Russell v. EPIC Hlthcare Mgmt

               IN THE UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT



                            No. 98-20743




THE UNITED STATES OF AMERICA,
ex rel SANDRA RUSSELL, in her own right;
SANDRA RUSSELL,
                                              Plaintiffs-Appellants

                                versus

EPIC HEALTHCARE MANAGEMENT GROUP;
HEARTHSTONE HOME HEALTH INC., doing business as
Continucare Health Services
                                        Defendants-Appellees



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


                          October 14, 1999

Before REYNALDO G. GARZA, HIGGINBOTHAM, and DAVIS, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

     This False Claims Act suit raises the question of time to

appeal under   Rule   4(a)(1)   of   the   Federal   Rules   of   Appellate

Procedure in qui tam cases in which the United States has not

intervened.    Qui tam plaintiff Sandra Russell filed a notice of

appeal of the dismissal of her action forty-eight days after the

entry of judgment.    We must decide if the parties have sixty days

in which to file a notice of appeal when the United States has not

intervened in a False Claims Act suit.          We find that Russell's
notice of appeal was timely filed within sixty days but we AFFIRM

the district court's dismissal of the suit because Russell failed

to plead fraud with particularity as required by Rule 9(b) of the

Federal Rules of Civil Procedure.

                                I

     Sandra Russell sued her employers, Epic Healthcare Management

Group and Hearthstone Home Health, Inc., d/b/a ContinuCare Health

Services, under the False Claims Act, 31 U.S.C. § 3729 et seq.

(1994).   The United States declined to intervene in the action.

Epic and Hearthstone sought dismissal of her suit on the ground

that she failed to plead fraud with particularity as required by

Rule 9(b).    The district court gave Russell the opportunity to

amend her complaint to rectify the deficiency, and the court

dismissed Russell’s action because her amended complaint failed to

comply with Rule 9(b).

                                II

     Russell’s case presents an issue of first impression in this

court:    whether the government is a party for purposes of Rule

4(a) of the Federal Rules of Appellate Procedure when a qui tam

plaintiff has brought suit on behalf of the government, but the

United States has declined to intervene in the action.           Rule

4(a)(1) of the Federal Rules of Appellate Procedure provides:

     In a civil case in which an appeal is permitted by law as
     of right from a district court to a court of appeals, the
     notice of appeal required by Rule 3 must be filed with
     the clerk of the district court within 30 days after the


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       entry of judgment or order appealed from; but if the
       United States or officer or agency thereof is a party,
       the notice of appeal may be filed by any party within 60
       days after such entry.

The sixty-day period is supported by the exigencies of government.

The Advisory Committee’s Notes of 1946 to Rule 73(a) of the Federal

Rules of Civil Procedure, the predecessor of Rule 4(a), explain

that    the   government's    institutional   decisionmaking   practices

require more time to decide whether to appeal and that in fairness,

the same time should be extended to other parties in a case in

which the government is a party.          See MOORE’S FEDERAL PRACTICE §

304.11[2], at 304-24 (3d ed. 1997).

       In a qui tam case in which the United States intervenes, the

government is clearly a party and the sixty-day rule applies.       The

difficulty arises when the government chooses not to intervene.

When a False Claims Act suit is initiated by a private person--a

qui tam plaintiff or relator--the action is brought "for the person

and for the Government" and is "brought in the name of the

Government."     31 U.S.C. § 3730(b)(1).      The government has sixty

days after receiving a complaint and evidentiary information from

the relator to decide whether to intervene in the suit.        See id. §

3730(b)(2)-(4).

       If the government decides not to intervene, the citizen may

conduct the action.          See id. § 3730(b)(4)(B).     However, the

government's involvement may continue.        If the government decides

not to intervene initially, it may request that it be served with

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copies   of   pleadings   and   be   sent   deposition   transcripts;   may

intervene later for good cause shown; may pursue alternative

remedies, such as administrative proceedings; and must give its

written consent to dismissal of the suit.           Id. § 3730(b)(1) and

(c).   Even when it does not intervene, the government receives the

larger share of any recovery.        See id. § 3730(d).

       The peculiar nature of the government’s relation to a qui tam

suit has in other contexts presented us the question whether the

non-intervening United States is a party to the suit for specified

purposes.     In Searcy v. Philips Electronics North America Corp.,

we held that the United States could not appeal of right when it

had not intervened before the district court, but that it could

appeal the settlement of the case as a non-party.            See 117 F.3d

154, 155 (5th Cir. 1997).       We were persuaded that the government

had no appeal of right because it was not a party to the suit,

reasoning that as the False Claims Act distinguishes cases in which

the government is and is not an active litigant, we should not

treat the government as a party for purposes of standing to appeal

when it had chosen not to intervene.         Id. at 156.

       In United States ex rel. Foulds v. Texas Tech University, we

held that the 11th Amendment barred a relator’s suit against a

state when the United States had not intervened because the United

States was not an active litigant and hence had not "commenced or

prosecuted" the action for purposes of the 11th Amendment. See 171


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F.3d 279, 290 (5th Cir. 1999).         The Foulds court recognized,

however, that the United States is a real party in interest to a

qui tam suit and may be a relevant party in the suit for some

purposes of the litigation.    See Foulds, 171 F.3d at 289, 291.

      Two circuits have examined the time-to-appeal issue and have

reached   conflicting   conclusions.    The   Ninth   Circuit   recently

applied the sixty-day period, emphasizing the need for simplicity

and clarity in applying the rule.        See United States ex rel.

Haycock v. Hughes Aircraft Co., 98 F.3d 1100 (9th Cir. 1996).        The

court pointed out that, even though the government declined to

intervene, the government’s name was still on all of the papers as

the plaintiff and the government would receive most of the money

from an award.   See id. at 1102.      Haycock applied the sixty-day

rule to ensure that the parties could determine the time for filing

"easily, without extensive research, and without uncertainty."1

Id.

      In contrast, the Tenth Circuit has applied the thirty-day

period, reasoning that the government’s name on the pleadings was

merely a statutory formality and that the relator did not merit the

longer period afforded the government.         United States ex rel.

      1
      In Searcy, we referred to the Ninth Circuit's Haycock
decision concerning the applicability of Fed. R. App. P. 4(a)(1):
"viewing the government as a party for the purposes of Rule 4(a)(1)
does not compel us to treat it as a party for all appellate
purposes." Searcy, 117 F.3d at 156. Searcy did not decide whether
the sixty-day rule applies when the government does not intervene
in a False Claims Act suit.

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Petrofsky v. Van Cott, Bagley, Cornwall, McCarthy, 588 F.2d 1327,

1329 (10th     Cir.    1978).     The     majority     rejected       the   dissent’s

argument that the language of the False Claims Act could mislead

the parties;    the majority held there was no prejudice because the

parties were aware that the government disclaimed participation.

See id. at 1329.

     The Tenth Circuit does not address the contention that the

government is a party albeit represented by the relator.                      Whether

in any sense a relator in a qui tam suit under the False Claims Act

is the government or is an agent or independent actor does not

control our reading of Rule 4.            We need not here join the debate

over a relator's standing under Article III.                 Rule 1 of the Federal

Rules   of   Civil    Procedure     provides      that   the    Rules       "shall    be

construed    and     administered    to       secure   the    just,    speedy,       and

inexpensive determination of every action."                  This is a charge to

resist reading the Rules in a manner that lays traps for the

unwary.      Doing so, we are persuaded by the Haycock court's view

that the language of the False Claims Act is apt to mislead qui tam

plaintiffs into believing that the United States is a party, and we

agree that Rule 4(a)(1) should be construed to reduce uncertainty

in the already difficult conceptual terrain of qui tam suits.

However the relationship between a relator and the government may

be shaded in different contexts, the government is ever present in

qui tam suits in ways that promote confusion.                   We hold that when


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the United States has declined to intervene in a False Claims Act

suit filed by a qui tam plaintiff, Rule 4(a)(1) provides the

remaining parties sixty days from the entry of the judgment or

order appealed from to file notices of appeal.

                                     III

     A   dismissal   for   failure   to    comply   with   Rule   9(b)   is   a

dismissal on the pleadings for failure to state a claim. See

Shushany v. Allwaste, Inc., 992 F.2d 517, 520 (5th Cir. 1993).                We

review dismissal on these grounds de novo.          See id.

     The complaint in a False Claims Act suit must fulfill the

requirements of Rule 9(b).     See United States ex rel. Thompson v.

Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997).

While the Federal Rules of Civil Procedure generally require in a

complaint only a short and plain statement of the cause of action,

Rule 9(b) states that "[i]n all averments of fraud or mistake, the

circumstances constituting fraud or mistake shall be stated with

particularity.   Malice, intent, knowledge, and other condition of

a mind of a person may be averred generally."          To plead fraud with

particularity a plaintiff must include the "'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.'" Williams v. WMX Tech., Inc., 112 F.3d 175, 177

(5th Cir. 1997)(quoting Tuchman v. DSC Communications Corp., 14




                                      7
F.3d 1061, 1068 (5th Cir. 1994)), cert. denied, 118 S. Ct. 412

(1997).

     The conduct to which liability attaches in a False Claims Act

suit consists in part of false statements or claims for payment

presented to the government.        See United States ex rel. Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999).

Because such statements or claims are among the circumstances

constituting fraud in a False Claims Act suit, these must be pled

with particularity under Rule 9(b).

     Russell maintains that the Rule 9(b) requirements should be

relaxed in her case because the information necessary to provide

her claim with sufficient particularity is within the exclusive

control of Epic and Hearthstone.           We have held that when the facts

relating    to   the      alleged   fraud    are    peculiarly   within     the

perpetrator’s knowledge, the Rule 9(b) standard is relaxed, and

fraud may be pled on information and belief, provided the plaintiff

sets forth the factual basis for his belief.              See Thompson, 125

F.3d at 903 (warning that the exception "must not be mistaken for

license to base claims of fraud on speculation and conclusory

allegations" (citations omitted)).           Russell asserts that she was

unable     to    obtain     the     necessary      information    because     a

confidentiality agreement prohibited her from copying relevant

documents while she worked for Epic and Hearthstone.             The district

court found that Russell was not entitled to the relaxed standard


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because     documents   containing   the   requisite   information   were

possessed by other entities, such as the Healthcare Financing

Administration.     We agree.

     We decline to further relax Rule 9(b) in the context of qui

tam suits.     The text of the rule provides no justification for

doing so.    As we observed in reading Rule 4 of the Federal Rules of

Appellate Procedure, we are to be practical and strive for simple,

direct and clear meanings.      We have no license to craft judicial

exceptions, and we see no reason to do so here.        Furthermore, the

False Claims Act grants a right of action to private citizens only

if they have independently obtained knowledge of fraud.          See 31

U.S.C. § 3730(e)(4). With this requirement the government seeks to

purchase information it might not otherwise acquire.            It must

decide on review of the sealed complaint whether to take the case

over.     A special relaxing of Rule 9(b) is a qui tam plaintiff's

ticket to the discovery process that the statute itself does not

contemplate.



                                     IV

     Russell's appeal was timely filed, but as her complaint fails

to allege a violation of the False Claims Act with particularity,

we AFFIRM the district court's dismissal of her suit.

     AFFIRMED.




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