United States v. Planned Parenthood of the Heartland , 765 F.3d 914 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-1654
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United States of America and State of Iowa, ex rel Susan Thayer
lllllllllllllllllllll Plaintiffs - Appellants
v.
Planned Parenthood of the Heartland
lllllllllllllllllllll Defendant - Appellee
United States of America; State of Iowa
lllllllllllllllllllllInterested parties
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: November 20, 2013
Filed: August 29, 2014
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Before WOLLMAN, COLLOTON, and GRUENDER, Circuit Judges.
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WOLLMAN, Circuit Judge.
Susan Thayer brought this qui tam action against Planned Parenthood of the
Heartland, Inc. (Planned Parenthood), alleging that Planned Parenthood violated the
False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, and the Iowa False Claims Act
(IFCA), Iowa Code Ann. §§ 685.1-.7, by submitting false or fraudulent claims for
Medicaid reimbursement. The district court dismissed her complaint for failure to
plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b).
We affirm in part, reverse in part, and remand for further proceedings.
I. Background
Planned Parenthood is an Iowa non-profit corporation that provides
reproductive healthcare services to patients, including Title XIX Medicaid-eligible
patients. From 1991 to December 2008, Thayer was employed as the center manager
of Planned Parenthood’s clinic in Storm Lake, Iowa. From 1993 to 1997, Thayer also
served as the center manager of Planned Parenthood’s clinic in LeMars, Iowa.
Planned Parenthood operated a total of seventeen clinics throughout Iowa during the
period of Thayer’s employment.
Thayer’s action seeks to recover funds that Planned Parenthood allegedly
obtained in violation of the FCA and the IFCA. Thayer’s second amended complaint
(hereinafter the complaint), alleges that Planned Parenthood wrongfully obtained
Medicaid reimbursements for prescriptions and services that either were not
reimbursable or were not reimbursable in the amounts claimed. Specifically, Thayer
alleges that Planned Parenthood: (1) filed claims for unnecessary quantities of birth
control pills that often were prescribed without examinations or were not received by
Planned Parenthood patients; (2) sought reimbursement for abortion-related services
in violation of federal law and instructed patients who experienced abortion-related
complications to give false information to medical professionals at other hospitals,
causing those medical professionals to unknowingly file claims for services
performed in connection with abortions; (3) filed claims for the full amount of
services that had already been paid, in whole or in part, by “donations” Planned
Parenthood coerced from patients; and (4) filed claims for more expensive services
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than were actually performed by engaging in a process known as “upcoding.” Thayer
alleges that all of Planned Parenthood’s clinics participated in these four fraudulent
schemes from early 2006 to December 2008. The complaint, however, does not
include any representative examples of the false claims that Thayer alleges that
Planned Parenthood submitted for reimbursement.
Planned Parenthood moved to dismiss the complaint, arguing that Thayer failed
to allege fraud with particularity as required by Rule 9(b). The district court granted
Planned Parenthood’s motion, concluding that Thayer failed to meet the pleading
requirements of Rule 9(b) as articulated in United States ex rel. Joshi v. St. Luke’s
Hospital, Inc., 441 F.3d 552 (8th Cir. 2006), because she failed “to provide a single
specific example of a particular fraudulent claim Planned Parenthood submitted to the
government, let alone any representative examples.” D. Ct. Order of Dec. 28, 2012,
at 6.
II. Discussion
We review de novo a district court’s decision to dismiss a complaint under
Rule 9(b). In re Baycol Prods. Litig., 732 F.3d 869, 874 (8th Cir. 2013). The FCA
imposes liability on those who knowingly “present false claims, or cause false claims
to be presented, to the government for payment or approval; [knowingly] use false
statements, or cause false statements to be used, to get a false claim paid or approved
by the government; or conspire to defraud the government, among other things.”1
United States ex rel. Raynor v. Nat’l Rural Utils. Coop. Fin., Corp., 690 F.3d 951,
955 (8th Cir. 2012) (citing 31 U.S.C. § 3729(a)(1)-(3)). Under the FCA, private
individuals are permitted “to bring a civil action in the name of the United States
1
Because the FCA and the IFCA are nearly identical, case law interpreting the
FCA also applies to the IFCA. See Eilbert v. Pelican (In re Eilbert), 162 F.3d 523,
526 (8th Cir. 1998).
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against those who violate the [FCA]’s provisions.” Baycol Prods. Litig., 732 F.3d at
874. Liability under the FCA attaches “not to the underlying fraudulent activity, but
to the claim for payment.” Id. at 875 (quoting Costner v. URS Consultants, Inc., 153
F.3d 667, 677 (8th Cir. 1998)).
A. Pleading Standard Under the FCA
“Because the FCA is an anti-fraud statute, complaints alleging violations of the
FCA must comply with Rule 9(b).” Joshi, 441 F.3d at 556. Rule 9(b) requires a party
alleging fraud to “state with particularity the circumstances constituting fraud[.]”
“This particularity requirement demands a higher degree of notice than that required
for other claims.” United States ex rel. Costner v. United States, 317 F.3d 883, 888
(8th Cir. 2003).
We explained in Joshi that to satisfy Rule 9(b)’s particularity requirement, “the
complaint must plead such facts as the time, place, and content of the defendant’s
false representations, as well as the details of the defendant’s fraudulent acts,
including when the acts occurred, who engaged in them, and what was obtained as
a result.” 441 F.3d at 556. In other words, “the complaint must identify the ‘who,
what, where, when, and how’ of the alleged fraud.” Id. (quoting Costner, 317 F.3d
at 888). Moreover, we stated that although an FCA complaint need not include the
“specific details of every alleged fraudulent claim” when a relator alleges that a
defendant engaged in a systematic practice or scheme of submitting fraudulent claims,
the complaint “must provide some representative examples of [the defendant’s]
alleged fraudulent conduct, specifying the time, place, and content of [the
defendant’s] acts and the identity of the actors.” Id. at 557.
Thayer concedes that she did not provide any representative examples of the
false claims in the complaint. She argues, however, that neither Rule 9(b) itself nor
Joshi requires that representative examples be pleaded in every FCA complaint that
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alleges a systematic practice or scheme of submitting false claims. We agree, and
conclude that Joshi’s representative-examples requirement need not be satisfied with
respect to some portions of the complaint.
Dr. Joshi was an anesthesiologist who had practiced at St. Luke’s Hospital
from 1989 to 1996. Id. at 554. His April 2004 qui tam action against the hospital and
the hospital’s chief of anesthesiology alleged, among other things, that the hospital
had systematically violated the FCA over a sixteen-year period by seeking Medicare
reimbursements at higher rates than those to which it was entitled and by submitting
claims for services that were not performed and supplies that were not provided. Id.
at 554, 557. He did not identify the details of any of the false claims in his complaint
but instead alleged that every claim submitted was fraudulent. Id. at 554-56. In
concluding that the complaint failed to satisfy Rule 9(b), we explained that “Dr.
Joshi’s allegation that ‘every’ claim submitted by St. Luke’s was fraudulent lack[ed]
sufficient ‘indicia of reliability[,]’” id. at 557, because, as an anesthesiologist rather
than a member of the hospital’s billing department, he failed to provide the factual
basis for his “knowledge concerning the alleged submission of fraudulent claims,” id.
at 558. We held that to satisfy Rule 9(b), he was required to plead at least some
representative examples of the false claims. Id. at 557.
Unlike Dr. Joshi, who had no direct connection to the hospital’s billing or
claims department and could only speculate that false claims were submitted, Thayer
was the center manager for two of Planned Parenthood’s clinics, oversaw Planned
Parenthood’s billing and claims systems, and was able to plead personal, first-hand
knowledge of Planned Parenthood’s submission of false claims. In these
circumstances, we find persuasive the approach of those circuits that have concluded
that a relator can satisfy Rule 9(b) by “alleging particular details of a scheme to
submit false claims paired with reliable indicia that lead to a strong inference that
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claims were actually submitted.”2 United States ex rel. Grubbs v. Kanneganti, 565
F.3d 180, 190 (5th Cir. 2009); see also Chesbrough v. VPA, P.C., 655 F.3d 461, 471
(6th Cir. 2011); Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th
Cir. 2010); United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163,
1172 (10th Cir. 2010); cf. United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc.,
707 F.3d 451, 457 (4th Cir. 2013) (indicating that a relator need not identify
individual false claims in order to satisfy Rule 9(b) if the “specific allegations of the
defendant’s fraudulent conduct necessarily led to the plausible inference that false
claims were presented to the government[,]” but that representative examples are
required if a defendant’s actions “could have led, but need not necessarily have led,
to the submission of false claims”), cert. denied, 134 S. Ct. 1759 (2014); United
States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009)
(explaining that in qui tam actions in which the defendant allegedly caused third
parties to file false claims, “a relator could satisfy Rule 9(b) by providing ‘factual or
statistical evidence to strengthen the inference of fraud beyond possibility’ without
necessarily providing details as to each false claim”); United States ex rel. Lusby v.
Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir. 2009) (“We don’t think it essential
for a relator to produce the invoices (and accompanying representations) at the outset
of the suit.”); Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005) (per
curiam) (stating that to satisfy Rule 9(b), an FCA “complaint must contain ‘some
2
Planned Parenthood argues that because we have continued to require relators
to plead representative examples of the false claims in order to satisfy Rule 9(b) in
cases following Joshi, we should not excuse Thayer’s failure to plead representative
examples. See United States ex rel. Dunn v. N. Mem’l Health Care, 739 F.3d 417,
420 (8th Cir. 2014); Baycol Prods. Litig., 732 F.3d at 878-80; United States ex rel.
Ketroser v. Mayo Found., 729 F.3d 825, 829 (8th Cir. 2013); United States ex rel.
Vigil v. Nelnet, Inc., 639 F.3d 791, 797-98 (8th Cir. 2011); United States ex rel. Roop
v. Hypoguard USA, Inc., 559 F.3d 818, 822-25 (8th Cir. 2009). Like Joshi, however,
these cases are distinguishable because the relators did not have access to the
defendants’ billing systems and were not able to plead personal knowledge of the
defendants’ submission of false claims.
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indicia of reliability’” to support the allegation that a false claim was submitted to the
government).
As Judge Higginbotham explicated in Grubbs, Rule 9(b) “is context specific
and flexible and must remain so to achieve the remedial purpose of the False Claim
Act.” See 565 F.3d at 190. Allowing a relator to satisfy Rule 9(b) by pleading the
“particular details of a scheme to submit false claims paired with reliable indicia that
lead to a strong inference that claims were actually submitted” fulfills the objectives
of Rule 9(b) “without stymieing legitimate efforts to expose fraud.” Id. These
objectives include both providing the defendant with adequate notice of the relator’s
claims and protecting the defendant from baseless claims. Id. at 190-91. We agree
that “[s]tating ‘with particularity the circumstances constituting fraud’ does not
necessarily and always mean stating the contents of a bill.” Id. at 190.
Given Rule 9(b)’s objective of protecting defendants from baseless claims,
relators whose allegations lack sufficient indicia of reliability should be required to
plead representative examples of the false claims because their allegations are more
likely to be unfounded. In contrast, a relator who provides sufficient indicia of
reliability to support her allegations that false claims were submitted, such as by
pleading details about the defendant’s billing practices and pleading personal
knowledge of the defendant’s submission of false claims, fulfills Rule 9(b)’s
objective of protecting the defendant from baseless claims. Accordingly, we
conclude that a relator can satisfy Rule 9(b) without pleading representative examples
of false claims if the relator can otherwise plead the “particular details of a scheme
to submit false claims paired with reliable indicia that lead to a strong inference that
claims were actually submitted.” Id. To satisfy the “particular details” requirement
of our holding, however, the relator must provide sufficient details “to enable the
defendant to respond specifically and quickly to the potentially damaging
allegations.” United States ex rel. Costner v. United States, 317 F.3d 883, 888 (8th
Cir. 2003).
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B. The Complaint
Applying this standard to the allegations in the complaint, we conclude that
Thayer has pled sufficiently particularized facts to support her allegations that
Planned Parenthood violated the FCA by filing claims for (1) unnecessary quantities
of birth control pills, (2) birth control pills dispensed without examinations or without
or prior to a physician’s order, (3) abortion-related services, and (4) the full amount
of services that had already been paid, in whole or in part, by “donations” Planned
Parenthood coerced from patients. Thayer adequately alleges the particular details
of these schemes, such as the names of the individuals that instructed her to carry out
these schemes, the two-year time period in which these schemes took place, the
clinics that participated in these schemes, and the methods by which these schemes
were perpetrated. Moreover, she alleges that her position as center manager gave her
access to Planned Parenthood’s centralized billing system, pleads specific details
about Planned Parenthood’s billing systems and practices, and alleges that she had
personal knowledge of Planned Parenthood’s submission of false claims. Thayer’s
claims thus have sufficient indicia of reliability because she provided the underlying
factual bases for her allegations. See Corsello, 428 F.3d at 1012-14 (describing the
indicia of reliability required under Rule 9(b)). Accordingly, because Thayer pleaded
the particular details of these schemes as well as the bases for her knowledge of these
details, these allegations are sufficient to withstand Rule 9(b)’s particularity
requirement.
Thayer’s allegations that Planned Parenthood violated the FCA by causing
other hospitals to unknowingly submit claims for abortion-related services and by
upcoding, however, are not sufficient to satisfy Rule 9(b). We address these
allegations in turn.
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1. Causing Other Hospitals to Submit False Claims
As set forth above, Thayer contends that Planned Parenthood violated the FCA
by instructing patients who experienced abortion-related complications to give false
information to medical professionals at other hospitals, causing those medical
professionals to unknowingly file claims for services performed in connection with
abortions. Specifically, Thayer alleges that Planned Parenthood’s clinic personnel
were instructed to tell patients who received abortions “to report to the local hospital
emergency room in case of hemorrhage or other serious side effect and to advise local
hospital emergency room personnel that [they] had suffered a ‘miscarriage’ and to
seek Title XIX-Medicaid coverage for such ‘miscarriage.’” Thayer further alleges
that she learned that false claims were subsequently filed by local hospitals “as a
direct result of Planned Parenthood[’s] . . . instructions to clients to falsely tell the
hospitals that they were merely suffering a miscarriage.” These allegations fail to
satisfy Rule 9(b) because they lack sufficient indicia of reliability. Thayer does not
allege that she had access to the billing systems of the unidentified local hospitals, nor
does she contend that she had knowledge of their billing practices. As a result,
Thayer is only able to speculate that false claims were submitted by these hospitals.
Because Thayer failed to provide a factual basis for her knowledge of these alleged
false claims, we are unable to infer that false claims were submitted. Accordingly,
we affirm the dismissal of these allegations.
2. Upcoding
The complaint alleges that Planned Parenthood scheduled large numbers of
clients for visits during the short windows of time in which physicians would be
available at the clinics. Thayer contends that Planned Parenthood then violated the
FCA by “bill[ing] visits . . . as problem visits, using CPT codes 99212-99215 (for
existing patients) and 99201-99205 (for new patients) for services performed during
this window of time even though the physician would usually only briefly look into
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the room from the hallway at the client or not even see the client[.]” In addition,
Thayer alleges that Planned Parenthood used problem codes in billing even “where
the client had no medical problem and was only seeking family planning services[.]”
These allegations also fail to satisfy Rule 9(b). Although Thayer is not required to
plead representative examples of the false claims, she still is required to plead the
particular details of the scheme to submit false claims. Thayer’s conclusory and
generalized allegations that Planned Parenthood violated the FCA by engaging in
upcoding do not meet this requirement. For example, Thayer failed to allege when
or how often upcoding took place at the various clinics, who or how many physicians
engaged in upcoding, or what types of services were involved in the upcoding
scheme. Moreover, instead of alleging what monies were fraudulently obtained as
a result of the alleged upcoding, Thayer merely contends that “the United States and
Iowa have been damaged in an amount to be proven at trial.” We thus affirm the
dismissal of Thayer’s upcoding allegations.3
C. Federal Rule of Civil Procedure 12(b)(6)
In addition to meeting Rule 9(b)’s particularity requirement, complaints
alleging violations of the FCA “must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.” Vigil, 639 F.3d at 796
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Independent of its argument
that Thayer’s allegations fail to satisfy Rule 9(b), Planned Parenthood asserts that
Thayer’s claims should be dismissed because she failed to state FCA claims as a
matter of law. Specifically, Planned Parenthood argues that the complaint should be
dismissed because (1) her allegations are based on alleged regulatory violations that
cannot serve as bases for liability under the FCA, (2) she failed to identify regulations
3
In light of this conclusion, we need not address Planned Parenthood’s
alternative argument that, at a minimum, the upcoding allegations should be
dismissed because Thayer failed to file those allegations under seal.
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that prohibit Planned Parenthood’s practices, or (3) the applicable regulations actually
permit Planned Parenthood’s conduct. The district court did not consider these
arguments in light of its decision to dismiss the complaint on the basis of Thayer’s
failure to plead representative examples of the false claims. On remand, the district
court should consider whether any of Thayer’s remaining allegations survive these
challenges. Our holding with respect to the Rule 9(b) issue, however, should not be
read as in any way expressing a view on Planned Parenthood’s Rule 12(b)(6)
arguments.
III. Conclusion
The judgment is affirmed in part and reversed in part. The case is remanded
to the district court for further proceedings consistent with this opinion.
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