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United States ex rel Tucker v. Nayak

January 11, 2008


The opinion of the court was delivered by: J. Phil Gilbert District Judge


This matter comes before the Court on defendant P.D.L. Nayak's ("Nayak") motion to dismiss (Doc. 16) pursuant to Federal Rule of Civil Procedure 12(b)(6). Relator Pam Tucker ("Tucker" or"Relator") has responded (Doc. 18), and Nayak has replied to that response (Doc. 19). For the following reasons, the Court will grant the motion.

I. Standard for Dismissal

When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts as true all allegations in the complaint. Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (quoting Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)); see United States ex rel. Fowler v. Caremark, R.X., LLC, 496 F.3d 730, 740 (7th Cir. 2007). Ordinarily, to avoid dismissal under Rule 12(b)(6) for failure to state a claim, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). However, more stringent standards apply where the complaint alleges fraud. Fed. R. Civ. P. 9(b). Where a complaint alleges fraud, it must "state with particularity the circumstances constituting fraud or mistake." Id.

II. Facts

Nayak is a doctor practicing in the Southern District of Illinois, and Tucker served as an insurance billing clerk in Nayak's office from June 2001 to January 2006. During Tucker's employment, Nayak caused his staff to bill Medicare for certain medical and technical procedures performed while Nayak was not in the building where the procedures were performed, knowing that the procedures were only payable under Medicare if the procedures had been performed while Nayak was in the building. Tucker alleges that Nayak submitted such bills to Medicare amounting to approximately $50,000 per week and totaling in excess of $10 million.

On September 5, 2006, Tucker filed a sealed complaint against Nayak alleging numerous violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq. The United States declined to intervene in this action, and on July 17, 2007, the Court unsealed the complaint. Tucker appears to contend Nayak violated the FCA by presenting unauthorized claims to Medicare and/or making false statements to get those claims paid. Nayak moves for dismissal of all of these claims for failure to plead fraud with the specificity required by Rule 9(b).

III. Analysis

FCA claims must be pleaded in accordance with Rule 9(b). United States ex rel. Fowler v. Caremark, R.X., LLC, 496 F.3d 730, 740 (7th Cir. 2007); United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376 (7th Cir. 2003). Rule 9(b) states, in pertinent part, "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." As observed in DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990), "[t]his means the who, what, when, where, and how: the first paragraph of any newspaper story."

Accord Fowler, 496 F.3d at 740. Generally, this means that "facts such as the identity of the person making the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff [must] be alleged in detail." Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006) (internal quotations omitted).*fn1

Relator presumably brings her claim pursuant to 31 U.S.C. § 3729(a)(1) and (2), which impose liability on any person who "knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval," or any person who "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government."

The crux of Nayak's argument is that Relator failed to allege (1) any materially false statements or claims, (2) the submission of any false certification or statement, (3) any federal statute or regulation that was violated, and (4) any actual, individual improper claim submitted to the United States. Relator believes her general allegations of fraudulent conduct suffice to alert Nayak to the "who, what, when, where and how" and that she need not identify any particular Medicare claim number, date or amount paid. Alternatively, she asks the Court to allow her an opportunity to replead with more specifics.

An FCA plaintiff must identify at least one knowingly false claim that was actually submitted and cannot rely on the mere probability that a claim was filed. United States ex rel. Crews v. NCS Healthcare of Ill., Inc., 460 F.3d 853, 856 (7th Cir. 2006). In Crews, a former pharmacy employee alleged, among other things, that her former employer improperly recycled medication originally paid for by Medicaid for use by nursing home patients and returned to the pharmacy by the nursing homes, by then reselling it for other Medicaid patients. Id. at 854-55. She was, however, unable to tie any particular recycled medication to any specific Medicaid claim. Id. at 856. Instead, she relied on the probability that the 10% to 20% of the medication returned from nursing homes was probably distributed to some of the 60% of nursing home patients on Medicaid. Id. The Seventh Circuit Court of Appeals agreed with three other Courts of Appeal that this is insufficient and that a relator has the burden of pointing to at least a single false claim that was actually submitted, not just probably submitted. Id. (citing United States ex rel. Quinn v. Omnicare, Inc., 382 F.3d 432 (3d Cir. 2004); United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301 (11th Cir.2002); United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995 (9th Cir.2002)). Since the Crews relator was unable to do that, the Court of Appeals affirmed the dismissal of her claim. Id. at 857.

More recently, in United States ex rel. Fowler v. Caremark, R.X., LLC, 496 F.3d 730 (7th Cir. 2007), the Seventh Circuit Court of Appeals confirmed that the relator must identify at least one specific false or fraudulent claim to support a claim that a defendant defrauded the government on a massive scale over a number of years. Id. at 740. In Fowler, the relators alleged, among other things, a massive scheme by Caremark, a mail order prescription service, to defraud the United States by charging it for prescription medications that were returned by customers. Id. at 734. In support of their claim, the relators identified individual prescriptions that were returned and corresponding invoices reflecting charges to the United States for those prescriptions. Id. at 741. However, the Court of Appeals concluded that the relators's complaint was insufficient because it failed to identify and describe Caremark's failure to reconcile the apparent double charging through other accounting means or to replace the returned medication free of charge, either of which would have completed the picture of a fraud. Id. In reviewing the sufficiency of the allegations of massive fraud, the Court demanded ...

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