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State v. Renal Ventures Management, LLC

United States Court of Appeals, Third Circuit

June 6, 2014

THOMAS FOGLIA, In the Name of the United States Government pursuant to the False Claims Act, 31 U.S.C. Section 3730; the State of New Jersey False Claims Act, Title 2A of the New Jersey Statutes and Amending 3 P.L. 1968, C. 413; The State of Texas pursuant to TEX.HUM.RES.CODE Sect. 36.001-26.117 and individually pursuant to the New Jersey Conscientious Employee Protection Act, N.J.S.A. 34:19-1 et Seq., Appellant
v.
RENAL VENTURES MANAGEMENT, LLC

Argued: September 11, 2013

On Appeal from the United States District Court for the District of New Jersey (D.C. No. 1-09-cv-01552 District Judge: Honorable Noel L. Hillman

Ross Begelman, Esquire (Argued) Marc M. Orlow, Esquire Begelman, Orlow & Melletz Counsel for Appellant

R. James Kravitz, Esquire Barry J. Muller, Esquire (Argued) Fox Rothchild Counsel for Appellee

Before: MCKEE, CHIEF JUDGE, SMITH, and SLOVITER, Circuit Judges

OPINION

SLOVITER, CIRCUIT JUDGE.

Thomas Foglia appeals the District Court's order dismissing his qui tam claim brought under the False Claims Act, 31 U.S.C. § 3729 et. seq. Foglia's complaint arises out of claims submitted or presented to Medicare by Defendant Renal Ventures ("Renal") that Foglia alleges are fraudulent. The District Court dismissed on the ground that the complaint failed to state a claim.[1]

I.

Foglia is a registered nurse who was employed with Renal starting on March 13, 2007, and was terminated around November 7, 2008. (App. 34) Renal is a dialysis care services company. (App. 34) Foglia filed a qui tam complaint against Renal on behalf of himself as a relator and on behalf of the United States under the False Claims Act ("FCA") in April 2009. (App. 25) The United States chose not to intervene. (App. 25) Foglia filed an amended complaint, and the District Court granted Renal's motion for judgment on the pleadings and gave Foglia twenty days to file a second amended complaint. (App. 67, 29) It was Foglia's second amended complaint ("SAC") that was before the District Court in the proceeding below. (App. 33)

In the argument before us, counsel for Foglia described his claim as in two parts; one was certification and the other was retaliation.[2] He claimed that Renal violated the FCA by falsely certifying that it was in compliance with state regulations regarding quality of care, by falsely submitting claims for reimbursement for the drug Zemplar, and by reusing single-use Zemplar vials. (App. 50-56) The District Court granted Renal's Motion to Dismiss the FCA complaint under Federal Rule of Civil Procedure 12(b)(6) because it determined that Foglia had failed to state his claim with the heightened level of particularity required by Federal Rule of Civil Procedure 9(b) for fraud claims. (App. 12-13) In particular, the District Court focused on Foglia's failure to provide a "representative sample" (App. 12) or to "identify representative examples of specific false claims made to the Government." (App. 16) The District Court also determined that even if Foglia's claim had met the requirement of Rule 9(b), Foglia "provided no authority under an express or implied false certification theory that the claims submitted by defendant violated a rule or statute establishing compliance as a condition of payment." (App. 16) The District Court dismissed the SAC with prejudice, stating that it did so in light of the fact that Foglia had twice amended his complaint and had engaged in initial discovery. (App. 22) Foglia here appeals the dismissal of his claim in relation to over-billing on Zemplar.

II.

Before we are able to decide whether Foglia has met the higher pleading requirements set by Federal Rule of Civil Procedure 9(b), and so whether he has stated a claim under Federal Rule of Civil Procedure 12(b)(6), we must first determine what Rule 9(b) requires of an FCA claimant, an issue this court has not had occasion to rule on specifically. Rule 9(b) states, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). However, the various Circuits disagree as to what a plaintiff, such as Foglia, must show at the pleading stage to satisfy the "particularity" requirement of Rule 9(b) in the context of a claim under the FCA.

The Fourth, Sixth, Eighth, and Eleventh Circuits have held that a plaintiff must show "representative samples" of the alleged fraudulent conduct, specifying the time, place, and content of the acts and the identity of the actors. See United States ex rel. Noah Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 455-56 (4th Cir. 2013), cert. denied, 2014 WL 1271321 (U.S. Mar. 31, 2014) (No. 12-1349); United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 510 (6th Cir. 2007); United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 557 (8th Cir. 2006); United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1308, 1312 (11th Cir. 2002). The First, [3] Fifth, and Ninth Circuits, however, have taken a more nuanced reading of the heightened pleading requirements of Rule 9(b), holding that it is sufficient for a plaintiff to allege "particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted." United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009); see also Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010).

In United States ex Rel. Wilkins v. United Health Group, Inc., 659 F.3d 295, 308 (3d Cir. 2011), we noted that we had never "held that a plaintiff must identify a specific claim for payment at the pleading stage of the case to state a claim for relief." (Emphasis in the original, citation omitted). While that conclusion does not itself commit us to the more nuanced standards favored by the First, Fifth, and Ninth Circuits, it is hard to reconcile the text of the FCA, which does not require that the exact content of the false claims in question be shown, with the "representative samples" standard favored by the Fourth, Sixth, Eighth, and Eleventh Circuits. As the Fifth Circuit has stated, requiring this sort of detail at the pleading stage would be "one small step shy of requiring production of actual documentation with the ...


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