United States Ex Rel. Willard v. Humana Health Plan of Texas Inc.

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS June 26, 2003

FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk

No. 02-40285

UNITED STATES OF AMERICA, EX. REL. IRVIN WILLARD,

Plaintiff-Appellant,

versus

HUMANA HEALTH PLAN OF TEXAS INC., ET AL.

Defendants,

HUMANA HEALTH PLAN OF TEXAS INC.; HUMANA INC.,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Texas

Before GARWOOD, JONES and STEWART, Circuit Judges.

GARWOOD, Circuit Judge:

In this qui tam action, the United States of America, through

its relator Irvin Willard (Willard), appeals from the judgment of

the district court, pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b),

dismissing the second amended complaint filed against Humana Health
Plan of Texas, Inc. and Humana, Inc. (Humana) alleging Humana

violated the False Claims Act, 31 U.S.C. § 3729, et seq. (FCA). We

affirm.

Facts and Proceedings Below

Humana, Inc., through its subsidiary Humana Health Plan of

Texas, Inc., operates health maintenance organizations in various

counties in Texas. Humana entered into contracts with the Health

Care Financing Administration (HCFA) of the United States

Department of Health and Human Services to provide health care

services to Medicare beneficiaries. Humana is paid a fixed rate

for each enrollee, determined annually, based on the average

anticipated Medicare expenses of all Medicare-eligible individuals

in a given geographic area, generally on a county-by-county basis.

These rates are referred to as capitation rates.

Willard worked as a sales representative for Humana from 1995

through 1998, selling Humana's Medicare HMO products. During this

time, Humana operated an HMO for Medicare beneficiaries in a

Houston service area comprised of Harris, Austin, Colorado,

Fayette, and Waller counties. Harris County encompasses the

metropolitan Houston area, while the other counties are comprised

of more rural areas.

An HMO under contract with the HCFA may not discriminate in

enrollment on the basis of health, or on any other basis used as a

proxy for health. See 42 U.S.C. § 1395mm(i)(6)(a)(iv); 42 C.F.R.

2
§ 417.428(b)(1). Willard contends that, fairly read, its Second

Amended Complaint alleges that Humana engaged in a “cherrypicking”

scheme “whereby less healthy potential program participants and

those living in counties outside Humana's favored geographic area

were methodically discouraged from joining Humana's HMO.” Willard

alleged in his complaint that Humana adopted a variety of

techniques to prevent eligible participants from learning they can

join Humana's HMOs. Willard further alleged that he was “told that

Humana only wanted to insure healthy people, and would lose money

if it enrolled sick people or people who lived too far from

Humana's established providers.” Willard asserts that when he

persisted in soliciting and enrolling people from the outlying

counties, he was warned not to do so, and was ultimately fired.

Willard contends that in order for Humana to gain entry into

the lucrative Houston market, HCFA required that Humana serve the

outlying counties. In his complaint, Willard alleged that

“[w]ithout revealing its intentions to either relators or HCFA,

Humana Texas entered [into] contracts to serve those counties with

no intention of actually enrolling Medicare participants there.”

In May 1999 Willard filed a qui tam complaint under the FCA

against Humana and other HMOs. The Government elected not to

intervene. Thereafter, in May 2000 Willard filed his First Amended

Complaint and Humana filed a motion to dismiss Willard's First

Amended Complaint pursuant to Federal Rules of Civil Procedure

3
12(b)(6) and 9(b), and challenged the constitutionality of the

FCA's qui tam provision. On August 10, 2000, Judge Kent stayed the

case pending this court's en banc decision in Riley v. St. Luke's

Episcopal Hospital, 252 F.3d 749 (5th Cir. 2001) (en banc), in

which this court upheld the constitutionality of the FCA's qui tam

provision. At a July 2001 status conference following the Riley

decision, Humana reasserted its request for Willard to plead fraud

with specificity. Judge Kent granted Willard leave to amend his

complaint and allowed Humana to reassert its non-constitutional

grounds for dismissal. Willard filed his Second Amended Complaint

later in July 2001.

On July 30, 2001, the case was transferred to Judge Lake.

Humana filed a renewed motion to dismiss Willard's Second Amended

Complaint pursuant to Fed. R. Civ. P. 12(b)(6) and 9(B) and Willard

moved for partial summary judgment. Judge Lake granted the motion

to dismiss and denied the motion for summary judgment as moot.

Willard appeals the district court's grant of the motion to

dismiss, as well as the district court's denial of leave to amend

his complaint.

DISCUSSION

I. Standard of Review

We review a Rule 12(b)(6) motion de novo and accept all well-

plead factual allegations as true. Abrams v. Baker Hughes, Inc.,

292 F.3d 424, 430 (5th Cir. 2002). “[T]he central issue is

4
whether, in the light most favorable to the plaintiff, the

complaint states a valid claim for relief.” Copeland v.

Wasserstein, Perella & Co., Inc., 278 F.3d 472, 477 (5th Cir.

2002). “Under Rule 12(b)(6), a claim maybe dismissed when a

plaintiff fails to allege any set of facts in support of his claim

which would entitle him to relief” and “the court accepts as true

the well-pled factual allegations in the complaint, and construes

them in the light most favorable to the plaintiff.” Taylor v.

Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002). However,

“conclusory allegations . . . will not suffice to prevent a motion

to dismiss,” id., and neither will “unwarranted deductions of

fact.” Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.

1992). In deciding a motion to dismiss the court may consider

documents attached to or incorporated in the complaint and matters

of which judicial notice may be taken. Lovelace v. Software

Spectrum Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996).

We review the district court's denial of leave to amend the

complaint for abuse of discretion. Hypes v. First Commerce Corp.,

134 F.3d 721, 727-28 (5th Cir. 1998).

II. Dismissal of Willard's Claims

Willard's Second Amended Complaint alleges that Humana

violated 31 U.S.C. § 3729(a)(1) and (a)(2). Section 3729 states in

relevant part:

“Any person who: (1) knowingly presents, or causes to be

5
 presented, to an officer or employee of the United States
Government or a member of the Armed Forces of the United
States a false or fraudulent claim for payment or
approval; (2) knowingly makes, uses, or causes to be made
or used, a false record or statement to get a false or
fraudulent claim paid or approved by the Government; . .
.
is liable to the United States Government for a civil
penalty . . .”

Willard contends that Humana engaged in a “cherrypicking”

scheme which violates the FCA in three distinct ways. First,

Willard argues that because Humana is paid based on the average

expenses for all Medicare-eligible individuals, covering both

healthy and sick beneficiaries, Humana effectively overcharged the

Government for Medicare services by “cherrypicking” which

beneficiaries it would target for enrollment. Secondly, Willard

claims that by seeking payment under the Medicare program, Humana

falsely represented (impliedly certified) compliance with all

material terms, statutes, and regulations central to the Medicare

HMO program. Finally, Willard argues that Humana procured its

contract with the HCFA by fraud in the inducement because Humana

never intended to provide services in the outlying counties.

III. Overcharging Theory of Liability

Willard argues that when Humana receives payment at the pre-

established “capitation rate” for healthier enrollees, this rate

includes compensation for providing services to those individuals,

as well as a “premium” to offset anticipated costs it expects to

incur from providing services to less healthy persons. Willard

6
contends that by not providing services to less healthy persons

under its “cherrypicking” scheme, Humana is effectively

overcharging the Government in violation of the FCA.

Humana persuasively argues that any alleged discrimination by

way of a “cherrypicking” scheme must occur within the population

for which uniform rates have been set. Humana asserts, and Willard

agrees, that the rates in this case are determined on a county-by-

county basis. Therefore, Willard must allege discrimination based

on health status within a single county, not discrepancies in

enrollment patterns among different counties, in order to establish

that Humana overcharged Medicare. As such, Willard's overcharging

theory of liability must fail because Willard has not alleged

discrimination based on health status within any particular county,

i.e. rate area.

As Humana's capitation reimbursement rates were adjusted to

each county, the district court properly concluded that Humana

accrued no unwarranted benefit and the government no loss by virtue

of Humana enrolling more beneficiaries in some counties than

others. The district court also properly concluded that it was

undisputed that all claims submitted by Humana were valid.

Moreover, the district court found that Humana's contract with the

government did not obligate it to take affirmative steps to enroll

beneficiaries in all counties. Perhaps most importantly, the trial

court correctly found:

7
 "Willard has also failed to state a cause of action under
31 U.S.C. § 3729(a)(2). Under section 3729(a)(2), the
plaintiff must identify both a false claim and a false
record or statement made or used to get that false claim
paid. Thompson [v. Columbia/HCA Healthcare Corp.], 125
F.3d [899] at 903 [5th Cir. 1997]. As explained above,
Willard has not identified a false claim. Moreover,
Willard has not identified any other document or
statement used to get an allegedly false claim paid."

The False Claims Act does not create liability merely for a

health care provider's disregard of Government regulations or

improper internal policies unless, as a result of such acts, the

provider knowingly asks the Government to pay amounts it does not

owe. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785

(4th Cir. 1999) ("The statute attaches liability, not to the

underlying fraudulent activity or to the government's wrongful

payment, but to the 'claim for payment.' . . . Therefore, a central

question in False Claims Act cases is whether the defendant ever

presented a 'false or fraudulent claim' to the government.")

(quoting United States v. Rivera, 55 F.3d 703, 709 (1st Cir.

1995)).

Because Willard does not allege that any of the claims were

false in the sense that they contained false statements or were for

services not performed or the like, Willard must resort to either

the “implied certification” or “fraud in the inducement” theories

of liability through which it may be possible to demonstrate that

otherwise valid claims are actionable under the FCA.

IV. “Implied Certification” Theory of Liability

8
 In order to receive payment, Humana submits enrollment lists

to HCFA identifying the persons enrolled in its HMO program for any

given month. Willard does not allege that those enrollment lists

were literally “false,” in that they requested payment for

individuals not enrolled or not eligible for enrollment. Rather,

Willard argues that by requesting payment, Humana has impliedly

represented to the Government that it has complied with applicable

statutes and regulations central to performance of Humana's

contract with HCFA, as well as the terms of the contract. Willard

further argues that by requesting payment, Humana impliedly

represented that the Government received everything it had

contracted and bargained for. As there was no express

certification of compliance, Willard contends that Humana made an

“implied certification” of compliance which the Government relied

upon.

This court has recognized that “services rendered in violation

of a statute do not necessarily constitute false or fraudulent

claims under the FCA.” Thompson v. Columbia/HCA Healthcare Corp.,

125 F.3d 899, 902 (5th Cir. 1997). This court, however, has also

recognized that the FCA “interdicts material misrepresentations

made to qualify for government privileges or services.” Id.

(quoting United States ex rel. Weinberger v. Equifax, Inc., 557

F.2d 456, 461 (5th Cir. 1977)). While this Circuit has decided

cases dealing with FCA liability based on express certifications of

9
compliance with various statutes and regulations, we have not

specifically addressed whether FCA liability can be based on an

“implied certification” theory.

Willard relies on the Tenth Circuit's decision in Shaw v. AAA

Engineering & Drafting, Inc., 213 F.3d 519 (10th Cir. 2000), to

support recognition of FCA liability based on an implied

certification theory. The defendant in Shaw had contracted to

perform photography services for the Government. Id. at 523.

Under the contract, the defendant was required to dispose of

certain chemicals used in the contracted for film processing in

accordance with environmental guidelines and standards. Id. at

527. The United States, appearing as amicus curiae, argued that by

submitting monthly invoices for the photography services, the

defendant:

“impliedly certified that it had complied with the silver
recovery [environmental compliance] provisions in the
contract; because [the defendant] was being paid not only
for photography services but also for environmental
compliance, its false implied certification of compliance
with the contract's silver recovery requirement gives
rise to liability under the FCA. Id. at 531.

The Tenth Circuit embraced the implied certification theory of FCA

liability, noting that it is consistent with the legislative

history of the 1986 amendments to the FCA and supported by the

language and structure of the FCA itself. Id. at 530.

The district court found Shaw unpersuasive, stating that:

“Although the court used the phrase ‘implied

10
 certification,’ the court did not create or recognize a
new or expanded cause of action under the False Claims
Act. ‘Implied certification’ amounts to nothing more
than an alternative expression of the well-accepted idea
that billing the government for something not delivered
may constitute a false claim. If the government defines
its bargain in a manner that requires adherence to a
statute or regulation, compliance with that statute or
regulation is implied by virtue of a request for payment.
As with a claim brought under the theory of express
certification, there can be no liability based upon an
implied certification unless compliance is a condition
for payment.” (citations omitted).

As the district court explained, “[t]he Tenth Circuit held

that submission of the invoices constituted a false claim because

the payment requested was for both photography services and for

silver recovery activities, but the silver recovery had not been

performed.” Thus, the critical point is that an action on which

payment was conditioned had not been performed. Other circuits

that have recognized the “implied certification” theory have also

set forth this requirement. See United States ex rel. Augustine v.

Century Health Svs., Inc., 289 F.3d 409, 415 (6th Cir. 2002)

(adopting the implied certification theory, explaining that FCA

liability “can attach if the claimant violates its continuing duty

to comply with the regulations on which payment is conditioned”);

Mikes v. Strauss, 274 F.3d 687, 700 (2d Cir. 2001) (concluding that

“implied false certification is appropriately applied only when the

underlying statute or regulation . . . expressly states the

provider must comply in order to be paid”); United States ex rel.

Siewick v. Jamieson Science & Eng'g, Inc., 214 F.3d 1372, 1376

11
(D.C. Cir. 2000) (holding that courts will “infer certification

from silence, but only where certification was a prerequisite to

the government action sought”).

This court need not determine here whether it will recognize

the “implied certification” theory, because even if assuming for

the sake of argument we were to apply such a theory here, Willard

would still lack a cognizable claim for two reasons. First,

Willard has failed to allege facts that would show that HCFA

conditioned its payment to Humana on any implied certification of

compliance with the anti-discriminatory regulations.

It is clear that compliance with the regulations Willard

alleges Humana violated was not a condition of payment under the

contract. If Humana engaged in any practice that “would reasonably

be expected to have the effect of denying or discouraging

enrollment” based on health status, the Government is merely

authorized to suspend future enrollment, suspend future payments,

or impose monetary penalties, rather than withhold payment for

those already enrolled. See 42 U.S.C. § 1395mm(i)(6). See also

United States v. Southland Management Corp., 326 F.3d 669, 676 (5th

Cir. 2003). Moreover, Willard does not allege that the regulations

concerning discrimination based on health status and income were

referenced in the contract. A review of the standard contract with

Medicare HMO providers submitted by Willard indicates that neither

42 U.S.C. § 1395mm(I)(6) or 42 C.F.R. § 417.428(b)(1) were

12
mentioned in the contract, let alone their compliance certified as

a condition for payment, despite the fact that compliance with

numerous other regulations, some of which are specific to health

care providers and others of which relate to labor more generally,

was incorporated either within the contract itself or in its

appendix.

Second, Willard has not alleged facts sufficient to reflect

that there was any regulatory violation. Willard does not allege

that Humana turned away healthy people or discouraged less healthy

Medicare eligible people per se from participating in the program.

Under 42 U.S.C. § 1395mm(i)(1), civil penalties may be imposed if

a Medicare contracting HMO engages in any practice that would

reasonably be expected to have the effect of denying or

discouraging enrollment by eligible individuals whose medical

condition or history indicates a need for substantial future

medical service. However, while Willard alleges that Humana

supervisors stated, as a matter of fact, that the company does not

profit by insuring the sick, Willard does not allege that Humana in

fact implemented a policy or practice of actually discouraging less

healthy individuals from enrolling or actually turning them away.

The complaint never alleges that either Willard or any of his

coworkers at the behest of Humana either actually turned away any

less healthy eligible individuals or actually discouraged any from

enrolling. Indeed, the complaint does not even allege that Willard

13
and other agents responsible for enrolling prospective

beneficiaries examined their medical histories or conducted an

evaluation of their future need for medical services.

Willard merely claims Humana accomplished a similar ultimate

result de facto by less aggressively marketing its plan in the

rural counties as compared with Harris County. However, Willard

does not allege that the Medicare eligible population in the rural

counties is less healthy on average than that in Harris County.

Even if this is assumed, the undisputed fact that reimbursement

rates are calibrated separately for each county means that such a

practice would not unduly benefit Humana or harm the Government.

Willard comes closer to alleging a regulatory violation under

42 C.F.R. § 417.428(b)(1), which prohibits, “[p]ractices that are

discriminatory. For example, the HMO or CMP may not engage in any

activity intended to recruit Medicare beneficiaries from higher

income areas (usually an indicator of better health) without making

a comparable effort to enroll Medicare beneficiaries from lower

income areas.” However, Willard never alleges that the rural

counties are lower income areas than Harris County. Although an

argument could perhaps be made that the general provision of 42

C.F.R. § 417.428(b)(1) might be construed to include discrimination

between urban and rural areas in the aggressiveness of marketing

efforts, Willard does not make this allegation, let alone cite any

authority or precedent supporting such a construction. Furthermore,

in light of the parenthetical reference to residents of higher

14
income areas generally having better health and the overarching

concern of discrimination between healthy and sick patients that

could undermine the capitation rate scheme, the lack of any obvious

and general correlation between urban and rural status and health

would suggest that this classification would not be a regulatorily

recognized proxy for health. Even to the extent urban and rural

differences affect health, so long as any marketing differences

occur on a county-by-county basis as opposed to distinguishing

between urban and rural areas that might lie within one county, the

latter of which is not alleged, the fact that capitation rates are

set county-by-county means ipso facto the government cannot be

shortchanged.

Finally, even if we were to find that Humana was under a

contractual or regulatory obligation to enroll beneficiaries on a

proportionate basis in every county, Willard's complaint fails

because it does not allege Humana enrolled a lower percentage of

Medicare eligible beneficiaries in the rural counties as compared

with Harris County.1

V. Fraud in the Inducement Theory of Liability

Entering into a contract with no intention of performing may

1
Even if we assume that Willard properly incorporated his
motion for summary judgment filed after his second amended
complaint into that complaint, neither this deficiency in his
complaint or any of the other deficiencies cited by the district
court or in this opinion are cured by Willard’s summary judgment
motion.

15
constitute fraud in the inducement. FCA liability has in certain

cases been imposed when the contract under which payment is made was

procured by fraud. See Harrison v. United States, 176 F.3d 776, 787

(4th Cir. 1999), citing United States ex rel. Marcus v. Hess, 317

U.S. 537, 543-44 (1943), as the most prominent of cases in which FCA

liability was imposed when the contract “was obtained originally

through false statements or fraudulent conduct.”

Willard argues that his complaint states a valid claim under

the FCA based on the theory of fraud in the inducement because

Humana “entered [into] contracts to serve [the outlying] counties

with no intention of actually enrolling Medicare participants

there.” The district court held that Willard's fraud in the

inducement claim failed to comply with the particularity in pleading

requirement imposed by Rule 9(b) of the Rules of Civil Procedure.

The requirements of Rule 9(b) apply to claims under the FCA.

United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125

F.3d 899, 903 (5th Cir. 1997), Bly-Magee v. California, 236 F.3d

1014, 1018 (9th Cir. 2001); United States ex rel. LaCorte v.

SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir.

1998); Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2d Cir.

1995). Under Rule 9(b), “[i]n all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with

particularity.” This court has stated that Rule 9(b) requires that

the plaintiff allege “the particulars of time, place, and contents

16
of the false representations,” Williams v. WMS Techs., 112 F.3d 175.

179 (5th Cir. 1997), as well as the identity of the person making

the misrepresentation and what that person obtained thereby,

otherwise referred to as the “who, what, when, where, and how” of

the alleged fraud. Thompson, 125 F.3d at 903.

Malice, intent, knowledge, and other condition of mind of a

person may be averred generally. Fed. R. Civ. P. 9(b). This second

sentence of Rule 9(b) “relaxes the particularity requirement for

conditions of the mind, such as scienter.” Tuchman v. DSC

Communications Corp., 14 F.3d 1061, 1068 (5th Cir. 1994). As this

court has explained, in order to adequately plead scienter, “a

plaintiff must set forth specific facts that support an inference

of fraud.” Id. Facts that show a defendant's motive to commit the

fraud may sometimes provide a factual background adequate for an

inference of fraudulent intent. Id.

The district court observed that Willard's fraud in the

inducement claim is a “one-sentence allegation, devoid of any

factual information that arguably did not even meet the pleading

requirements of Federal Rule of Civil Procedure 8(a), and certainly

[did] not meet the requirements of Rule 9(b).” The district court

noted:

“Willard does not assert a single fact to support his
allegation that Humana entered into a contract with the
HCFA with no intent to perform it. Willard does not
allege who was involved in the negotiations, or where or
when the negotiations took place, or that he has any
basis for his allegation. Willard does not allege any

17
 facts as to what was said before, during, or after the
contract negotiations to indicate that the contract was
entered with no intent on Humana's part to enroll
eligible participants from rural counties.”

At best, Willard arguably complied with the loosened 9(b)

requirement as to state of mind. Although Willard's complaint

offered no specificity relevant to Humana's intent at the time when

the contract was entered into, Willard did offer subsequent

statements of Humana officials suggesting they were strongly averse

to serving the rural counties. However, the trial court correctly

held that Willard did not come close to setting forth the

particulars of “time, place, and contents of the false

representations, as well as the identity of the person making the

misrepresentation and what [that person] obtained thereby,”

otherwise referred to as the “who, what, when, where, and how” of

the alleged fraud. Willard merely makes a general assertion that

Humana had to agree to serve the rural counties in order to obtain

the contract, although Willard does not assert this commitment was

ever memorialized in writing. Willard does not allege when or how

this commitment was made or who at Humana made it.

It is true that the pleading requirements of Rule 9(b) may be

to some extent relaxed where, as is arguably the case here, the

facts relating to the alleged fraud are peculiarly within the

perpetrator's knowledge. ABC Arbitrage v. Tchuruk, 291 F.3d 336,

350 (5th Cir. 2002). Although we have held that fraud may be

pleaded on information and belief under such circumstances, we have

18
also warned that this exception “must not be mistaken for license

to base claims of fraud on speculation and conclusory allegations.”

Id. at 350 n.67. In addition, even where allegations are based on

information and belief, the complaint must set forth a factual basis

for such belief. Id.

First, Willard failed to argue in his briefs to this court that

the facts were peculiarly within Humana's knowledge and therefore

his pleadings should have been held to a lower standard by the

district court on the issue of fraud in the inducement. Second,

even if this court were inclined to consider this argument sua

sponte, Willard's one-sentence allegation fails to set forth a

factual basis even upon information and belief that provides the

particularity required by Rule 9(b).

In addition, this court may consider alternative grounds for

upholding the district court's decision. Henderson v. Century Fin.

Co., Inc., 577 F.2d 997, 1002 n. 5 (5th Cir.1978). We observe that

Willard's fraud in the inducement theory also fails to state a

cognizable claim because there is no regulatory violation.

In United States v. Shah, 44 F.3d 285, 293 (5th Cir. 1995), this

court noted, "Generally, "there is no inference of fraudulent intent

not to perform from the mere fact that a promise made is

subsequently not performed." (footnote omitted). See also

Restatement (Second) of Torts § 530(1). However, where substantial

nonperformance is coupled with other probative factors, such as

19
"where only a short time elapses between the making of the promise

and the refusal to perform it, and there is no change in the

circumstances," an intent not to perform when the promise was made

may, in appropriate circumstances, be properly inferred. 37 Am.

Jur. 2d, Fraud and Deceit, § 478 (footnotes omitted)." Shah, 44

F.3d at 293 n.14.

Therefore, the requisite intent must be coupled with prompt,

substantial nonperformance to demonstrate fraud in the inducement.

It must be shown that the defendant promptly followed through on its

intent not to perform by substantially failing to carry out its

obligations under the contract. Willard has not alleged that no

Medicare eligible participants were enrolled by Humana in the rural

counties or that the percentage of Medicare eligible participants

enrolled in the rural counties was lower (much less substantially

lower) than that in Harris County. It would be illogical to find

fraud where a party secretly did not intend to perform the contract

when it was signed, but in actuality did perform, as the civil law

generally regulates actions, not thoughts alone. This requirement

is also necessary because the government must suffer an injury in

fact for there to be standing. Berge v. Bd. of Trustees of Univ.

of Ala., 104 F.3d 1453, 1458 (4th Cir.), cert. denied, 118 S. Ct.

301 (1997). Clearly, an intention devoid of an action cannot cause

an injury in fact.

Accordingly, in addition to Willard's fraud in the inducement

20
claim not passing the Rule 9(b) bar, the claim is also deficient in

light of the district court’s correct determination that Willard

failed to state a cognizable claim that Humana violated an

applicable regulation or provision of the contract.2

VI. Failure to Grant Willard Leave to Amend Complaint for Third
Time

Willard argues that the district court erred by dismissing his

Second Amended Complaint in part based on Fed. R. Civ. P. 9(b)

without granting him another opportunity to amend. The district

court stated that “Willard has not requested leave to amend his

complaint to remedy this failure.”

Under Rule 15 (a), "leave to amend shall be freely given when

justice so requires," and should be granted absent some

justification for refusal. Foman v. Davis, 83 S.Ct. 227, 230

(1962). The liberal amendment policy underlying Rule 15 (a) affords

the court broad discretion in granting leave to amend and,

consequently, a motion for leave to amend should not be denied

unless there is "undue delay, bad faith or dilatory motive on the

part of the movant, repeated failure to cure deficiencies by

amendments previously allowed [or] undue prejudice to the opposing

party by virtue of allowance of the amendment, . . . " Foman, 83

2
We should not be understood as holding that, apart from the
defects we have noted in the text, a fraud in the inducement claim
of the general sort urged by Willard would support an FCA claim
(particularly one the United States has declined to pursue) in
circumstances similar to these. We merely so assume arguendo.

21
S.Ct. at 230.

Except as authorized by the first sentence of Fed. R. Civ. P.

15(a) for one amendment before service of a responsive pleading, a

complaint may be amended only by leave of the district court, and,

while such leave is to be freely given when justice so requires, the

decision is left to the sound discretion of the district court and

will only be reversed on appeal when that discretion has been

abused. Zenith Radio Corp. v. Hazeltine Research, Inc., 91 S. Ct.

795, 802 (1971); Dunn v. Koehring Co., 546 F.2d 1193, 1198 (5th Cir.

1977).

A party who neglects to ask the district court for leave to

amend cannot expect to receive such a dispensation from the court

of appeals. Vega-Rodriguez v. Puerto Rico Tel. Co., 110 F.3d 174,

183-84 (1st Cir. 1997). Rule 15(a) applies where plaintiffs

"expressly requested" to amend even though their request "was not

contained in a properly captioned motion paper." Ballisteri v.

Pacifica Police Dep’t, 901 F.2d 696, 701 (5th Cir. 1988). A formal

motion is not always required, so long as the requesting party has

set forth with particularity the grounds for the amendment and the

relief sought. Fed. R. Civ. P. 7(b)(1), 15(a); Edwards v.

Occidental Chemical Corp., 892 F.2d 1442, 1445-46 (9th Cir. 1990).

"[A] bare request in an opposition to a motion to dismiss - without

any indication of the particular grounds on which the amendment is

sought, cf. Fed. R. Civ. P. 7(b) - does not constitute a motion

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within the contemplation of Rule 15(a)." Confederate Mem'l Ass'n,

Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993).

For several reasons, the district court did not abuse its

discretion in not allowing Willard to amend his complaint for a

third time. First, Willard did not expressly request with

particularity the opportunity to amend his complaint for the third

time. Willard points to the following sentences on page 20 of his

Response to Humana's Second Motion to Dismiss:

“In any event, the only relief possibly available to it
at this stage of the case is that relator replead. A
court should not dismiss a plaintiff's complaint under
Rule 9(b) unless the plaintiff has already been given the
opportunity to amend. Hart v. Bayer Corp., 199 F.3d 239,
247, n.6 (5th Cir. 2000); Gold v. Morrison-Knudsen Co.,
68 F.3d 1475, 1476 (2nd Cir. 1995).“

While Willard need not necessarily have filed a separate Rule

15 motion to amend, this brief statement does not expressly request

that Willard be given leave to amend and does not provide any

indication of the grounds on which such an amendment should be

permitted. Following the district court's order dismissing the

case, Willard did not file a motion to reconsider as part of which

he could have moved to amend his complaint.

Additionally, leave to amend properly may be denied when the

part seeking leave has repeatedly failed to cure deficiencies by

amendments previously allowed and when amendment would be futile.

Foman, 83 S.Ct. at 230. Here, Willard has already had two

opportunities to amend the complaint. The record indicates that the

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second instance in which the district court granted Willard leave

to amend was to cure the complaint's lack of specificity, which is

the same basis on which Willard now argues he should be allowed to

amend for a third time.

Finally, it appears that a third chance to amend would prove

to be futile. First, there is no indication in Willard's briefs to

this court that he will be able to allege the necessary “who, what,

when, where, and how” of the alleged fraud. Furthermore, because

Willard has failed to make a cognizable claim that Humana violated

its contract or an applicable regulation, Willard's fraud in the

inducement claim cannot be sustained independent of Rule 9(b).

CONCLUSION

For the reasons stated, the district court’s judgment

dismissing the action is

AFFIRMED.

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