Michael McElligott v. McKesson Corporation ( 2022 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 10 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL MCELLIGOTT; CARL No. 21-15477
KELLEY,
D.C. No. 4:19-cv-02233-DMR
Plaintiffs-Appellants,
and MEMORANDUM*
UNITED STATES OF AMERICA,
Plaintiff,
v.
MCKESSON CORPORATION, a Delaware
corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Donna M. Ryu, Magistrate Judge, Presiding
Submitted February 14, 2022**
San Francisco, California
Before: GOULD and RAWLINSON, Circuit Judges, and ADELMAN,*** District
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Judge.
Relators Michael McElligott and Carl Kelley (Relators) appeal the district
court’s dismissal of their claims under the False Claims Act (FCA), 31 U.S.C.
§§ 3729–33, against McKesson Corporation without leave to amend. We have
jurisdiction, 28 U.S.C. § 1291, and affirm.
We review de novo the dismissal of claims under the FCA and assume the
facts as alleged in Relators’ second amended complaint are true. United States ex
rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 898 (9th Cir. 2017). We “examine
only whether [R]elators’ allegations support a cause of action under the False
Claims Act under the theories presented,” id., applying the heightened pleading
standards of Federal Rule of Civil Procedure 9(b), see Ebeid ex rel. United States
v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). We review a district court’s denial
of leave to amend for abuse of discretion but conduct de novo review of an order
finding a proposed amendment futile. See Cohen v. ConAgra Brands, Inc., 16 F.4th
1283, 1287 (9th Cir. 2021).
1. Relators first contend that the second amended complaint adequately
alleges that McKesson “knowingly present[ed], or cause[d] to be presented, a false
or fraudulent claim for payment or approval,” by making an express false
***
The Honorable Lynn S. Adelman, United States District Judge for the
Eastern District of Wisconsin, sitting by designation.
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certification. 31 U.S.C. § 3729(a)(1)(A). To plead a claim for express false
certification, a complaint must allege facts from which it may reasonably be
inferred that the defendant submitted a claim for payment to the government in
which it expressly certified that it had complied with a specific law or provision of
the contract with which it knew it had not complied. United States ex rel. Silingo v.
WellPoint, Inc., 904 F.3d 667, 675–76 (9th Cir. 2018). Here, the complaint
contains no such allegations.
2. Relators next contend that the second amended complaint adequately
alleges that McKesson violated the FCA by making implied false certifications. To
state a claim based on an implied false certification, the complaint must allege two
elements: (1) “the claim does not merely request payment, but also makes specific
representations about the goods or services provided”; and (2) “the defendant’s
failure to disclose noncompliance with material statutory, regulatory, or contractual
requirements makes those representations misleading half-truths.” Universal
Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 190 (2016); see
also United States ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 1018 (9th Cir.
2018) (concluding that, under Ninth Circuit precedent, relators must satisfy
Escobar’s two elements to prevail on an implied false certification theory). Here,
the second amended complaint does not allege that, in its claims for payment,
McKesson made specific representations about the medical supplies it provided
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that were rendered misleading half-truths by its failure to disclose noncompliance
with material statutory, regulatory, or contractual requirements. Although the
complaint alleges that McKesson’s claims did not disclose that it delivered the
medical supplies through a supply chain that did not comply with various laws
regulating controlled substances, the complaint does not allege that McKesson
made any “specific representations” in its claims for payment that were rendered
half-truths by this nondisclosure. As far as the complaint reveals, McKesson
represented nothing more in its claims for payment than that it delivered certain
medical supplies on certain dates. The complaint does not allege that those
representations were false, and McKesson’s failure to disclose that the supplies
were delivered through a noncompliant supply chain did not render misleading the
representation that the supplies were delivered.
3. The second amended complaint also fails to allege materiality. In the
context of false certification claims, “[a] misrepresentation about compliance with
a statutory, regulatory, or contractual requirement must be material to the
Government’s payment decision in order to be actionable.” Escobar, 579 U.S. at
181. Here, nothing in the complaint gives rise to a reasonable inference that the
security of McKesson’s supply chain was material to the government’s decision to
pay for medical supplies that McKesson actually delivered. Although the
complaint alleges that the contract contained a provision requiring McKesson to
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obey all laws, the complaint does not allege that compliance with this provision
was designated as a condition of payment for goods delivered; nor does it allege
other facts from which it could reasonably be inferred that the government deemed
noncompliance with the “obey all laws” provision relevant to its decision to pay
for goods delivered. Id. at 192–96.
4. The district court did not abuse its discretion in denying leave to amend. It
is readily apparent that the court denied leave to amend because the amendments
would have been futile, Roth v. Garcia Marquez, 942 F.2d 617, 628–29 (9th Cir.
1991), and Relators do not identify any amendments that could have cured the
deficiencies in the second amended complaint.
AFFIRMED.
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