RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0230p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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RICHARD CHESBROUGH, MD and KIM
Plaintiffs-Appellants, --
CHESBROUGH,
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No. 10-1494
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v.
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VPA, P.C., doing business as Visiting
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Physicians Association,
Defendant-Appellee. -
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Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 06-15630—Anna Diggs Taylor, District Judge.
Argued: July 27, 2011
Decided and Filed: August 23, 2011
Before: BOGGS, GILMAN, and COOK, Circuit Judges.
_________________
COUNSEL
ARGUED: Danielle C. Schoeny, SOMMERS SCHWARTZ, P.C., Southfield,
Michigan, for Appellants. Sheldon H. Klein, BUTZEL LONG, Bloomfield Hills,
Michigan, for Appellee. ON BRIEF: Danielle C. Schoeny, SOMMERS SCHWARTZ,
P.C., Southfield, Michigan, for Appellants. Debra A. Geroux, BUTZEL LONG,
Bloomfield Hills, Michigan, Max R. Hoffman, Jr., BUTZEL LONG, Lansing, Michigan,
for Appellee.
1
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 2
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OPINION
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BOGGS, Circuit Judge. Dr. Richard and Kim Chesbrough appeal the district
court’s grant of the motion of Visiting Physicians Association, P.C. (“VPA”) to dismiss
their lawsuit alleging violations of the Federal False Claims Act (“FCA”), 31 U.S.C.
§ 3279 et seq., and the Michigan Medicaid False Claim Act. The Chesbroughs allege
as qui tam relators on behalf of the United States that VPA defrauded the government
by submitting Medicare and Medicaid billings for defective radiology studies, and that
the billings were also fraudulent because VPA was an invalid corporation. We affirm
the district court’s dismissal of the Chesbroughs’ action because the Chesbroughs failed
to identify any specific fraudulent claim submitted to the government, as is required to
plead an FCA violation with the particularity mandated by Federal Rule of Civil
Procedure 9(b).
I
Dr. Chesbrough runs Radiology Medical Consultants (“RMC”), a radiology
service business. On January 27, 2006, RMC entered into an agreement with VPA,
which provides in-home medical services for homebound and disabled patients, to
interpret images created by VPA’s technologists. The contract provided that RMC
would serve as an independent contractor and would have “no involvement with billing
procedures of Medicare, Medicaid,” or any other provider. VPA would pay RMC for
each exam interpreted, per a fee schedule. According to the Chesbroughs, the images
VPA provided them for interpretation were often of poor quality or defective, because
the films were overexposed, underexposed, improperly positioned, or omitted necessary
clinical information. After approximately six months, RMC ended its relationship with
VPA.
On December 18, 2006, the Chesbroughs filed this action under seal. They
alleged that the diagnostic studies billed by VPA were “false and/or fraudulent,” in
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 3
violation of 31 U.S.C. § 3729(a)(1)-(2), and the Michigan Medicaid False Claim Act,
MCL 400.611(10)(a)(1) ,1 because the tests “were either not properly documented as
to indication, were performed with equipment that did not conform to industry
standards[,] or were administered by inadequately trained radiology technologists.” The
Chesbroughs alleged that “approximately one-half of the studies reviewed . . . were of
either no diagnostic value or limited diagnostic value.” More specifically, they alleged
that 50% of the x-ray examinations they reviewed were “so limited or non-diagnostic as
to represent defective testing,” but that “all were submitted for full reimbursement by
VPA.” They alleged that 60% of the ultrasound studies they reviewed “did not have
appropriate images to render a diagnostic interpretation.” They further alleged that 50%
of the echocardiograms they reviewed were nondiagnostic or of poor quality. They also
alleged that the x-ray examinations and ultrasound studies often had no clinical history
or identifying information attached.
The Chesbroughs also alleged that VPA was not owned by a physician, in
violation of Michigan’s Professional Service Corporation Act, MCL 450.221 et seq., and
that it was therefore operating as an unauthorized or illegal corporation, in violation of
31 U.S.C. § 3729(a)(2), (7).
The Chesbroughs attached as exhibits to their complaint twenty-seven examples
of x-ray examinations that they alleged were defective because of “light technique,” poor
positioning, or limited views. The x-ray studies included the patient and ordering
physician’s names, the account number, the facility, the technician’s name, and the date
of the exam. They also attached a review performed by a vascular technologist of ten
ultrasound vascular studies. The reviewer indicated the patients’ names and the dates
of the studies and opined that the studies did not meet professional standards of practice.
On March 23, 2009, the United States declined to intervene in the action,
pursuant to 31 U.S.C. § 3730(b)(4)(B), giving the Chesbroughs the right to continue the
1
The district court dismissed the Chesbroughs’ action with no mention of their state-law claims.
The Chesbroughs do not argue in their briefs to this court that their state-law claims survive, and we
therefore do not address those claims.
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 4
action themselves. The district court lifted the seal and ordered the complaint served on
April 6, 2009.
On October 23, 2009, VPA filed a motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6), arguing that the complaint failed to meet the particularity
requirements of Rule 9(b). The district court dismissed the complaint on March 30,
2010, after a hearing, reasoning as follows:
The plaintiffs here appear to be speculating [that] their fraudulent claims
were submitted. . . . The plaintiffs here are unable to provide dates or
particularities for even a single claim that was submitted to the
government, much less any false statement made in connection therewith.
The Chesbroughs timely appealed. In their appeal, they raise only the issue of whether
their FCA claims meet the requirements of Rule 9(b).
II
The FCA penalizes “[a]ny 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) (2006). It also
punishes any person who “knowingly makes, uses, or causes to be made or used, a false
record or statement to get a false or fraudulent claim paid or approved by the
Government,” id. § 3729(a)(2), or “knowingly makes, uses, or causes to be made or
used, a false record or statement to conceal, avoid, or decrease an obligation to pay or
transmit money or property to the Government,” id. § 3729(a)(7).2 The penalties to
2
In 2009, Congress passed the Fraud Enforcement and Recovery Act, Pub.L. No. 111-21, 123
Stat. 1617 (2009), which renumbered the provisions at issue in this case as § 3729(a)(1)(A), (B), and (G).
We refer to the sections as they were numbered at the time the Chesbroughs filed their action. The
language of § 3729(a)(2) was amended, but the change has no impact on the issue in this appeal. It now
reads: “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false
or fraudulent claim.” § 3729(a)(1)(B) (emphasis added). The deletion of the words “to get” likely
responded to the Supreme Court’s decision in Allison Engine Co., v. United States ex rel. Sanders, 553
U.S. 662 (2008), holding that § 3729(a)(2) contained an intent requirement—and thus required that a
subcontractor who submitted a false statement to a prime contractor must intend that the statement be used
“to get” the government to pay a claim. By striking the words “to get,” Congress eliminated that
requirement. S.Rep. No. 111-10, at 11 (2009). Here, because there is no issue as to VPA’s purpose in
submitting claims for allegedly defective studies, we need not decide whether the new language applies
to the Chesbroughs’ claim. See United States ex rel. SNAPP, Inc., 618 F.3d 505, 514 (6th Cir. 2010)
(“SNAPP II”) (noting that it is “unsettled” whether the change applies retroactively).
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 5
which the FCA subjects a person who submits a false claim to the federal government
can include civil penalties and triple damages. See ibid. If the government declines to
intervene in an action, the relator may proceed independently and be awarded a
“reasonable amount”—between 25 and 30 percent—of any proceeds or settlement, along
with reasonable costs and attorney’s fees. Id. § 3730(d)(2).
Complaints alleging FCA violations must comply with Rule 9(b)’s requirement
that fraud be pled with particularity because “defendants accused of defrauding the
federal government have the same protections as defendants sued for fraud in other
contexts.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003). Rule 9(b)
requires that “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.” The Rule’s purpose is to alert
defendants “as to the particulars of their alleged misconduct” so that they may respond.
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 503 (6th Cir.
2007). The heightened pleading standard is also designed to prevent “fishing
expeditions,” id. at 503 n.11, to protect defendants’ reputations from allegations of fraud,
ibid., and to narrow potentially wide-ranging discovery to relevant matters, United States
v. SNAPP, Inc., 532 F.3d 496, 504 (6th Cir. 2008) (“SNAPP I”).
We review de novo a district court’s dismissal of a complaint for failure to plead
with particularity under Rule 9(b). Bledsoe, 501 F.3d at 502. The Rule “is to be
interpreted in conjunction with Federal Rule of Civil Procedure 8,” requiring a “short
and plain statement of the claim.” Id. at 503. Construing the complaint in the light most
favorable to the plaintiff and accepting all factual allegations as true, we determine
whether the complaint contains “enough facts to state a claim to relief that is plausible
on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). To plead fraud with
particularity, the plaintiff must allege (1) “the time, place, and content of the alleged
misrepresentation,” (2) “the fraudulent scheme,” (3) the defendant’s fraudulent intent,
and (4) the resulting injury. Bledsoe, 501 F.3d at 504.
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 6
For the purposes of this case, the relevant elements of the claim are the
“fraudulent scheme” and the “misrepresentation”—the actual presentment of a false
claim to the government.
The Fraudulent Scheme
We first examine whether the Chesbroughs have alleged a scheme that
constitutes “fraud” within the meaning of the FCA. They allege that VPA engaged in
a pattern of “continuous fraudulent Medicare and Medicaid billing.” The FCA reaches
claims submitted by health-care providers to Medicare and Medicaid—indeed, one of
its primary uses has been to combat fraud in the health-care field. Mikes v. Straus, 274
F.3d 687, 692 (2d Cir. 2001).
As examples of VPA’s alleged fraud, the Chesbroughs attached to their
complaint twenty-seven x-ray studies and a review of ten vascular ultrasound studies,
all of which were allegedly defective or nondiagnostic. Most of the studies are
described as “suboptimal” or of “poor quality,” or as failing to meet “standards of care.”
The equipment used and the technicians’ technique are criticized. The Chesbroughs
allege that the studies do not meet industry standards established by the American
College of Radiology and the Society for Vascular Ultrasound. Of the thirty-seven
appended studies, five are described as nondiagnostic, while the rest were apparently
used for diagnosis. See R.20-2 (Ex.D) at 3, 4, 9, 14, 16. The Chesbroughs argue that
“Medicare and Medicaid should not reimburse for such poor quality testing[,] and billing
for such is prohibited by regulation.” R.20 at ¶ 4.
Not all of the appended studies, however, can support a claim of “fraud” for the
purposes of an FCA action. Although the FCA does not define the terms “false” and
“fraudulent,” as used in the statute, courts have interpreted the language to require a
defendant to have aimed to extract from the government “money the government
otherwise would not have paid.” Mikes, 274 F.3d at 696.
There are situations in which a claimant’s failure to comply with regulations can
make claims submitted to the government “fraudulent” within the meaning of the FCA.
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 7
This theory of liability is referred to as “false certification.” United States ex rel. Willis
v. United Health Grp., ___F.3d___, 2011 WL 2573380, at *6 (3d Cir. June 30, 2011).
When a claim expressly states that it complies with a particular statute, regulation, or
contractual term that is a prerequisite for payment, failure to actually comply would
render the claim fraudulent. See Mikes, 274 F.3d at 697–99.
The Chesbroughs, however, do not argue that VPA expressly certified that its
studies complied with industry standards. Rather, they contend that, in submitting
claims, VPA impliedly certified that the studies for which it billed met those standards.
In United States ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d 409, 415 (6th
Cir. 2002), this court adopted the “implied certification” theory of liability, holding that
“liability can attach if the claimant violates its continuing duty to comply with the
regulations on which payment is conditioned.” Ibid. Under that theory, it is not the
violation of a regulation itself that creates a cause of action under the FCA. Rather,
noncompliance constitutes actionable fraud only when compliance is a prerequisite to
obtaining payment. Thus, a relator cannot merely allege that a defendant violated a
standard—he or she must allege that compliance with the standard was required to
obtain payment.
As an example of the application of the implied-certification theory, the Second
Circuit in Mikes addressed whether the qui tam relator, a pulmonologist, had sufficiently
alleged fraud when she contended that the defendant health-care providers had submitted
reimbursement requests to the government for spirometry (lung function) tests that were
inaccurate and did not conform to guidelines established by the American Thoracic
Society. 274 F.3d at 694–95. The court held that, even though the defendants submitted
forms certifying that the services provided were “medically indicated and necessary,”
they never certified that the spirometry procedure was executed to a particular standard.
Id. at 698. The court distinguished between procedures that should not have been
performed or billed, because they were unnecessary for diagnosis or were not covered
by Medicare or Medicaid, and procedures that were of poor quality. Id. at 699.
Compliance with certain standards of medical care was not required for reimbursement,
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 8
and the court declined to interpret the FCA in a way that would “enforce compliance
with all medical regulations,” because “courts are not the best forum to resolve medical
issues concerning levels of care.” Id. at 699–700. Quality-of-care issues were better
monitored by state and local agencies and medical boards and societies than qui tam
relators and the federal government. Ibid.
Although the Chesbroughs allege that VPA failed to meet “objective standards”
for testing, they do not allege that VPA was expressly required to comply with those
standards as a prerequisite to payment of claims. They identify no specific Medicare or
Medicaid regulation that mentions the standards. They instead allege generally that
“Medicare regulations . . . only allow for reimbursement of indicated, appropriate
diagnostic testing on Medicare beneficiaries.” Medicare does not require compliance
with an industry standard as a prerequisite to payment. Thus, requesting payment for
tests that allegedly did not comply with a particular standard of care does not amount to
a “fraudulent scheme” actionable under the FCA.
The Chesbroughs do attach to their complaint five studies that are allegedly
“nondiagnostic.” These, we believe, could form the basis of an FCA claim. A test
known to be of “no medical value,” that is billed to the government would constitute a
claim for “worthless services,” because the test is “so deficient that for all practical
purposes it is the equivalent of no performance at all.” Mikes, 274 F.3d at 702–03. If
VPA sought reimbursement for services that it knew were not just of poor quality but
had no medical value, then it would have effectively submitted claims for services that
were not actually provided. This would amount to a “false or fraudulent” claim within
the meaning of the FCA. See ibid. (“[A] worthless services claim is a distinct claim
under the Act. It is effectively derivative of an allegation that a claim is factually false
because it seeks reimbursement for a service not provided.”); United States ex rel. Lee
v. SmithKline Beecham, Inc., 245 F.3d 1048, 1053 (9th Cir. 2001) (“In an appropriate
case, knowingly billing for worthless services . . . may be actionable under § 3729,
regardless of any false certification conduct.”). Thus, we find that the Chesbroughs have
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 9
adequately alleged a fraudulent scheme only insofar as they claim that VPA knowingly
submitted claims to the government for completely nondiagnostic tests.
The Chesbroughs also posit other fraudulent schemes. They allege that VPA
violated the Health Insurance Portability and Accountability Act (HIPAA) by failing to
preserve patient confidentiality. But they do not cite to a statute or regulation that
conditions payment of a claim on compliance with HIPAA.
The Chesbroughs further allege that VPA is an “illegal corporation” under
Michigan law because it is not owned by a person licensed to perform medical services.
They cite 42 C.F.R. §§ 410.32(b)(3) and 410.33(a) for the requirements with which VPA
failed to comply. Examining those regulations, however, we do not find that the facts
alleged in the complaint would violate those regulations. Under § 410.32(b)(3),
[e]xcept where otherwise indicated, all diagnostic x-ray and other
diagnostic tests subject to this provision and payable under the physician
fee schedule must be furnished under at least a general level of physician
supervision as defined in paragraph (b)(3)(i) of this section. In addition,
some of these tests also require either direct or personal supervision as
defined in paragraphs (b)(3)(ii) or (b)(3)(iii) of this section, respectively.
(However, diagnostic tests performed by a physician assistant (PA) that
the PA is legally authorized to perform under State law require only a
general level of physician supervision.) When direct or personal
supervision is required, physician supervision at the specified level is
required throughout the performance of the test.
42 C.F.R. § 410.32(b)(3). We do not find in the Chesbrough’s complaint any allegation
that VPA allowed tests to be performed without physician supervision, and this
regulation therefore cannot support a fraudulent scheme. Notably, while the
Chesbroughs allege that VPA is not owned by a licensed medical practitioner, in
violation of Michigan law, the federal regulation does not state that tests must be
performed by an entity owned by a physician. Similarly, the Chesbroughs have not
alleged that VPA violated 42 § C.F.R. 410.33(a), which provides in relevant part that
carriers will pay for diagnostic procedures under the physician fee
schedule only when performed by a physician, a group practice of
physicians, an approved supplier of portable x-ray services, a nurse
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 10
practitioner, or a clinical nurse specialist when he or she performs a test
he or she is authorized by the State to perform, or an independent
diagnostic testing facility (IDTF).
Nothing in the complaint alleges that VPA submitted claims “under the physician fee
schedule” that were not performed by a physician or specialist authorized to perform the
test. Rather, the complaint alleges generally that VPA was an “illegal corporation.”
Even if VPA is not incorporated in compliance with Michigan law and is not owned by
a physician, the Chesbroughs identify no regulation that makes payment contingent on
compliance with Michigan’s laws of incorporation. We conclude that the Chesbroughs
have failed to plead a fraudulent scheme based on these theories.
Presentment to the Government
Having concluded that the Chesbroughs have sufficiently alleged a fraudulent
scheme insofar as they have claimed VPA billed the government for worthless tests, we
must decide whether they have sufficiently alleged that claims for those tests were
actually submitted to the government. In Bledsoe, this court held that, where a relator
alleges a “complex and far-reaching fraudulent scheme,” in violation of § 3729(a)(1),
it is insufficient to simply plead the scheme; he must also identify a representative false
claim that was actually submitted to the government. 501 F.3d at 510. Although the
relator does not need to identify every false claim submitted for payment, he must
identify with specificity “characteristic examples that are illustrative of the class of all
claims covered by the fraudulent scheme.” Id. at 511 (internal quotation marks omitted);
see also SNAPP I, 532 F.3d at 506 (holding that relator failed to “include specific
examples of the defendant’s claims for payment” when it alleged defendant entered into
an “undetermined number of contracts with the federal government”); SNAPP II, 618
F.3d at 514 (concluding that annual contracts with government did not constitute
“claims”). The Chesbroughs argue that the studies they attached to their complaint
satisfy the requirement that they identify representative claims. The challenge they face,
however, is that they cannot identify any actual claims made by VPA for payment. In
Bledsoe, a relator alleged that a health care provider engaged in schemes to defraud
Medicare and Medicaid involving the fraudulent use of physician provider numbers, the
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 11
submission of inflated cost reports, and the miscoding of procedures. This court held
that, with respect to all but a handful of his claims, the relator failed to identify with
particularity any billings or cost reports that were actually submitted to the government,
or any dates on which bills were submitted. See id. at 511–15. Therefore, the relator
failed to satisfy Rule 9(b). Ibid.3
Similarly, in Sanderson v. HCA - The Healthcare Co., 447 F.3d 873 (6th Cir.
2006), this court held that a complaint alleging a scheme of misallocating hospital debt
to maximize federal reimbursements failed to satisfy Rule 9(b) because, although it
detailed the allegedly fraudulent accounting methodology, it did not identify specific
fraudulent cost reports. Id. at 878–79. And in United States ex rel. Marlar v. BWXT
Y-12, LLC, 525 F.3d 439 (6th Cir. 2008), we dismissed a complaint because a relator
alleged that false reports were compiled on workplace injuries, but failed to connect the
alleged fraud to claims submitted to the government. Id. at 446 (“Marlar does not allege
personal knowledge of the procedures through which BWXT compiled its [reports]
submitted to DOE.”). If the government had intervened in the Chesbrough’s action, it
could presumably have identified actual claims submitted by VPA; the
Chesbroughs—like the relators in the above cases—have no first-hand knowledge of
VPA’s billing practices.
Bledsoe left open the possibility that a court may “relax” the requirements of
Rule 9(b) “in circumstances where a relator demonstrates that he cannot allege the
specifics of actual false claims that in all likelihood exist, and the reason that the relator
cannot produce such allegations is not attributable to the conduct of the relator.” 501
F.3d at 504 n.12. We declined to speculate “as to the contours or existence of any such
exception to the general rule that an allegation of an actual false claim is a necessary
element of a FCA violation.” Ibid.
Bledsoe cited an Eleventh Circuit case, Hill v. Morehouse Medical Associates,
Inc., 2003 WL 22019936 (11th Cir. August 15, 2003) (unpublished), as an example of
3
We allowed one portion of the Bledsoe complaint to go forward. The relator alleged fraudulent
billing with respect to a particular patient, submitted to Medicaid on a particular date. Id. at 514.
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 12
when this relaxed standard might be appropriate. In Hill, the relator was a former billing
department employee who alleged that she had seen claims with fraudulently altered
billing codes submitted to Medicare. Id. at *1. Although she could not identify the
specific names and dates of the claims, she had personal knowledge that billings were
submitted because she had worked in the billing department. The Eleventh Circuit held
that her allegation sufficed to “alert[] the defendants to the precise misconduct with
which they are charged.” Id. at *5 (alteration added, quotation marks and alteration
omitted).
Other examples of the application of the relaxed standard come from the
Eleventh Circuit and district courts in this circuit. In United States v. R&F Properties
of Lake County, Inc., 433 F.3d 1349 (11th Cir. 2005), the Eleventh Circuit found the
pleading standard satisfied when a nurse “believed” fraudulent claims for services were
submitted based on her personal discussions with an office administrator. Id. at 1360.
In United States ex rel. Lane v. Murfreesboro Dermatology Clinic, PLC, 2010 WL
1926131 (E.D. Tenn. May 12, 2010), a claim went forward in which the plaintiff was a
former billing specialist with specialized knowledge of defendant’s billing practices, but
could not identify specific claims because she no longer worked for defendant. Id. at *4.
The Chesbroughs argue that the relaxed standard should apply to their action,
because, as independent contractors, they had no access to VPA’s billing records, but,
they claim, the facts support “a reasonable inference—not a mere assumption—that VPA
did, in fact, submit claims to Medicare for the radiological services and studies VPA and
Dr. Chesbrough completed.” Appellant Br. 19. They contend that they provided detail
as to 1) the time frame in which the alleged fraud occurred—a six-month period in 2005
and 2006, 2) the place and content of the fraud, 3) the fraudulent “scheme,” and 4) the
fact that the United States was injured as a result of improper billing. They point out that
they attached to their complaint studies that contained patient, physician, and technician
names and dates. The attachments, they argue, “provided sufficient detail of time, place,
and content to comply with the pleading requirements and enable VPA to respond to
Relator’s claims.” Further, because their contract with VPA stated that VPA would be
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 13
“responsible for all billing,” it is a reasonable inference that VPA submitted claims to
Medicare for the studies it performed.
Although we do not foreclose the possibility that this court may apply a
“relaxed” version of Rule 9(b) in certain situations, we do not find it appropriate to do
so here. The case law just discussed suggests that the requirement that a relator identify
an actual false claim may be relaxed when, even though the relator is unable to produce
an actual billing or invoice, he or she has pled facts which support a strong inference that
a claim was submitted. Such an inference may arise when the relator has “personal
knowledge that the claims were submitted by Defendants . . . for payment.” Lane, 2010
WL 1926131, at *5; see also Marlar, 525 F.3d at 446 (“Marlar does not allege personal
knowledge of [billing] procedures . . . .”); Hill, 2003 WL 22019936, at *3. Here, the
Chesbroughs lack the personal knowledge of billing practices or contracts with the
government that the relators had in cases like Lane. Their personal knowledge is limited
to the allegedly fraudulent scheme.
There may be other situations in which a relator alleges facts from which it is
highly likely that a claim was submitted to the government for payment. But that, too,
is not the case here. The mere existence of a few allegedly “nondiagnostic” tests does
not support a strong inference that claims for those tests were submitted to the
government. Assuming that the five tests alleged by the Chesbroughs to be
nondiagnostic constituted “worthless services,” it is not necessarily true that VPA billed
the government for these tests. To conclude that a claim was presented requires a series
of assumptions. First, one must assume that the tests were performed on Medicare or
Medicaid patients, and could therefore have been billed to the government. The
Chesbroughs allege in the complaint that “[a]pproximately 50% of [VPA]’s patients are
Medicare or Medicaid beneficiaries.” One must then assume that VPA submitted bills
for useless tests. The Chesbroughs argue that VPA, as a for-profit company, must have
billed for the services it performed. But VPA might have absorbed the expense of the
five nondiagnostic tests itself. Thus, this is not a situation in which the alleged facts
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 14
support a strong inference—rather than simply a possibility—that a false claim was
presented to the government.
The Chesbroughs argue that they have alleged sufficient facts to allow VPA to
respond to their complaint, and that information about claims submitted to the
government is exclusively within VPA’s control. The complaint alerted VPA to “exactly
what the fraud entails,” United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849,
855 (7th Cir. 2009), and VPA is in the position to verify whether claims for the
particular studies attached to the complaint were submitted. This court, however, has
rejected the argument that a claim should survive a motion to dismiss on the basis that
necessary information is exclusively within the defendant’s control, even in the context
of the less rigorous pleading requirements of Federal Rule of Civil Procedure 8. New
Albany Tractor, Inc. v. Louisville Tractor, Inc., __F.3d__, 2011 WL 2448909, at *3 (6th
Cir. June 21, 2011) (“[P]laintiff must allege specific facts . . . even if those facts are only
within the head or hands of the defendants. The plaintiff may not use the discovery
process to obtain these facts after filing suit.”).
In Bledsoe, Sanderson, and Marlar, we imposed a strict requirement that relators
identify actual false claims. The Chesbroughs have no personal knowledge that claims
for nondiagnostic tests were presented to the government, nor do they allege facts that
strongly support an inference that such billings were submitted. We therefore conclude
that the Chesbroughs’ complaint fails to satisfy Rule 9(b).
Alleged Violations of § 3729(a)(2), (7)
The Chesbroughs attempt to skirt Bledsoe’s requirement by alleging violations
of § 3729(a)(2), (7). They argue that, even if actual false claims must be identified in
an action under § 3729(a)(1), “there is no requirement of presenting a claim to the
Government” for actions pursuant to § 3729(a)(2), (7). For support, they cite Allison
Engine, in which the Supreme Court explained, “What § 3729(a)(2) demands is not
proof that the defendant caused a false record or statement to be presented or submitted
to the Government but that the defendant made a false record or statement for the
No. 10-1494 Chesbrough, et al. v. VPA, P.C. Page 15
purpose of getting ‘a false or fraudulent claim paid or approved by the Government.’”
553 U.S. at 671.
But the Chesbroughs’ argument misses the Supreme Court’s point in Allison
Engine. The case addressed the possibility that, rather than presenting a claim to the
government itself, a defendant might instead be a subcontractor who “submits a false
statement to the prime contractor intending for the statement to be used by the prime
contractor to get the Government to pay its claim.” Id. at 671. Thus, the fact that
“presentment” is not required for a § 3729(a)(2) claim does not relieve the Chesbroughs
of the need to plead a connection between the alleged fraud and an actual claim made
to the government.
Moreover, although the Chesbroughs are correct that § 3729(a)(7), known as “the
reverse false claims” provision, does not require presentment of a claim to the
government, it does require “proof that the defendant made a false record or statement
at a time that the defendant owed to the government an obligation”—a duty to pay
money or property. Am. Textile Mfrs. Inst., Inc. v. The Ltd., Inc., 190 F.3d 729, 736 (6th
Cir. 1999). The Chesbroughs have not identified in their complaint any concrete
obligation owed to the government by VPA at the time an allegedly false statement was
made. Rather, they merely allege that VPA is obligated to repay all payments it received
from the government. Their allegations involving § 3729(a)(7) accordingly fail.
III
The district court’s dismissal of the Chesbroughs’ FCA action is therefore
AFFIRMED.