an “abnormal situation.” Making general complaints to one’s supervisor, without taking any other steps, is not “protected conduct.” See id. at 187 - 188 (citing Zahodnick v. IBM, 135 F.3d 911, 914 (4th Cir. 1997) (“Simply reporting his concern of a mischarging to the government to his supervisor does not suffice to establish that [relator] was acting ‘in furtherance’ of ‘a qui tam action.’”)). Also, as demonstrated above, the allegations in the First Amended Complaint fail to sustain a False Claims Act claim and, therefore, are not protected activities under the False Claims Act. See Dookeran v. Mercy Hosp. of Pittsburgh, 281 F.3d 105, 108 (3d Cir. 2002) (“If there is no way that [plaintiff’s] conduct of informing [employer’s] administrators about the allegedly fraudulent application could reasonably lead to a viable FCA action, then the whistle-blower provision provides him no protection.”). Nor has the First Amended Complaint alleged, as it must to show retaliation, that River’s Edge was on notice of the “distinct possibility” of False Claims Act litigation prior to Relator’s termination. See Hutchins, 253 F.3d at 188-189 (“‘Merely grumbling to the employer about . . . regulatory violations does not satisfy the requirement . . . .’”) (citation omitted). Instead, the First Amended Complaint merely pleads, without factual support, that Defendants “knew or should have known that Plaintiff was engaging in protected activities.” See Am. Compl. ¶ 225. That conclusory statement is insufficient to plead that River’s Edge had actual knowledge of her Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 29 of 32 -22- purported protected actions or plead retaliation in violation of the False Claims Act. See Hutchins, 253 F.3d at 188 (requiring employer to have actual knowledge because “without knowledge an employee is contemplating a False Claims Act suit, ‘there would be no basis to conclude that the employer harbored [§ 3730(h)’s] prohibited motivation [i.e., retaliation].’”) (citation omitted). V. CONCLUSION For the foregoing reasons, Defendants Bakers Bay Nursing Home Associates and DePaul Healthcare respectfully request that this Court dismiss Relator’s First Amended Complaint in its entirety, with prejudice. Respectfully submitted, Richard J. Zack (ID No. 77142) Abigail A. Hazlett (ID No. 313387) Brian M. Nichilo (ID No. 313786) PEPPER HAMILTON LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA 19103-2799 Tele.: 215-981-4000 Fax: 215-981-4750 Attorneys for Defendants Dated: March 31, 2017 Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 30 of 32 CERTIFICATE OF SERVICE I, Brian M. Nichilo, hereby certify that on March 31, 2017, a true and correct copy of the foregoing Motion to Dismiss All Counts of Relator’s First Amended Complaint and the accompanying Memorandum of Law were served upon Counsel of Record via the Court’s ECF system. Brian M. Nichilo Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 31 of 32 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA __________________________________________ : UNITED STATES OF AMERICA, : ex rel. TERRY JACKSON, : CIVIL ACTION : Plaintiffs, : CASE NO. 15-00020 : v. : : BAKER’S BAY NURSING HOME : ASSOCIATES, LP, d/b/a RIVER’S EDGE : and DEPAUL HEALTHCARE, LP, : : Defendants. : __________________________________________: ORDER AND NOW, this ____ of ___________, 2017, upon consideration of Defendants Baker’s Bay Nursing Home Associates, doing business as River’s Edge, and DePaul Healthcare’s Motion to Dismiss All Counts of Relator’s First Amended Complaint, and any response thereto, IT IS ORDERED that: 1. Defendants’ Motion is GRANTED. 2. Relator Terry Jackson’s First Amended Complaint is DISMISSED WITH PREJUDICE. BY THE COURT: HONORABLE EDUARDO C. ROBRENO Judge, United States District Court Case 2:15-cv-00020-ER Document 37 Filed 03/31/17 Page 32 of 32