United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS June 26, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 02-40285
UNITED STATES OF AMERICA, EX. REL. IRVIN WILLARD,
Plaintiff-Appellant,
versus
HUMANA HEALTH PLAN OF TEXAS INC., ET AL.
Defendants,
HUMANA HEALTH PLAN OF TEXAS INC.; HUMANA INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Texas
Before GARWOOD, JONES and STEWART, Circuit Judges.
GARWOOD, Circuit Judge:
In this qui tam action, the United States of America, through
its relator Irvin Willard (Willard), appeals from the judgment of
the district court, pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b),
dismissing the second amended complaint filed against Humana Health
Plan of Texas, Inc. and Humana, Inc. (Humana) alleging Humana
violated the False Claims Act, 31 U.S.C. § 3729, et seq. (FCA). We
affirm.
Facts and Proceedings Below
Humana, Inc., through its subsidiary Humana Health Plan of
Texas, Inc., operates health maintenance organizations in various
counties in Texas. Humana entered into contracts with the Health
Care Financing Administration (HCFA) of the United States
Department of Health and Human Services to provide health care
services to Medicare beneficiaries. Humana is paid a fixed rate
for each enrollee, determined annually, based on the average
anticipated Medicare expenses of all Medicare-eligible individuals
in a given geographic area, generally on a county-by-county basis.
These rates are referred to as capitation rates.
Willard worked as a sales representative for Humana from 1995
through 1998, selling Humana's Medicare HMO products. During this
time, Humana operated an HMO for Medicare beneficiaries in a
Houston service area comprised of Harris, Austin, Colorado,
Fayette, and Waller counties. Harris County encompasses the
metropolitan Houston area, while the other counties are comprised
of more rural areas.
An HMO under contract with the HCFA may not discriminate in
enrollment on the basis of health, or on any other basis used as a
proxy for health. See 42 U.S.C. § 1395mm(i)(6)(a)(iv); 42 C.F.R.
2
§ 417.428(b)(1). Willard contends that, fairly read, its Second
Amended Complaint alleges that Humana engaged in a “cherrypicking”
scheme “whereby less healthy potential program participants and
those living in counties outside Humana's favored geographic area
were methodically discouraged from joining Humana's HMO.” Willard
alleged in his complaint that Humana adopted a variety of
techniques to prevent eligible participants from learning they can
join Humana's HMOs. Willard further alleged that he was “told that
Humana only wanted to insure healthy people, and would lose money
if it enrolled sick people or people who lived too far from
Humana's established providers.” Willard asserts that when he
persisted in soliciting and enrolling people from the outlying
counties, he was warned not to do so, and was ultimately fired.
Willard contends that in order for Humana to gain entry into
the lucrative Houston market, HCFA required that Humana serve the
outlying counties. In his complaint, Willard alleged that
“[w]ithout revealing its intentions to either relators or HCFA,
Humana Texas entered [into] contracts to serve those counties with
no intention of actually enrolling Medicare participants there.”
In May 1999 Willard filed a qui tam complaint under the FCA
against Humana and other HMOs. The Government elected not to
intervene. Thereafter, in May 2000 Willard filed his First Amended
Complaint and Humana filed a motion to dismiss Willard's First
Amended Complaint pursuant to Federal Rules of Civil Procedure
3
12(b)(6) and 9(b), and challenged the constitutionality of the
FCA's qui tam provision. On August 10, 2000, Judge Kent stayed the
case pending this court's en banc decision in Riley v. St. Luke's
Episcopal Hospital, 252 F.3d 749 (5th Cir. 2001) (en banc), in
which this court upheld the constitutionality of the FCA's qui tam
provision. At a July 2001 status conference following the Riley
decision, Humana reasserted its request for Willard to plead fraud
with specificity. Judge Kent granted Willard leave to amend his
complaint and allowed Humana to reassert its non-constitutional
grounds for dismissal. Willard filed his Second Amended Complaint
later in July 2001.
On July 30, 2001, the case was transferred to Judge Lake.
Humana filed a renewed motion to dismiss Willard's Second Amended
Complaint pursuant to Fed. R. Civ. P. 12(b)(6) and 9(B) and Willard
moved for partial summary judgment. Judge Lake granted the motion
to dismiss and denied the motion for summary judgment as moot.
Willard appeals the district court's grant of the motion to
dismiss, as well as the district court's denial of leave to amend
his complaint.
DISCUSSION
I. Standard of Review
We review a Rule 12(b)(6) motion de novo and accept all well-
plead factual allegations as true. Abrams v. Baker Hughes, Inc.,
292 F.3d 424, 430 (5th Cir. 2002). “[T]he central issue is
4
whether, in the light most favorable to the plaintiff, the
complaint states a valid claim for relief.” Copeland v.
Wasserstein, Perella & Co., Inc., 278 F.3d 472, 477 (5th Cir.
2002). “Under Rule 12(b)(6), a claim maybe dismissed when a
plaintiff fails to allege any set of facts in support of his claim
which would entitle him to relief” and “the court accepts as true
the well-pled factual allegations in the complaint, and construes
them in the light most favorable to the plaintiff.” Taylor v.
Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002). However,
“conclusory allegations . . . will not suffice to prevent a motion
to dismiss,” id., and neither will “unwarranted deductions of
fact.” Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.
1992). In deciding a motion to dismiss the court may consider
documents attached to or incorporated in the complaint and matters
of which judicial notice may be taken. Lovelace v. Software
Spectrum Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996).
We review the district court's denial of leave to amend the
complaint for abuse of discretion. Hypes v. First Commerce Corp.,
134 F.3d 721, 727-28 (5th Cir. 1998).
II. Dismissal of Willard's Claims
Willard's Second Amended Complaint alleges that Humana
violated 31 U.S.C. § 3729(a)(1) and (a)(2). Section 3729 states in
relevant part:
“Any person who: (1) knowingly presents, or causes to be
5
presented, to an officer or employee of the United States
Government or a member of the Armed Forces of the United
States a false or fraudulent claim for payment or
approval; (2) 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; . .
.
is liable to the United States Government for a civil
penalty . . .”
Willard contends that Humana engaged in a “cherrypicking”
scheme which violates the FCA in three distinct ways. First,
Willard argues that because Humana is paid based on the average
expenses for all Medicare-eligible individuals, covering both
healthy and sick beneficiaries, Humana effectively overcharged the
Government for Medicare services by “cherrypicking” which
beneficiaries it would target for enrollment. Secondly, Willard
claims that by seeking payment under the Medicare program, Humana
falsely represented (impliedly certified) compliance with all
material terms, statutes, and regulations central to the Medicare
HMO program. Finally, Willard argues that Humana procured its
contract with the HCFA by fraud in the inducement because Humana
never intended to provide services in the outlying counties.
III. Overcharging Theory of Liability
Willard argues that when Humana receives payment at the pre-
established “capitation rate” for healthier enrollees, this rate
includes compensation for providing services to those individuals,
as well as a “premium” to offset anticipated costs it expects to
incur from providing services to less healthy persons. Willard
6
contends that by not providing services to less healthy persons
under its “cherrypicking” scheme, Humana is effectively
overcharging the Government in violation of the FCA.
Humana persuasively argues that any alleged discrimination by
way of a “cherrypicking” scheme must occur within the population
for which uniform rates have been set. Humana asserts, and Willard
agrees, that the rates in this case are determined on a county-by-
county basis. Therefore, Willard must allege discrimination based
on health status within a single county, not discrepancies in
enrollment patterns among different counties, in order to establish
that Humana overcharged Medicare. As such, Willard's overcharging
theory of liability must fail because Willard has not alleged
discrimination based on health status within any particular county,
i.e. rate area.
As Humana's capitation reimbursement rates were adjusted to
each county, the district court properly concluded that Humana
accrued no unwarranted benefit and the government no loss by virtue
of Humana enrolling more beneficiaries in some counties than
others. The district court also properly concluded that it was
undisputed that all claims submitted by Humana were valid.
Moreover, the district court found that Humana's contract with the
government did not obligate it to take affirmative steps to enroll
beneficiaries in all counties. Perhaps most importantly, the trial
court correctly found:
7
"Willard has also failed to state a cause of action under
31 U.S.C. § 3729(a)(2). Under section 3729(a)(2), the
plaintiff must identify both a false claim and a false
record or statement made or used to get that false claim
paid. Thompson [v. Columbia/HCA Healthcare Corp.], 125
F.3d [899] at 903 [5th Cir. 1997]. As explained above,
Willard has not identified a false claim. Moreover,
Willard has not identified any other document or
statement used to get an allegedly false claim paid."
The False Claims Act does not create liability merely for a
health care provider's disregard of Government regulations or
improper internal policies unless, as a result of such acts, the
provider knowingly asks the Government to pay amounts it does not
owe. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785
(4th Cir. 1999) ("The statute attaches liability, not to the
underlying fraudulent activity or to the government's wrongful
payment, but to the 'claim for payment.' . . . Therefore, a central
question in False Claims Act cases is whether the defendant ever
presented a 'false or fraudulent claim' to the government.")
(quoting United States v. Rivera, 55 F.3d 703, 709 (1st Cir.
1995)).
Because Willard does not allege that any of the claims were
false in the sense that they contained false statements or were for
services not performed or the like, Willard must resort to either
the “implied certification” or “fraud in the inducement” theories
of liability through which it may be possible to demonstrate that
otherwise valid claims are actionable under the FCA.
IV. “Implied Certification” Theory of Liability
8
In order to receive payment, Humana submits enrollment lists
to HCFA identifying the persons enrolled in its HMO program for any
given month. Willard does not allege that those enrollment lists
were literally “false,” in that they requested payment for
individuals not enrolled or not eligible for enrollment. Rather,
Willard argues that by requesting payment, Humana has impliedly
represented to the Government that it has complied with applicable
statutes and regulations central to performance of Humana's
contract with HCFA, as well as the terms of the contract. Willard
further argues that by requesting payment, Humana impliedly
represented that the Government received everything it had
contracted and bargained for. As there was no express
certification of compliance, Willard contends that Humana made an
“implied certification” of compliance which the Government relied
upon.
This court has recognized that “services rendered in violation
of a statute do not necessarily constitute false or fraudulent
claims under the FCA.” Thompson v. Columbia/HCA Healthcare Corp.,
125 F.3d 899, 902 (5th Cir. 1997). This court, however, has also
recognized that the FCA “interdicts material misrepresentations
made to qualify for government privileges or services.” Id.
(quoting United States ex rel. Weinberger v. Equifax, Inc., 557
F.2d 456, 461 (5th Cir. 1977)). While this Circuit has decided
cases dealing with FCA liability based on express certifications of
9
compliance with various statutes and regulations, we have not
specifically addressed whether FCA liability can be based on an
“implied certification” theory.
Willard relies on the Tenth Circuit's decision in Shaw v. AAA
Engineering & Drafting, Inc., 213 F.3d 519 (10th Cir. 2000), to
support recognition of FCA liability based on an implied
certification theory. The defendant in Shaw had contracted to
perform photography services for the Government. Id. at 523.
Under the contract, the defendant was required to dispose of
certain chemicals used in the contracted for film processing in
accordance with environmental guidelines and standards. Id. at
527. The United States, appearing as amicus curiae, argued that by
submitting monthly invoices for the photography services, the
defendant:
“impliedly certified that it had complied with the silver
recovery [environmental compliance] provisions in the
contract; because [the defendant] was being paid not only
for photography services but also for environmental
compliance, its false implied certification of compliance
with the contract's silver recovery requirement gives
rise to liability under the FCA. Id. at 531.
The Tenth Circuit embraced the implied certification theory of FCA
liability, noting that it is consistent with the legislative
history of the 1986 amendments to the FCA and supported by the
language and structure of the FCA itself. Id. at 530.
The district court found Shaw unpersuasive, stating that:
“Although the court used the phrase ‘implied
10
certification,’ the court did not create or recognize a
new or expanded cause of action under the False Claims
Act. ‘Implied certification’ amounts to nothing more
than an alternative expression of the well-accepted idea
that billing the government for something not delivered
may constitute a false claim. If the government defines
its bargain in a manner that requires adherence to a
statute or regulation, compliance with that statute or
regulation is implied by virtue of a request for payment.
As with a claim brought under the theory of express
certification, there can be no liability based upon an
implied certification unless compliance is a condition
for payment.” (citations omitted).
As the district court explained, “[t]he Tenth Circuit held
that submission of the invoices constituted a false claim because
the payment requested was for both photography services and for
silver recovery activities, but the silver recovery had not been
performed.” Thus, the critical point is that an action on which
payment was conditioned had not been performed. Other circuits
that have recognized the “implied certification” theory have also
set forth this requirement. See United States ex rel. Augustine v.
Century Health Svs., Inc., 289 F.3d 409, 415 (6th Cir. 2002)
(adopting the implied certification theory, explaining that FCA
liability “can attach if the claimant violates its continuing duty
to comply with the regulations on which payment is conditioned”);
Mikes v. Strauss, 274 F.3d 687, 700 (2d Cir. 2001) (concluding that
“implied false certification is appropriately applied only when the
underlying statute or regulation . . . expressly states the
provider must comply in order to be paid”); United States ex rel.
Siewick v. Jamieson Science & Eng'g, Inc., 214 F.3d 1372, 1376
11
(D.C. Cir. 2000) (holding that courts will “infer certification
from silence, but only where certification was a prerequisite to
the government action sought”).
This court need not determine here whether it will recognize
the “implied certification” theory, because even if assuming for
the sake of argument we were to apply such a theory here, Willard
would still lack a cognizable claim for two reasons. First,
Willard has failed to allege facts that would show that HCFA
conditioned its payment to Humana on any implied certification of
compliance with the anti-discriminatory regulations.
It is clear that compliance with the regulations Willard
alleges Humana violated was not a condition of payment under the
contract. If Humana engaged in any practice that “would reasonably
be expected to have the effect of denying or discouraging
enrollment” based on health status, the Government is merely
authorized to suspend future enrollment, suspend future payments,
or impose monetary penalties, rather than withhold payment for
those already enrolled. See 42 U.S.C. § 1395mm(i)(6). See also
United States v. Southland Management Corp., 326 F.3d 669, 676 (5th
Cir. 2003). Moreover, Willard does not allege that the regulations
concerning discrimination based on health status and income were
referenced in the contract. A review of the standard contract with
Medicare HMO providers submitted by Willard indicates that neither
42 U.S.C. § 1395mm(I)(6) or 42 C.F.R. § 417.428(b)(1) were
12
mentioned in the contract, let alone their compliance certified as
a condition for payment, despite the fact that compliance with
numerous other regulations, some of which are specific to health
care providers and others of which relate to labor more generally,
was incorporated either within the contract itself or in its
appendix.
Second, Willard has not alleged facts sufficient to reflect
that there was any regulatory violation. Willard does not allege
that Humana turned away healthy people or discouraged less healthy
Medicare eligible people per se from participating in the program.
Under 42 U.S.C. § 1395mm(i)(1), civil penalties may be imposed if
a Medicare contracting HMO engages in any practice that would
reasonably be expected to have the effect of denying or
discouraging enrollment by eligible individuals whose medical
condition or history indicates a need for substantial future
medical service. However, while Willard alleges that Humana
supervisors stated, as a matter of fact, that the company does not
profit by insuring the sick, Willard does not allege that Humana in
fact implemented a policy or practice of actually discouraging less
healthy individuals from enrolling or actually turning them away.
The complaint never alleges that either Willard or any of his
coworkers at the behest of Humana either actually turned away any
less healthy eligible individuals or actually discouraged any from
enrolling. Indeed, the complaint does not even allege that Willard
13
and other agents responsible for enrolling prospective
beneficiaries examined their medical histories or conducted an
evaluation of their future need for medical services.
Willard merely claims Humana accomplished a similar ultimate
result de facto by less aggressively marketing its plan in the
rural counties as compared with Harris County. However, Willard
does not allege that the Medicare eligible population in the rural
counties is less healthy on average than that in Harris County.
Even if this is assumed, the undisputed fact that reimbursement
rates are calibrated separately for each county means that such a
practice would not unduly benefit Humana or harm the Government.
Willard comes closer to alleging a regulatory violation under
42 C.F.R. § 417.428(b)(1), which prohibits, “[p]ractices that are
discriminatory. For example, the HMO or CMP may not engage in any
activity intended to recruit Medicare beneficiaries from higher
income areas (usually an indicator of better health) without making
a comparable effort to enroll Medicare beneficiaries from lower
income areas.” However, Willard never alleges that the rural
counties are lower income areas than Harris County. Although an
argument could perhaps be made that the general provision of 42
C.F.R. § 417.428(b)(1) might be construed to include discrimination
between urban and rural areas in the aggressiveness of marketing
efforts, Willard does not make this allegation, let alone cite any
authority or precedent supporting such a construction. Furthermore,
in light of the parenthetical reference to residents of higher
14
income areas generally having better health and the overarching
concern of discrimination between healthy and sick patients that
could undermine the capitation rate scheme, the lack of any obvious
and general correlation between urban and rural status and health
would suggest that this classification would not be a regulatorily
recognized proxy for health. Even to the extent urban and rural
differences affect health, so long as any marketing differences
occur on a county-by-county basis as opposed to distinguishing
between urban and rural areas that might lie within one county, the
latter of which is not alleged, the fact that capitation rates are
set county-by-county means ipso facto the government cannot be
shortchanged.
Finally, even if we were to find that Humana was under a
contractual or regulatory obligation to enroll beneficiaries on a
proportionate basis in every county, Willard's complaint fails
because it does not allege Humana enrolled a lower percentage of
Medicare eligible beneficiaries in the rural counties as compared
with Harris County.1
V. Fraud in the Inducement Theory of Liability
Entering into a contract with no intention of performing may
1
Even if we assume that Willard properly incorporated his
motion for summary judgment filed after his second amended
complaint into that complaint, neither this deficiency in his
complaint or any of the other deficiencies cited by the district
court or in this opinion are cured by Willard’s summary judgment
motion.
15
constitute fraud in the inducement. FCA liability has in certain
cases been imposed when the contract under which payment is made was
procured by fraud. See Harrison v. United States, 176 F.3d 776, 787
(4th Cir. 1999), citing United States ex rel. Marcus v. Hess, 317
U.S. 537, 543-44 (1943), as the most prominent of cases in which FCA
liability was imposed when the contract “was obtained originally
through false statements or fraudulent conduct.”
Willard argues that his complaint states a valid claim under
the FCA based on the theory of fraud in the inducement because
Humana “entered [into] contracts to serve [the outlying] counties
with no intention of actually enrolling Medicare participants
there.” The district court held that Willard's fraud in the
inducement claim failed to comply with the particularity in pleading
requirement imposed by Rule 9(b) of the Rules of Civil Procedure.
The requirements of Rule 9(b) apply to claims under the FCA.
United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125
F.3d 899, 903 (5th Cir. 1997), Bly-Magee v. California, 236 F.3d
1014, 1018 (9th Cir. 2001); United States ex rel. LaCorte v.
SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir.
1998); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2d Cir.
1995). Under Rule 9(b), “[i]n all averments of fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with
particularity.” This court has stated that Rule 9(b) requires that
the plaintiff allege “the particulars of time, place, and contents
16
of the false representations,” Williams v. WMS Techs., 112 F.3d 175.
179 (5th Cir. 1997), as well as the identity of the person making
the misrepresentation and what that person obtained thereby,
otherwise referred to as the “who, what, when, where, and how” of
the alleged fraud. Thompson, 125 F.3d at 903.
Malice, intent, knowledge, and other condition of mind of a
person may be averred generally. Fed. R. Civ. P. 9(b). This second
sentence of Rule 9(b) “relaxes the particularity requirement for
conditions of the mind, such as scienter.” Tuchman v. DSC
Communications Corp., 14 F.3d 1061, 1068 (5th Cir. 1994). As this
court has explained, in order to adequately plead scienter, “a
plaintiff must set forth specific facts that support an inference
of fraud.” Id. Facts that show a defendant's motive to commit the
fraud may sometimes provide a factual background adequate for an
inference of fraudulent intent. Id.
The district court observed that Willard's fraud in the
inducement claim is a “one-sentence allegation, devoid of any
factual information that arguably did not even meet the pleading
requirements of Federal Rule of Civil Procedure 8(a), and certainly
[did] not meet the requirements of Rule 9(b).” The district court
noted:
“Willard does not assert a single fact to support his
allegation that Humana entered into a contract with the
HCFA with no intent to perform it. Willard does not
allege who was involved in the negotiations, or where or
when the negotiations took place, or that he has any
basis for his allegation. Willard does not allege any
17
facts as to what was said before, during, or after the
contract negotiations to indicate that the contract was
entered with no intent on Humana's part to enroll
eligible participants from rural counties.”
At best, Willard arguably complied with the loosened 9(b)
requirement as to state of mind. Although Willard's complaint
offered no specificity relevant to Humana's intent at the time when
the contract was entered into, Willard did offer subsequent
statements of Humana officials suggesting they were strongly averse
to serving the rural counties. However, the trial court correctly
held that Willard did not come close to setting forth the
particulars of “time, place, and contents of the false
representations, as well as the identity of the person making the
misrepresentation and what [that person] obtained thereby,”
otherwise referred to as the “who, what, when, where, and how” of
the alleged fraud. Willard merely makes a general assertion that
Humana had to agree to serve the rural counties in order to obtain
the contract, although Willard does not assert this commitment was
ever memorialized in writing. Willard does not allege when or how
this commitment was made or who at Humana made it.
It is true that the pleading requirements of Rule 9(b) may be
to some extent relaxed where, as is arguably the case here, the
facts relating to the alleged fraud are peculiarly within the
perpetrator's knowledge. ABC Arbitrage v. Tchuruk, 291 F.3d 336,
350 (5th Cir. 2002). Although we have held that fraud may be
pleaded on information and belief under such circumstances, we have
18
also warned that this exception “must not be mistaken for license
to base claims of fraud on speculation and conclusory allegations.”
Id. at 350 n.67. In addition, even where allegations are based on
information and belief, the complaint must set forth a factual basis
for such belief. Id.
First, Willard failed to argue in his briefs to this court that
the facts were peculiarly within Humana's knowledge and therefore
his pleadings should have been held to a lower standard by the
district court on the issue of fraud in the inducement. Second,
even if this court were inclined to consider this argument sua
sponte, Willard's one-sentence allegation fails to set forth a
factual basis even upon information and belief that provides the
particularity required by Rule 9(b).
In addition, this court may consider alternative grounds for
upholding the district court's decision. Henderson v. Century Fin.
Co., Inc., 577 F.2d 997, 1002 n. 5 (5th Cir.1978). We observe that
Willard's fraud in the inducement theory also fails to state a
cognizable claim because there is no regulatory violation.
In United States v. Shah, 44 F.3d 285, 293 (5th Cir. 1995), this
court noted, "Generally, "there is no inference of fraudulent intent
not to perform from the mere fact that a promise made is
subsequently not performed." (footnote omitted). See also
Restatement (Second) of Torts § 530(1). However, where substantial
nonperformance is coupled with other probative factors, such as
19
"where only a short time elapses between the making of the promise
and the refusal to perform it, and there is no change in the
circumstances," an intent not to perform when the promise was made
may, in appropriate circumstances, be properly inferred. 37 Am.
Jur. 2d, Fraud and Deceit, § 478 (footnotes omitted)." Shah, 44
F.3d at 293 n.14.
Therefore, the requisite intent must be coupled with prompt,
substantial nonperformance to demonstrate fraud in the inducement.
It must be shown that the defendant promptly followed through on its
intent not to perform by substantially failing to carry out its
obligations under the contract. Willard has not alleged that no
Medicare eligible participants were enrolled by Humana in the rural
counties or that the percentage of Medicare eligible participants
enrolled in the rural counties was lower (much less substantially
lower) than that in Harris County. It would be illogical to find
fraud where a party secretly did not intend to perform the contract
when it was signed, but in actuality did perform, as the civil law
generally regulates actions, not thoughts alone. This requirement
is also necessary because the government must suffer an injury in
fact for there to be standing. Berge v. Bd. of Trustees of Univ.
of Ala., 104 F.3d 1453, 1458 (4th Cir.), cert. denied, 118 S. Ct.
301 (1997). Clearly, an intention devoid of an action cannot cause
an injury in fact.
Accordingly, in addition to Willard's fraud in the inducement
20
claim not passing the Rule 9(b) bar, the claim is also deficient in
light of the district court’s correct determination that Willard
failed to state a cognizable claim that Humana violated an
applicable regulation or provision of the contract.2
VI. Failure to Grant Willard Leave to Amend Complaint for Third
Time
Willard argues that the district court erred by dismissing his
Second Amended Complaint in part based on Fed. R. Civ. P. 9(b)
without granting him another opportunity to amend. The district
court stated that “Willard has not requested leave to amend his
complaint to remedy this failure.”
Under Rule 15 (a), "leave to amend shall be freely given when
justice so requires," and should be granted absent some
justification for refusal. Foman v. Davis, 83 S.Ct. 227, 230
(1962). The liberal amendment policy underlying Rule 15 (a) affords
the court broad discretion in granting leave to amend and,
consequently, a motion for leave to amend should not be denied
unless there is "undue delay, bad faith or dilatory motive on the
part of the movant, repeated failure to cure deficiencies by
amendments previously allowed [or] undue prejudice to the opposing
party by virtue of allowance of the amendment, . . . " Foman, 83
2
We should not be understood as holding that, apart from the
defects we have noted in the text, a fraud in the inducement claim
of the general sort urged by Willard would support an FCA claim
(particularly one the United States has declined to pursue) in
circumstances similar to these. We merely so assume arguendo.
21
S.Ct. at 230.
Except as authorized by the first sentence of Fed. R. Civ. P.
15(a) for one amendment before service of a responsive pleading, a
complaint may be amended only by leave of the district court, and,
while such leave is to be freely given when justice so requires, the
decision is left to the sound discretion of the district court and
will only be reversed on appeal when that discretion has been
abused. Zenith Radio Corp. v. Hazeltine Research, Inc., 91 S. Ct.
795, 802 (1971); Dunn v. Koehring Co., 546 F.2d 1193, 1198 (5th Cir.
1977).
A party who neglects to ask the district court for leave to
amend cannot expect to receive such a dispensation from the court
of appeals. Vega-Rodriguez v. Puerto Rico Tel. Co., 110 F.3d 174,
183-84 (1st Cir. 1997). Rule 15(a) applies where plaintiffs
"expressly requested" to amend even though their request "was not
contained in a properly captioned motion paper." Ballisteri v.
Pacifica Police Dep’t, 901 F.2d 696, 701 (5th Cir. 1988). A formal
motion is not always required, so long as the requesting party has
set forth with particularity the grounds for the amendment and the
relief sought. Fed. R. Civ. P. 7(b)(1), 15(a); Edwards v.
Occidental Chemical Corp., 892 F.2d 1442, 1445-46 (9th Cir. 1990).
"[A] bare request in an opposition to a motion to dismiss - without
any indication of the particular grounds on which the amendment is
sought, cf. Fed. R. Civ. P. 7(b) - does not constitute a motion
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within the contemplation of Rule 15(a)." Confederate Mem'l Ass'n,
Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993).
For several reasons, the district court did not abuse its
discretion in not allowing Willard to amend his complaint for a
third time. First, Willard did not expressly request with
particularity the opportunity to amend his complaint for the third
time. Willard points to the following sentences on page 20 of his
Response to Humana's Second Motion to Dismiss:
“In any event, the only relief possibly available to it
at this stage of the case is that relator replead. A
court should not dismiss a plaintiff's complaint under
Rule 9(b) unless the plaintiff has already been given the
opportunity to amend. Hart v. Bayer Corp., 199 F.3d 239,
247, n.6 (5th Cir. 2000); Gold v. Morrison-Knudsen Co.,
68 F.3d 1475, 1476 (2nd Cir. 1995).“
While Willard need not necessarily have filed a separate Rule
15 motion to amend, this brief statement does not expressly request
that Willard be given leave to amend and does not provide any
indication of the grounds on which such an amendment should be
permitted. Following the district court's order dismissing the
case, Willard did not file a motion to reconsider as part of which
he could have moved to amend his complaint.
Additionally, leave to amend properly may be denied when the
part seeking leave has repeatedly failed to cure deficiencies by
amendments previously allowed and when amendment would be futile.
Foman, 83 S.Ct. at 230. Here, Willard has already had two
opportunities to amend the complaint. The record indicates that the
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second instance in which the district court granted Willard leave
to amend was to cure the complaint's lack of specificity, which is
the same basis on which Willard now argues he should be allowed to
amend for a third time.
Finally, it appears that a third chance to amend would prove
to be futile. First, there is no indication in Willard's briefs to
this court that he will be able to allege the necessary “who, what,
when, where, and how” of the alleged fraud. Furthermore, because
Willard has failed to make a cognizable claim that Humana violated
its contract or an applicable regulation, Willard's fraud in the
inducement claim cannot be sustained independent of Rule 9(b).
CONCLUSION
For the reasons stated, the district court’s judgment
dismissing the action is
AFFIRMED.
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