Opinion
Civil Action No. 3:97-CV-2738-H.
April 9, 1999
MEMORANDUM OPINION AND ORDER
Before the Court are Home Care Services, Inc.'s Partial Motion to Dismiss Under Fed.R.Civ.P. 9(b) and 12(b)(6), and for award of Attorneys' Fees Under 31 U.S.C. § 3703(d), filed November 20, 1998; the Individual Defendants' Motion to Dismiss Under Fed.R.Civ.P. 9(b) and 12(b)(6), and for award of Attorneys' Fees Under 31 U.S.C. § 3703(d), filed November 20, 1998; Plaintiff's Responses to the Motions to Dismiss, and in the alternative, a Counter-Motion for Leave to Amend Complaint, filed December 22, 1998; the Individual Defendants' Response to Plaintiff's Motion for Leave to Amend Complaint, filed January 11, 1999; and Plaintiffs' Reply to the Individual Defendants' Response, filed January 22, 1999.
This is a qui tam action brought by Plaintiff under 31 U.S.C. § 3730(b), which authorizes private citizens with knowledge of possible violations of the False Claims Act, 31 U.S.C. § 3729, et seq., ("FCA") to sue on behalf of the government. Plaintiff alleges that both Home Care Services, Inc. and the individually-named Defendants (collectively, "Defendants") have violated the False Claims Act by submitting false and fraudulent claims reimbursements to the government under the Medicare and Medicaid programs. Defendants move to dismiss Plaintiff's complaint on the grounds that it is not plead with sufficient particularity to meet the requirements of Federal Rule of Civil Procedure 9(b) ("Rule 9(b)"). For the reasons set forth herein, Defendants' motions are denied.
FACTUAL BACKGROUND
Plaintiff Clara Olloh-Okeke is a licensed home health aid and was employed by Defendant Home Care Services, Inc. ("HCS"), from April 1997 until her termination on October 31, 1997. Defendant Shirley Germanos is the owner of HCS. Defendant Reni Germanos Walsh is the director of nursing of HCS and is the daughter of Shirley Germanos. Mary Jenson is a case manager at HCS. Plaintiff alleges that the Defendants violated the False Claims Act by submitting false and fraudulent claims reimbursements to the government under the Medicare and Medicaid programs prior to and since 1991. Plaintiff also asserts causes of action for retaliatory discharge under 31 U.S.C. § 3730(h) and Texas common law. Plaintiff filed this lawsuit under seal so that the United States government could investigate her allegations and determine whether to exercise its statutory right to intervene and prosecute this lawsuit. See 31 U.S.C. § 3730(b)(3). The government declined to intervene, and this Court subsequently unsealed the complaint. See October 5, 1998 Order.
Defendant HCS moves for dismissal of the claims related to the False Claims Act based upon Plaintiff's failure to comply with the requirements of Rule 9(b). The Individual Defendants move to dismiss the entire case on the same grounds. They also advance an additional constitutional challenge to Plaintiff's complaint. The Court will analyze the motions of the two sets of Defendants in tandem. Additionally, the Court will analyze these motions in light of Plaintiff's proposed amended complaint in order to determine whether amendment is futile. See F.D.I.C. v. Conner, 20 F.3d 1376, 1385 (5th Cir. 1994).
RULE 12(B)(6) STANDARD
A dismissal for failure to plead fraud with particularity under Rule 9(b) is treated as a dismissal for failure to state a claim under Rule 12(b)(6). United States ex rel Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997). Motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) are "disfavored in the law" and courts "will rarely encounter circumstances which justify granting such a motion." Mahone v. Addicks Util. Dist., 836 F.2d 921, 926 (5th Cir. 1988). A motion to dismiss is granted only "if it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-6 (1957). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). To avoid dismissal for failure to state a claim, however, a plaintiff "must plead specific facts, not mere conclusory allegations." Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992).
ANALYSIS
1. Rule 9(b) and the Plaintiff's False Claims Act Claims.
Claims brought under the FCA must comply with Rule 9(b). United States ex rel Thompson, 125 F.3d at 903. Rule 9(b) requires that in a fraud case, the allegations of fraud must be pled with particularity — that is, at a minimum, Rule 9(b) requires a plaintiff to set forth the "who, what, where, when, and how" of the alleged fraud. See Williams v. WMX Tech., Inc., 112 F.3d 175, 177 (5th Cir. 1997).
Federal Rule of Civil Procedure 9(b) states: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally."
Defendants contend that Plaintiff's FCA claims fail to identify with specificity the contents and dates of any specific claims that were fraudulently submitted to the government or the specific defendant who submitted the allegedly fraudulent claims.
The Court's interpretation of Rule 9(b) is to be harmonized with the general principles of Fed.R.Civ.P. 8, which requires only that a complaint give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests. See Norman v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir. 1994); Cadle Co. v. Schultz, 779 F. Supp. 392, 396 (N.D. Tex. 1991) ( quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see also 5 CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE, § 1298 (2d ed. 1995 Supp. 1999). Furthermore, Rule 8(f) instructs the Court to construe all pleadings "as to do substantial justice." Williams, 112 F.3d at 178.
The application of the Rule 9(b) standard is flexible and depends upon the particular circumstances of the litigation at bar. Shushany v. Allwaste, Inc., 992 F.2d 517, 521 (5th Cir. 1993). Courts have consistently found that where allegations of fraudulent conduct are numerous or take place over an extended period of time, less specificity is required to satisfy the pleading requirements of Rule 9(b). United States ex rel Thompson v. Columbia/HCA Healthcare Corp., 20 F. Supp.2d 1017, 1039 (S.D. Tex. 1998) (citing cases). Furthermore, the Fifth Circuit has recognized that a relaxed pleading requirement was appropriate, "allowing fraud to be pled on information and belief where, as here, the facts relating to the alleged fraud are peculiarly within the perpetrator's knowledge." Id. ( quoting United States ex rel Thompson, 125 F.3d at 903).
After carefully reviewing the Proposed Amended Complaint, the Court finds that the allegations are sufficient to apprise Defendants of Plaintiff's claims of fraud and satisfy the requirements of Rule 9(b). See United States ex rel Thompson, 20 F. Supp.2d at 1039; see also Corwin v. Marney, Orton, Inv., 788 F.2d 1063, 1068 (5th Cir. 1986) (although Rule 9(b) calls for fraud to be plead with particularity, the allegations must still be as short, plain, simple, direct, and concise as is reasonable under the circumstances); Mitchell Energy Corp. v. Martin, 616 F. Supp. 924, 927 (S.D. Tex. 1985) (a complaint need not set forth all facts pertinent to a case in order to meet the heightened pleading standard of Rule 9(b)). Defendants' Motions to Dismiss based upon Plaintiff's failure to plead with specificity are denied.
2. Constitutional Challenges to Qui Tam Provisions of the False Claims Act.
Relying on a decision of Judge Hoyt of the United States District Court for the Southern District of Texas, United States ex rel Riley v. St. Like's Episcopal Hosp., 982 F. Supp. 1261 (S.D. Tex. 1997), the Individual Defendants argue that the Plaintiff's private qui tam suit is unconstitutional. First, they allege Plaintiff lacks standing under Article III of the United States Constitution. Second, they argue that the qui tam provisions of the FCA violate the Appointments Clause of Article II of the United States Constitution. Finally, Defendants contend that Plaintiff's suit impermissibly infringes on the power of the executive branch to control the prosecution of litigation in the name of the United States, and therefore, violates the principle of "separation of powers."
Judge Harmon, also of the Southern District of Texas, recently considered all of these arguments and, in a very thorough opinion, rejected each of them. See United States ex rel Thompson, 20 F. Supp.2d 1017, 1044-46 (S.D. Tex. 1998). This Court joins Judge Harmon and every other federal appellate court that has considered the issue in disagreeing with Riley because it goes against 134 years of case law specifically concluding or assuming that the qui tam provisions are constitutional. See, e.g., United States ex rel. Kreindler Kreindler v. United Technologies Corp., 985 F.2d 1148 (2d Cir. 1993); United States ex rel. Taxpayers Against Fraud v. General Electric Co., 41 F.3d 1032 (6th Cir. 1994); United States ex rel Kelly v. Boeing Co., 9 F.3d 743 (9th Cir. 1993).
CONCLUSION
For the reasons given above, Defendants' Motions to Dismiss are DENIED. See Federal Rules of Civil Procedure 9(b) and 12(b)(6). Additionally, because the Court has concluded that Plaintiff has stated claims, it sees no reason why it should not grant Plaintiff's motion for leave to amend at this pre-discovery stage of the litigation, especially when the purpose of the amended pleading is greater specificity.
The Clerk of the Court is DIRECTED to FILE the Amended Complaint attached to Plaintiff's Response to Partial Motions to Dismiss of Defendant Home Care Services, Inc., and in the alternative, Counter-Motion for Leave to Amend Complaint, filed December 22, 1998.
SO ORDERED.