F I L E D
United States Court of Appeals
Tenth Circuit
PU BL ISH
December 5, 2006
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AM ERICA, ex
rel. EDYTH L. SIKKENGA, and
ED Y TH L. SIK K EN G A , on her own
behalf,
Plaintiffs-Appellants,
v. No. 05-4088
REGEN CE BLUECRO SS
BLUESHIELD OF UTAH, formerly
known as Blue Cross and Blue Shield
of U tah; A SSO CIA TED REG IONAL
AN D U NIVERSITY
PATH OLO GISTS, INC.; JOHN P.
M ITCHELL; JED H. PITCHER; and
FR AN K BR OWN ,
Defendants-Appellees.
U N ITED STA TES O F A M ER ICA;
TA X PA YER S A G A IN ST FR AUD
ED U CA TIO N FU N D ; A D MIN ASTAR
FED ERAL, INC.; BLUECRO SS
B LU ESH IELD A SSO CIA TIO N;
BLUE CRO SS AN D B LUE SHIELD
O F A LA BA M A ; B LU E C RO SS AND
BLUE SH IELD OF KANSAS;
B LU EC RO SS B LU ESH IELD OF
M ONTA NA; BLUECRO SS
B LU ESH IELD O F N EB RA SK A;
B LU EC RO SS B LU ESH IELD OF
TENN ESSEE; HEA LTHN OW NEW
Y O RK , IN C.; M U TU A L O F O M AHA
IN SU RAN CE C OM PA N Y ;
NORIDIAN M UTUAL INSURANCE
COM PANY ; PREMERA
BLUECRO SS; UN ITED
GOVERNM ENT SERVICES, L.L.C.;
W ISC ONSIN PH Y SIC IA N S
SERVICE INSURANCE
CORPORATION; JON M .
HUNTSM AN, JR., Governor of Utah,
Amici Curiae.
Appeal from the United States District Court
for the District of Utah
(D .C . N o. 2:99-cv-00086-D AK )
Arthur J. England, Jr., Greenberg Traurig, L.L.C., M iami, Florida; and Daniel L.
Day, M urray, Utah (D avid K . Isom, Greenberg Traurig, L.L.C., Denver,
C olorado; M atthew R. H ow ell, Fillmore Spencer, L.L.C., Provo Utah; Roger H.
Hoole, Hoole & King, L.C., Salt Lake City, Utah, with them on the briefs) for
Plaintiffs-Appellants.
Robert K. Huffman, M iller & Chevalier Chartered, W ashington, D.C., (Randy L.
Dryer and James T. Blanch, Parsons Behle & Latimer, Salt Lake City, Utah, with
him on the brief), for Defendants-Appellees Regence Bluecross Blueshield of
Utah, John P. M itchell, Jed H. Pitcher, and Frank Brown.
James Jardine, Ray Quinney & Nebeker, P.C., Salt Lake City, Utah for
Defendant-Appellee Associated Regional and University Pathologists, Inc.
Charles W . Scarborough, Appellate Division, Department of Justice, W ashington,
D.C., (Paul M . W arner, United States Attorney, District of Utah, Salt Lake City,
Utah; Peter D. Keisler and Douglas N. Letter, D epartment of Justice, Civil
Division, W ashington, D.C., with him on the brief), for amicus curiae the United
States of A merica on behalf of Plaintiffs-Appellants.
James M oorman, and Joseph E. B. W hite, Taxpayers Against Fraud Education
Fund, W ashington, D.C., filed an amicus curiae brief for Taxpayers Against Fraud
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Education Fund on behalf of Plaintiffs-Appellants.
M ichael S. Lee, General Counsel to the Governor, Salt Lake City, Utah, for
amicus curiae Jon M . Huntsman, Jr., Governor of Utah on behalf of Defendant-
Appellee Associated Regional and University Pathologists, Inc.
Gary L. Ayers, Foulston Siefkin, L.L.P., W ichita, Kansas, filed an amicus curiae
brief for Adminastar Federal, Inc., Bluecross Blueshield A ssociation, Blue Cross
and Blue Shield of A labama, Blue Cross and Blue Shield of Kansas, Bluecross
Blueshield of M ontana, Bluecross Blueshield of Nebraska, Bluecross Blueshield
of Tennessee, Healthnow New York Inc., M utual of Omaha Insurance Company,
Noridian M utual Insurance Company, Premera Bluecross, United Government
Services, L.L.C., and W isconsin Physicians Service Insurance Corporation on
behalf of Defendant-Appellee Regence Bluecross Blueshield of Utah.
Before L UC ER O, PO RFILIO, and HA RTZ, Circuit Judges.
L UC ER O, Circuit Judge.
Concerned that “two companies [were] bilking the United States out of
millions of dollars,” Edyth Sikkenga brought suit under the False Claims Act
(“FCA”), 31 U.S.C. § 3729(a), alleging that her former employer, Regence
BlueCross BlueShield of Utah (“Regence”), three Regence managers, and
Associated Regional and University Pathologists (“ARUP”) presented false
M edicare claims to the Government. Sikkenga also presented the claim that
Regence submitted a false budget payment request to the Health Care Financing
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Authority (“HCFA”), 1 the agency that manages M edicare, and fraudulently
avoided adverse contract action by HCFA by backdating and falsifying documents
to manipulate its contract performance ratings. She also alleged that Regence
retaliated against her by terminating her employment after she took actions to
stop this “fraud.” The district court dismissed her claim against ARUP, finding
that it was not a “person” subject to liability under the FCA because it is an arm-
of-the-state. The court dismissed all claims against Regence and the Regence
employees, finding that Regence was immune from suit under 42 U.S.C.
§ 1395u(e), and that Sikkenga did not trigger the whisteblower provision of 31
U.S.C. § 3730(h) because she did not allege that she notified Regence of her
intent to file an FCA claim. Sikkenga’s state law claim was also dismissed on the
basis that she failed to allege a clear and substantial public policy offended by
Regence in Sikkenga’s termination. Exercising jurisdiction under 28 U.S.C.
§ 1291, we A FFIR M the district court’s dismissal of Sikkenga’s false budget
claim, its dismissal of her whistleblower claim, and its dismissal of her contract
performance score manipulation claim. W e REV ER SE the lower court’s
dismissal of Sikkenga’s claim against A RUP, her claim that Regence and its
managers caused false claims to be presented, and her state law claim for
wrongful termination, and R EM AND for further proceedings consistent with this
1
In 2001 this agency was renamed the Centers for M edicare and M edicaid
Services.
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decision.
I
M edicare is a federal insurance program w hich provides health benefits for
elderly and disabled individuals. See 42 U.S.C. §§ 1395 et seq. The program is
administered through private organizations contracted by the Department of
Health and Human Services. 2 M edicare Part A provides for basic in-patient
hospital services, nursing home and hospice care, and, in some instances, home
health services. Part B, a voluntary supplemental program, provides
reimbursement for outpatient hospital services, services of physicians and other
health care professionals, and certain durable medical supplies and equipment.
For five years, Sikkenga worked for Regence, the M edicare carrier for the State
of Utah. Sikkenga’s job included reviewing claims submitted by medical service
providers, including laboratories such as ARUP, a laboratory entirely owned by,
and located at the University of Utah M edical Center. After complaining
internally that ARUP was presenting false claims for M edicare reimbursement,
and that Regence had failed to take appropriate action to stop this “fraud,”
2
Prior to 2003, Part A was administered by organizations known as “fiscal
intermediaries” and Part B by organizations known as “carriers.” See Blue Cross
and Blue Shield of M aryland, Inc. v. United States Dep’t of Health & Human
Servs., 718 F. Supp. 80 (D.D.C. 1989). Carriers and intermediaries are now
collectively called “medicare administrative contractors.” 42 U.S.C. §§ 1395h(a),
1395u(a), 1395kk-1.
-5-
Sikkenga filed suit as a qui tam relator 3 under the FCA, 31 U.S.C. § 3729(a),
against Regence, three Regence managers, 4 and ARUP. In her individual
capacity, Sikkenga also brought an FCA whistleblower retaliation suit and several
state law actions against Regence and its managers.
Sikkenga brought four claims under the FCA, including a whistleblower
claim, and several state law claims. In her first FC A cause of action (“Claim 1”),
Sikkenga alleged that Regence and ARUP violated the FCA when Regence paid
claims for laboratory testing submitted by ARUP that were improper under
M edicare Part B. Specifically, Sikkenga alleged that ARUP used a diagnostic
code to falsely document the medical necessity of thousands of claims where
ARUP did not obtain that code from the referring physician and the code did not
document the true medical necessity of the test performed. Sikkenga also claimed
that ARUP falsely submitted to Regence, a M edicare Part B carrier, various
claims related to renal failure under a code suggesting that the patient was
involved in a kidney transplant, when such a procedure should have been paid
3
Under the FCA, an action can be comm enced either by the United States
itself, or as a qui tam action, by a private person, or “relator,” acting “for the
person and for the United States Government” against the alleged false claimant
“in the name of the Government.” Vermont Agency of Natural Resources v.
United States ex rel. Stevens, 529 U.S. 765, 768 (2000). Sikkenga filed her
Complaint against the Regence defendants and ARUP under seal pursuant to the
qui tam provisions of the FCA. The United States declined to intervene and the
complaint was unsealed and served on the defendants.
4
The three R egence managers are John M itchell (“M itchell”), Jed H.
Pitcher (“Pitcher”), and Frank Brown (“Brown”).
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through M edicare Part A, not Part B. After amending her complaint, Sikkenga
also asserted that Regence “caused” ARUP to present these false claims. 5 She
further argued that Regence’s query of a M edicare database amounted to an
independent presentation of a false claim to the government, or the use of a false
record to get a false claim paid by the government under the FCA.
In her second FCA cause of action (“Claim 2”), Sikkenga alleged that
Regence directly submitted a false budget request in 1992, in connection with an
Early Claims Review process. Her third cause of action (“Claim 3”) alleged that
Regence fraudulently avoided Contractor Performance Evaluation Program
(“CPEP”) score reductions by backdating a letter involving a Comprehensive
M edical Review and paying ARUP’s claims as “adjustments” rather than
“reviews.” In essence, Sikkenga claimed that by manipulating its CPEP scores,
Regence was able to obtain unmerited renew als of its contract as the M edicare
Part B carrier for Utah, and that all claims for administrative costs under the
contract thereafter were fraudulent. Finally, Sikkenga also asserted an FCA
W histleblower retaliation claim (“Claim 4”). Sikkenga abandons most of her
5
The district court allowed Sikkenga to amend her complaint to cure
failings in the allegations under Federal Rule of Civil Procedure 12(b)(6) and a
lack of particularity for her “causing to be presented” FCA claims under Federal
Rule of Civil Procedure 9(b). Sikkenga’s initial complaint also included a
conspiracy allegation. That claim was dismissed by the district court under Rule
12(b)(6), was not reasserted by Sikkenga in her amended complaint, and is not a
subject of this appeal.
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state law claims, appealing only the district court’s dismissal of her wrongful
termination in violation of public policy claim. 6
The district court dismissed Claim 1 because it determined that both
Regence and the Regence managers were immune from suit and that ARUP w as
not a “person” under the FCA; Claim 2 because it was barred by the FCA’s
statute of limitations; Claim 3 because Sikkenga failed to allege fraud with the
particularity required under Federal Rule of Civil Procedure 9(b); and Claim 4
because Sikkenga had not alleged that she had notified Regence of her intent to
file an FCA claim. Because there were no grounds to suggest that Sikkenga’s
termination was in violation of a clear and substantial public policy absent an
underlying FCA claim, the court dismissed her state law wrongful termination
claim as well. W e review Sikkenga’s appeal of each of these dismissals.
II
Sikkenga contends that the district court made three errors in dismissing
Claim 1, her FCA claim that ARUP submitted “false” claims to Regence and that
Regence paid them. First, she argues that the district court erred in ruling that
M edicare Part B’s immunity provision, 42 U.S.C. § 1395u(e), 7 provided Regence
6
Sikkenga’s four state law causes of action were: wrongful termination in
violation of public policy, breach of contract for failure to pay accrued vacation
pay, intentional infliction of emotional distress, and breach of the implied
covenant of good faith and fair dealing in the employment contract.
7
The enactment of the M edicare Prescription Drug, Improvement and
(continued...)
-8-
with absolute immunity from any suit premised on its payment of ARUP’s claims.
Second, Sikkenga contends that the court erred when it ruled, under Rule
12(b)(6), that she had failed to adequately allege that Regence had “caused”
ARUP to present false claims. Finally, Sikkenga appeals the district court’s
determination that ARUP w as an arm-of-the-state and therefore not a “person”
liable under the FC A.
A
Regence has been the major M edicare Part B carrier for Utah since 1987,
7
(...continued)
M odernization Act of 2003, Pub. L. 108-173, 117 Stat. 2066 (2003), alters the
language of the immunity provision made applicable to “medicare administrative
contractors”:
(3) LIA BILITY O F M ED ICARE ADMINISTRATIVE
CONTRACTOR. –
(A) IN GENERAL. – No medicare administrative contractor
shall be liable to the United States for a payment by a certifying or
disbursing officer, unless in connection with such payment, the
medicare administrative contractor acted with reckless disregard of
its obligations under the medicare administrative contract or with
intent to defraud the United States.
(B) RELATIONSH IP TO FA LSE CLAIM S A CT. –
Nothing in this subsection shall be construed to limit liability for
conduct that would constitute a violation of sections 3729 through
3731 of title 31, United States Code.
42 U.S.C. § 1395kk-1(d)(3).
The 2003 amendments to the M edicare Act did not go into effect until
October 2005, and do not apply retroactively to cases alleging fraud by a
contractor prior to that date. Additionally, the Centers for M edicare and
M edicaid Services, the new name for the reorganized HCFA, has until 2011 to
phase in new contracts with medicare administrative contractors. Therefore, our
interpretation of the immunity provision under § 1395u(e)(3) will apply to actions
brought under existing or older contracts for the near future.
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pursuant to a contract with the Department of Health and Human Services’ H ealth
Care Financing Administration (“HCFA”). Under its contract, Regence was
responsible for processing and paying M edicare Part B claims submitted by
medical care providers. As part of its claims evaluation process, Regence was
contractually obligated to ensure that claims w ere paid only for medically
necessary care – a requirement for reimbursement under the M edicare program.
From June 20, 1990, until she was terminated on April 4, 1995, Sikkenga
worked for Regence in its M edicare Part B Review and Analysis Division.
During her employment, Sikkenga became concerned that Regence was paying
ARUP for laboratory testing claims that did not adequately document their
medical necessity, and were potentially improper under M edicare Part B.
Specifically, Sikkenga was concerned that ARUP w as using a generic ICD-9 code
796.4 “other abnormal clinical finding,” to document the medical necessity of
thousands of claims when a more specific code was applicable. 8 Sikkenga
thought that claims using this generic code, when ARUP had not obtained the
code from the referring physician, did not document the true medical necessity of
the test performed, and as such were not properly payable under M edicare Part B.
8
ICD-9-CM codes refers to the International Classification of D iseases,
Ninth Revision, Clinical M odification codes, a coding system used to describe the
diagnosis or medical condition for which medical services are rendered when
M edicare claims are submitted to M edicare carriers. Such codes are not required
from independent clinical laboratories for non-physician services, but can be used
by them to document medical services. See 42 C.F.R. §§ 424.3, 424.32.
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Sikkenga also suspected that ARUP falsely submitted various ICD-9 codes related
to renal failure in connection with CPT code 86317, a code suggesting that the
patient was involved in a kidney transplant, a procedure that should have been
paid through M edicare Part A, rather than Part B. 9 Because of her concern that
these claims were fraudulent, Sikkenga implemented internal audits to more
closely evaluate A RUP’s claims using the suspect codes, referred the matter to
Regence’s internal fraud and abuse section, discussed the matter with her
supervisors within Regence, and instructed A RUP to change its billing practices.
Sikkenga claims that she was ultimately terminated from her position with
Regence in April 1995 because of her managers’ dissatisfaction with her actions
regarding ARUP.
B
The FCA imposes 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,” 31 U.S.C. § 3729(a)(1),
or “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.”
31 U.S.C. § 3729(a)(2). In her first FCA claim, Sikkenga alleged that Regence
9
CPT codes refer to “Current Procedural Technology” codes, which
describe medical services such as treatments, tests, and procedures, and are an
accepted means of reporting such medical services to government and health
insurance programs.
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and the individual defendants had violated the FCA by paying false claims
involving the 796.4 codes and renal failure tests. Relying on United States ex rel.
Body v. Blue C ross and Blue Shield of A labama, Inc., 156 F.3d 1098 (11th Cir.
1998), the district court interpreted the M edicare immunity provision, 42 U.S.C.
§ 1395u(e), to provide absolute immunity to M edicare contractors’ payments of
claims. On that basis, the court found that Regence and the individual defendants
were immune from suit as to any claims based on Regence’s payment of the
allegedly false claims, interpreting that provision to provide absolute immunity to
a M edicare contractor’s payment of a claim. The version of M edicare’s statutory
immunity provision in effect at the time of this case states:
(1) No individual designated pursuant to a contract under this section
as a certifying officer shall, in the absence of gross negligence or
intent to defraud the United States, be liable with respect to any
payments certified by him under this section.
(2) No disbursing officer shall, in the absence of gross negligence or intent
to defraud the United States, be liable w ith respect to any payment by him
under this section if it was based upon a voucher signed by a certifying
officer designated as provided in paragraph (1) of this subsection.
(3) N o such carrier shall be liable to the United States for any payments
referred to in paragraph (1) or (2).
42 U.S.C. § 1395u(e) (1999).
In Body, the Eleventh Circuit held that M edicare’s Part A immunity
provision, 42 U.S.C. § 1395h(i)(3), 10 unambiguously provided absolute immunity
10
The statutory language of the M edicare Part A immunity provision is
essentially identical to the Part B immunity provision. Section 1395h(i) differs
(continued...)
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to M edicare fiscal intermediaries, in contrast to the express limitation present in
§§ 1395h(i)(1) and (2), which provided immunity for payments by certifying or
disbursing officers only in the absence of gross negligence or intent to defraud.
Body, 156 F.3d at 1112. Sikkenga contends that the district court misinterpreted
§ 1395u(e)(3), and that the immunity conferred on M edicare carriers by this
provision does not extend to circumstances involving gross negligence or an
intent to defraud the United States.
“W e review the district court’s interpretation of a federal statute de novo.”
United States v. Quarrell, 310 F.3d 664, 669 (10th Cir. 2002). In interpreting
statutes our primary task is to “determine congressional intent, using traditional
tools of statutory interpretation.” M cGraw v. Barnhart, 450 F.3d 493, 498 (10th
Cir. 2006). “W hen interpreting the language of a statute, the starting point is
always the language of the statute itself. If the language is clear and
unambiguous, the plain meaning of the statute controls. A statute is ambiguous
when it is capable of being understood by reasonably well-informed persons in
two or more different senses.” Id. (quoting Quarrell, 310 F.3d at 669). “If an
10
(...continued)
from § 1395u(e) only in substituting “an agreement” for “a contract” and “agency
or organization” for “carrier.” Under the doctrine of in pari materia we give these
statutes the same interpretation and refer to them interchangeably hereinafter.
See United States ex rel. Rahman v. Oncology Assocs., 201 F.3d 277, 287 n.2
(4th Cir. 1999) (discussing cases in which courts have treated Part A fiscal
intermediaries and Part B carriers equivalently).
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ambiguity is found, a court may seek guidance from Congress’s intent, a task
aided by reviewing the legislative history. A court can also resolve ambiguities
by looking at the purpose behind the statute.” Id. at 499.
To decide the extent of immunity conferred upon M edicare Part B
carriers, w e look to the text of § 1395u(e)(3), specifically, what is meant by its
incorporation of the phrase “any payments referred to in paragraph (1) or (2).”
Body looked solely to the text of § 1395h(i)(3) and held that the absence of the
qualifying language present in the first tw o paragraphs was determinative.
Although we agree with the Eleventh Circuit that §§ 1395h(i)(3) and 1395u(e)(3)
are unambiguous, we disagree that they do not include the gross negligence and
fraud exception. This is made clear by restating § 1395u(e) to avoid the
egregious use of the split infinitive:
(1) In the absence of gross negligence or intent to defraud the United
States, no individual designated pursuant to a contract under this
section as a certifying officer shall be liable with respect to any
payments certified by him under this section.
(2) In the absence of gross negligence or intent to defraud the United
States, no disbursing officer shall be liable with respect to any
payment by him under this section if it was based upon a voucher
signed by a certifying officer designated as provided in paragraph (1)
of this subsection.
(3) No such carrier shall be liable to the United States for any
payments referred to in paragraph (1) or (2).
Correctly read, the payments referred to and incorporated by § 1395u(e)(3) are
payments made “in the absence of gross negligence or intent to defraud the
United States.”
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To the extent that our disagreement with the Eleventh Circuit can be said to
evince ambiguity in the statute, see Quarrell, 310 F.3d at 669 (“A statute is
ambiguous when it is capable of being understood by reasonably well-informed
persons in two or more different senses.”) (internal quotations omitted), we find
support for our interpretation in the legislative history of this provision. See
United States v. Roberts, 88 F.3d 872, 877 (10th Cir. 1996) (“Only if the statutory
language is ambiguous should a court turn to legislative history as an aid in
determining the statute’s meaning.”). In the H ouse Conference Report
accompanying the passage of § 1395u(e)(3), the committee stated that this
provision provides carriers with “the same immunity from liability for incorrect
payments as would be provided their certifying and disbursing officers.” 11 H.R.
11
The language in § 1395u(e)(3) was not included in the original draft of
House Resolution 6675 (Social Security Amendments of 1965). H.R. Rep. No.
89-213, at 148, 160 (1965) (Section analysis of §§ 1816(g)(1), (2) and 1842(e)(1),
(2)). Section 1842(e)(3) of H .R. 6675, applicable to carriers under M edicare Part
B, ultimately became codified at 42 U.S.C. § 1395u(e)(3), the provision we are
interpreting. Section 1816(g)(3) applied to fiscal intermediaries under M edicare
Part A became codified at 42 U.S.C. § 1395h(i)(3). On M ay 17, 1965, Assistant
Secretary of the Department of Health, Education, and W elfare (“HEW ”), W ilbur
Cohen, fulfilling a promise made to the Senate Finance Committee by the
Secretary of HEW , forwarded recommended clarifying and technical changes to
the resolution in a letter from HEW to the Chairman of the Committee. The title
of the relevant proposed amendment was: “Provide that an employing agency of
certifying or disbursing officer would be excused from liability when such officer
is excused.” The text of the change was: “(3) No carrier shall be liable to the
United States for any payments referred to in paragraph (1) or (2).” A Bill to
Provide a Hospital Insurance Program for the Aged Under the Social Security Act
with a Supplementary Health Benefits Program and an Expanded Program of
(continued...)
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R ep. N o. 89-682, at 37 (1965) (Conf. Rep.), as reprinted in 1965 U.S.C.C.A.N.
2228, 2231. Thus, the legislative history unequivocally resolves any ambiguity
that might exist because of the statute’s poor grammatical structure. The
immunity available to Regence as a M edicare carrier under § 1395u(e)(3) is co-
extensive with that of its certifying and disbursing officers – in other words, the
11
(...continued)
M edical Assistance, to Increase Benefits Under the Old-age, Survivors, and
Disability Insurance System, to Improve the Federal-State Public Assistance
Programs, and for Other Purposes: Hearings on H.R. 6675 Before the S. Comm.
on Fin., 89th Cong. 499 (1965) (Letter of the Hon. W ilbur Cohen). Explaining
the recommended amendment, Assistant Secretary Cohen stated:
The changes are needed in order to provide agencies and
organizations authorized to make payments under part A and carriers
authorized to make payments under part B with the same immunity
from liability for incorrect payments as w ould be provided their
certifying and disbursing officers.
Id.
On June 3, 1965, the Senate Finance Committee published these
recommended amendments in a committee print. Staff of S. Comm. on Fin., 89th
Cong., Text of and Justifications for Amendments to H.R. 6675 Recommended
by the D epartment of Health, Education, and W elfare 28-29 (Comm. Print 1965).
Cohen’s proposed changes w ere included in the Senate Finance Committee report
dated June 30, 1965. S. Rep. No. 89-404, at 165, 177 (1965), as reprinted in 1965
U.S.C.C.A.N. 1943, 2104, 2117. The language from HEW ’s letter was included
in the Conference Report. H.R. Rep. No. 89-682, at 37 (1965) (Conf. Rep.), as
reprinted in 1965 U.S.C.C.A.N. 2228, 2231. The amendment of both immunity
provisions, in such a short span of time, with the language and explanation
included in the committee reports from both the Senate Finance and Conference
Committees, strongly indicates the intent of Congress was not to grant absolute
immunity to carriers in § 1395u(e)(3), but instead, as stated by the Conference
Report, to provide carriers with the same immunity as their certifying and
disbursing officers.
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12
immunity excludes cases involving fraud and gross negligence.
12
Further, in contrast to the district court’s evaluation below, the
legislative history accompanying Congress’s 2003 amendment of the M edicare
statute indicates that the textual change to the immunity provision, now present at
42 U.S.C. § 1395kk-1(d), was not intended to change the law , but merely to
continue to provide the same limited immunity that M edicare carriers enjoyed
prior to the amendment:
M edicare contractor reform will not succeed if contractors are
subject to unlimited civil liability for carrying out the payments . . .
expected of them. The conference agreement would therefore
continue the past policy of limiting the liability of certifying and
disbursing officers, and the M edicare administrative contractors for
whom those officers serve, with respect to certain payments.
In addition, the language contained in [§§ 1395k-1(d) of] the
conference agreement clarifies that M edicare administrative
contractors are not liable for inadvertent billing errors, but, as in the
past, are liable for all damages resulting from reckless disregard or
intent to defraud the United States. Importantly, the reckless
disregard standard is the same as the standard under the False Claims
Act. This standard balances the practical need to shelter M edicare
administrative contractors from frivolous civil litigation by
disgruntled providers or beneficiaries w ith the M edicare program’s
interest in protecting itself from contractor fraud. . . .[The FCA]
applies to M edicare fiscal intermediaries and carriers under current
law .
149 Cong. Rec. S15,606, S15,644 (2003) (emphasis added) (statement of Sen.
Grassley during debate on the M edicare Drug, Improvement and M odernization
Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (2003)). Our reading of the
statute avoids the potential pitfall created by Body – that its broad all-
encompassing immunity would render M edicare carriers immune under the FCA
for any actions remotely premised on payment – and meets our obligation to
construe statutes harmoniously. See Chemical W eapons W orking Group v. Dep’t
of the Army, 111 F.3d 1485, 1490 (10th Cir. 1997) (stating that we are required to
construe apparently conflicting statutes harmoniously when possible). It is
important to note that under the normal rule of liability for disbursing and
certifying officers and their supervisors, such officers and supervisors are liable
even for negligent payments. 31 U.S.C. §§ 3527(a), 3528. The M edicare
immunity provision, rather than indicating a complete abandonment of the normal
(continued...)
-17-
C
Our interpretation of the statute, however, does not require that we reverse
the district court’s dismissal of Sikkenga’s fraudulent payment claims in their
entirety. Because the FCA does not provide a remedy for claims for payment of a
false or fraudulent claim, dismissal of these claims under Rule 12(b)(6) was
appropriate. 13 However, Sikkenga also alleged that Regence caused fraudulent
claims to be submitted to the federal government. Section 1395u(e)(3), which
contains a fraud exception, does not provide immunity for carriers who cause
fraudulent claims to be presented.
The district court’s order did not recognize immunity for Regence as to
Sikkenga’s “causing to be presented” claim under the FCA. Instead,
acknowledging that “Regence’s immunity may not extend to the FCA’s
prohibition against ‘causing’ false claims to be presented,” the district court
dismissed Sikkenga’s first FCA cause of action against Regence without prejudice
and provided Sikkenga the opportunity to amend her complaint to specifically
plead facts that would support her claim that Regence caused ARUP to submit
12
(...continued)
presumption that individuals disbursing government funds are responsible for
negligent payments, indicates instead Congress’s intent to provide some
limitation to this normal default rule, not a “blank check” for M edicare carriers to
com mit fraud free from the FC A.
13
Similarly, no FCA cause of action exists as to the individual Regence
defendants merely for “paying” the claims.
-18-
false claims. 14 The district court subsequently rejected Sikkenga’s position that
her amended allegations w ere sufficient to allege that Regence “caused” ARUP to
present false claims. In doing so, the court interpreted the FCA’s “causing to be
presented” language as requiring “some sort of affirmative action on the part of
the defendant before imposing liability.” Interpreting Sikkenga’s complaint to
allege only passive acceptance of ARUP’s claims, the district court found that
Sikkenga’s allegations had failed to demonstrate an affirmative action, and
dismissed the claim against Regence and the Regence defendants under Rule
12(b)(6). On the same grounds, the district court dismissed Sikkenga’s argument,
presented for the first time in her amended complaint, that Regence’s actions in
querying a M edicare database called the “Common W orking File” (“CW F” or
“H ost”), 15 was either the presentation of a false claim to the government, or,
14
The district court instructed Sikkenga to “allege specific facts
demonstrating that the Regence Defendants caused ARUP to present false claims
rather than merely allowing or accepting such claims.” Because the district court
dismissed the first cause of action without prejudice for failure to plead fraud
with particularity under Federal Rule of Civil Procedure 9(b), it provided
Sikkenga sixty days to amend her complaint and plead her first cause of action
with the particularity required by Rule 9(b), and instructed her to “identify
specific claims that did not properly document medical necessity.”
15
The Common W orking File, or Host, is a computerized database for
maintaining M edicare beneficiary information for persons within an assigned
geographical area. The CW F/Host is maintained by a separate contractor under
contract with the Department of Health and Human Services, and contains
M edicare beneficiary entitlement and utilization data. See Blue Cross & Blue
Shield of M aryland, Inc. v. United States Dep’t of Health & Human Servs., 718 F.
Supp. 80, 81 n.4 (D.D.C. 1989).
-19-
under 31 U.S.C. § 3729(a)(2), the knowing making, or using of a false record to
get a false claim paid or approved. 16 W e now turn to the dismissal of these claims
under Rule 12(b)(6).
1
W e review dismissals under Rule 12(b)(6) de novo, and will uphold such a
dismissal “only when it appears that the plaintiff can prove no set of facts in
support of the claims that would entitle him to relief, accepting the well-pleaded
allegations of the complaint as true and construing them in the light most
favorable to the plaintiff.” D obbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th
Cir. 2003) (quotations omitted). Our role is to assess w hether the plaintiff’s
complaint alone is legally sufficient to state a claim upon which relief may be
granted. Id.
In her amended complaint, Sikkenga focused on the “resolution” reached
between the Regence individual defendants, Regence, and ARUP that “allowed”
ARUP to continue to submit claims w ith the 796.4 code, arguing that:
16
Sikkenga also included two lists of ARUP claims that she alleges w ere
false because they used the ICD-9 code of 796.4 to document medical necessity.
Regence continued to assert before the district court that these lists failed to meet
the requirements of Fed. R. Civ. P. 9(b) because they failed to specify which
claims were false under Sikkenga’s theory. Regence argued that merely stating
that some of the listed claims were false was not sufficient to meet Rule 9(b)’s
particularity requirements. Because the district court held that Sikkenga failed to
allege a violation of the FCA under Rule 12(b)(6), it did not decide R egence’s
pending Rule 9(b) motion.
-20-
by way of this ‘resolution’ . . . [defendants] reached an agreement
among themselves to systematically circumvent the requirements of
the Contract and the Social Security Act and related regulations for
the purpose of getting ARUP’s false claims paid by the government
with M edicare Part B funds even though these Defendants were fully
aware that such claims were not payable.
She also alleged that “[b]y assuring ARUP that such claims would continue to be
accepted, Regence encouraged, facilitated, and caused ARUP’s presentation of
false claims for payment.” (emphasis added).
2
In order to determine whether Sikkenga’s allegations survive a Rule
12(b)(6) challenge, we must first decide what is required for an entity to have
“caused” a claim to be presented under the FCA. One case, United States ex rel.
Long v. SCS Bus. & Technical Inst., 999 F. Supp. 78, 91 (D.D.C. 1998), rev’d on
other grounds, 173 F.3d 890 (D.C. Cir. 1999), supports Sikkenga’s view that the
failure to prevent a third party from filing false claims after having knowledge
that the claims were false is sufficient to state a claim under the FCA.
W here a defendant has an ongoing business relationship with a
repeated false claimant, and the defendant know s of the false claims,
yet does not cease doing business with the claimant or disclose the
false claims to the United States, the defendant’s ostrich-like
behavior itself becomes “a course of conduct that allowed fraudulent
claims to be presented to the government.”
United States v. President & Fellows of Harvard College, 323 F. Supp. 2d 151,
187 (D . M ass. 2004) (quoting Long, 999 F. Supp. at 91). Sikkenga asserts that in
United States ex rel. M arcus v. Hess, the Supreme Court interpreted the “causing
-21-
to be presented language” of an earlier version of the FCA to “reach any person
who knowingly assisted in causing the government to pay claims which w ere
grounded in fraud, without regard to whether that person had direct contractual
relations with the government.” 317 U.S. 537, 544-45 (1943) (emphasis added).
However, Hess involved consideration of the text of the FCA as a whole, not
solely the “causing to be presented” provision. Id. at 544-45. W e do not consider
Hess’s “assisted” language to be dispositive in analyzing whether she has
adequately pled a “causing to be presented” claim.
Relying on United States ex rel. Shaver v. Lucas W . Corp., 237 F.3d 932,
933 (8th Cir. 2001), and United States v. M ackby, 261 F.3d 821, 827-28 (9th Cir.
2001), the defendants argue that the FCA requires an affirmative instruction to
present a false claim before imposing liability. The district court rejected both
parties’ contentions, instead interpreting Shaver and United States ex rel. Glass v.
M edtronic, Inc., 957 F.2d 605, 606 (8th Cir. 1992), to require “some sort of
affirmative action on the part of a defendant before imposing liability [under the
FCA].” M otivating the district court was its concern that too broad an
interpretation of the “causes to be presented” language in the FCA “would impose
liability on parties merely for failing to prevent the fraudulent acts of others.”
W e share this concern.
Generally, mere knowledge of the submission of claims and knowledge of
-22-
the falsity of those claims is insufficient to establish liability under the FCA. See
United States v. M urphy, 937 F.2d 1032, 1039 (6th Cir. 1991). Under
§ 3729(a)(1)’s requirement that a person “cause” a false claim to be presented, the
appropriate focus of the inquiry is on “the specific conduct of the person from
whom the Government seeks to collect.” United States v. Bornstein, 423 U.S.
303, 313 (1976). Thus, the appropriate inquiry under § 3729(a)(1) is whether that
specific conduct causes the presentment of a false claim.
The Third Circuit has borrowed traditional principles of tort law to analyze
causation for damages under the FCA. See United States v. Hibbs, 568 F.2d 347,
349 (3d Cir. 1977) (holding that, in assessing damages under the FCA, “a causal
connection must be shown between loss and fraudulent conduct” and that “a broad
‘but for’ test is not in compliance with the [FCA]”). Such an approach is useful
in analyzing causation under § 3729 as well, and provides a familiar test – that of
proximate causation – to determine whether there is a sufficient nexus between
the conduct of the party and the ultimate presentation of the false claim to support
liability under the FCA. Such a test separates the wheat from the chaff, allowing
FCA claims to proceed against parties who can fairly be said to have caused a
claim to be presented to the government, while w innowing out those claims w ith
only attenuated links between the defendants’ specific actions and the
presentation of the false claim. Attempting to strike this same balance, the
district court required “some sort of an affirmative action on the part of the
-23-
defendants.” W e agree that a standard requiring more than mere passive
acquiescence is most consistent with the purposes of the FCA. Furthermore, such
a standard strikes the appropriate balance between shielding from liability parties
who merely fail to prevent the fraudulent acts of others, and ensuring that liability
attaches for “affirmative acts” that do cause or assist the presentation of a
fraudulent claim. 17
Applying this standard to Sikkenga’s allegations, we disagree with the
district court’s assessment that Sikkenga failed to sufficiently allege a “causing to
be presented” claim under the FCA. Our role in reviewing a Rule 12(b)(6)
dismissal is “not to weigh potential evidence that the parties might present at
trial, but to assess whether the plaintiff’s complaint alone is legally sufficient to
17
Although the partial concurrence and partial dissent would not rule on the
scope of causation under the FCA, we consider establishing this standard
necessary to resolving the case before us. A bald assertion that a defendant has
caused a false claim to be presented would plainly fail to state a claim for relief.
See Hall v. Bellmon, 935 F.2d 1106, 1109-10 (10th Cir. 1991) (“[C]onclusory
allegations w ithout supporting factual averments are insufficient to state a claim
on which relief can be based.”). We therefore must consider whether Sikkenga’s
factual allegations are sufficient to support a “causes to be presented” FCA claim.
The proximate causation standard strikes the proper analytical balance and
comports with the rule requiring strict construction of punitive civil statutes. See
Comm’r v. Acker, 361 U.S. 87, 91 (1959). As noted above, there is no support
for the defendants’ position that a causing to be presented claim requires a direct
order to present a false claim. The only remaining plausible constructions of
“causes to be presented” are but for causation and proximate causation. By
adopting proximate causation we narrow, rather than enlarge, the field of actions
for which FCA liability may be imposed.
-24-
state a claim upon which relief may be granted.” Sutton v. Utah State Sch. for the
Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999). Although a close case,
Sikkenga’s allegations state that Regence engaged in certain actions, specifically,
“agreeing to circumvent” contractual and statutory requirements, and “assuring”
ARUP that Regence would continue to accept the claims coded with the disputed
796.4 code. Sikkenga alleges that these actions assisted ARUP in continuing to
submit the allegedly false claims. She supports her description of the alleged
scheme with specific actions taken by Regence that she claims were in support of
this “agreement to circumvent.” Because we must construe these allegations in
the light most favorable to Sikkenga, we cannot conclude that Sikkenga could
prove no set of facts in support of her claim that would entitle her to relief against
Regence for “causing” ARUP to present the allegedly false claims. Accordingly,
we reverse the district court’s dismissal of Sikkenga’s claim that Regence
“caused” ARUP to present false claims under Rule 12(b)(6), 18 and remand for
further proceedings consistent with this opinion. 19
18
For the same reason, the dismissal of Sikkenga’s “causing to be
presented” claims against the individual Regence defendants is also reversed.
19
W e caution, however, that we express no opinion as to whether
Sikkenga’s complaint meets the requirements of Rule 9(b) to plead fraud with
particularity. See United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d
1301, 1308-09 (11th Cir. 2002) (holding that Rule 9(b) applies to actions under
the FCA); Bly-M agee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001) (same);
United States ex rel. Russell v. Epic Healthcare M gmt. Group, 193 F.3d 304, 308
(5th Cir.1999) (same); Harrison v. W estinghouse Savannah River Co., 176 F.3d
(continued...)
-25-
3
In her amended complaint, Sikkenga introduced a new theory of FCA
liability, arguing that Regence’s actions in querying the CW F/Host amounted to
either the presentation of a false claim to the government, or, under 31 U.S.C.
§ 3729(a)(2), the knowing, making, or using of a false record to get a false claim
paid or approved. The district court rejected this theory, finding that
Regence’s query to the Host and the CW F is not a claim for payment
but, rather, a secondary data review within the M edicare claim
processing and payment process that is designed to look at an
additional body of information to ensure that payments only go to
beneficiaries with proper utilization and entitlement status.
W e agree with the district court that Regence’s query to the Host/CW F w as
not a separate presentation of a false claim or the making or using of a false
record to get a false claim paid. To the contrary, the CW F was designed to
improve the accuracy and timeliness of M edicare claims processing by reducing
payment errors and providing carriers w ith updated entitlement and eligibility
data on beneficiaries. See Blue Cross & Blue Shield of M aryland, Inc. v. United
19
(...continued)
776, 783-84 (4th Cir.1999) (same); United States ex rel. LaCorte v. SmithKline
Beecham C linical Labs., Inc., 149 F.3d 227, 234 (3d Cir. 1998) (same); Gold v.
M orrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir.1995) (same, collecting
cases). Although we admit to some concern that Sikkenga’s allegations are an
inadequate attempt to allege a conspiracy under § 3729 (a)(3) under the guise of
alleging a “causing to be presented” claim, we are confident that a proper Rule
9(b) analysis by the district court on remand can determine if her allegations meet
Rule 9(b)’s particularity requirements.
-26-
States Dep’t of Health & Human Servs., 718 F. Supp. 80, 81 n.4 (D .D.C. 1989).
The M edicare Carrier M anual describes the CW F as a part of the processing of a
claim for payment concerned with verifying a portion of the requirement for
payment and facilitating the integration of M edicare databases for each eligible
beneficiary. M edicare Carriers M anual, Part 3, §§ 6000 et. seq. This CW F/Host
query is clearly a secondary data review within the payment process. Being such,
the district court’s dismissal of Sikkenga’s claims premised upon Regence’s query
to the Host/CW F under Rule 12(b)(6) is AFFIRM ED. 20
D
W e now turn to the district court’s decision that ARUP is an arm-of-the-
state and thus not subject to liability under the FCA. After according the parties
one year of limited discovery on the issue of whether ARUP is a state entity, the
district court applied the test we articulated in Sturdevant v. Paulsen, 218 F.3d
1160 (10th Cir. 2001), and concluded that ARUP w as “sufficiently tied to the
University of Utah to be considered an arm of the state.” The court then
dismissed Sikkenga’s sole FCA claim against A RUP. 21 In her appeal of this
decision, Sikkenga advances tw o arguments. First, she urges that because ARU P
is a corporation, it must be a person and therefore is liable under the FCA.
20
To the extent this allegation reaches the individual Regence defendants,
its dismissal similarly is affirmed.
21
Because of this determination, the district court did not rule upon
ARUP’s claim that it w as entitled to Eleventh Amendment immunity.
-27-
Second, Sikkenga argues that the district court improperly found that ARUP is an
arm-of-the-state.
Because the FCA imposes liability for “[a]ny person who – (1) 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,” 31 U.S.C.
§ 3729(a) (emphasis added), subject matter jurisdiction for an FCA claim under
28 U.S.C. § 1331 depends on the claim being made against a person as that term
is interpreted under the FCA. See Vermont Agency of Natural Resources v.
United States ex rel. Stevens, 529 U.S. 765, 778-780 (2000). W hen subject
matter jurisdiction is dependent on the same statute which provides the
substantive claim in the case, then the jurisdictional question is intertwined with
the merits of a case, and a Rule 12(b)(1) motion should be resolved under either
Rule 12(b)(6) or Rule 56. United States ex rel. King v. Hillcrest Health Ctr., Inc.,
264 F.3d 1271, 1278 (10th Cir. 2001). W hen a court relies on affidavits and other
evidentiary material submitted by the parties to resolve disputed jurisdictional
facts, a defendant’s motion to dismiss should be treated as one for summary
judgment under Rule 56(c). United States ex rel. Ramseyer v. Century Healthcare
Corp., 90 F.3d 1514, 1518 (10th Cir. 1996). Although the district court did not
treat ARUP’s motion as one for summary judgment, even though it relied on
materials outside the complaint, we will exercise our plenary power and consider
the defendant’s motion as a motion for summary judgment. See id. W e review
-28-
the grant of summary judgment de novo, applying the same legal standard used by
the district court under Rule 56(c). Id. The determination of subject matter
jurisdiction is reviewed de novo. 22 Id.
Even though we recognize the ordinary presumption of “personhood” that
arises from ARUP’s incorporation, see 1 U.S.C. § 1; Cook County v. United
States ex rel. Chandler, 538 U.S. 119,125 (2003), this recognition is tempered by
the Supreme Court’s express instruction that under the FCA we must apply the
longstanding interpretive presumption that the term person does not include a
sovereign. See Stevens, 529 U.S. at 784 n.14; see also United States ex rel.
Adrian v. Regents of the Univ. of California, 363 F.3d 398, 401 (5th Cir. 2004)
(holding that the Regents are an arm-of-the-state despite corporate organization
through which it managed university laboratory); Donald v. Univ. of California
Bd. of Regents, 329 F.3d 1040, 1044 (9th Cir. 2003) (holding Regents are an arm-
of-the-state despite corporate organization through which it managed university
hospital). Thus, in Stevens, after recognizing the “virtual coincidence of scope”
between the statutory inquiry under the FCA and the Eleventh Amendment
inquiry, the Court held that the term person in the FCA does not include States.
Stevens, 599 U.S. at 780. Subsequently, in Chandler, the Court held that
22
W e agree with the district court’s observation that “the facts regarding
ARUP’s relationship with the University of Utah do not appear to be in dispute.
Rather, it is the legal import to assign certain facts that is in dispute.”
-29-
municipal corporations were included as potentially liable “persons” under the
FCA. 538 U.S. at 133. This distinction mimics that made by the Court in the
Eleventh Amendment context, where it explained: “the bar of the Eleventh
Amendment to suits in federal courts extends to States and state officials in
appropriate circumstances, but does not extend to counties and similar municipal
corporations.” Sturdevant, 218 F.3d at 1164 (quoting M ount Healthy City Sch.
Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1974)). In order to draw this
statutory distinction under the FCA, courts have used the Eleventh A mendment’s
arm-of-the-state doctrine to decide if “entities created by state governments . . .
operate as alter egos or instrumentalities of the states.” Id. at 1164 (quoting
W atson v. Univ. of U tah M ed. Ctr., 75 F.3d 569, 574 (10th Cir. 1996)); See also
Adrian, 363 F.3d at 402 (using arm-of-the-state language to hold that the
University of California Regents, as manager of a university hospital, is not
subject to qui tam FCA claims because the Regents are a state entity under
Stevens); United States ex rel. Ali v. Danie, M ann, Johnson, & M endenhall, 355
F.3d 1140, 1146-47 (9th Cir. 2004) (discussing use of the arm-of-the-state test for
various statutes).
Because of the “virtual coincidence of scope” between the FCA and
Eleventh Amendment inquiries, we conclude that the appropriate approach to
determine if a state-related entity is subject to liability under the FCA is to apply
Eleventh Amendment arm-of-the-state analysis. The question is thus, whether
-30-
ARUP “is ‘more like a county or city than . . . like an arm of the state?’”
Sturdevant, 218 F.3d at 1164 (quoting M ount Healthy, 429 U.S. at 280). In
conducting this inquiry, we have cautioned that “[a]lthough ultimately a matter of
federal law, arm-of-the-state status must be determined in each case by reference
to the particular state laws characterizing the entity.” Id. at 1164.
In Sturdevant, we stated that there are three factors to be considered in the
arm-of-the-state analysis: (1) the state’s legal liability for a judgment; (2) the
degree of autonomy from the state – both as a matter of law and the amount of
guidance and control exercised by the state; and (3) the extent of financing the
agency receives independent of the state treasury and its ability to provide for its
own financing. 218 F.3d at 1164.
1
First and foremost, it is clear that the State of Utah’s treasury is not legally
liable for any judgment against ARUP. Both the record and Utah law establish
that any judgment against A RUP would be satisfied out of ARUP’s treasury, with
no recourse to either the State treasury or the general funds appropriated for the
normal operation of the University. Utah Code Ann. § 53B-7-103(3)(d). W e
recognize that ARUP’s property is vested in the State of Utah by operation of
Utah statute, Utah C ode A nn. § 53B-2-101, and that any depletion of A RUP’s
general treasury would require, as a practical matter, increased state funding of
the U niversity of U tah M edical Center and the U niversity itself. However, we are
-31-
bound by the Supreme Court’s decision in Regents of California v. Doe, 519 U.S.
425 (1997), which requires us “to focus on legal liability for a judgment, rather
than on the practical, or indirect, impact a judgment would have on a state’s
treasury.” Sturdevant, 218 F.3d at 1164 (quoting Duke v. Grady M un. Schs., 127
F.3d 972, 981 (10th Cir. 1997). Analysis of this factor clearly weighs against
recognizing ARUP as an arm-of-the-state. N evertheless, other factors remain
relevant to the evaluation of an entity’s status, as the absence of legal liability is
not determinative. Id. at 1166 (citing Duke v. Grady M un. Schs., 127 F.3d at
978).
2
The second factor – the degree of autonomy from the state – is a bit tricky.
Recognizing the difficult nature of the question, the district court relied heavily
on our analysis of the factors tying the University M edical Center to the
University of Utah in W atson, and concluded that A RUP is an arm-of-the-state.
W e agree that the question is a close one, but come to the opposite conclusion as
to ARUP’s status.
In 1984, ARUP was incorporated under the Utah Business Corporation Act,
and currently exists under the Utah Revised Business Corporation Act. From
1984 to 2002, ARUP was a wholly owned subsidiary of a separate corporate
entity, Associated University Pathologists, Inc., (“AUP”), which in turn was
owned by the University of Utah. Although AUP was a non-stock membership
-32-
corporation, ARUP itself issued stock. 23 Until 2002, ARUP’s articles of
incorporation and by-laws were similar to those that would be adopted by an
ordinary business concern. After AUP’s 2002 dissolution, ARUP amended its
articles of incorporation to explicitly limit its operations to comport with
restrictions A RUP contends w ere required by the operation of Utah law from its
inception. Tightening the focus of its argument, ARUP contends that its
commercial operations are limited to those that offer a “substantial and valuable
educational or research experience for registered students and faculty.” 24 Yet,
ARUP’s actual business operations are much broader than ARUP contends, and
are not limited geographically or by the type of testing services it performs.
23
Belying ARUP’s claims that it is an “integral” part of the University of
Utah, the University has actively considered selling ARUP in the past, and sold
ARUP’s substance abuse testing division to a commercial laboratory.
24
W e recognize that Utah’s Revised Business Corporation Act authorizes a
corporation engaging in a business that is subject to regulation under another
Utah statute to incorporate. The Act specifically states such incorporation is
authorized, “only if permitted by, and subject to all limitations of, the other
statute.” U tah C ode A nn. § 16-10a-301(2). ARUP contends that the State Board
of Regents has, under its statutory authority, issued regulations that constrain
ARUP’s business activities to those that offer a “substantial and valuable
educational or research experience for registered students and faculty,” but such
regulations are not pointed to by the parties and are not present in the record.
There is some debate between the parties over w hether w e should evaluate
A RU P’s status at the time of the 1999 filing of the underlying complaint, or if w e
can consider the post-filing changes to ARUP’s corporate articles of
incorporation. In 2002, ARUP changed its articles of incorporation to facilitate
its request to be treated as tax-exempt by the Internal Revenue Service. Our
determination of ARUP’s status is, however, not dependent on any alteration in
ARUP’s articles of incorporation, so we decline the parties’ invitation to wade
into this dispute.
-33-
ARUP engages in nationwide activity as a commercial laboratory. It is
licensed in nine states and markets its services in all fifty. In addition to
performing laboratory operations for the U niversity of U tah M edical Center,
ARUP also provides laboratory testing for third parties. 25 The record does not
disclose the percentage of laboratory services provided to third parties that are
routine versus those that provide an educational or research benefit, but it is clear
from the nature of Sikkenga’s claims that ARUP provides a substantial number of
tests and earns the bulk of its revenue from its operations outside the University
community. 26
Under Utah Code provisions governing ordinary corporations, and those
controlling the State of Utah’s higher education system, ARUP may sue and be
sued. Utah Code Ann. §§ 16-10a-302(1), 53B-2-101. ARUP is not incorporated
as a non-profit corporation, although it has been granted tax-exempt status as a
§ 501(c)(3) entity by the IRS. ARUP can enter into contracts with comm ercial
entities, and maintains bank accounts in its own name. See Utah Code Ann.
§ 53B-7-103(3).
Further, the relationship between the U niversity M edical Center’s
25
ARUP provides both routine and esoteric laboratory testing. The more
esoteric tests provide an educational or research benefit to the Department of
Pathology and School of M edicine.
26
For the fiscal year ending in June 1998, seventy-six percent of ARUP’s
revenues derived from testing provided to other hospitals.
-34-
Department of Pathology and ARUP is more than an inter-departmental
agreement. Rather than providing services through a more informal operating
scheme, the Department of Pathology has routinely entered into comm ercial
contracts w ith ARUP to provide the services of approximately half of its
pathologists to ARUP. At ARUP’s inception, the M edical Center sold its existing
hospital clinical laboratory operations and assets pursuant to a competitive
contract awarded to ARUP. This purchase was funded by a combination of funds
contributed by the Department of Pathology and notes payable to various
departments of the University. Of ARUP’s 1215 employees, barely ten percent
are “pathologists,” “residents and fellows,” or “laboratory science students in AS,
BS and M S programs that have operational responsibilities.” The bulk of ARU P
employees are in “laboratory operations,” “general and administrative,” “sales
and marketing,” “customer services,” and “handling & logistics.” Although the
University’s Department of Pathology provided the capital to set up ARUP, the
bulk of ARUP’s revenues flow from ARUP’s comm ercial operations to the
University, rather than from the University to ARUP. Retirement plans for ARU P
employees, as opposed to those individuals simultaneously occupying positions
within ARUP and the University of Utah, are covered under a different private
retirement system than the system for University employees.
W hile it is clear that ARUP is a wholly owned corporation, the stock of
which is owned by the U niversity of U tah, its day-to-day operations are
-35-
independent. Although ARUP’s Chairman reports to Senior Vice-President for
Health Sciences, 27 who in turn reports directly to the University President, it is
ARUP’s B oard of Directors that “sets policies and operational objectives w hile
providing appropriate oversight of ARUP’s business affairs . . . [and] monitors
ARUP’s business operations and financial management to help it compete w ithin
the marketplace for laboratory services.” The University President provides only
“strategic oversight.”
W e recognize that there are ties between the University and ARUP, but
these arise as an incidence of ownership, and are several degrees removed from
the direct relationship set up under Utah law between the University of Utah and
the State. The entire University, including ARUP, is subject to the governance of
the State Board of Regents, which is appointed by the Governor and approved by
the State Senate. ARUP’s property is vested with the State of Utah through the
University and the Utah Board of Regents, and the President of the University, as
representative of the owner, appoints ARUP’s directors. The Chairman of the
University M edical School’s Department of Pathology traditionally operates as
the Chairman of ARUP. Further, there are some indications that ARUP is
connected with the University M edical School on an operational level. Several
mandatory pathology courses in the Department of Pathology are offered within
27
W ho is also Dean of the University M edical School.
-36-
ARUP, and ARUP provides hands-on training for the Department of Pathology.
ARUP’s infusions of funds support functions within the Deparments of Pathology,
Obstetrics, and Pediatrics. ARUP also provides office space to other U niversity
components at below-market rents. However, when we evaluate the entire
relationship between ARUP and the University, ARUP retains substantial
autonomy in its operations, and operates with little, if any guidance or
interference from the University or the State. 28
3
As for the third component of financial independence, the record show s a
history of complex, intertwined relationships for funding capital improvement
projects between the U niversity and ARUP. ARUP’s financial statements are
audited by independent accountants, and subsequently included as a separate item
in the financial statements of the University of Utah. This data is used at some
point by the legislature in determining the overall appropriations for the
28
Although present in the record and potentially relevant in other
circumstances, we do not rely on several less compelling and often contradictory
indicators of ARUP’s status. Among these are whether ARUP has raised
Eleventh Amendment immunity as a defense in other cases, whether A RUP is
represented by private counsel or by the Utah Attorney General’s Office, or how
ARUP licenses its few vehicles. As w e cautioned in Sturdevant, “it is easy to
become caught up in the minutiae,” but these details “must not eclipse” the
distinction between instrumentalities of the state and political subdivisions of a
state. 218 F.3d at 1170.
-37-
University. Utah Code Ann. § 53B-7-101. Nevertheless, it is clear that since
1989, ARUP has been self-sustaining, generating operating funds and profit
through its commercial activity. It is equally clear that ARUP’s substantial
surplus flows to the University rather than vice-versa. W hen, as here, an entity is
privatized and is structured to achieve financial independence from the state
entity which owns it, we will not disregard its structure merely because the state
retains proprietorial title to its asset. From our review of the record, we conclude
that ARUP was designed to be not only self-sustaining, but a commercial “profit
center” for the University M edical Center.
4
As recognized by the Supreme Court, “[w]hen indicators of immunity point
in different directions, the Eleventh Amendment’s tw in reasons for being remain
our prime guide.” Hess v. Port Auth. Trans-Hudson, Corp., 513 U.S. 30, 47
(1994) (recognizing the protection of State treasuries and dignity as sovereigns in
our federal system as the Eleventh Amendment’s tw in reasons for being). As in
Hess, common sense and the rationale of the Eleventh A mendment do not require
that sovereign immunity attach when an agency is structured to be self-sustaining
and has a long history of paying its own way. Id. at 49-50.
W hen a state forms an ordinary corporation, with anticipated and actual
financial independence, to enter the private sector and compete as a commercial
entity, even though the income may be devoted to support some public function or
-38-
use, that entity is not an arm-of-the-state. W e are convinced from our review of
the record that ARUP w as designed to operate as a commercial enterprise, not as
the alter ego of the State of Utah. W e find persuasive the reasoning in two recent
cases from the Seventh and First Circuits which articulate that:
strings that tie the [entity] to the state are found in many cases in
which a state decides to privatize a formerly state function. They do
not require that privatization be treated as a farce in which the
privatized entity enjoys the benefits both of not being the state and so
being freed from the regulations that constrain state agencies, and of
being the state and so being immune from suit in federal court.
Takle v. Univ. of W isconsin Hospital & Clinics Auth., 402 F.3d 768, 771 (7th
Cir. 2005); see also Fresenius M edical Care Cardiovascular Res., Inc. v. Puerto
Rico, 322 F.3d 56 (1st Cir. 2003).
W ith the twin rationales for the Eleventh Amendment informing our
analysis, we conclude that ARUP, with its anticipated and actual financial
independence, is not an arm-of-the-state. 29 Accordingly, we REV ER SE the
district court’s dismissal of ARUP, and REM AND for further proceedings
consistent with this opinion. 30
III
29
ARUP argues, as an alternative basis to affirm the district court’s
dismissal, that it is entitled to Eleventh Amendment immunity. Because the
analysis is essentially the same as the arm-of-the-state analysis above, it follow s
that A RUP is not entitled to Eleventh Amendment immunity.
30
W e reiterate, in this respect as well, that we express no opinion of
whether Sikkenga’s allegations as to ARUP’s allegedly false claims will survive
scrutiny under Rule 9(b).
-39-
In her second FCA cause of action, Sikkenga alleged that Regence
presented a false budget request to the United States in connection with an Early
Claims Review that Regence was to perform in 1992. Sikkenga pleaded that the
services covered by the budget request were never performed. The district court
dismissed the claim as time-barred under the FCA’s statute of limitations,
interpreting 31 U.S.C. § 3731(b) to apply only to the United States G overnment,
not to qui tam relators. Although acknowledging that her claim was filed more
than seven years after the violation was committed, Sikkenga argues that she is
entitled to a ten-year statute of limitations under § 3731(b). W e review the
district court’s analysis of the statute de novo. UM LIC-Nine Corp. v. Lipan
Springs Dev. Corp., 168 F.3d 1173, 1177 (10th Cir. 1999), using the same
standard of review as discussed in section II.B.
In our analysis of this issue, we first turn to the language of the statute,
which reads:
(b) A civil action under [31 U.S.C.] section 3730 may not be
brought –
(1) more than 6 years after the date on which the violation is
committed, or
(2) more than 3 years after the date when facts material to the right
of action are known or reasonably should have been known by the
official of the United States charged with responsibility to act in the
circumstances, but in no event more than 10 years after the date on
which the violation is committed,
whichever occurs last.
31 U.S.C. § 3731(b).
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This language has been interpreted by various courts to apply to qui tam
FCA actions in three different ways. In the first, courts have held that the
three-year tolling provision applies only if the government has intervened in the
action, because § 3731(b)(2) only applies to government officials. These courts
view § 3731(b)(2) as simply inapplicable to FCA suits brought by a relator, and
rely upon the statute’s use of the term “official of the United States” as an
indication that Congress did not intend the tolling provision of § 3731(b)(2) to
apply to private qui tam relators. See United States ex rel. Amin v. George
W ashington Univ., 26 F. Supp. 2d 162, 172 (D.D.C. 1998); United States ex rel.
Thistlethwaite v. Dowty W oodville Polymer, Ltd., 6 F. Supp. 2d 263, 265
(S.D.N.Y. 1998).
Other courts have relied on the fact that procedurally qui tam relators are
considered to stand in the place of the United States through the FCA. Thus, even
though Congress referred only to the government in the FCA’s text or legislative
history, the context made it obvious that Congress intended to include qui tam
relators in these provisions. These courts have held that, because of this
generalized use of the term “government,” the statute of limitations should be
read to apply as if a relator were an official of the U nited States under
§ 3731(b)(2). See United States ex rel. Downy v. Corning, Inc., 118 F. Supp. 2d
1160, 1170 (D. Utah 2000); United States ex rel. Hyatt v. Northrop Corp., 91 F.3d
1211, 1214-16 (9th Cir. 1996). Under this interpretation, the three year statute of
-41-
limitations begins running when the relator gains knowledge of the wrongdoing,
limited by the ten-year statute of repose in § 3731(b)(2).
The third interpretation, from an unpublished opinion by a district court in
Utah, held that the literal text of the statute does not make § 3731(b)(2)
inapplicable to relators, and interpreted § 3731(b)(2) such that a relator has until
3 years after a government official learns of a violation to file an FCA claim.
United States ex rel. Colunga v. Hercules Inc., No. 89-CV-954B, 1998 U.S. Dist.
LEXIS 21811, 1998 W L 310481 (D. Utah M ar. 6, 1998). Under this approach,
which Sikkenga would have us declare the correct interpretation, if there is no
indication that the government ever knew of the wrongdoing, the statute of
limitations is ten years.
In examining the text we acknowledge that the statute is ambiguous. The
text does not explicitly limit the applicability of § 3731(b)(2) to cases in which
the government has intervened; however, the term “the official of the United
States charged with responsibility to act in the circumstances” is also more
specific than a reference to the United States or the “government” generally, and
could be read to exclude qui tam relators when the United States has not
intervened. W hen a statute’s plain meaning is ambiguous, courts may seek
guidance from legislative intent and statutory purpose to determine congressional
intent. See In re Geneva Steel Co., 281 F.3d 1173, 1178 (10th Cir. 2002).
Several courts have examined portions of the legislative history applicable
-42-
to this provision, but their analysis is of only limited assistance in deciding the
issue before us. See Hyatt, 91 F.3d at 1214 n.4, n.5 (quoting H.R. Rep. No. 99-
660, at 25 (1986), and S. Rep. No. 99-345, at 30 (1986), as reprinted in 1986
U.S.C.C.A.N. 5266, 5280, 5295); Amin, 26 F. Supp. 2d at 172-73 (discussing
same).
The Senate Report accompanying the legislation, stated:
Subsection (b) of section 3731 of title 31, as amended by section 3 of
the bill, would include an explicit tolling provision on the statute of
limitations under the False Claims Act. The statute of limitations
does not begin to run until the material facts are known by an official
within the Department of Justice with the authority to act in the
circumstances.
S. Rep. No. 99-345, at 30 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5295.
Additionally, the Senate, when debating the 1986 amendments to the False Claims
Act stated:
The committee has added a tolling provisions [sic] to the False
Claims Act which is adopted directly from 28 U.S.C. § 2416(c).
W hile section 2416(c) is a provision of general applicability, the
committee intends that the False Claims Act tolling provision be
liberally construed because the conduct addressed here is so
inherently deceptive and carefully concealed. Thus, courts should be
leary of finding that the Government had knowledge of the existence
of a possible cause of action based merely upon the discovery of
irregularities that fall short of a concrete suspicion that fraud has
occurred. Some corroborative information to support that suspicion
should be required. Similarly, care should be taken to assure that the
information has reached an official in a position both to recognize
the existence of a possible violation of this act and to take steps to
address it.
-43-
132 Cong. Rec. S11,238 (1986) (Senator Grassley’s statement explaining
amendments). 31 Section 2416(c) establishes a tolling period applicable to the
various limitations periods described in § 2415 when an action is brought by the
United States to recover monetary damages, and also uses the term “known by an
official of the United States charged with responsibility to act in the
circumstances.” Although these portions of the legislative history directly
31
Additionally, in testimony before the House Judiciary Committee
concerning proposed changes to the False Claims Act, M r. Richard K. W illard,
Assistant Attorney General, Civil Division, Department of Justice, stated that:
[T]he bill modifies the statute of limitations to include a discovery
rule, to address the situations where the G overnment does not learn
about the falsity of the claim at the time it was submitted. . . . [and in
response to a query by Chairman G lickman asking if there was a
precedent in Federal law for such a statute of limitations, replied]
Actually, M r. Chairman, there is. The general statute of limitations
for the Federal Government, 28 U.S.C. § 2416(c) does include a
tolling provision. The problem is the False Claims Act, as I
understand it at least, has its own statute of limitations and is not
subject to the general provision. So what we are proposing to do is
to conform the False Claims Act to the general rule under comm on
law in most States, and for that matter, for the Federal Government,
to provide this limited tolling period where the fraudulent conduct
has been concealed, as it frequently is, from the Government, and we
don’t find out about it until later. I can say M r. Chairman, that I
frequently see requests to sue come in right on the brink of the
statute of limitations, and sometimes beyond, causing us to miss out
on some claims we could otherwise bring because it has just taken
that long to discover the fraud and get a case ready to pursue. This
amendment would give us a little more flexibility in bringing some
cases that otherwise would be barred.
False Claims Act Amendments: Hearings Before the H. Subcomm. on Admin.
Law and Governmental Relations of the H. Comm. on the Judiciary, 99th Cong.
118, 159 (1986) (Statement of M r. Richard K. W illard, Assistant Attorney
General, Dep’t of Justice).
-44-
support the conclusion that § 3731(b)(2) was intended by Congress to apply only
to the government, and not qui tam relators, they do not conclusively resolve the
issue before us.
Both the text and legislative history of the FCA use the terms
“government,” and “United States” to refer to suits brought by either the Attorney
General or qui tam relators. See, e.g., § 3731(c) (“In any action brought under
section 3730, the United States shall be required to prove all essential elements of
the cause of action, including damages, by a preponderance of the evidence.”);
S. Rep. No. 99-345, at 6-7 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5271-
72 (discussing the scienter requirement and referring to evidence that the
“government” must offer). Assuredly the Senate report points to the Department
of Justice official “with the authority to act in the circumstances” as the relevant
official under § 3731(b), but the report’s usefulness is limited by the fact that
Congress chose to use a more general term in the FCA’s text. 32 This is troubling
in light of Congress’s use of the term “Attorney General” in other sections of the
FCA, such as § 3730. See § 3730 (instructing the “Attorney General” to
investigate a violation under § 3729). It is unclear w hy Congress would explicitly
refer to the “Attorney General” as the person with sole power to perform certain
32
The choice of language may arise from a desire to align the statutory
language with that used in 28 U.S.C. § 2416(c), from which Congress obtained
the tolling provision as described above.
-45-
functions under the FCA, and “yet leave unclear on the face of the statute whether
‘the official of the United States charged with responsibility to act’ is in fact only
the Attorney General.” United States v. Island Park, 791 F. Supp. 354, 363
(E.D.N.Y. 1992); see also United States ex rel. Hyatt v. Northrup Corp., 91 F.3d
1211, 1214-15 (9th Cir. 1996). However, when the Senate’s explanation that
§ 3731(b) is borrowed directly from 28 U.S.C. § 2416(c) is added to the mix, the
clouds clear and resolution of the matter comes into focus: A lthough intended to
be liberally construed as to the government, the tolling provision of § 3731(b)
was not intended to apply to private qui tam suits. Rather, it was intended to
provide the Department of Justice with “a little more flexibility in bringing some
cases that otherwise would be barred.” False Claims Act Amendments: Hearings
B efore the H . Subcomm. on A dmin. Law and Governmental Relations of the H.
C om m. on the Judiciary, 99th C ong. 159 (1986) (Statement of M r. Richard K.
W illard, Assistant Attorney General, Dep’t of Justice).
Statutory purposes underlying the 1986 FCA amendments support this
interpretation. The purpose in amending the FCA was “not only to provide the
Government’s law enforcers with more effective tools, but to encourage any
individual knowing of Government fraud to bring that information forward.”
S. Rep. No. 99-345, at 2 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5266-
67. Emphasizing that the statute was remedial, the Senate report reviewed the
history of the FCA’s qui tam provisions, quoting Justice Black:
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[The FCA] is intended to protect the Treasury against the hungry and
unscrupulous host that encompass it on every side, and should be
construed accordingly. It was passed on the theory, based on
experience as old as modern civilization, that one of the least
expensive and most effective means of preventing frauds on the
Treasury is to make the perpetrators of them liable to actions by
private persons acting, if you please, under the strong stimulus of
personal ill will or the hope of gain. Prosecutions conducted by such
means compare with the ordinary methods as the enterprising
privateer does to the slow-going public vessel.
Id. at 11, as reprinted in 1986 U.S.C.C.A.N. 5276 (quoting United States v.
Griswold, 24 F. 361, 366 (D. Ore. 1885)). Thus, Congress viewed qui tam
prosecutions as providing a means to achieve rapid exposure of fraud against the
public fisc, unencumbered by the lack of resources or the bureaucracy inherent in
enforcement by public authorities.
Accordingly, we hold that § 3731(b)(2) was not intended to apply to private
qui tam relators at all. W e recognize that this interpretation creates the
possibility that a relator who learns of fraudulent activity seven years after it
occurs would be barred from bringing suit. 33 However, this result is more in
accord with the FCA’s stated purpose of encouraging prompt action on the part of
relators and would discourage those relators who chose to delay on bringing an
FCA claim, or refrain from informing the government of the fraud, to allow
increasing damages to accrue. Congress cannot have intended such a result.
33
The United States, however, could still independently bring an FCA
claim as it w ould be able to avail itself of the tolling provision of § 3731(b)(2).
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W e are also concerned that a contrary interpretation, along the lines of that
adopted by the Hyatt and Downy courts, would result in evisceration of the six-
year statute of limitations in § 3731(b)(1) in the vast majority of cases. It is a
cardinal principle of statutory construction that our duty is to “give effect, if
possible, to every clause and word of a statute rather than to emasculate an entire
section.” Lamb v. Thompson, 265 F.3d 1038, 1051 (10th Cir. 2001) (quotation
omitted). If relators could avail themselves of the tolling provisions of
§ 3731(b)(2), then we are hard pressed to describe a circumstance where the six
year statute of limitations in § 3731(b)(1) would be applicable. M oreover, even if
the statute was not ambiguous, the reading urged by the partial concurrence and
partial dissent, and the court in Colunga, would run afoul of the absurdity
doctrine. See Public Citizen v. United States Dep't of Justice, 491 U.S. 440, 455
(1989) (“Looking beyond the naked text for guidance is perfectly proper when the
result it apparently decrees is difficult to fathom or where it seems inconsistent
with Congress’ intention.”). Surely, Congress could not have intended to base a
statute of limitations on the knowledge of a non-party. Consequently, we
conclude that the district court did not err when it interpreted § 3731(b) to bar
Sikkenga’s second FCA cause of action, and its dismissal of this claim is
therefore, AFFIRM ED.
IV
Sikkenga’s third FCA cause of action alleges that Regence fraudulently
-48-
avoided CPEP score reductions by backdating a letter to a physician as part of a
Comprehensive M edical Review, and by processing claims ARUP had
resubmitted after Sikkenga’s initial denial as adjustments rather than as reviews.
Sikkenga presents two theories to support her claim. First, she argues that by
engaging in these two actions, Regence “knowingly failed to perform properly
under the Contract but submitted claims for administrative costs as though
conforming services had been provided.” Second, she contends that by avoiding
CPEP score reductions Regence obtained renewals of its M edicare Part B
contract, which HCFA would have otherwise terminated, and that each claim for
administrative costs under the contract thereafter w as therefore false.
In its analysis of this issue, the district court found that Sikkenga’s third
FCA cause of action failed to identify particular claims that were allegedly false
under Federal Rule of Civil Procedure 9(b). The court also determined that
Sikkenga’s claim that the “alleged misrepresentations w ould have resulted in
HCFA not renewing Regence’s contract” was “hopelessly speculative” because
there was no indication of whether or when HCFA would have decided not to
renew the contract.
In review ing a district court’s dismissal pursuant to Rule 9(b) for failure to
plead fraud with particularity, we accept as true all well-pleaded facts, as
distinguished from conclusory allegations, and view those facts in the light most
favorable to the non-moving party. See Grossman v. Novell, Inc., 120 F.3d 1112,
-49-
1118 & n.5 (10th Cir. 1997). W e confine our analysis to the text of the
complaint. Koch v. Koch Indus., 203 F.3d 1202, 1236 (10th Cir. 2000). Rule
9(b) states that “in all averments of fraud or mistake, the circumstances
constituting the fraud or mistake shall be stated with particularity.” Fed. R. Civ.
P. 9(b). Its heightened pleading requirements apply to actions under the FCA.
See supra, note 19. “A t a minimum, Rule 9(b) requires that a plaintiff set forth
the ‘who, what, when, where and how’ of the alleged fraud.” Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1998), and must
“set forth the time, place, and contents of the false representation, the identity of
the party making the false statements and the consequences thereof.” Koch, 203
F.3d at 1236.
Noticeably absent from Sikkenga’s original complaint are any factual
allegations supporting her first theory that Regence fraudulently submitted claims
for services not performed under the contract. She fails to identify any specific
claim made by Regence for administrative costs under its contract. Similarly she
does not identify any claims that were presented to the government to support her
second theory of FCA liability – that HCFA would have terminated Regence’s
contract but for their fraud. She insists that her failure to comply with Rule 9(b)
should be excused however, because the information is exclusively in the control
of Regence, and contends that “[b]y attaching a copy of the Contract and alleging
fraudulent inducement [and] how Regence would have subsequently been paid
-50-
under the contract,” she has “sufficiently alleged that Regence subm itted false
claims for administrative costs to the government.” W e disagree.
Liability under the FCA requires a false claim – a “defendant’s presentation
of a false or fraudulent claim to the government is a central element of every
False Claims A ct case.” U nited States ex rel. Karvelas v. M elrose-W akefield
Hosp., 360 F.3d 220, 232 (1st Cir. 2004); see also United States ex rel. Clausen v.
Lab. Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002); Harrison v.
W estinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999).
“Underlying schemes and other wrongful activities that result in the submission of
fraudulent claims are included in the ‘circumstances constituting fraud and
mistake’ that must be pled with particularity under Rule 9(b).” Karvelas, 360
F.3d at 232. However, unless such pleadings are “linked to allegations, stated
with particularity, of the actual false claims submitted to the government,” id.,
they do not meet the particularity requirements of Rule 9(b). W e agree with our
sibling circuit, that:
Rule 9(b)’s directive that ‘the circumstances constituting fraud and
mistake shall be stated w ith particularity’ does not permit a False
Claims Act plaintiff merely to describe a private scheme in detail but
then to allege simply and without any stated reason for his belief that
claims requesting illegal payment must have been submitted, were
likely submitted or should have been submitted to the Government.
Clausen, 290 F.3d at 1311. W e conclude that Sikkenga’s complaint falls
woefully short of adequately pleading that false or fraudulent claims were
-51-
submitted by Regence. As stated by the First Circuit, to satisfy Rule 9(b)’s
requirements:
[A] relator must provide details that identify particular false claims
for payment that were submitted to the government. In a case such
as this, details concerning the dates of the claims, the content of the
forms or the bills submitted, their identification numbers, the amount
of money charged to the government, the particular goods and
services for which the government was billed, the individuals
involved in the billing, and the length of time between the alleged
fraudulent practices and the submission of claims based on those
practices are the types of information that may help a relator to state
his or her claims with particularity. These details do not constitute a
checklist of mandatory requirements that must be satisfied for each
allegation included in a complaint. However, like the Eleventh
Circuit, we believe that “some of this information, for at least some
of the claims must be pleaded in order to satisfy Rule 9(b).”
Karvelas, 360 F.3d at 232-33 (footnotes omitted) (citing Clausen, 290 F.3d at
1312 n.21). Sikkenga neither alleges the specifics of any actual claims submitted
under either of her two theories, nor pleads any false certifications upon which
she premises her claim under her first theory – for failing to perform in
accordance with the contract, but submitting claims for payment as if Regence
had.
W e agree with the district court that Sikkenga’s second theory – that
Regence’s alleged fraudulent manipulations of its CPEP scores, would, at some
point, have resulted in the HCFA not renewing Regence’s contract – was
“hopelessly speculative in that there is no basis for the assertion that the alleged
misrepresentations would have resulted in H CFA not renew ing Regence’s
-52-
contract.” Sikkenga’s allegations under her second theory are flawed in many
respects. The chain of causation required to tie Regence’s alleged
misrepresentations to a possible contract termination is attenuated, and lacks
sufficient factual allegations to be anything more than conjecture. 34
Sikkenga’s claims that Rule 9(b)’s requirements should be relaxed because
the information is exclusively within the control of the Regence defendants.
Although we acknowledge that courts have sometimes relaxed the requirements of
Rule 9(b), we agree with the Fifth Circuit’s caution that “this exception must not
be mistaken for license to base claims of fraud on speculation and conclusory
allegations.” Thompson, 125 F.3d at 903 (quotation omitted). Further, even in
circumstances where allegations of fraud may be based on information and belief,
because the facts are peculiarly within the opposing party’s knowledge, Rule 9(b)
continues to require the complaint to “set[] forth the factual basis for the
plaintiff’s belief.” K och, 203 F.3d at 1237. Sikkenga’s complaint does not state
that its allegations regarding her third FCA cause of action are based on
information and belief, nor do they set forth any factual basis, apart from the
34
To follow Sikkenga’s theory, one must accept that the two acts she
alleges Regence committed would have resulted in a lowering of Regence’s CPEP
score, and that the lowering of the score alone w ould have resulted in the HCFA’s
decision to not renew Regence’s contract. She provides no detail on the temporal
proximity of the misrepresentation, the possible score reductions, or a time when
the HCFA was considering the renewal of Regence’s contract. Nor does she tie
any specific claim thereafter to this series of events. Such a generalized daisy
chain of causation does not meet the requirements of Rule 9(b).
-53-
existence of the government contract, to support that any false claims were
actually made. Because Rule 9(b) does not excuse the general and speculative
nature of Sikkenga’s allegations, we AFFIRM the district court’s dismissal of
Sikkenga’s third FCA cause of action under Federal Rule of Civil Procedure 9(b).
V
In her fourth and final FCA cause of action, Sikkenga alleges that the
Regence defendants retaliated against her in violation of 31 U.S.C. § 3730(h), the
FCA’s W histleblower Protection provision. Section 3730(h) states:
Any employee who is discharged [or] demoted . . . by his or her
employer because of law ful acts done by the employee . . . in
furtherance of an action under this section, including investigation
for, initiation of, testimony for, or assistance in an action filed or to
be filed under this section, shall be entitled to all relief necessary to
make the employee whole.
31 U.S.C. § 3730(h). This claim was dismissed by the district court under Rule
12(b)(6) because Sikkenga failed to allege that the Regence defendants were on
notice that she was acting in furtherance of a private qui tam or government FCA
action. In United States ex rel. Ramseyer v. Century Healthcare Corp., we held
that,
[w ]hen seeking legal redress for retaliatory discharge under the FCA,
plaintiff has the burden of pleading facts w hich would demonstrate
that defendants had been put on notice that plaintiff was either taking
action in furtherance of a qui tam action or assisting in an FCA
action brought by the government.
90 F.3d 1514, 1522 (10th Cir. 1996). This requirement is in full accord with the
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congressional purpose in passing § 3730(h):
Section [3730(h)] provides relief only if the whistleblower can show
by a preponderance of the evidence that the employer’s retaliatory
actions resulted ‘because’ of the whistleblower’s participation in a
protected activity. Under other Federal whistleblower statutes, the
‘because’ standard has developed into a two-pronged approach. One,
the whistleblower must show the employer had knowledge the
employee was engaged in “protected activity” and, two, the
retaliation was motivated, at least in part, by the employee’s
engaging in protected activity.
S. Rep. No. 99-345, at 35 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5300.
In Ramseyer, we held that where employees’ regular duties include
investigation of fraud, such persons must clearly plead notice to their employers
of their intentions of bringing or assisting in an FCA action in order to overcome
the presumption that they are merely acting in accordance with their employment
obligations. 90 F.3d at 1523 n.7. In this case, as in Ramseyer, Sikkenga’s duties
included monitoring compliance with M edicare requirements. Sikkenga
comm unicated to her superiors within the company and to Regence’s internal
fraud and abuse division, her belief that violations of these requirements were
occurring. On the complaint, the district court determined that Sikkenga “only
took actions that she claims she was authorized to take as part of her employment
with Regence,” and that she failed to allege either that she informed her superiors
of her intention to bring an FCA action or that she w as going to report Regence’s
noncompliance to government officials. The district court also found that
Sikkenga had not alleged that she had indicated to Regence that she was
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contemplating a private qui tam action or was assisting in an FCA action brought
by the government.
On our review of Sikkenga’s complaint, we agree that it fails to allege that
the Regence defendants had been put on notice that she was acting in furtherance
of a private qui tam or government FCA action. Such an allegation is necessary
to establish that Sikkenga’s termination was “because” of her protected activity.
Because she starkly fails to allege this causal link, we AFFIRM the district
court’s dismissal of her FCA whistleblower retaliation claim.
VI
Ruling that Sikkenga had failed to allege a clear and substantial public
policy offended by Regence’s termination of her employment in violation of Utah
law, the district court dismissed her state law claim as well. Sikkenga argues that
this decision was in error. 35 In order to prove a tort of wrongful discharge under
Utah law , a plaintiff must prove that “(1) her employment was terminated, (2) a
clear and substantial public policy existed, (3) the plaintiff’s conduct implicated
that clear and substantial public policy, and (4) the termination and conduct in
35
The district court exercised supplemental jurisdiction over Sikkenga’s
state law causes of action under 28 U.S.C. § 1367, finding that her state law
claims against Regence for wrongful termination were factually related enough to
the FCA claim against ARUP that the principles of judicial economy, fairness,
and convenience would be served by allowing Sikkenga’s state law claims to
remain in the same action. The exercise of this discretion has not been appealed,
nor has the district court’s disposition of Sikkenga’s remaining state law causes of
action.
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furtherance of the public policy are casually connected.” Rackley v. Fairview
Care Ctrs., Inc., 23 P.3d 1022, 1026 (Utah 2001).
This claim was dismissed by the district court because Sikkenga failed to
allege a clear and substantial public policy as a prima facie element of her claim
for wrongful termination. Under Utah law, “[t]he public policy exception to the
employment at will presumption is much narrower than traditional notions of
public policy,” and is to be narrowly construed. Id. at 1026-27. A “clear” public
policy must be plainly defined by one of three sources: (1) legislative
enactments, (2) constitutional standards, or (3) judicial decisions, and is
“substantial” only if it is of “overreaching importance to the public, as opposed to
the parties only.” Id. at 1027. W hether a clear and substantial public policy
exists to support an employee’s wrongful termination claim is a question of law.
Id. at 1026.
The district court determined that, “[w]ithout a valid False Claims Act
claim against Regence, . . . Sikkenga has not demonstrated a clear and substantial
public policy for her wrongful termination claim against Regence.” As discussed
in II.B and II.C supra, the district court erred when it dismissed Sikkenga’s
claims under Rule 12(b)(6) because her complaint adequately alleged that
Regence caused ARUP to present false or fraudulent claims to the United States
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in violation of the FCA – actions for which Regence is not immune. 36 Because
the district court’s determination that Sikkenga had failed to allege a wrongful
termination in violation of public policy was premised on its conclusion that
Regence was immune under 42 U.S.C. § 1395u(e), its dependent determination
that Sikkenga has failed to allege a clear and substantial public policy necessarily
fails as well. 37 Thus, we REV ER SE the district court’s dismissal of Sikkenga’s
state law wrongful termination claim to the extent that the clear and substantial
36
W e emphasize again that we take no position on whether Sikkenga’s
allegations, that Regence “caused” the false claims to be presented as discussed in
II.C supra, meet the requirements of adequately alleging a violation of the FCA
under Rule 9(b). Because Sikkenga’s state law claim is dependent on a “valid
FCA claim” against Regence, such a determination will also be relevant to
resolution of the state law claim on remand. W e also note that Sikkenga did not
appeal the district court’s dismissal of her claim against defendant M itchell
individually, based on its determination that Utah law did not provide for liability
against a supervisor for w rongful termination. Our ruling does not disturb that
determination as the law of the case.
37
Sikkenga also argues that her wrongful termination allegation identified
the public policy of encouraging employees to resist pressure to engage in,
facilitate, or conceal illegal activity as established in Utah Supreme Court case
law. The district court, however, held that she had failed to allege any criminal
conduct in her complaint, only civil wrongs, and accordingly held that this claim
did not amount to pleading a clear and substantial public policy, refusing to allow
her to overcome deficiencies in stating a claim by “making arguments that extend
beyond the allegations in the complaint.” Jojola v. Chavex, 55 F.3d 488, 494
(10th Cir. 1995) (“It is well-established, however, that in determining whether to
grant a motion to dismiss, the district court, and consequently this court, are
limited to assessing the legal sufficiency of the allegations contained within the
four corners of the complaint.”). W e agree that her complaint fails to allege a
criminal violation. On appeal, she attempts to argue that her factual pleadings
amount to an allegation of participating in a crime. Relying on Jojola, we also
will not allow Sikkenga to advance arguments before us that extend beyond the
allegations in her amended complaint.
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public policy it alleges is a violation of the FCA, and REM AND for further
proceedings consistent with this decision.
VII
Accordingly, dismissal of the FCA Claim 1, the “presenting” claim against
ARUP and the “causing to be presented” claim against Regence, under Rule
12(b)(6) is REVERSED; dismissal of Claim 2, the FCA claim involving the 1992
false budget request submitted by Regence, under Rule 12(b)(6) is AFFIRM ED;
dismissal of Claim 3, the CPEP score manipulations and contract renewal claim,
under Rule 9(b) is AFFIRM ED; dismissal of Claim 4, the FCA W histleblower
Retaliation claim against Regence, under Rule 12(b)(6) is AFFIRM ED; and
dismissal of the state law claim of wrongful termination in violation of public
policy against Regence, under Rule 12(b)(6) is REVERSED. 38 The case is
REM AND ED for further proceedings consistent with this opinion.
38
Any further pending motions before this court are denied.
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05-4088, United States ex rel. Sikkenga v. Regence
HA RTZ, Circuit Judge concurring/dissenting.
I join Parts I, II(A), II(C)(1), II(C)(3), II(D), IV, and VI of Judge Lucero’s
opinion. I concur in the result in Parts II(B) and II(C)(2). I dissent from Part III.
I. Special Concurrence Regarding Part II(B) (Regence Imm unity)
I agree that Regence is not immunized by 42 U.S.C. § 1395u(e) (1994)
from all liability arising from its payment of claims. As I shall try to explain, I
think that the most reasonable reading of § 1395u(e)(3) is that it immunizes the
carrier from liability for an employee’s act when the employee is immunized from
liability for that act by paragraph (1) or (2) of § 1395u(e).
Section 1395u(e) states:
(1) No individual designated pursuant to a contract under this
section as a certifying officer shall, in the absence of gross
negligence or intent to defraud the United States, be liable w ith
respect to any payments certified by him under this section.
(2) No disbursing officer shall, in the absence of gross
negligence or intent to defraud the United States, be liable w ith
respect to any payment by him under this section if it was based upon
a voucher signed by a certifying officer designated as provided in
paragraph (1) of this subsection.
(3) No such carrier shall be liable to the United States for any
payments referred to in paragraph (1) or (2).
The thrust of subsection (e) is to eliminate suits based on errors comm itted
without gross negligence or fraudulent intent. Paragraph (1) says that the
certifying officer is not liable for certifying a payment unless the officer acted
with gross negligence or fraudulent intent. Paragraph (2) states that the
disbursing officer is not liable for making a certified payment unless the officer
acted with gross negligence or fraudulent intent. Then, to avoid suits that skip the
middleman and go directly against the carrier, paragraph (3) immunizes the
carrier from liability when its employee is immune.
To be sure, paragraph (3)’s language poses difficulties. For one thing, it is
unclear what the antecedent of such is in the phrase “such carrier.” M uch more
importantly, the phrase “any payments referred to in paragraph (1) or (2)” is
ambiguous. Regence would have us read the phrase as encompassing all
payments, or at least all payments certified by a certifying officer. This is a
possible reading. After all, paragraphs (1) and (2) describe payments certified by
a certifying officer for which a certifying or disbursing officer may be liable
(w hen the certifying or disbursing officer acts w ith gross negligence or intent to
defraud) and payments certified by a certifying officer for which the certifying or
disbursing officer is immune from liability (when there is no such gross
negligence or fraudulent intent). Thus, paragraphs (1) and (2) can be said to
“refer to” certified payments for which the officers are immune and certified
payments for w hich they are not— that is, all certified payments. Under
Regence’s reading, carriers w ould be immune under paragraph (3) from liability
for all payments certified by a certifying officer.
But if the intent of paragraph (3)— “No . . . carrier shall be liable . . . for
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any payments referred to in paragraph (1) or (2)”— were to immunize carriers for
all payments certified by certifying officers, one wonders why the drafters chose
such a peculiar way to say it. A more natural mode of expression would have
been, “no carrier shall be liable for any payments certified by a certifying
officer.” A nd if the “payments referred to in paragraph (1) or (2)” are both
payments for which an officer may be liable and payments for which an officer is
immune, why include “or (2)” at the end of the quoted phrase? Nothing would be
lost by saying merely “any payment referred to in paragraph (1),” because— if one
says that each paragraph “refers to” payments for which there may be liability as
well as payments for which there is immunity— the same payments are “referred
to” in both paragraphs (1) and (2). Each paragraph, under Regence’s reading,
addresses all certified payments: For each payment, the certifying officer is
either subject to liability or immune, and the same goes for the disbursing officer;
paragraph (1) addresses the certified payments for which certifying officers are
immune or may be liable (that is, all certified payments), and paragraph (2)
addresses certified payments for which disbursing officers are immune or may be
liable (that is, all certified payments). Thus, in the phrase “payments referred to
in paragraph (1) or (2),” the words “or (2)” are surplusage. Ordinarily, we should
avoid a construction of a statute that renders portions of the statutory language
superfluous. See Arlington Cent. Sch. Dist. Bd. of Educ. v. M urphy, 126 S. Ct.
2455, 2460 n.1 (2006) (but noting that “instances of surplusage are not
-3-
unknown”).
I would interpret paragraph (3) differently. First, one must read § 1395u(e)
in context. That context is liability for erroneous payments. It makes no sense to
provide immunity unless the immunized conduct may otherw ise generate liability.
Correct payments do not generate liability. The risk of liability arises only when
a certifying or disbursing officer, through fault (negligence or otherwise), does
something leading to an erroneous payment. Accordingly, when paragraph (1)
says that a certifying officer shall not be liable “with respect to any payments
certified by him under this section,” it is implicitly referring only to payments for
which the officer would otherwise be liable— that is, payments based on
certifications that were erroneous because of the officer’s fault. Immunity would
be unnecessary with respect to any other payments.
The purpose of paragraph (1), then, is to carve out from the set of payments
for which the certifying officer may be liable those payments for which the
officer is immune. Those payments are payments that were erroneously made
because of the certifying officer’s fault, but when the fault did not rise to gross
negligence or intentional fraud. Given that purpose, it is natural to say that the
payments “referred to in paragraph (1)” are the carved-out payments, those for
which the certifying officer might have been liable (because of fault) but for the
immunity provided when the officer did not act with gross negligence or
fraudulent intent.
-4-
Similarly, the payments “referred to in paragraph . . . (2)” are the certified
payments for which the disbursing officer might have been liable but for his
statutory immunity. And paragraph (3)’s protection of carriers from liability for
“any payments referred to in paragraph (1) or (2)” therefore provides essentially
respondeat-superior immunity. If the carrier would otherwise be liable for an
erroneous certified payment because of the fault of a certifying or disbursing
officer, the carrier is immune when the officer did not act with gross negligence
or intent to defraud.
Accordingly, I join the majority in rejecting Regence’s defense that it is
immune under § 1395u(e) from Sikkenga’s claim.
II. Special Concurrence Regarding Part II(C)(2) - Causation
I also agree with the majority that Sikkenga’s complaint states a claim that
Regence caused ARUP to submit a false claim. In my view , however, we should
be wary of applying tort concepts of causation to the False Claims Act because of
its long-term congruence with a criminal statute and its present punitive
provisions.
I begin with some history of the False Claims Act. The original 1863 Act
was a criminal statute which included a provision for civil claims. Section 1
imposed a criminal penalty on military personnel who “present[ed] or cause[d] to
be presented for payment or approval . . . any claim upon or against the
Government of the United States . . . knowing such claim to be false, fictitious, or
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fraudulent.” (I fail to see a material difference from the present language of 31
U.S.C. § 3729(a): “knowingly presents, or causes to be presented . . . a false or
fraudulent claim for payment or approval.”) Section 3 of the 1863 statute applied
to nonmilitary personnel, imposing civil liability (double damages and a $2,000
penalty) on those “who shall do or commit any of the acts prohibited by any of
the foregoing provisions,” as well as criminal punishment if convicted. In 1874
the criminal provisions of former sections 1 and 3 were consolidated in Revised
Statutes of the United States, Title 70 (Crimes) § 5438, while the civil provisions
were moved to Title 36 (Debts D ue by or to the United States). But the civil
provisions still cross-referenced the criminal statute for a description of the
prohibited conduct. See Rev. Statutes, Title 36 § 3490 (“any [nonmilitary] person
. . . who shall do or commit any of the acts prohibited by any of the provisions of
[§ 5438] shall forfeit [$2,000 plus double damages]”). Although § 5438 was
repealed in 1909 and replaced by two separate criminal statutes, the repealed
statute “ha[d] continued vitality . . . insofar as it specifie[d] the acts giving rise to
civil liability under § 3490.” United States v. Bornstein, 423 U.S. 303, 305 n.1
(1976). Only in 1982 did Congress enact legislation that made the False Claims
Act’s civil provisions freestanding, without a cross-reference to a criminal statute.
See Pub. L. No. 97-258, § 3729, 96 Stat. 877, 978 (1982).
Courts strictly construe ambiguous language in criminal statutes in favor of
lenity. See United States v. Kozminski, 487 U.S. 931, 952 (1988). This rule of
-6-
strict construction applies even when the language is applied in a civil context.
See Crandon v. United States, 494 U.S. 152, 158 (1990) (“[B]ecause the
governing standard is set forth in a criminal statute, it is appropriate to apply the
rule of lenity in resolving any ambiguity in the ambit of the statute’s coverage.”).
Thus, at least through 1982 the civil provisions of the False Claims A ct were to
be construed strictly. Indeed, United States v. M cNinch, 356 U.S. 595 (1958), in
holding that an application for credit insurance was not a “claim” within the
m eaning of the False C laims A ct, stated: “[I]t must be kept in mind . . . [that] w e
are actually construing the provisions of a criminal statute. Such provisions must
be carefully restricted, not only to their literal terms but to the evident purpose of
Congress in using those terms, particularly where they are broad and susceptible
to numerous definitions,” id. at 598 (internal footnote omitted). To be sure, the
civil and criminal provisions have since then been technically divorced; but the
pertinent language of the civil provision has not materially changed, so there is no
reason to believe that the language should be interpreted any differently now than
it should have been in 1909 (or 1982). See Cook County v. United States ex rel.
Chandler, 538 U.S. 119, 132 (2003) (refusing to infer that 1986 amendments to
False Claims Act silently redefined the word person in the statute).
Reinforcing this view is that the False Claims Act is a punitive statute, and
civil punitive statutes, like criminal statutes, are to be construed strictly. See
Comm’r v. Acker, 361 U.S. 87, 91 (1959). The Act is punitive in two respects.
-7-
The availability of treble damages, even though it has “a compensatory side,”
Cook County, 538 U.S. at 130, also has a punitive character, see Vt. Agency of
Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 785 (2000). In
addition, § 3729(a)(7) of the Act provides for a penalty of $5,000 to $10,000
regardless of actual damages. See Wood, Walker & Co. v. Evans, 461 F.2d 852,
855 (10th Cir. 1972) (courts strictly construe statutes under which “the amount of
the damages is fixed in a somew hat liquidated measure w ithout regard to injury
suffered”).
Accordingly, I would refrain from “borrow[ing] traditional principles of
tort law to analyze causation for damages under the FCA.” O p. at 23. At this
stage of the case, however, it is unnecessary to explore the precise scope of
causation under the False Claims A ct. We are review ing a dismissal for failure to
state a claim. The allegations of the Complaint are therefore taken as true.
Sikkenga alleges that any claim submitted to Regence with diagnosis code 796.4
is a false claim. I confess to some skepticism about the allegation. I would think
that a claim submitted with an improper code is simply an improperly documented
claim; the underlying claim may still be proper, and compensable once the
documentation is corrected. But Regence has not challenged the allegation,
perhaps because it is a matter to be decided after the presentation of evidence, not
when ruling on the pleadings. As for causation, Sikkenga’s complaint explicitly
alleges that Regence “caused ARUP to present false claims for payment or
-8-
approval.” Aplt. App. at 489 (Am. Compl. at ¶ 140). M oreover, Sikkenga
describes the manner of causation. She alleges that Regence told ARUP that it
would accept claims submitted with a 796.4 code. Given the ongoing relationship
between Regence and ARUP, for Regence to inform ARUP that it would process
claims that are false on their face could, in my view, constitute causing, in the
criminal-law sense, ARUP to submit false claims. The typical context in which
“causing” an act to occur arises in criminal cases is when the act is performed by
an innocent party rather than by a partner in crime. For example, in a mail-fraud
case the defendant “causes” a mailing to take place by handing the envelope to a
friend or secretary to take to the post office, or by depositing an out-of-state
check in a bank (which, at least in the old days, would need to mail the check to
the originating bank for clearance). See, e.g., Pereira v. United States, 347 U.S.
1, 8-9 (1954). W hat the defendant does is to set in motion a process that in the
ordinary course will result in the prohibited action, without the need for any
intermediary to have a nefarious motive. Sikkenga’s complaint appears to
encompass an allegation that Regence in this sense caused the filing of false
claims by ARUP— perhaps A RUP had a nefarious motive, but false claims w ould
have been submitted regardless of that motive.
I should add, however, that I doubt that causation could be shown by
evidence that Regence said only that it would accept claims (that may or may not
be legitimate) w ithout adequate documentation substantiating that they are proper.
-9-
In that circumstance, the submitter of the claims is not being advised to submit
false claims, only that it is being trusted not to do so.
III. Dissent Regarding Part III (Statute of Limitations)
Finally, I disagree with the majority’s construction of the False Claims Act
statute of limitations, 31 U.S.C. § 3731(b). The statute reads:
(b) A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation of
section 3729 is committed, or
(2) more than 3 years after the date when facts material to the
right of action are known or reasonably should have been known
by the official of the United States charged with responsibility
to act in the circumstances, but in no event more than 10 years
after the date on which the violation is comm itted.
whichever occurs last.
I join the majority in rejecting the Ninth Circuit’s view in United States ex
rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996), that a relator can be
“the official of the United States charged with responsibility to act” in
paragraph (2). But I cannot agree that the statute can be read to say that
paragraph (2) does not apply to suits by relators. Our view of w hat Congress
must have intended cannot substitute for statutory language. See Robbins v.
Chronister, 435 F.3d 1238, 1241 (10th Cir. 2006) (en banc) (strictly limiting use
of absurdity doctrine to construe statute contrary to its language). Congress may
have wanted to limit relators to the six-year limitation period; but it did not say
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so. I agree with District Judge Benson that there is no ambiguity to resolve. See
United States ex rel. Colunga v. Hercules, Inc., No. 89-CV-954B, 1998 W L
310481, *5 (D. Utah M ar. 6, 1998). The majority’s invocation of the absurdity
doctrine makes no attempt to establish the satisfaction of the extremely strict
conditions for application of that doctrine set forth in our recent unanimous en
banc opinion on the subject. See Robbins. In any event, as Judge Benson
explained, the plain meaning of § 3731(b) is not absurd. Congress could well
have decided that a relator should not be time-barred if the government is not. To
bar the relator but not the government may accomplish nothing more than
preventing the relator from securing her just reward in bringing the matter to
court. I would not foreclose, however, the possibility that an equitable doctrine
implicitly incorporated in the statute could bar a relator who delays, for improper
reasons, reporting fraud to the Government. Cf. Young v. United States, 535 U.S.
43, 49 (2002) (noting that equitable tolling is a background principle generally
applied in construing statutes of limitations).
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United States Ex Rel. Sikkenga v. Regence Bluecross Blueshield
Court: Court of Appeals for the Tenth Circuit
Date filed: 2006-12-05
Citations: 472 F.3d 702
Copy CitationsCombined Opinion