17‐178‐cv
United States of America ex rel. Tessler v. City of New York
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.
CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS
PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE
32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
ʺSUMMARY ORDERʺ). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 5th day of October, two thousand seventeen.
PRESENT:
DENNY CHIN,
CHRISTOPHER F. DRONEY,
Circuit Judges,
JANE A. RESTANI,
Judge.*
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UNITED STATES OF AMERICA ex rel. AKIVA
TESSLER,
Plaintiff‐Appellant,
FELIX GONZALEZ,
Plaintiff,
v. 17‐178‐cv
* Jane A. Restani, Judge for the United States Court of International Trade, sitting by
designation.
CITY OF NEW YORK,
Defendant‐Appellee.
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FOR PLAINTIFF‐APPELLANT: AKIVA TESSLER, pro se, New York,
New York.
FOR DEFENDANT‐APPELLEE: DEBO P. ADEGBILE, Boyd M. Johnson
III, David W. Ogden, Saurabh H.
Sanghvi, Wilmer Cutler Pickering Hale
and Dorr LLP, New York, New York and
Washington, DC.
Zachary W. Carter, Corporation Counsel
of the City of New York, New York,
New York.
Appeal from a judgment of the United States District Court for the
Southern District of New York (Furman, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiff‐appellant Akiva Tessler, proceeding pro se, appeals from a
judgment entered December 20, 2016, dismissing his qui tam action brought under the
False Claims Act (the ʺFCAʺ), 31 U.S.C. §§ 3729–3733, against defendant‐appellee City of
New York (the ʺCityʺ). Tesslerʹs second amended complaint (the ʺSACʺ) asserted two
categories of claims. First, it alleged that the City failed to recoup overpayments of
benefits for the Supplemental Nutrition Assistance Program and Temporary Assistance
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for Needy Families Program, as required by statute and regulations, and then sought
reimbursement for those overpayments from the Government (the ʺaid‐to‐continue
claimsʺ). Second, it alleged that the City failed to redetermine the eligibility of
recipients to participate in a Medicare Savings Program (the ʺMSP claimsʺ). By opinion
and order entered December 16, 2016, the district court granted the Cityʹs motion to
dismiss the SAC for failure to state a claim. We assume the partiesʹ familiarity with the
underlying facts, the procedural history of the case, and the issues on appeal.
We review de novo the dismissal of a complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6), accepting all factual allegations as true and drawing all
reasonable inferences in the plaintiffʹs favor. Biro v. Conde Nast, 807 F.3d 541, 544 (2d
Cir. 2015). The complaint must plead ʺenough facts to state a claim to relief that is
plausible on its face.ʺ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). Although a court must accept as true all factual
allegations in the complaint, that requirement does not apply to legal conclusions.
Iqbal, 556 U.S. at 678.
The FCA imposes civil liability on ʺany person who . . . knowingly
presents, or causes to be presented, a false or fraudulent claim for payment or approval.ʺ
31 U.S.C. § 3729(a). ʺ[F]raud under the FCA has two components: the defendant must
submit or cause the submission of a claim for payment to the government, and the claim
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for payment must itself be false or fraudulent.ʺ United States ex rel. Chorches as Trustee for
Bankr. Estate of Fabula v. Am. Med. Response, Inc. (ʺFabulaʺ), 865 F.3d 71, 83 (2d Cir. 2017)
(alteration in original) (quoting Hagerty ex rel. United States v. Cyberonics, Inc., 844 F.3d 26,
31 (1st Cir. 2016)).
FCA complaints are subject to Federal Rule of Civil Procedure 9(b), which
provides that ʺ[i]n alleging fraud . . . , a party must state with particularity the
circumstances constituting fraud.ʺ Fabula, 865 F.3d at 81 (alteration in original) (quoting
Fed. R. Civ. P. 9(b)). ʺThat ordinarily requires a complaint alleging fraud to (1) specify
the statements that the plaintiff contends were fraudulent, (2) identify the speaker,
(3) state where and when the statements were made, and (4) explain why the statements
were fraudulent.ʺ Id. (citation and quotation marks omitted). To comply with Rule
9(b), the complaint must be supported by more than ʺconclusory statementsʺ or
ʺhypotheses,ʺ and it must set forth ʺparticularized allegations of fact.ʺ See United States
ex rel. Ladas v. Exelis, Inc., 824 F.3d 16, 26–27 (2d Cir. 2016). Rule 9(b) permits scienter to
be averred generally, but ʺwe have repeatedly required plaintiffs to plead the factual
basis which gives rise to a strong inference of fraudulent intent.ʺ OʹBrien v. Natʹl Prop.
Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (internal quotation marks omitted); see
also Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002 (2016)
(observing that FCAʹs scienter requirement is ʺrigorousʺ).
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I. Aid‐to‐Continue Claims
We agree with the district court that the SACʹs aid‐to‐continue claims
failed to include particularized allegations of fact sufficient to satisfy Rule 9(b). The
SAC alleges in conclusory fashion that there was a ʺcustom and practiceʺ at the City of
not recouping aid‐to‐continue benefits, but it fails to provide particularized facts to
support that assertion. Tessler does not, for example, set forth the origins or details of
the custom and practice or identify the employees who purportedly implement it.
Tessler provides a list of 28 hearings in which he observed that the recipient lost and
alleges that the benefits were ʺrequired to be recoupedʺ and ʺexceeded any relevant
thresholds,ʺ as well as statistics from a database showing few fair hearings addressing
recoupment. Appellantʹs Br. 24. But the SAC does not contain any details as to why
these benefits were required to be recouped. Moreover, as the district court noted,
under applicable law and guidelines, the City is not obligated to recoup overpayments
unless they exceed certain thresholds. See 7 C.F.R. § 273.18(e)(2)(i); N.Y.S. Office of
Temporary and Disability Assistance, Administrative Directive 05‐ADM‐15 (Sept. 6,
2005), available at https://otda.ny.gov/policy/directives/2005/ADM/05‐ADM‐15.pdf; 18
N.Y.C.R.R. § 352.31(d)(5).
In Fabula, we clarified that a relator who has personal knowledge that
records are falsified need not necessarily have personal knowledge that those records
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were actually submitted where the factual allegations made it highly plausible that the
employer submitted falsified records. 865 F.3d at 82‐86. Fabula, an emergency
medical technician, alleged that his employer directed him to falsify patient care reports
for ambulance transports so that they would qualify for Medicare reimbursement. Id. at
76‐77. Fabula had no access to his employerʹs billing department and therefore could
not personally verify whether any of his reports were actually submitted to the
Government. Id. at 82. We held that Fabula could plead submission on information
and belief because submissions were uniquely within his employerʹs knowledge and
control and Fabulaʹs factual allegations made it highly plausible that Fabulaʹs employer
submitted the falsified records. Id. at 83‐86.
Unlike Fabula, however, Tessler fails to plausibly allege that the City
submitted false or fraudulent claims for payment. Tessler lacked personal knowledge
that the City failed to recoup the aid‐to‐continue overpayments to those recipients, and
that the City submitted claims for federal reimbursement for any unrecouped
overpayments. The SAC alleges only ʺhypothesesʺ and conclusory allegations. For
these reasons, the SAC fails to plead the aid‐to‐continue claims with particularity as
required by Rule 9(b).
II. MSP Claims
As to the MSP claims, the SAC does not set forth a sufficient factual basis to
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give rise to a strong inference of fraudulent intent. See OʹBrien, 936 F.2d at 676. Tessler
asserted that the Cityʹs failure to redetermine recipientsʹ eligibility for MSP benefits was
ʺknowing and/or intentional, and/or [resulted from] reckless disregard and/or deliberate
ignorance.ʺ J.A. 67. The district court, however, was not required to credit those legal
conclusions. See Iqbal, 556 U.S. at 678. While the SAC alleges that the City knew it
failed to recertify over one thousand MSP recipients, the allegations do not support a
strong inference of fraudulent intent; indeed, the SAC does not plausibly allege that
anyone at the City knew, or was reckless in not knowing, that the City was causing false
claims to be presented to the federal government on behalf of individuals who were
ineligible to receive benefits. Tesslerʹs MSP claims thus fall short of Rule 9(b) and FCA
scienter requirements.
III. Denial of Leave to Amend
A district court ʺhas broad discretion in determining whether to grant
leave to amendʺ and leave ʺshould generally be denied in instances of futility . . . [or]
repeated failure to cure deficiencies by amendments previously allowed.ʺ Ladas, 824
F.3d at 28 (citation and quotation marks omitted). We review the district courtʹs futility
finding de novo and its decision to deny leave to amend a complaint for abuse of
discretion. Balintulo v. Ford Motor Co., 796 F.3d 160, 164 (2d Cir. 2015). Tesslerʹs
ʺcontention that the District Court abused its discretion in not permitting an amendment
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that was never requested is frivolous.ʺ Horoshko v. Citibank, N.A., 373 F.3d 248, 249–50
(2d Cir. 2004). Further, Tessler failed ʺto explain how [he] proposed to amend the
complaint to cure its defects.ʺ See F5 Capital v. Pappas, 856 F.3d 61, 90 (2d Cir. 2017).
Moreover, Tessler had three opportunities to present his complaint and there is no
indication that a third amended complaint would address the aforementioned issues.
For these reasons, it was not an abuse of discretion for the district court to deny Tessler
an opportunity to further amend.
We have considered Tesslerʹs remaining arguments and find them to be
without merit. Accordingly, we AFFIRM the district courtʹs judgment.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk
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