FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SADEK R. EBEID, M.D., ex rel.
United States of America,
Plaintiff-Appellant,
v.
THERESA A. LUNGWITZ; EDWARD C. No. 09-16122
IRBY (MRS.), AKA Margaret Irby,
individually and DBA Health D.C. No.
2:08-cv-00544-SRB
Resource Center; HOME HEALTH
OPINION
RESOURCES, INC., an Arizona
corporation; THE CROSSING HOSPICE
CARE, INC., an Arizona
corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Argued and Submitted
March 9, 2010—San Francisco, California
Filed August 9, 2010
Before: J. Clifford Wallace, Susan P. Graber, and
M. Margaret McKeown, Circuit Judges.
Opinion by Judge McKeown
11249
11252 EBEID v. LUNGWITZ
COUNSEL
Michael J. Khori, Law Offices of Michael J. Khori, Irvine,
California, for the plaintiff-appellant.
Paul G. Ulrich and Noel C. Capps, Renaud Cook Drury
Mesaros, PA, Phoenix, Arizona, for the defendants-appellees.
Astrid G. Meghrigian, California Medical Association, Sacra-
mento, California, for the amicus curiae.
OPINION
McKEOWN, Circuit Judge:
In this appeal under the False Claims Act (“FCA”), 31
U.S.C. §§ 3729-3731, Sadek Ebeid claims that Theresa Lung-
witz submitted false certifications to the federal government
in connection with Medicare payments for three health care
businesses: Health Resource Center, LLC (the “Clinic”),
Home Health Resources, Inc. (the “Home Healthcare Agen-
cy”) and The Crossing Hospice Care, Inc. (the “Hospice”).
(We refer to the defendants collectively as “Lungwitz,”
except where it is necessary to identify individual defen-
dants.) Central to Ebeid’s claims are the allegations that
Lungwitz engaged in the “unlawful corporate practice of med-
icine” and that referrals among the health care businesses
were unlawful, which allegedly makes fraudulent every claim
for Medicare reimbursement during that period.
“The FCA was enacted during the Civil War with the pur-
pose of forfending widespread fraud by government contrac-
EBEID v. LUNGWITZ 11253
tors who were submitting inflated invoices and shipping
faulty goods to the government.” United States ex rel. Hopper
v. Anton, 91 F.3d 1261, 1265-66 (9th Cir. 1996). To encour-
age insiders to disclose fraud and thereby bolster enforce-
ment, the FCA contains a qui tam provision that permits
private persons (known as “relators”) to bring civil actions on
behalf of the United States and claim a portion of any award.
See 31 U.S.C. § 3730(b), (d) (2008); Hopper, 91 F.3d at 1266
n.7. At the time that Ebeid filed his Second Amended Com-
plaint,1 the FCA imposed liability on anyone who, inter alia:
(1) knowingly presents, or causes to be presented, to
an officer or employee of the United States Govern-
ment . . . 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 Govern-
ment;
(3) conspires to defraud the Government by getting
a false or fraudulent claim allowed or paid . . . .
31 U.S.C. § 3729(a) (2008).
Ebeid, a private physician in Arizona, is not an insider in
Lungwitz’s businesses and does not raise a typical FCA claim
1
Ebeid’s original complaint and his First Amended Complaint were
filed under seal. The district court unsealed the First Amended Complaint
when the government elected not to intervene. Lungwitz answered, raising
a Rule 12(b)(6) defense, among others. Ebeid moved to file a Second
Amended Complaint, and the district court granted the motion without
opposition. In a later Scheduling Order, the district court instructed the
parties that further amended complaints should not be filed. The district
court eventually granted Lungwitz’s motion to dismiss the Second
Amended Complaint for failing to meet the pleading standard of Rule
9(b).
11254 EBEID v. LUNGWITZ
that Lungwitz overcharged the government for services pro-
vided, or that she made express false certifications to the gov-
ernment to receive payment. Instead, Ebeid alleges that all of
the Medicare billing submitted by Lungwitz was unlawful
under a theory of implied false certification. Ebeid alleges that
the illegal corporate structure of the health care businesses
gave Lungwitz a prohibited amount of control over the medi-
cal decisions of physicians employed in the various enter-
prises and that the health care businesses illegally referred
patients amongst themselves.
Ebeid raises a theory of implied false certification, “based
on the notion that the act of submitting a claim for reimburse-
ment itself implies compliance with governing federal rules
that are a precondition to payment.” United States ex rel.
Mikes v. Straus, 274 F.3d 687, 699 (2d Cir. 2001). Although
we reserved the issue of whether this theory was viable in
United States ex rel. Hendow v. University of Phoenix, 461
F.3d 1166, 1172 n.1 (9th Cir. 2006), we now join our sister
circuits in recognizing a theory of implied certification under
the FCA. See United States ex rel. Conner v. Salina Reg’l
Health Ctr., Inc., 543 F.3d 1211, 1217-18 (10th Cir. 2008);
United States ex rel. McNutt v. Haleyville Med. Supplies, Inc.,
423 F.3d 1256, 1259 (11th Cir. 2005); United States ex rel.
Augustine v. Century Health Services, Inc., 289 F.3d 409, 415
(6th Cir. 2002); Mikes, 274 F.3d at 699. Nonetheless, even
under this theory of implied false certification, Ebeid fails to
plead fraud with sufficient particularity to satisfy the pleading
standard under Federal Rule of Civil Procedure 9(b). Thus, on
de novo review, we affirm the district court’s dismissal of his
Second Amended Complaint.2 See United States ex rel. Lee v.
2
The district court’s order did not specify whether it dismissed the Sec-
ond Amended Complaint with prejudice. After the Second Amended
Complaint was filed, the district court notified the parties in its Scheduling
Order that further amended complaints should not be filed. In addition, on
appeal Ebeid does not challenge that order or seek leave to amend; instead
he requests only reinstatement of the Second Amended Complaint. As we
explain below, the Second Amended Complaint does not state a claim on
which relief can be granted, and it would be futile to remand for its rein-
statement. Thus, we construe the order as dismissal with prejudice.
EBEID v. LUNGWITZ 11255
SmithKline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir.
2001).
I. IMPLIED FALSE CERTIFICATION
[1] We address first whether the FCA contemplates an
implied false certification claim. The first court to recognize
implied false certification was the Court of Federal Claims in
Ab-Tech Construction, Inc. v. United States, 31 Fed. Cl. 429
(Fed. Cl. 1994), aff’d mem., 57 F.3d 1084 (Fed. Cir. 1995)
(table). There, to participate in a government program, the
defendant signed a “Statement of Cooperation,” promising to
comply with “the program’s requirements for continuing eli-
gibility.” Id. at 432. The court found that claims for payment
submitted to the government “represented an implied certifi-
cation . . . of [the defendant’s] continuing adherence to the
requirements for participation,” even though individual claims
for payment did not require a certification of compliance. Id.
at 434. Thus, the defendant’s non-compliance rendered the
claims “false,” and liability attached under the FCA. Id.
[2] Since Ab-Tech, the Second, Sixth, Tenth, and Eleventh
Circuits have endorsed the implied false certification theory.
See Mikes, 274 F.3d at 699-700; Augustine, 289 F.3d at 415;
Conner, 543 F.3d at 1217-18; McNutt, 423 F.3d at 1259. The
Second Circuit in Mikes observed that “[f]oundational support
for the implied false certification theory may be found in Con-
gress’ expressly stated purpose that the Act include at least
some kinds of legally false claims and in the Supreme Court’s
admonition that the Act intends to reach all forms of fraud
that might cause financial loss to the government.” 274 F.3d
at 699 (citations omitted).
In Mikes, the plaintiff argued that by submitting Medicare
reimbursement forms, the defendant implicitly certified com-
pliance with two Medicare statutes: 42 U.S.C.
§ 1395y(a)(1)(A), which prohibited payments for medical
procedures that were “not reasonable and necessary for the
11256 EBEID v. LUNGWITZ
diagnosis or treatment of illness or injury or to improve the
functioning of a malformed body member,” and 42 U.S.C.
§ 1320c-5(a), which mandated a qualitative standard of care.
Mikes, 274 F.3d at 700-01. The court held “that in submitting
a Medicare reimbursement form, a defendant implicitly certi-
fies compliance with § 1395y(a)(1)(A), but not § 1320c-5(a).”
Id. at 702. The court reasoned that, in the Medicare context,
“implied false certification is appropriately applied only when
the underlying statute or regulation upon which the plaintiff
relies expressly states the provider must comply in order to be
paid.” Id. at 700 (emphasis in original). Section 1395y(1)(A)
expressly conditioned payment on compliance; however,
§ 1320c-5(a) did not because it established “conditions of
participation, rather than prerequisites to receiving reim-
bursement.” Id. at 701-02 (emphases added). Thus, § 1320c-
5(a) established a condition of participation because it was
prospective in nature, “directed at the provider’s continued
eligibility in the Medicare program, rather than any individual
incident of noncompliance,” as evidenced by its requirement
that the Secretary of Health and Human Services may impose
sanctions only after a peer review organization finds evidence
of violations in “a substantial number of cases” and recom-
mends sanctions. Id. at 702.
Although we have not addressed directly the viability of the
implied false certification theory, our precedent regarding
express false certification is instructive. Prior to our decision
in Hendow, the leading case in this circuit on false certifica-
tion was Hopper, 91 F.3d at 1266. In Hopper, we held that
“[v]iolations of laws, rules, or regulations alone do not create
a cause of action under the FCA. It is the false certification
of compliance which creates liability when certification is a
prerequisite to obtaining a government benefit.” Id. Under this
standard, we concluded that FCA liability cannot attach
“where regulatory compliance was not a sine qua non of
receipt of state funding.” Id. at 1267. Thus, Hopper failed to
state a viable claim where the forms on which his claims were
submitted did “not contain any certification concerning regu-
EBEID v. LUNGWITZ 11257
latory compliance” and the statute at issue did “not require
funding recipients to certify their compliance with federal law
and regulations.” Id.
Later, in Hendow, we clarified the four elements of a false
certification claim: “(1) a false statement or fraudulent course
of conduct, (2) made with scienter, (3) that was material,
causing (4) the government to pay out money or forfeit mon-
eys due.” Hendow, 461 F.3d at 1174. To establish the materi-
ality element, “the false statement or course of conduct must
be material to the government’s decision to pay out moneys
to the claimant.” Id. at 1172. To establish materiality, we
pointed out that the term “certification” had no special signifi-
cance; rather, “the question is merely whether the false
certification—or assertion, or statement—was relevant to the
government’s decision to confer a benefit.” Id. at 1173.
The defendant in Hendow argued that the materiality ele-
ment was not satisfied because the incentive compensation
ban under Title IV and the Higher Education Act of 1965 that
it allegedly violated was “merely a condition of participation,
not a condition of payment,” and therefore provided no basis
for an FCA claim under Mikes. Id. at 1176. We reasoned that
the participation-payment differentiation set forth in Mikes
was limited to the Medicare context. We also observed that,
“[i]n the context of Title IV and the Higher Education Act, if
we held that conditions of participation were not conditions of
payment, there would be no conditions of payment at all.” Id.
In addition, although Mikes required that “the underlying stat-
ute ‘expressly’ condition payment on compliance,” we stated
that our precedent contained no such limitation. Id. at 1177.3
[3] The Second Circuit’s analysis in Mikes of the implied
false certification theory is persuasive and consistent with our
3
We need not decide whether to adopt the Second Circuit’s requirement
in the Medicare context that “the underlying statute ‘expressly’ condition
payment on compliance,” as Ebeid’s position fails regardless.
11258 EBEID v. LUNGWITZ
precedent. The implied false certification theory shares com-
mon limitations with the express false certification theory as
delineated in Hopper and Hendow. Express certification sim-
ply means that the entity seeking payment certifies compli-
ance with a law, rule or regulation as part of the process
through which the claim for payment is submitted. Implied
false certification occurs when an entity has previously
undertaken to expressly comply with a law, rule, or regula-
tion, and that obligation is implicated by submitting a claim
for payment even though a certification of compliance is not
required in the process of submitting the claim. Under both
theories, “[i]t is the false certification of compliance which
creates liability when certification is a prerequisite to obtain-
ing a government benefit.” Hopper, 91 F.3d at 1266. Like-
wise, materiality is satisfied under both theories only where
compliance is “a sine qua non of receipt of state funding.” Id.
at 1267.
II. PLEADING STANDARD UNDER THE FALSE CLAIMS ACT
[4] Having established that a relator may bring a claim of
implied false certification, we now turn to pleading require-
ments under Federal Rule of Civil Procedure 9(b), and the
question of whether Ebeid has met them. “[I]n alleging fraud
or mistake,” Rule 9(b) requires a party to “state with particu-
larity the circumstances constituting fraud or mistake,”
including “the who, what, when, where, and how of the mis-
conduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d
1097, 1106 (9th Cir. 2003) (internal quotation marks omitted).
In addition, “ ‘[t]he plaintiff must set forth what is false or
misleading about a statement, and why it is false.’ ” Id. (quot-
ing Decker v. GlenFed, Inc. (In re GlenFed, Inc. Sec. Litig.),
42 F.3d 1541, 1548 (9th Cir. 1994) (en banc)).
[5] To survive a Rule 9(b) motion to dismiss, a complaint
alleging implied false certification must plead with particular-
ity allegations that provide a reasonable basis to infer that (1)
the defendant explicitly undertook to comply with a law, rule
EBEID v. LUNGWITZ 11259
or regulation that is implicated in submitting a claim for pay-
ment and that (2) claims were submitted (3) even though the
defendant was not in compliance with that law, rule or regula-
tion. We do not embrace the district court’s categorical
approach that would, as a matter of course, require a relator
to identify representative examples of false claims to support
every allegation, although we recognize that this requirement
has been adopted by some of our sister circuits. See United
States ex rel. Bledsoe v. Cmty. Health Sys., 501 F.3d 493, 510
(6th Cir. 2007); United States ex rel. Joshi v. St. Luke’s Hosp.,
Inc., 441 F.3d 552, 557 (8th Cir. 2006); United States ex rel.
Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 233 (1st
Cir. 2004); United States ex rel. Clausen v. Lab Corp. of Am.,
290 F.3d 1301, 1312 n.21 (11th Cir. 2002). In our view, use
of representative examples is simply one means of meeting
the pleading obligation. We join the Fifth Circuit in conclud-
ing, in accord with general pleading requirements under Rule
9(b), that it is sufficient to allege “particular details of a
scheme to submit false claims paired with reliable indicia that
lead to a strong inference that claims were actually submit-
ted.” United States ex rel. Grubbs v. Ravikumar Kanneganti,
565 F.3d 180, 190 (5th Cir. 2009).4
Ebeid argues that the traditional pleading standards for
fraud under Rule 9(b) should be relaxed here because the
alleged fraud was of an extended duration and “the billing
information is solely in Lungwitz’s possession.” To be sure,
Ebeid is not privy to the details of patient billing. As he points
out, in the securities fraud context we have held that “Rule
9(b) may be relaxed to permit discovery in a limited class of
corporate fraud cases where the evidence is within a defen-
dant’s exclusive possession.” Lee, 245 F.3d at 1052 (citing
4
Likewise, a plaintiff may, but need not, provide representative exam-
ples to establish the payment element of the prima facie case. The rule
9(b) standard may be satisfied by pleading with particularity a reasonable
basis to infer that the government either paid money or forfeited moneys
due.
11260 EBEID v. LUNGWITZ
Wool v. Tandem Computers Inc., 818 F.2d 1433, 1439 (9th
Cir. 1987); Deutsch v. Flannery, 823 F.2d 1361, 1366 (9th
Cir. 1987)). We are not persuaded that this limited principle
should be applied in this case. To jettison the particularity
requirement simply because it would facilitate a claim by an
outsider is hardly grounds for overriding the general rule,
especially because the FCA is geared primarily to encourage
insiders to disclose information necessary to prevent fraud on
the government.
While Ebeid is not required to allege “all facts supporting
each and every instance” of billing submitted in violation of
the Stark Act or the purported bar on the corporate practice
of medicine, Lee, 245 F.3d at 1051, Rule 9(b) still requires
Ebeid to plead the fraud with some level of specificity.
Indeed, even under a relaxed standard, Ebeid must provide
enough detail “to give [Lungwitz] notice of the particular mis-
conduct which is alleged to constitute the fraud charged so
that [she] can defend against the charge and not just deny that
[she has] done anything wrong.” Lee, 245 F.3d at 1051-52
(citing Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir.
1993)). Ebeid must also supply reasonable indicia that false
claims were actually submitted. The Second Amended Com-
plaint does neither.
III. EBEID’S SECOND AMENDED COMPLAINT
Although Ebeid’s Second Amended Complaint invokes the
framework of an implied false certification claim,5 it fails to
plead this claim with the particularity required by Rule 9(b).
Ebeid alleges that “the United States would not have paid” the
5
The Second Amended Complaint does not use the phrase “implied
false certification” but it sufficiently raises this theory through allegations
that the government paid claims because it believed Lungwitz was in com-
pliance with laws upon which payment was conditioned. See Hendow, 461
F.3d at 1173 (explaining that the term “certification” has no special signif-
icance).
EBEID v. LUNGWITZ 11261
submitted claims had it known of Lungwitz’s non-compliance
with various state and federal laws. Ebeid alleges that Lung-
witz violated the Arizona common law prohibition on the cor-
porate practice of medicine, the Stark Act, 42 U.S.C.
§ 1395nn, and certain Medicare regulations contained in 42
C.F.R. Part 424, Subpart B. To the extent that any of these
laws may form the basis for an implied false certification,
Ebeid still fails to “state with particularity the circumstances
constituting fraud or mistake,” as required by Rule 9(b).
A. Corporate Practice of Medicine
[6] Ebeid alleges that the claims submitted to the govern-
ment were false because the health care businesses “were
engaged in the unlawful corporate practice of medicine.” The
Second Amended Complaint does not refer to any statute,
rule, regulation, or contract that conditions payment on com-
pliance with state law governing the corporate practice of
medicine. Instead, Ebeid baldly asserts that had Lungwitz
“not concealed or failed to disclose information affecting the
right to payment, the United States would not have paid the
claims.” This conclusory allegation is insufficient under Rule
9(b).
B. Stark Act
[7] Ebeid also alleges that Lungwitz falsely implied com-
pliance with the Stark Act. The Stark Act generally prohibits
a physician from referring Medicare patients to entities in
which the physician has a prohibited “financial interest.” See
42 U.S.C. § 1395nn(a)(1). Although the Stark Act may pro-
vide a valid basis from which to imply certification, because
it expressly conditions payment on compliance, 42 U.S.C.
§ 1395nn(g)(1) (“No payment may be made under this sub-
chapter for a designated health service which is provided in
violation of subsection (a)(1) of this section.”),6 Ebeid simply
6
Unlike 42 U.S.C. § 1320c-5(a), which the court in Mikes found insuffi-
cient as the basis of an implied certification claim, the Stark Act does not
11262 EBEID v. LUNGWITZ
alleges that Lungwitz “concealed and failed to disclose that
the Clinic’s physicians had a financial relationship to the
Home Health Care Agency and the Hospice to which the phy-
sicians referred patients.” The only clarification given is that
allegedly unlawful “referrals . . . were made by physicians
who were employed by and whose livelihood depended upon
Lungwitz.” These general allegations—lacking any details or
facts setting out the “who, what, when, where, and how” of
the “financial relationship” or alleged referrals—are insuffi-
cient under Rule 9(b). Vess, 317 F.3d at 1106. As with the
corporate practice of medicine claims, a global indictment of
Lungwitz’s business is not enough.
C. Medicare Regulations
Related to the alleged Stark Act violations, Ebeid alleges
that Lungwitz submitted claims for reimbursement while
Lungwitz “and employee physicians had a significant finan-
cial or contractual interest in the referral of patients from the
Clinic to the Home Health Care Agency and Hospice in viola-
tion of 42 C.F.R. [Part] 424, Subpart B.”
Of the ten sections in Part 424, Subpart B of the Medicare
regulations, Ebeid alleges a violation only of § 424.22,
directed to home health services, which provides in relevant
part:
Medicare . . . pays for home health services only if
a physician certifies and recertifies the content speci-
require continuous or numerous violations before a practitioner can be
excluded from providing reimbursable services; rather, the Stark Act pro-
hibits providers from submitting claims, or the government from paying
claims, for “services furnished pursuant to a [prohibited] referral.” 42
U.S.C. § 1395nn(a)(1)(B) & (g)(1). Accordingly, a plausible allegation of
failure to comply with the Stark Act, stated with sufficient particularity to
meet the requirements of Rule 9(b), might support a claim of implied false
certification. Ebeid, however, fails to meet the threshold requirement of
particularity.
EBEID v. LUNGWITZ 11263
fied in paragraphs (a)(1) and (b)(2) of this section, as
appropriate.
....
(d) A physician who has a financial relationship, as
defined at § 411.354 of this chapter, with a [home
health agency (“HHA”)] may not certify or recertify
the need for home health services or establish or
review a plan of treatment for the HHA unless the
financial relationship satisfies the requirements of
one of the exceptions set forth in § 411.355 through
§ 411.357 of this chapter.
42 C.F.R. § 424.22.
Like the Stark Act, § 424.22(d) may serve as the basis for
an implied false certification because it provides a condition
of payment, not participation. Although Part 424 is entitled
“Conditions for Medicare Payment,” our analysis does not
rest on the title. Instead we look to the specific text of the reg-
ulation, which provides that “Medicare . . . pays for home
health services only if a physician certifies and recertifies” the
need for home health care services. 42 C.F.R. § 424.22
(emphasis added). A physician in a prohibited financial rela-
tionship may not certify or recertify such need. Id.
§ 424.22(d). Therefore, certification of compliance with the
ban on financial relationships prohibited under § 424.22(d)
may be inferred by the submission of a related Medicare
claim for home health care services.
[8] Ebeid alleges that Lungwitz and Irby “owned, con-
trolled, and profited from” the health care businesses. Because
referrals from the Clinic to the Home Health Care Agency
“were made by physicians who were employed by and whose
livelihood depended upon Lungwitz and/or Irby,” Ebeid
maintains that those referrals were made unlawful by “finan-
cial and contractual relationship between [Lungwitz] and the
11264 EBEID v. LUNGWITZ
physicians.” Although § 424.22(d) provides a sufficient basis
for implying certification, Ebeid’s Second Amended Com-
plaint fails to plead such a theory with the particularity
required by Rule 9(b) for the same reasons germane to the
alleged Stark Act violation.
CONCLUSION
Although Ebeid articulates the framework of a claim for
implied false certification, he fails to plead it with the particu-
larity required of Rule 9(b). We affirm the district court’s
order dismissing the Second Amended Complaint with preju-
dice.
AFFIRMED.