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United States of America Ex Rel. v. Americare

March 29, 2013


The opinion of the court was delivered by: Block, Senior District Judge:


Plaintiff-relator Patricia Mooney brings this action under the federal False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., and the New York False Claims Act ("New York FCA"), N.Y. State Fin. Law § 187 et seq. She raises the following qui tam claims on behalf of the United States for alleged violations related to Medicare and Medicaid: (1) violations of the FCA, (2) conspiracy to violate the FCA, and (3) violations of the New York FCA.*fn1 Plaintiff alleges two fraudulent schemes, one involving the payment of kickbacks in exchange for referrals, and one involving the alteration of documents to justify home health services. Plaintiff also asserts a retaliation claim under the FCA, alleging that she was harassed and ultimately fired for investigating this conduct. She asserts these claims against Americare, Inc., Americare Certified Special Services, Inc. ("Americare CSS"), Americare Therapy Services, Martin Kleinman, David Helfgott, and Shaindy Inzlicht. Defendants have moved to dismiss the Third Amended Complaint ("TAC"). For the reasons set forth below, defendants' motion is granted in part and denied in part.


Defendants provide home health nursing services to patients living in private residences and residential adult care facilities. TAC ¶ 2. Plaintiff worked for Americare CSS from 2002 to 2005 as a Staff Development Manager and later as the Director of Quality Improvement. Id. ¶ 8. She claims that she "was responsible for . . . reviewing Americare's Medicare and Medicaid billings to ensure compliance with applicable regulations," id. ¶ 46, and that in this role she "learned of defendants' scheme to defraud Medicare and Medicaid by (1) fraudulently obtaining and supplying hundreds of patients in exchange for the payment of illegal kickbacks; and (2) using false and fraudulent documents to support false reimbursement claims made to Medicare and Medicaid for skilled nursing services," id. ¶ 47. Plaintiff contends that defendants conspired with third-party vendors Royal Home Care ("Royal") and Immediate Home Care ("Immediate") to carry out the fraudulent referral scheme. See id. ¶¶ 49-51. She states that "hundreds of thousands, if not millions, of dollars in Medicare and Medicaid funds" were wrongly paid by the government. Id. ¶ 121. Plaintiff also claims that she was fired for objecting to this conduct and calling it to the attention of management. Id. ¶¶ 111-15.

Plaintiff filed her original complaint in April 2006, and she filed her most recent version, the Third Amended Complaint, on January 24, 2012. She seeks treble damages as well as civil penalties for the federal and state FCA violations.


A. Plaintiff's Qui Tam Claims

Pursuant to the FCA, private persons, known as "relators," may file qui tam actions and recover damages on behalf of the United States. Congress recently enacted the Fraud Enforcement Recovery Act of 2009 ("FERA"), which amended and renumbered the FCA. See Pub. L. No. 111-21, § 4, 123 Stat. 1617, 1621-22. Only certain FCA provisions apply retroactively to plaintiff's claims, which were filed in April 2006. See id.; United States ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 113 (2d Cir. 2010), rev'd on other grounds, 131 S.Ct. 1885 (2011). Because § 3729(a)(1)(A) does not apply retroactively, the former provision (§ 3729(a)(1)) applies and establishes liability for "knowingly present[ing], or caus[ing] to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval." However, § 3729(a)(1)(B) (formerly § 3729(a)(2)), does apply retroactively and establishes liability for "knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim." Finally, because § 3729(a)(1)(C) does not apply retroactively, the former provision (§ 3729(a)(3)) applies and establishes liability for "conspir[ing] to defraud the Government by getting a false or fraudulent claim allowed or paid." See FERA § 4(a), 123 Stat. at 1621; see also Kirk, 601 F.3d at 113; United States ex rel. Walner v. NorthShore Univ. Healthsystem, 660 F. Supp. 2d 891, 896 n.3 (N.D. Ill. 2009); United States ex rel. Moore v. Cmty. Health Servs., 09-cv-1127, 2012 WL 1069474, at *4 (D. Conn. Mar. 29, 2012).

The Second Circuit has recognized that § 3729(a)(1) requires a plaintiff to show "that defendants (1) made a claim, (2) to the United States government, (3) that is false or fraudulent, (4) knowing of its falsity, and (5) seeking payment from the federal treasury." Kirk, 601 F.3d at 113 (quoting Mikes v. Straus, 274 F.3d 687, 695 (2d Cir. 2001)). A false or fraudulent claim is one "aimed at extracting money the government otherwise would not have paid." Mikes, 274 F.3d at 696. The wrongful activity must be linked "to the government's decision to pay." Id. Section 3729(a)(1)(B) does not, however, require "proof that the defendant caused a false record or statement to be presented or submitted to the Government but that the defendant made a false record or statement for the purpose of getting a false or fraudulent claim paid or approved by the Government." Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 671 (2008) (internal quotation marks omitted) (referencing former § 3729(a)(2)).

1. Pleading Standard for Qui Tam Claims

Defendants' primary argument is that plaintiff has not pled her qui tam claims with the particularity required by Federal Rule of Civil Procedure 9(b). "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). This heightened pleading standard is "designed to provide a defendant with fair notice of a plaintiff's claim, to safeguard a defendant's reputation from improvident charges of wrongdoing, and to protect a defendant against the institution of a strike suit," O'Brien v. Nat'l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (internal quotation marks omitted), in addition to "discourag[ing] the filing of complaints as a pretext for discovery of unknown wrongs," Madonna v. United States, 878 F.2d 62, 66 (2d Cir. 1989) (internal quotation marks omitted).

Claims brought under the FCA, as well as its state analogue, must comply with Rule 9(b)'s heightened pleading standard. See Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir. 1995); United States ex rel. Polansky v. Pfizer, Inc., 04-cv-704, 2009 WL 1456582, at *4 (E.D.N.Y. May 22, 2009). To satisfy this standard, a 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." Wood v. Applied Research Assocs., 328 F. App'x 744, 747 (2d Cir. 2009)(quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994)) (internal quotation marks omitted); see also United States v. Dialysis Clinic, Inc., 09-cv-710, 2011 WL 167246, at *9 (N.D.N.Y. Jan. 19, 2011) ("Where a complaint fails to specify the time, place, speaker and content of the alleged misrepresentations, it will lack the particulars required by 9(b)."). "In other words, Rule 9(b) requires that a plaintiff set forth the who, what, when, where and how of the alleged fraud." Polansky, 2009 WL 1456582, at *4 (FCA case) (quoting United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)) (internal quotation marks omitted).

Because the Second Circuit has not explained exactly what Rule 9(b) demands of FCA claims, several courts have relied on a standard articulated by the First Circuit:

As applied to the FCA, Rule 9(b)'s requirement that averments of fraud be stated with particularity-specifying the "time, place, and content" of the alleged false or fraudulent representations-means that a relator must provide details that identify particular false claims for payment that were submitted to the government. . . . [D]etails concerning the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices are the types of information that may help a relator to state his or her claims with particularity. These details do not constitute a checklist of mandatory requirements that must be satisfied by each allegation included in a complaint. However, . . . some of this information for at least some of the claims must be pleaded in order to satisfy Rule 9(b).

United States ex rel. Karvelas v. Melrose-Wakefield Hospital, 360 F.3d 220, 232-33 (1st Cir. 2004) (internal quotation marks omitted), abrogated on other grounds by Allison Engine Co., 553 U.S. 662; see United States v. Huron Consulting Grp., 09-cv-1800, 2011 WL 253259, at *2 n.2 (S.D.N.Y. Jan. 24, 2011) (quoting Karvelas); Polansky, 2009 WL 1456582, at *4 (same). Though "[u]nderlying schemes and other wrongful activities that result in the submission of fraudulent claims are included in the 'circumstances constituting fraud or mistake' that must be pled with particularity pursuant to Rule 9(b)," these "pleadings invariably are inadequate unless they are linked to allegations, stated with particularity, of the actual false claims submitted to the government that constitute the essential element of an FCA qui tam action." Karvelas, 360 F.3dat 232; see also Dialysis Clinic, 2011 WL 167246, at *10 ("[A]llegations of violations of federal regulations are insufficient to establish a claim under the FCA if plaintiff cannot identify, with any particularity, the actual false claims submitted by the defendant." (citing Johnson v. Univ. of Rochester Med. Ctr., 686 F. Supp. 2d 259, 265 (W.D.N.Y. 2010))).

There are a few situations in which the stringent requirements of Rule 9(b) may be relaxed. The Second Circuit applies a relaxed pleading standard when a plaintiff is not in a position to know specific facts until after discovery and "when facts are peculiarly within the opposing party's knowledge." Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990). Yet the complaint must still "adduce specific facts supporting a strong inference of fraud" to satisfy Rule 9(b); "bas[ing] claims of fraud on speculation and conclusory allegations" is not enough. Id. Pleadings based upon information and belief "must be accompanied by a statement of the facts upon which the belief is based." Di Vittorio v. Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987). Courts in this Circuit have also relaxed the pleading requirement "in cases involving complex fraudulent schemes or those occurring over a lengthy period of ...

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