On February 7, 2022, the Northern District of New York dismissed a qui tam complaint against a New York nursing facility operator, Kingston NH Operations LLC, which operates Ten Broeck Center (TBC). The relator, a former employee, claimed that the facility inadequately cared for Medicaid and Medicare beneficiaries during the COVID-19 pandemic. Among other things, the relator alleged that the facility did not comply with state-issued mask mandates and social distancing guidelines, downplayed the severity of the spread of COVID-19 within the facility, and improperly terminated her employment in retaliation for calling attention to the improper conduct. The government declined to intervene. The district court’s decision implicates a longstanding circuit split over how Rule 9(b) applies to False Claims Act actions and analyzes the question of whether Rule 9(b) requires a relator to identify specific examples of false claims.
In moving to dismiss, the facility argued that the relator’s complaint failed to satisfy Fed. R. Civ. P. 9(b)’s heightened pleading standard because to the relator did not identify “who submitted the false claims, the dates of service, dates of [the claims’] submission, the patient for whom the claim was allegedly submitted, how the claim was false, to whom the statement was made, when the statement was made, or any other [relevant] facts . . ..” In opposition to the retaliation claims, the facility also argued that the relator failed to allege facts plausibly suggesting that she engaged in a protected activity as required under the FCA and the New York FCA, and that the relator was not a covered employee within the meaning of N.Y. Labor Law § 741. Finally, the facility contended that the complaint alleged no facts plausibly suggesting that the facility’s conduct presented either a “substantial and specific danger to public health or safety or a significant threat to the health of a specific patient.”
The court ruled in favor of the facility. Applying the rule adopted by the Second Circuit, the court held that Fed. R. Civ. P. 9(b) “does not require that every qui tam complaint provide details of actual bills or invoices submitted to the government.” Nevertheless, the court went on, a relator must allege facts that lead to a “strong [inference] that specific claims were indeed submitted and that information about [the details of] the claims submitted are peculiarly within the opposing party’s knowledge.” Further, the court reasoned, a relator must allege a factual nexus between the improper conduct and the submission of a false claim. Although relator’s complaint provided extensive facts as to how TBC staff and residents defied state-issued mask mandates and social distancing guidelines, relator “merely stated a set of circumstances and ask[ed] the Court to connect the dots by assuming that defendant submitted false claims.” Specifically, the court found relator’s complaint lacked the following information: (1) the identity or position of the employee(s) who allegedly submitted fraudulent claims or claims containing false statements; (2) the number of fraudulent claims or claims containing false statements and their respective dollar amounts; and (3) any personal knowledge as to the existence of prior or future fraudulent billing practices. The court also noted that “[m]ateriality must also ‘be pleaded with particularity under [Fed. R. Civ. P.] 9(b)’” and relator failed to allege any facts that plausibly suggest even a single claim that defendant had submitted to Medicaid or Medicare, leaving the court unable to assess materiality of any submitted claim. Based on this reasoning, the court ultimately dismissed relator’s FCA and NYFCA claims.
The court also dismissed relator’s retaliation claims, reasoning that while relator sufficiently alleged facts plausibly suggesting her good faith belief that she was engaged in a protected activity, she failed to allege facts plausibly suggesting that an employee in a similar circumstance would have believed noncompliance with mask mandates could possibly suggest that fraudulent claims or claims containing false statements had been submitted to Medicaid. Since the court dismissed all of relator’s claims over which it had original jurisdiction except for one state law claim brought under N.Y. Labor Law § 741, the court had discretion on whether it would exercise supplemental jurisdiction for the remaining claim, but it ultimately declined.
In another case, Johnson v. Bethany Hospice and Palliative Care, which also raises the question of how Rule 9(b) applies to FCA actions, the Supreme Court recently called for the views of the Solicitor General.
The decision from the Northern District of New York can be found here.
