United States Court of Appeals
For the First Circuit
No. 17-1610
THOMAS GUILFOILE,
Plaintiff, Appellant,
v.
JOHN M. SHIELDS, SR.; SHIELDS PHARMACY, LLC, d/b/a Shields
Health Solutions; UMASS MEMORIAL SHIELDS PHARMACY, LLC, d/b/a
Shields Health Solutions; SHIELDS PHARMACY EQUITY, LLC, d/b/a
Shields Health Solutions; SHIELDS SPECIALTY PHARMACY HOLDINGS,
LLC, d/b/a Shields Health Solutions,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Howard, Chief Judge,
Lipez and Barron, Circuit Judges.
Paul W. Mollica, with whom Tammy T. Marzigliano and Outten &
Golden LLP were on brief, for appellant.
Brian J. Leske for appellees.
Michael J. Sullivan and Ashcroft Law Firm, LLC on brief for
appellee John M. Shields.
Walter B. Prince, William A. Worth, and Prince Lobel Tye LLP
on brief for appellees Shields Pharmacy, LLC, and Shields Pharmacy
Equity, LLC.
David C. Casey, Stephen T. Melnick, and Littler Mendelson PC
on brief for appellees UMass Memorial Shields Pharmacy, LLC, and
Shields Specialty Pharmacy Holdings, LLC.
January 15, 2019
LIPEZ, Circuit Judge. In alleged violation of the False
Claims Act, appellant Thomas Guilfoile claims he was fired from
his job in retaliation for accusing his employer of violating the
Anti-Kickback Statute and making false representations in customer
contracts. See 31 U.S.C. § 3730(h); 42 U.S.C. § 1320a-7b(b). The
district court dismissed his complaint on the ground that Guilfoile
did not allege sufficient facts to show he was engaged in protected
conduct within the meaning of the retaliation provision of the
False Claims Act. After careful review of the complaint and the
law, we affirm as to the contractual language claim but vacate and
remand as to the claim involving the Anti-Kickback Statute.
I.
A. Factual Background
Because this appeal follows the grant of a motion to
dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), we
recite the facts as alleged in the amended complaint. See
Davis v. Coakley, 802 F.3d 128, 130 (1st Cir. 2015). We include
only those facts relevant to the issues on appeal.
Appellant Guilfoile is a seasoned management
professional with 30 years of finance and operations experience.
Appellee John Shields, Guilfoile's employer during the period
relevant to this case, is the CEO of a collection of health care
LLCs, joint ventures, and holding companies that operate in concert
as a single integrated entity (the "Integrated Entity"). The
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component businesses of the Integrated Entity include appellees
Shields Pharmacy, LLC; UMass Memorial Shields Pharmacy, LLC;
Shields Pharmacy Equity, LLC; and Shields Specialty Pharmacy
Holdings, LLC.1
The Integrated Entity partners with hospitals to provide
specialty pharmacy services for chronically ill patients by either
operating a pharmacy directly in the hospital or by filling
specialty prescriptions through an off-site location. The
Integrated Entity processes the prescriptions, bills the patient's
insurance, provides patients with financial advice, and follows up
with patients to ensure their adherence to complex medication
regimens. The Integrated Entity regularly bills federal insurance
programs, including Medicaid and Medicare, for the services it
provides to patients covered by those programs. As a secondary
line of business, the Integrated Entity also runs home infusion
and high-risk care management programs.
After years of providing free business advice to his
long-time friend and neighbor Shields, Guilfoile began to consult
for the Integrated Entity in April 2013 and officially joined the
Integrated Entity full-time as president in August of that year.
1 All four component corporations are closely-held
corporations with a shared principal place of business at an office
in Quincy, Massachusetts. Two of the corporations are incorporated
in Massachusetts and two are incorporated in Delaware. Shields is
the sole manager registered with the Secretary of the Commonwealth
of Massachusetts for all four corporations.
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Guilfoile's employment contract included terms governing salary,
bonuses, an equity stake in the Integrated Entity's joint ventures,
an equity vesting schedule, and protocols in the event of
termination. Shields was Guilfoile's immediate supervisor. The
complaint alleges that during Guilfoile's tenure, Shields
Specialty Pharmacy Holdings and UMass Memorial Shields Pharmacy
had boards of directors composed of Shields, Guilfoile, and the
same two other individuals.2
Under Guilfoile's leadership, the Integrated Entity grew
from a start-up to a successful operation generating millions of
dollars in profit. The Integrated Entity enjoyed overwhelmingly
positive feedback from patients, providers, and employees, and
Guilfoile's leadership was appreciated by Shields and the
Integrated Entity.
However, in the fall of 2015, Guilfoile became concerned
that the Integrated Entity was violating the law. At that time,
he learned that Shields had previously entered into a contract on
behalf of the Integrated Entity with Michael Greene,3 Shields's
long-time friend and a consultant whom several New Jersey hospitals
2 The complaint does not shed much further light on the
Integrated Entity's management structure. For ease of reference,
we join the parties and refer to the two boards of directors
identified in the complaint as "the Board."
3 The pleadings, briefs, and the district court's order
sometimes spell the consultant's surname as "Green," but we follow
the spelling suggested by appellant and supported by the record.
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paid for financial advice. The contract obligated the Integrated
Entity to, among other things, pay Greene's consulting firm, the
Ayrault Group, $35,000 per quarter for each hospital contract that
Greene successfully referred to the Integrated Entity,
specifically targeting two hospitals that Greene was working for
as a paid consultant: Newark Beth Israel Medical Center ("NBIMC")
and University Hospital ("University"). The Integrated Entity,
with assistance from Greene, eventually entered into contracts for
specialty pharmacy services with both NBIMC and University, and
the Integrated Entity paid Greene "referral fees." Guilfoile
believed that these payments "had improperly induced [Greene] to
steer [the] hospital contracts to the Integrated Entity."
Guilfoile conferred with the Integrated Entity's
counsel, who agreed that Guilfoile had valid concerns about the
contract with Greene. Guilfoile notified Shields that he believed
the contract violated the federal Anti-Kickback Statute because
the Integrated Entity had paid Greene to secure contracts with
hospitals that would result in the Integrated Entity making claims
for payment to federal insurance programs. Such payments are
prohibited by the statute, as explained in greater detail below.
Guilfoile was especially concerned about the implications of the
kickback scheme for the contract with University, which he believed
was government owned.
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At Guilfoile's insistence, Shields ultimately approached
Greene to discuss voiding Greene's contract with the Integrated
Entity and obtaining refunds of any payments to the Ayrault Group.
After an apparent negotiation, Shields revealed to Guilfoile that
Greene agreed to waive payments yet to be made for the University
referral but refused to return the money that the Integrated Entity
had already paid for the NBIMC referral. Guilfoile believed that
by letting the NBIMC payment stand, the Integrated Entity still
may have violated the Anti-Kickback Statute. He therefore urged
Shields to reveal the matter to the Board and offered to make the
disclosure jointly. Shields refused.
In December 2015, Guilfoile learned that the contracts
the Integrated Entity had used to form partnerships with hospitals
contained a false representation that the Integrated Entity
maintained "a fully staffed 24/7 [c]all [c]enter in Quincy,
Massachusetts." The Integrated Entity at the time did not have
such a center.4 Guilfoile believed that making false
representations to government-owned hospitals, like University,
about medication management services for chronically ill patients
with serious medical conditions was contract fraud and posed a
serious threat to public health and safety.
4 The complaint is unclear as to whether the Integrated
Entity operated a call center that did not conform with the
description in the contracts, or if the Integrated Entity did not
operate a call center at all.
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Despite Guilfoile's insistence that the Integrated
Entity either amend the contracts to remove the representation or
create a fully-staffed 24/7 call center, Shields refused to take
action or notify the Board. Instead, Shields suggested that the
Integrated Entity should address the issue only if a customer
complained about the breach. In an effort to bring the Integrated
Entity into compliance with the contractual language, Guilfoile
alerted the Human Resources department and the Director of
Operations that they should prepare to hire enough staff to operate
a 24/7 call center.
On December 22, 2015, Shields asked Guilfoile to come
to his home office, where Shields expressed his concern about
Guilfoile "going over his head" and "airing his dirty laundry" to
the Board. Shields told Guilfoile that he viewed the Board as a
"third rail" -- i.e., an entity that should be approached with
caution -- to which Guilfoile was getting too close. Shields also
explained that he felt he "had to protect his interests and his
family" and that he could not risk a vote by the Board against
him. After Guilfoile rejected Shields's suggestion that the two
of them consider "parting ways," the meeting ended without a
concrete resolution. Shields stated that he would give the matter
additional thought.
A week later, on December 28, Shields terminated
Guilfoile's employment in a phone call without further
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explanation. The following day, Shields emailed Guilfoile to
confirm that his employment was terminated. Shields did not
provide any reason for the termination and did not refer to
Guilfoile's performance or possible misconduct as a basis for the
termination. Guilfoile then received a written notice stating
that his termination was retroactive to December 22. The letter
did not state that he was being terminated for cause.
After his termination, Guilfoile notified the Board that
Shields had terminated him because he feared that Guilfoile would
report the suspected violations of law to the Board. Guilfoile
subsequently forwarded a letter to the Board memorializing his
concerns. Following these disclosures, Shields made repeated
threats to file suit against Guilfoile for defamation and tortious
interference, which he in fact subsequently did. On February 26,
2016, Guilfoile received a letter from the Integrated Entity
discussing its purported right to repurchase Guilfoile's vested
equity for a total of $15. The letter stated, for the first time,
that Guilfoile had been "terminated for cause."
B. Procedural Background
On April 1, 2016, Guilfoile filed this action against
the Integrated Entity and Shields alleging "whistleblower
retaliation" in violation of the False Claims Act and a variety of
state law employment, wage, contract, and tort claims. In the
operative amended complaint ("the complaint"), filed after
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defendants filed motions to dismiss, Guilfoile alleges that the
Integrated Entity retaliated against him for his "efforts to stop
violations of the [False Claims Act]," specifically his
"disclosures . . . related to the kickbacks [the Integrated Entity]
paid Mr. Green[e] in exchange for referrals of federally insured
patients, and disclosures related to contracts the Integrated
Entity entered into with government-owned hospitals even though
the Integrated Entity knew the contracts included fraudulent
terms."
Regarding the payments to the Ayrault Group, the
complaint alleges that Guilfoile reasonably believed the payments
to be "violations of the [Anti-Kickback Statute], a per se
violation of the [False Claims Act], resulting in the submission
of fraudulent claims to the government," and that "[t]he Integrated
Entity violated the [Anti-Kickback Statute] and the [False Claims
Act] by willfully paying remuneration to induce a person [Greene]
to refer patients for the furnishing of a service for which the
Integrated Entity knew payment would be made under federal health
care programs." Finally, the complaint alleges that the Integrated
Entity retaliated against Guilfoile by terminating his employment,
"threatening to sue him, fabricating an after-the-fact contention
as to 'cause,' attempting to repurchase his equity for the amount
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of $15, and then making good on their threat to sue him after he
instituted this law suit."5
Following oral argument on defendants' motions to
dismiss, Guilfoile requested leave to file a memorandum "in
response to legal authority and factual allegations that
[d]efendants raised for the first time during oral argument." The
last sentence of the brief accompanying the request stated, "If
this [c]ourt determines . . . that the present [a]mended
[c]omplaint does not adequately plead a cause of action under the
anti-retaliation provision of the [False Claims Act], plaintiff
respectfully requests that the [c]ourt allow him the opportunity
to file a second amended complaint alleging additional facts, like
those set forth in this memorandum and supporting affidavit."
Guilfoile's "supporting affidavit" alleged additional facts
concerning the Integrated Entity's business, Greene's role in
recommending the Integrated Entity to the hospitals for the
provision of pharmacy services, and the nature of the 24/7 call
center service.
In granting the motions to dismiss, the district court
determined that Guilfoile had failed to adequately plead that he
was engaged in protected conduct, the first element of a False
5The complaint alleges that "four days after Mr. Guilfoile
initiated this action in federal court . . . Mr. Shields filed
suit against [him] in state court, bringing claims for defamation
and tortious interference."
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Claims Act retaliation claim. The court therefore dismissed the
retaliation count without analyzing the other elements of the
claim. The court then declined to exercise supplemental
jurisdiction over the state law claims and dismissed them without
prejudice. In a footnote, the court granted in part and denied in
part Guilfoile's request to provide a response to defendants'
purportedly new theories and factual allegations presented at oral
argument. The court stated that it had considered his briefing as
to the legal authority first raised at oral argument, but had not
considered factual assertions outside the complaint, presumably
including the factual assertions in the "supporting affidavit."
The court did not respond to Guilfoile's suggestion in his motion
that he be allowed to file a second amended complaint if the court
found the operative complaint lacking.
Guilfoile subsequently filed a "Motion to Vacate
Judgment and For Leave to Amend the Complaint" pursuant to Federal
Rules of Civil Procedure 59(e) and 15(a). After the district court
denied the motion, Guilfoile timely appealed both the dismissal of
his complaint and the denial of his post-judgment motion.
II.
A. Standard of Review
We review de novo a district court's grant of a motion
to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).
Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011). We must
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evaluate whether the complaint adequately pleads facts that "state
a claim to relief that is plausible on its face." Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). In performing this
evaluation, we "assume the truth of all well-pleaded facts and
give the plaintiff the benefit of all reasonable inferences
therefrom." Thomas v. Rhode Island, 542 F.3d 944, 948 (1st Cir.
2008). However, we do not "draw unreasonable inferences or credit
bald assertions [or] empty conclusions." Theriault v. Genesis
HealthCare LLC, 890 F.3d 342, 348 (1st Cir. 2018) (alteration in
original) (internal quotation marks omitted). A suit is properly
dismissed "if the complaint does not set forth factual allegations,
either direct or inferential, respecting each material element
necessary to sustain recovery under some actionable legal theory."
U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 384
(1st Cir. 2011) (emphasis added) (internal quotation marks
omitted). Before reviewing the sufficiency of the complaint under
this standard, we provide a brief overview of the pertinent
statutes.
B. False Claims Act
The False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733,
prohibits, in relevant part, any person from "knowingly
present[ing], or caus[ing] to be presented, a false or fraudulent
claim" to the federal government. 31 U.S.C. § 3729(a)(1)(A)
(emphasis added); see Universal Health Servs., Inc. v. United
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States ex rel. Escobar, 136 S. Ct. 1989, 1996 (2016) (explaining
that the FCA is focused "on those who present or directly induce
the submission of false or fraudulent claims").6 For purposes of
the statute, "a 'claim' . . . includes direct requests to the
[g]overnment for payment as well as reimbursement requests made to
the recipients of federal funds under federal benefit programs."
Escobar, 136 S. Ct. at 1996 (citing 31 U.S.C. § 3729(b)(2)(A)).
The FCA includes a scienter requirement that the false claim be
submitted "knowingly." 31 U.S.C. § 3729(a)(1), (b)(1). A "non-
submitting" entity that knowingly causes the submission of a false
claim may be liable under the FCA even if the entity directly
submitting the claim to the government lacks the requisite mental
state. See Hutcheson, 647 F.3d at 389-90.
The FCA is also "subject to a judicially-imposed
requirement that the allegedly false claim . . . be material."
United States ex rel. Loughren v. Unum Grp., 613 F.3d 300, 307
(1st Cir. 2010).7 The falsity of a claim is "material" if it has
6 The FCA does not define "false or fraudulent." However,
the Supreme Court has held that the phrase encompasses
"misrepresentations by omission" in addition to "express
falsehoods." Escobar, 136 S. Ct. at 1999.
7 The FCA defines and uses "material." See 31 U.S.C.
§ 3729(a)(1)(B), (G), (b)(4). However, § 3729(a)(1)(A), which
prohibits the knowing submission of false claims, does not contain
the term. We have therefore described the "materiality"
requirement in regard to § 3729(a)(1)(A) as judicially created
because it derives from a general reading of materiality into all
sections of the FCA rather than from the statutory language. See
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"a natural tendency to influence or was capable of influencing the
[government]'s decision" whether to pay or reimburse the claim.
Id. The Supreme Court has emphasized that the FCA's "materiality
standard is demanding," and a plaintiff directly alleging the
submission of a false claim8 must plead facts to support
allegations of materiality with "plausibility and particularity."
Escobar, 136 S. Ct. at 2003, 2004 n.6. Whether an express or
implied false representation of compliance with statutes or
regulations is "material" is ordinarily "a fact-intensive and
context-specific inquiry." New York v. Amgen Inc., 652 F.3d 103,
111 (1st Cir. 2011).
In addition to prohibiting the submission of false
claims, the FCA bars an employer from retaliating against an
employee "because of lawful acts done . . . in furtherance of an
action under this section or other efforts to stop 1 or more
violations of [the FCA]." 31 U.S.C. § 3730(h)(1). To prevail on
an FCA retaliation claim, "a plaintiff must show that 1) the
employee's conduct was protected under the FCA; 2) the employer
Hutcheson, 647 F.3d at 388 n.13. Indeed, the Supreme Court has
declined to decide "whether § 3729(a)(1)(A)'s materiality
requirement is governed by § 3729(b)(4) [the statutory definition
of "materiality"] or derived directly from the common law."
Escobar, 136 S. Ct. at 2002.
8 The False Claims Act's "qui tam" provisions authorize
private individuals, known as "relators," to bring suit on the
government's behalf based on the submission of false claims to the
government. See 31 U.S.C. § 3730(b).
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knew that the employee was engaged in such conduct; and 3) the
employer discharged or discriminated against the employee because
of his or her protected conduct." United States ex rel. Karvelas
v. Melrose-Wakefield Hosp., 360 F.3d 220, 235 (1st Cir. 2004),
abrogated on other grounds by Allison Engine Co., Inc. v. United
States ex rel. Sanders, 553 U.S. 662 (2008). In general, "proving
a violation of § 3729 [the false claims provision] is not an
element of a § 3730(h) [retaliation] cause of action." Graham
Cty. Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 545 U.S. 409, 416 n.1 (2005).
The pleading standards for actions directly alleging the
submission of false claims, such as qui tam actions pursuant to 31
U.S.C. § 3730(b), and the pleading standards for actions alleging
retaliation, differ in crucial ways. In a suit directly alleging
the submission of a false claim, a plaintiff must sufficiently
plead facts supporting the existence of an actual false claim.
See Karvelas, 360 F.3d at 225 ("Evidence of an actual false claim
is the sine qua non of a False Claims Act violation." (internal
quotation marks omitted)). However, in a suit alleging retaliation
under the FCA, a plaintiff must sufficiently plead that he or she
was retaliated against based on "conduct that reasonably could
lead to a viable FCA action." Id. at 236. We have further
explained that "conduct protected under" the FCA retaliation
provision encompasses an employee's "investigations, inquiries,
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testimonies or other activities that concern the employer's
knowing submission of false or fraudulent claims for payment to
the government." United States ex rel. Booker v. Pfizer, Inc.,
847 F.3d 52, 59 (1st Cir. 2017) (quoting Karvelas, 360 F.3d at
237).9 This standard is consistent with the legislative intent
that "[p]rotected activity [for purposes of an FCA retaliation
claim] should . . . be interpreted broadly." Karvelas, 360 F.3d
at 236 (quoting S. Rep. No. 99–345, at 34 (1986), reprinted in
1986 U.S.C.C.A.N. 5266, 5299). Because an FCA retaliation claim
"does not require a showing of fraud," a plaintiff alleging
retaliation "need not meet the heightened pleading requirements of
[Federal Rule of Civil Procedure] 9(b)." Id. at 238 n.23.10
9 We derived the "reasonably could lead" standard from the
statutory language prohibiting retaliation by an employer "because
of lawful acts done by the employee . . . in furtherance of an
[FCA] action." See Karvelas, 360 F.3d at 235-36 (quoting 31 U.S.C.
§ 3730(h)(1)). Therefore, a court must consider whether the
conduct of the employee who was allegedly retaliated against --
that is, the employee's whistleblowing or investigative activities
-- reasonably could lead to an FCA action. Of course, the question
of whether the employer engaged in conduct that could run afoul of
the FCA is a necessary component of this inquiry. After all, the
employee's conduct must "concern the employer's knowing submission
of false . . . claims . . . because only such conduct reasonably
could lead to an FCA action." Booker, 847 F.3d at 59-60 (internal
quotation marks omitted).
10 Conversely, because a direct FCA claim does require a
showing of fraud, a qui tam plaintiff must "meet the Rule 9(b)
pleading standards." Karvelas, 360 F.3d at 238.
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C. Anti-Kickback Statute
The Anti-Kickback Statute ("AKS") criminalizes, in
relevant part, the "knowing[] and willful[]" offer or payment of
"any remuneration (including any kickback, bribe, or rebate)" to
induce a person to "recommend . . . ordering any . . . service
. . . for which payment may be made in whole or in part under a
[f]ederal health care program." 42 U.S.C. § 1320a-7b(b)(2)(B).
Relevant considerations for identifying an unlawful kickback
include: (1) whether the person being paid the alleged kickback is
"in a position to generate [f]ederal health care program business"
and (2) whether at least one purpose of the payment could be "to
induce or reward the referral or recommendation of business payable
in whole or in part by a [f]ederal health care program." OIG
Supplemental Compliance Program Guidance for Hospitals, 70 Fed.
Reg. 4858, 4864 (Jan. 31, 2005). Essentially, the AKS targets any
remunerative scheme through which a person is "paid 'in return
for' referrals" to a program under which payments may be made from
federal funds. United States v. Patel, 778 F.3d 607, 618 (7th
Cir. 2015) (quoting 42 U.S.C. § 1320a-7b(b)(1)(A)).
In 2010, the AKS was amended to create an express link to the FCA.
The AKS now provides that "a claim that includes items or services
resulting from a violation of this section constitutes a false or
fraudulent claim for purposes of [the FCA]." 42 U.S.C.
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§ 1320a-7b(g), as amended by the Patient Protection and Affordable
Care Act, Pub. L. No. 1110148, 124 Stat. 119 (2010).
III.
Appellant contends that he was retaliated against within
the meaning of the FCA anti-retaliation provision when he was fired
after raising concerns to Shields and others about (1) the alleged
kickbacks to Greene and (2) the contractual misrepresentations
regarding a 24/7 call center. Although appellees attack the
sufficiency of the complaint on several grounds, the district court
dismissed the FCA claims on the basis that Guilfoile had not
plausibly pleaded that he had engaged in protected conduct. Our
analysis begins with this first element of an FCA retaliation
claim.
A. Payments to Greene/Ayrault Group
The district court concluded that Guilfoile had failed
to adequately plead that his actions in raising concerns about the
payments to Greene and the Ayrault Group reasonably could have led
to an FCA action. Specifically, the district court reasoned that
Guilfoile failed to adequately plead an AKS violation, and that
even if he had adequately pleaded an AKS violation, he failed to
connect any such violation to a potential false claim within the
meaning of the FCA. We disagree with the district court's approach
and its conclusion.
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Guilfoile has brought an FCA retaliation claim, not a
"direct" claim of an FCA violation. As discussed above, adequately
pleading an FCA retaliation claim does not require adequately
pleading the submission of a false claim or meeting the Rule 9(b)
standards for pleading fraud. See Graham Cty., 545 U.S. at 416 &
n.1; Karvelas, 360 F.3d at 238 n.23; see also United States ex
rel. Grenadyor v. Ukrainian Vill. Pharmacy, Inc., 772 F.3d 1102,
1108-09 (7th Cir. 2014) (affirming dismissal of qui tam claim for
failure to plead kickbacks with particularity but reversing
dismissal of retaliation claim based on internal reporting of
alleged kickbacks). Rather, plaintiffs like Guilfoile need only
plead that their actions in reporting or raising concerns about
their employer's conduct "reasonably could lead to an FCA action."
Booker, 847 F.3d at 59 (internal quotation marks omitted). Put
colloquially, rather than plausibly pleading the existence of a
fire -- the actual submission of a false claim -- a plaintiff
alleging FCA retaliation need only plausibly plead a reasonable
amount of smoke -- conduct that could reasonably lead to an FCA
action based on the submission of a false claim.
Because this case involves an alleged violation of the
AKS, we consider the 2010 amendment to the AKS stating that "a
claim that includes items or services resulting from a violation
of this section constitutes a false or fraudulent claim for
purposes of [the FCA.]" 42 U.S.C. § 1320a-7b(g). We have
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previously declined to directly address the impact of
§ 1320a-7b(g) on FCA actions, see Hutcheson, 647 F.3d at 379 n.1,
and we do not attempt to assess the full implications of the AKS
provision today. We need not do so because the issue before us is
not the standard for proving an FCA violation based on the AKS,
but rather the requirements for pleading an FCA retaliation claim.
For our present purposes, it is enough to say that in light of
§ 1320a-7b(g), "[a]n AKS violation that results in a federal health
care payment is a per se false claim under the FCA." United States
ex rel. Lutz v. United States, 853 F.3d 131, 135 (4th Cir. 2017).
That is, drawing on the "resulting from" language of the 2010
amendment, if there is a sufficient causal connection between an
AKS violation and a claim submitted to the federal government,
that claim is false within the meaning of the FCA. See United
States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d
89, 96-98 (3d Cir. 2018) (discussing causal connection issue);11
United States ex rel. Bawduniak v. Biogen Idec, Inc., No. 12-CV-
10601-IT, 2018 WL 1996829, at *5-6 (D. Mass. Apr. 27, 2018) (same).
We further read the AKS amendment as obviating the need
for a plaintiff to plead materiality -- that is, to plead that
11 We note that Greenfield involved a qui tam suit directly
alleging an FCA claim based on a violation of the AKS and
ultimately turned on the standard for proving such claims at
summary judgment. See Greenfield, 880 F.3d at 98.
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compliance with the AKS was material to the government's decision
to pay any specific claim. This construction inescapably follows
from the statute's plain language stating that a claim resulting
from a violation of the AKS "constitutes a false or fraudulent
claim." 42 U.S.C. § 1320a-7b(g). The statute's use of the term
"constitutes" would be meaningless if courts had to engage in a
materiality analysis -- for example, by inquiring into whether the
entity submitting the claim had certified its compliance with the
AKS -- after establishing that a claim resulted from an AKS
violation. See, e.g., United States v. Catholic Health
Initiatives, 312 F. Supp. 3d 584, 594 (S.D. Tex. 2018) ("Due to
[§ 1320a–7b(g)], liability under the FCA for AKS violations does
not require the defendants to have expressly certified their
compliance with the AKS."); United States ex rel. Kester v.
Novartis Pharm. Corp., 43 F. Supp. 3d 332, 364 (S.D.N.Y. 2014)
(stating that "from and after [the AKS amendment,] the act of
submitting a claim . . . itself implie[d] compliance with the AKS,
even in [the] absence of any express certification of compliance."
(second alteration in original) (internal quotation marks and
citation omitted)).
Our reading of § 1320a-7b(g) is consistent with the
legislative history, which indicates Congress's intent to "ensure
that all claims resulting from illegal kickbacks are 'false and
fraudulent'" and to "strengthen [] whistleblower actions based on
- 22 -
medical care kickbacks . . . [b]y making all claims that stem from
an illegal kickback subject to the False Claims Act." 155 Cong.
Rec. S10852-01, S10853 (daily ed. Oct. 28, 2009) (statement of
Sen. Kaufman). If a plaintiff must plead and prove that compliance
with the AKS was "material" to a claim "resulting from" an AKS
violation, § 1320a-7b(g) would not represent the strengthening of
whistleblower actions that Congress intended. Moreover,
§ 1320a-7b(g)'s obviation of the "materiality" inquiry essentially
codifies the long-standing view that AKS violations are "material"
in the FCA context.12 This codification has the benefit, however,
of bypassing judicially created theories of materiality, such as
express or implied certification, that "do more to obscure than
12 Prior to the 2010 AKS amendment, courts had consistently
held that compliance with the AKS (or the lack thereof) was
"material" to the government's decision to pay a given claim based
on the theory that the government's payment was contingent on the
submitting entity's express or implied certification that it had
complied with the AKS. See, e.g., Amgen, 652 F.3d at 110; United
States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295,
314 (3rd Cir. 2011), abrogated on other grounds by Escobar, 136 S.
Ct. 1989; United States v. Rogan, 517 F.3d 449, 452-53 (7th Cir.
2008); United States ex rel. Westmoreland v. Amgen, Inc., 812 F.
Supp. 2d 39, 52 (D. Mass. 2011); United States ex rel. Lisitza v.
Johnson & Johnson, 765 F. Supp. 2d 112, 127-28 (D. Mass. 2011)
(citing cases). The legislative history suggests that the 2010
amendment was intended to codify the link between AKS violations
and false claims within the meaning of the FCA as well as to
correct one district court case holding that claims for payment
resulting from AKS violations could be "laundered" if the claims
were submitted to the government by a party who was unaware that
a kickback had occurred. See 155 Cong. Rec. S10852-01, S10853-54
(daily ed. Oct. 28, 2009) (statements of Sens. Kaufman and Leahy);
Kester, 41 F. Supp. 3d at 332-35 (discussing the 2010 amendment's
legislative history).
- 23 -
clarify the issues before" a court considering an FCA claim.
Hutcheson, 647 F.3d at 385–86.
With this understanding of the AKS amendment in mind, we
consider whether Guilfoile has plausibly pleaded that the concerns
he raised about the payments to Greene reasonably could have led
to an FCA action. The allegations in the complaint, coupled with
the reasonable inferences we must draw from them, plausibly pleaded
that claims for payment were, or were going to be, submitted to
the government in connection with the Integrated Entity's work
with the New Jersey hospitals. Specifically, the complaint alleges
that the Integrated Entity "regularly bills federal insurance
programs[,] including[] Medicaid [and] Medicare," and that
Guilfoile "believed the contract with Mr. Green[e] violated the
federal AKS because the Integrated Entity had paid illegal
kickbacks to secure a contract at hospitals where it billed to
federal insurance programs." (Emphasis added.) These allegations
support the reasonable inference that the government was being
billed for services provided by the Integrated Entity in connection
with its contracts with the hospitals.
Guilfoile has also plausibly alleged a sufficient causal
connection between any submitted claims and the payments to Greene.
Specifically, the complaint alleges that the Integrated Entity
entered into an agreement to pay Greene
"for each hospital contract that [he] successfully referred to the
- 24 -
Integrated Entity, specifically targeting two hospitals that [he]
was working for as a paid consultant"; that the Integrated Entity
entered into contracts with those two hospitals; and that the
Integrated Entity in fact paid him "referral fees." The allegation
that Greene was paid pursuant to the agreement supports the
reasonable inference that Greene was responsible for connecting
the Integrated Entity with the New Jersey hospitals. In other
words, we reasonably infer from the complaint's allegations that
the Integrated Entity paid Greene to induce him to use his position
with the hospitals to influence them to select the Integrated
Entity for the contracts at issue. Further, the complaint permits
the reasonable inference that, if not for the agreement with
Greene, the Integrated Entity would not have been in a position to
benefit from federal health care payments arising from its work
with the hospitals. See supra 5-6.13
Finally, Guilfoile has plausibly alleged that the
payments to Greene were a violation of the AKS. The relationship
between the Integrated Entity and Greene -- payment to induce the
13 In addition to the allegation that Greene was paid for
referring the hospitals to the Integrated Entity, the complaint
alleges that Greene advised the Integrated Entity on how to bid
for the hospital contracts. Contrary to the suggestion by
appellees, and drawing all reasonable inferences in Guilfoile's
favor, we simply do not read the complaint to allege that the
extent of Greene's assistance to the Integrated Entity was
providing insider information about the hospitals' bidding
process.
- 25 -
generation of federal health care program business -- has the
hallmarks of a kickback scheme. See 42 U.S.C. § 1320a-7b(b)(2)(B)
(criminalizing payments to "induce [a] person . . . to . . .
recommend purchasing, leasing, or ordering any good, facility,
service, or item for which payment may be made in whole or in part
under a [f]ederal health care program"). Importantly, the nature
of the alleged scheme is materially indistinguishable from the
scheme in United States v. Bay State Ambulance & Hospital Rental
Service, Inc., 874 F.2d 20 (1st Cir. 1989), which involved a
criminal conviction under the AKS. In Bay State, a hospital
employee, who was on an advisory committee charged with advising
the hospital on accepting bids for an ambulance services contract,
was paid by an ambulance company to induce him to recommend that
the hospital enter into a contract for ambulance services with
that company. See 874 F.2d at 22. There was no allegation that
the hospital employee was paid to refer individual patients for
individual ambulance trips or that the federal government would
pay the hospital simply for entering into the contract with the
ambulance company, which contract was the direct outcome of the
illegal remuneration scheme. Yet, we held that a crime had
occurred under the AKS once the person who was in a position to
influence the hospital was paid to use his influence to win the
contract for the ambulance company. See id.
- 26 -
The dissent's concern with the "attenuated" nature of
the AKS scheme alleged in the complaint is misplaced.14 First,
although we can see how our colleague drew his interpretation from
the language of the AKS, we are bound by Bay State, as the dissent
recognizes. Appellees point to no authority for the contention
that the AKS scheme as pleaded is materially distinguishable from
the scheme in Bay State and outside the compass of the AKS. The
dissent's attempt to factually distinguish Bay State is also
unconvincing. Any suggestion in the dissent that the nature of
the kickback scheme is more speculative than the scheme in Bay
State fails to adequately recognize the difference between
pleading standards for an FCA retaliation claim, at issue here,
and standards of proof for a criminal conviction under the AKS, at
issue in Bay State. Second, but equally as important, this case
gives us no reason to question Bay State. The type of scheme
proven in Bay State and alleged in the present case is in the
heartland of what the AKS is intended to prevent -- the use of
payments to improperly influence decisions on the provision of
14As our dissenting colleague articulates his concern:
"There is . . . a fair amount of attenuation between the actual
transactions that Greene was allegedly induced to 'arrange for'
(the hospitals' 'purchas[es]' or 'order[s]' of the Integrated
Entity's general pharmacy services) and the transactions 'for
which payment may be made . . . under a Federal health care program'
(some unknown purchases from an Integrated Entity-run pharmacy of
some unknown drugs by some unknown patients who happened to be
eligible for reimbursement under a federal health care program)."
- 27 -
health care that lead to claims for payment to federal health care
programs.15 Accepting our colleague's contention -- that there is
too great a distance between the Integrated Entity's payments to
Greene to capture the hospital contracts and the submission of
claims to federal insurance programs, which is the unmistakable
objective of the contracts -- would leave a hole in the statutory
scheme and essentially permit pay-offs to capture federal health
care funds. See OIG Supplemental Guidance, 70 Fed. Reg. at 4864
(an illegal kickback is a payment whose purpose, at least in part,
is "to induce or reward the referral or recommendation of business
payable in whole or in part by a [f]ederal health care program").
Further, we disagree with our dissenting colleague that
our interpretation of the FCA and the AKS, and our application of
the statutory language to the alleged facts in light of our
precedent, is foreclosed by the manner in which Guilfoile presented
15 We also disagree with the dissent that we should consider
here arguments not raised in Bay State that would challenge the
viability of that decision. Unlike in United States v. DiPina,
178 F.3d 68, 73 (1st Cir. 1999), where we acknowledged that we are
not bound by dicta in a prior opinion, accepting the appellees'
arguments about attenuation in this case would mean that the
holding in Bay State was incorrect and that the case was therefore
wrongly decided. The similar facts in Bay State and this case are
not "background facts." They are facts that implicate the
applicability of the AKS in both cases. It is a fundamental
principle that a newly constituted appellate panel cannot overrule
a prior panel in the absence of newly announced Supreme Court law,
an intervening en banc opinion of this court, a statutory
overruling, or developments in the law. See Lassend v. United
States, 898 F.3d 115, 124-25 & n.6 (1st Cir. 2018).
- 28 -
his arguments before us or before the district court. This is not
a case where an appellant has tried to introduce on appeal an issue
that was never before the district court or to otherwise "sand
bag" the other side. Although Guilfoile may not have consistently
raised certain arguments, the core issue of whether the payment
scheme as pleaded falls within the compass of the AKS was before
the district court and is at the core of his appeal. Before the
district court and before us, Guilfoile consistently argued that
he has adequately alleged an AKS violation for purposes of pleading
an FCA retaliation claim. The fact that he did not rely on Bay
State or did not consistently present a "market access" theory to
support the AKS violation in no way precludes us from reaching our
result. In the context of a de novo review necessitating our
interpretation of a statute, we routinely employ rationales that
have been less than satisfactorily presented by the parties if
that is the correct way of resolving the issue under the applicable
law. We cannot allow our responsibility to articulate the most
sensible resolution of an issue, especially, as here, an issue of
statutory interpretation involving our own precedent, to be
unreasonably circumscribed by the parties' arguments.
Hence, in summary, after drawing all reasonable
inferences in Guilfoile's favor and considering the effect of the
statutory language drawing a connection between AKS violations and
FCA actions, we conclude Guilfoile has plausibly pleaded that he
- 29 -
engaged in protected conduct within the meaning of an FCA
retaliation claim. That is, when Guilfoile raised concerns about
the payments to Greene he was engaging in conduct that "reasonably
could lead to an FCA action," Booker, 847 F.3d at 59 (internal
quotation marks omitted), specifically, an FCA action based on the
submission of claims resulting from an AKS violation.16
In view of its conclusion that Guilfoile had not
adequately pleaded that he engaged in protected conduct, the
district court did not go on to analyze the other two elements of
Guilfoile's FCA retaliation claim: specifically, that (1) his
employer knew that he was engaged in protected conduct and (2) his
employer retaliated against him because of that conduct. See
Karvelas, 360 F.3d at 235. However, we readily conclude that
Guilfoile has plausibly alleged that the Integrated Entity knew
that he was engaging in protected conduct. Guilfoile specifically
16 Many of the cases cited by appellees for the proposition
that the complaint does not adequately plead an FCA retaliation
claim are clearly inapposite because they apply standards for
directly pleading violations of the AKS and FCA, see, e.g., United
States ex rel. Kalec v. NuWave Monitoring, LLC, 84 F. Supp. 3d 793
(N.D. Ill. 2015); standards for proving AKS and FCA claims on
summary judgment, see, e.g., United States ex rel. Perales v. St.
Margaret's Hosp., 243 F. Supp. 2d 843 (C.D. Ill. 2003); standards
for assessing criminal conviction under the AKS, see, e.g., Patel,
778 F.3d 607; or standards for evaluating FCA retaliation claims
that we do not follow, see, e.g., United States ex rel. Uhlig v.
Fluor Corp., 839 F.3d 628, 635 (7th Cir. 2016). The case of United
States ex rel. Rost v. Pfizer, Inc., 736 F. Supp. 2d 367 (D. Mass.
2010), predates the 2010 amendment to the AKS and applies an
outmoded theory of implied certification.
- 30 -
alleged that "he notified Mr. Shields . . . that he believed the
contract with Mr. Green[e] violated the federal AKS because the
Integrated Entity had paid illegal kickbacks to secure a contract
at hospitals where it billed federal insurance programs."
Guilfoile also has plausibly pleaded that he was
retaliated against because of his protected conduct, given the
close temporal proximity -- about a week -- of his termination to
his final conversation with Shields about the payments to Greene.
See Harrington v. Aggregate Indus. Ne. Region, Inc., 668 F.3d 25,
32 (1st Cir. 2012) (suggesting that a plaintiff can satisfy the
third element of a prima facie retaliation case by plausibly
pleading temporal proximity where the retaliatory action occurred
two months after the protected conduct). To the extent appellees
contend that the complaint does not adequately allege that
Guilfoile informed Shields that he was concerned about fraud on
the government, see, e.g., McKenzie v. BellSouth Telecomms., Inc.,
219 F.3d 508, 516 (6th Cir. 2000), we disagree. The complaint
explicitly alleges, for example, that Guilfoile "notified []
Shields . . . that he believed the contract with [] Green[e]
violated the federal AKS because the Integrated Entity had paid
illegal kickbacks to secure a contract at hospitals where it billed
to federal insurance programs."
- 31 -
B. The 24/7 Call Center
We agree with the district court that Guilfoile has not
sufficiently pleaded a connection between the 24/7 call center
contractual terms and the submission of any claim.17 In general,
"[i]t is not the case that any breach of contract, or violation of
regulations or law, or receipt of money from the government where
one is not entitled to receive the money, automatically gives rise
to a claim under the FCA." United States ex rel. Hopper v. Anton,
91 F.3d 1261, 1265 (9th Cir. 1996). Even in the FCA retaliation
context, there must be a reasonable connection between the alleged
conduct and the submission of claims within the purview of the
FCA.
For a plaintiff to adequately plead that a contractual
breach could reasonably lead to an FCA action, he or she must
17 Anticipating this possible outcome of our review,
Guilfoile asserts that the district court erred by twice rejecting
his requests to amend the complaint to correct any pleading
deficiencies. But he has not demonstrated that the court abused
its discretion and committed a manifest error of law in denying
his motion to vacate the judgment and amend the complaint. See
Markel Am. Ins. Co. v. Díaz-Santiago, 674 F.3d 21, 32 (1st Cir.
2012) (stating that we "review[] the district court's denial of
post-judgment relief under Rule 59(e) for abuse of discretion,"
and that, "[g]enerally, to prevail on a Rule 59(e) motion, the
moving party must . . . clearly establish a manifest error of law."
(internal quotation marks omitted)); Maldonado v. Dominguez, 137
F.3d 1, 11 (1st Cir. 1998) ("[A] district court cannot allow an
amended pleading where a final judgment has been rendered unless
that judgment is first set aside or vacated pursuant to Fed. R.
Civ. P. 59 or 60.").
- 32 -
adequately plead causation and materiality. See D'Agostino v.
ev3, Inc., 845 F.3d 1, 7-8 (1st Cir. 2016). With respect to the
24/7 call center contractual term, Guilfoile has not pleaded any
plausible connection between the alleged contractual breach and
the submission of claims to the government, or how the contractual
breach would have been material to the payment of any claims. For
this reason, the district court correctly dismissed Guilfoile's
FCA retaliation claim to the extent it relied on his activities
concerning the 24/7 call center.18
IV.
For the foregoing reasons, we affirm dismissal of the
complaint as to the 24/7 call center issue but vacate and remand
as to the retaliation claim involving a potential violation of the
Anti-Kickback Statute. Given this disposition, the district court
may need to reconsider its decision to decline supplemental
jurisdiction over Guilfoile's state law claims.
So ordered. Costs to appellant.
- Concurring and Dissenting Opinion Follows -
18Our reasoning and conclusion would be the same if Guilfoile
had alleged that the Integrated Entity violated any statute or
regulation by not having a 24/7 call center or by falsely stating
in its contracts that it had a 24/7 call center. See Booker, 847
F.3d at 60. However, we do not read the complaint to plausibly
allege that the Integrated Entity violated any statutes or
regulations despite Guilfoile's subjective belief that the alleged
false representation "posed a serious threat to public health and
safety."
- 33 -
BARRON, Circuit Judge, concurring in part and dissenting
in part. To plead a viable retaliation claim under the False
Claims Act ("FCA"), 31 U.S.C. § 3730(h)(1), a plaintiff must allege
that the conduct that he reported to his employer and that resulted
in his termination was "calculated, or reasonably could lead, to
a viable FCA action." United States ex rel. Karvelas v. Melrose-
Wakefield Hosp., 360 F.3d 220, 236 (1st Cir. 2004) (internal
quotation marks omitted). Thus, when an FCA retaliation claim
relies on a report of a violation of the Anti-Kickback Statute
("AKS"), 42 U.S.C. § 1320a-7b(g), as is the case here, the
plaintiff needs to allege facts that would suffice to show that
the conduct that he reported to his employer is of a kind that is
actionable under the AKS. See Karvelas, 360 F.3d at 237 (holding
that "protected" activities must "concern the employer's knowing
submission of false or fraudulent claims for payment to the
government" (emphasis added)).
To be clear, the plaintiff in such a case need not prove
at the pleading stage that what he complained to his employer about
was an actual AKS violation. But, the plaintiff must sufficiently
allege that "his reports concerned FCA-violating activity such as
the submission of false claims" resulting from conduct that could
constitute a violation of the AKS. United States ex rel. Booker
v. Pfizer, Inc., 847 F.3d 52, 60 (1st Cir. 2017). And, for that
reason, the allegation in Thomas Guilfoile's complaint in this
- 34 -
case that "he reasonably believed" that the conduct that he was
reporting to his employer prior to his termination revealed a
"violation[] of the AKS . . . resulting in the submission of
fraudulent claims to the government" is not itself of any
significance. Guilfoile must do more than assert a "legal
conclusion couched as a factual allegation" to satisfy his burden
at the pleading stage. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007));
see also Karvelas, 360 F.3d at 224 (setting aside "bald assertions"
or "unsupportable conclusions" in an FCA complaint). The crucial
question that we must resolve, therefore, is whether, taking as
true the complaint's factual allegations about the conduct that
Guilfoile reported to his employer, Guilfoile has satisfied his
burden to show that the conduct that he allegedly reported is at
least of a kind that falls within the scope of the AKS. For, if
that conduct alleged is not even of that kind, then I do not see
how his FCA retaliation claim -- insofar as it is premised on the
report of an AKS violation -- may survive a motion to dismiss.
I.
Guilfoile alleges in his complaint that his employer --
several general pharmacy services providers operating as a single
integrated entity (the "Integrated Entity") -- was bidding for
hospital contracts with the assistance of a financial consultant,
Michael Greene, who was simultaneously serving as a financial
- 35 -
advisor to those hospitals. I agree with the majority that
Guilfoile sufficiently alleges in his complaint that he was fired
by his employer after reporting that it was making payments to the
consultant in order to induce him to use his position at the
hospitals to steer the hospital contracts the Integrated Entity's
way. See Maj. Op. 25. I also agree that these allegations of
employer-induced double-dealing are concerning.
Nevertheless, the District Court found those factual
allegations -- even if taken as true -- to be legally wanting.
The District Court did so because it interpreted the AKS to
prohibit only payments made to induce "other providers or
individuals [to] directly refer[] or recommend[] patients to
specific services" to be paid for with federal health care funds.
The District Court then concluded that Guilfoile has not alleged
facts sufficient to show that Greene "could or did play a role in
referring or recommending federal program patients to Defendants
through his financial consultant work with Defendants."
In reaching that conclusion, the District Court rejected
Guilfoile's argument that Greene's facilitation of general
contracts between the Integrated Entity and the hospitals for
general pharmacy services that created the opportunity for
"general access to patients amounts to a referral or
recommendation" within the meaning of the AKS. The District Court
appears to have relied for that determination on the attenuated
- 36 -
relationship between two things: (1) the general contracts for
pharmacy services that Greene allegedly arranged between the
Integrated Entity and the hospitals; and (2) the particular
purchases by particular buyers of drugs from the pharmacies set up
by the Integrated Entity in the hospitals.
I see how the text of the AKS lends support to the
District Court's logic. As relevant here, the AKS prohibits
payments "to induce" the recipient of the payments "to purchase,
lease, order, or arrange for or recommend purchasing, leasing, or
ordering any good, facility, service, or item for which payment
may be made in whole or in part under a Federal health care
program[.]" 42 U.S.C. § 1320a-7b(b)(2)(B). The only transactions
that Guilfoile has alleged that the Integrated Entity paid Greene
to induce him to "arrange for or recommend" directly, however, are
the "purchas[es]" or "order[s]" by the hospitals of the specialty
pharmacy services provided by the Integrated Entity via the
contracts allegedly facilitated by Greene's paid work for
Integrated Entity. But, "payment . . . under a Federal health
care program" is not made for those general services. Rather,
payment is only made from a federal health care program in
consequence of the particular purchases by particular buyers of
drugs from the pharmacies set up by the Integrated Entity in the
hospitals.
- 37 -
There is, then, necessarily a fair amount of
attenuation between the actual transactions that Greene was
allegedly induced to "arrange for" (the hospitals' "purchas[es]"
or "order[s]" of the Integrated Entity's general pharmacy
services) and the transactions "for which payment may be made . .
. under a Federal health care program" (some unknown purchases
from an Integrated Entity-run pharmacy of some unknown drugs by
some unknown patients who happened to be eligible for reimbursement
under a federal health care program). Moreover, that degree of
attenuation appears to inhere in the conduct that Guilfoile's
complaint alleges took place, given the middleman nature of the
general pharmacy services that the Integrated Entity retained
Greene to assist it in offering to the hospitals. Thus, nothing
about Guilfoile's allegations concerning his report of that
conduct to his employer indicates that the progression of the case
will reveal the attenuation that concerned the District Court to
be any less substantial than it now appears to be.
II.
The majority rejects the District Court's reasoning
regarding the attenuation problem. The majority concludes that
United States v. Bay State Ambulance & Hosp. Rental Serv., Inc.,
874 F.2d 20 (1st Cir. 1989), compels us to construe the AKS to
encompass situations with this degree of attenuation between
general services contracts and any federal payment from a federal
- 38 -
health care program that would result from particular purchases by
particular patients availing themselves of those services. See
Maj. Op. 26-27. It is true that Bay State did uphold the AKS
conviction of an ambulance services company and its president for
paying kickbacks to a hospital employee. Bay State did so,
moreover, even though that employee "arrange[d] for" only a general
ambulance services contract between the hospital and the ambulance
services provider, and not any particular purchase of ambulance
services by a patient for which the federal government would make
a payment. See id. at 25-26, 36.
In my view, however, Bay State is not so clearly
controlling a precedent on the attenuation issue as the majority
concludes that it is. That is so for three reasons.
First, the attenuation issue was not raised in Bay State.
And thus, Bay State did not need to address -- and did not in fact
address -- whether what the kickback recipient "arrange[d] for or
recommend[ed]" fell within the scope of the AKS or was instead too
attenuated from any payment from a federal healthcare program to
do so because the parties made no such argument. See Gately v.
Com. of Mass., 2 F.3d 1221, 1226 (1st Cir. 1993) (describing the
"essential principles of stare decisis" to include "(1) an issue
of law must have been heard and decided" and "(2) if an issue is
not argued, or though argued is ignored by the court, or is
reserved, the decision does not constitute a precedent to be
- 39 -
followed"); United States v. DiPina, 178 F.3d 68, 73 (1st Cir.
1999) ("Where, in a prior decision, we have not considered an issue
directly and assessed the arguments of parties with an interest in
its resolution, that decision does not bind us in a subsequent
case where the issue is adequately presented and squarely before
us, merely because some of the background facts are the same.").
Second, Bay State is in some respects an easier case in
which to find the nexus that the text of the AKS demands between
the payment from a federal health care program and the transaction
that the payment recipient "arrange[d] for" than this one is. The
ambulance services eventually purchased by patients in Bay State
were clearly reimbursable under a federal health care program. By
contrast, it is less clear to me that the specialty pharmacy
service (as opposed to the drugs purchased by patients) is itself
reimbursable, thereby making the attenuation issue that concerned
the District Court all the more acute. And Guilfoile's complaint
does nothing to supply useful clarification.19
19 Contraryto the majority's suggestion that this distinction
is insignificant, see Maj. Op. 27-28, it seems to me that the fact
that the contracts between the Integrated Entity and the hospitals
contemplate the provision of a general service that is not itself
reimbursable under a federal healthcare program should give us
pause. The text of the relevant AKS provision requires that the
"good, facility, service, or item" at issue be one "for which
payment may be made in whole or in part under a Federal health
care program[.]" 42 U.S.C. § 1320a-7b(b)(2)(B). And I have found
no authority -- nor does Guilfoile identify any -- that suggests
that the AKS does encompass conduct predicated on the defendant's
offering of middleman services of this type. See, e.g., United
- 40 -
Finally, we should, in my view, be wary of extending Bay
State in construing the AKS to reach the conduct alleged here.
Congress passed the AKS to address a form of corruption that
threatens to cheat federal taxpayers and that might also pose a
risk to public health. See, e.g., Medicare-Medicaid Anti–Fraud
and Abuse Amendments, Pub. L. 95-142, 91 Stat. 1183 (1977)
(describing the act as one "to strengthen the capability of the
Government to detect, prosecute, and punish fraudulent activities
under the [M]edicare and [M]edicaid programs"); United States v.
Hancock, 604 F.2d 999, 1001 (7th Cir. 1979) (identifying the "evils
Congress sought to prevent by enacting the kickback statutes" to
include the "potential for increased costs to the Medicare-
Medicaid system and misapplication of federal funds"). In fact,
Congress was so concerned about this form of corruption that it
even made it a felony to engage in the conduct that the AKS covers.
See Pub. L. 95-142 (upgrading an AKS violation to a felony).
States v. Polin, 194 F.3d 863, 864-65 (7th Cir. 1999) (upholding
convictions of a doctor and nurse who paid a pacemaker company
sales representative a fee for each patient he "referred" to the
company for pacemaker monitoring services); United States v.
Vernon, 723 F.3d 1234, 1254-55 (11th Cir. 2013) (upholding
conviction of specialty pharmacy executive who paid a patient
advocate a 45% commission for each prescription that her patients
filled at the pharmacy to induce the patient advocate to refer her
patients to the pharmacy); United States v. Shoemaker, 746 F.3d
614 (5th Cir. 2014) (upholding conviction of nursing staffing
company executive who paid a hospital's board chair $5 for each
staffing hour that the hospital purchased from the nursing company
to induce the chair to recommend to the hospital's COO that the
hospital increase its hours from the nursing company).
- 41 -
But, the AKS, like any statute that addresses an
important public problem, does not have limitless reach. And, as
with any statute that imposes criminal liability, as the AKS does,
we must be careful to construe its reach in a manner that ensures
that it affords those subject to it with due notice and in
accordance with the principle that only Congress may impose
criminal liability. See Liporata v. United States, 471 U.S. 419,
427 (1985).
I recognize that we would not need to worry about
transgressing those interpretive principles here if, as the
majority concludes, this case concerns the alleged reporting of
conduct that falls within the AKS's "heartland." See Maj. Op. 27.
But, I do not see how we could so conclude, no matter how broad
the AKS may seem to be. In fact, if the conduct alleged in the
complaint before us constitutes conduct that is of a kind that
falls within the AKS's heartland, then I would be hard-pressed to
conjure the kind of conduct that would reside on its outskirts.
Of course, statutes that have cores also have
peripheries. And conduct that falls within the periphery of a
statute's scope is no less unlawful than conduct that falls within
its core. At the same time, conduct that lies outside even the
periphery -- as measured, most clearly, by the words that Congress
chose to denominate the statute's bounds -- is not conduct that
may give rise to liability. And that is so no matter how much
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such conduct may seem to be concerning in its own right and no
matter how much that kind of conduct may even bear some resemblance
to the kind of conduct that plainly does falls within the statute's
scope.
For all of these reasons, then, Bay State does not, in
my view, dictate the outcome in this case. And that matters
because, although we are generally free to affirm a judgment below
on any ground manifest in the record, see MacDonald v. Town of
Eastham, 745 F.3d 8, 11 (1st Cir. 2014), we are not equally free
to reverse one on a ground that the appellant does not raise on
appeal. Yet while Guilfoile did cite Bay State in a footnote in
his filings below to support the proposition that "paying
inducements for referrals to access markets in order to bill
federal health care programs is a cognizable violation of the AKS,
and therefore the FCA," he has inexplicably, as the Integrated
Entity points out, abandoned that market access argument on
appeal.20 See Igartúa v. United States, 626 F.3d 592, 603 (1st
20
I note that Guilfoile does cite Bay State on appeal, but
only in support of the separate points that he adequately alleged
that Greene's position as a financial advisor at the hospitals put
him on sufficient footing to steer the hospital contracts to the
Integrated Entity and that he does not need to show that the
alleged arrangement resulted in a drain on the public fisc.
Guilfoile does not, however, make any argument on appeal as to how
Bay State resolves the attenuation issue in his favor. See
González v. Vélez, 864 F.3d 45, 56 n.7 (1st Cir. 2017) ("On appeal,
. . . claims are deemed abandoned unless they are, at a minimum,
accompanied by some developed argumentation.").
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Cir. 2010) (noting that "[a]rguments that are intentionally
relinquished or abandoned" or "raised in a perfunctory or not
serious manner [are] waived").
Having abandoned that theory for why the attenuation
inherent in the conduct that he alleged poses no concern, Guilfoile
engages with the attenuation issue on appeal only by invoking cases
that discuss whether the plaintiff has sufficiently made out a
false claim under the FCA. See, e.g., U.S. ex rel. Hutcheson v.
Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011) (holding
that hospitals' claims for reimbursement of doctor's services
using medical devices were "false" under the FCA where the doctors
had accepted kickbacks from the medical device manufacturer);
United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 740
(D.C. Cir. 1998) (holding that plaintiff had "a good faith basis
for going forward at the time of retaliation" as to the
"[]submission of a false claim to the federal government" element
where the plaintiff knew that 80% of the defendant's money came
from the federal government). But, those cases bear only on the
separate element of an FCA action that a "false or fraudulent
claim" be submitted to the federal government. See 31 U.S.C. §§
3729(a)(1),(b)(2). Given that Guilfoile's FCA retaliation claim
is premised only on the theory that the conduct that he reported
to his employer was prohibited by the AKS, see 42 U.S.C. § 1320a-
7b(g), that separate issue takes on significance only if Guilfoile
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has sufficiently alleged as a threshold matter that the conduct
that he was reporting was of a kind that violates the AKS.
III.
Because I do not believe that Bay State is controlling
on the critical issue of attenuation, and because Guilfoile has
dropped the market access theory that he pressed below, I see no
viable basis on appeal for rejecting the District Court's
conclusion that Guilfoile "has not set forth sufficient factual
allegations to support a plausible anti-kickback statute
violation." To excuse the waiver here is to deprive the appellees
of their judgment based on an argument that Guilfoile -- by
abandoning that argument on appeal -- gave them no reason to think
that they needed to confront and that, understandably, they did
not. Accordingly, I see no reason to decide, without adequate
briefing from the parties, the open interpretive question
concerning the scope of what constitutes conduct that is of a kind
the AKS encompasses on which Guilfoile's retaliation claim
necessarily depends. And so, given the posture of this case -- a
posture that is of Guilfoile's own making on appeal -- I conclude
that we must affirm the District Court's decision.
I therefore respectfully dissent.
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Guilfoile v. Shields
Court: Court of Appeals for the First Circuit
Date filed: 2019-01-15
Citations: 913 F.3d 178
Copy CitationsCombined Opinion