Barrett et al v. Beauty Basics Inc
MEMORANDUM OPINION AND ORDER DENYING 28 MOTION for Leave to File a second amended complaint under the False Claims Act, 31 U.S.C. §§ 372933 (FCA). Signed by Judge Virginia Emerson Hopkins on 5/10/2016. (JLC)
2016 May-10 PM 02:36
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
UNITED STATES ex rel. RANDI
BEAUTY BASICS INC,
) Case No.: 2:13-CV-1989-VEH
MEMORANDUM OPINION AND ORDER
Plaintiff-Relator Randi Creighton seeks the court's permission to file a second
amended complaint under the False Claims Act, 31 U.S.C. §§ 3729–33 (FCA), after her
first two complaints were dismissed for failure to comply with Rule 9(b). Defendant
Beauty Basics, Inc. opposes the motion as futile because, it says, the complaint still fails
to satisfy Rule 9(b). The court agrees that amendment would be futile, but for a different
reason—non-compliance with Rules 8 and 10. The motion will be DENIED.
“The court should freely give leave [to amend a complaint] when justice so
requires,” FED. R. CIV. P. 15(a)(2), but “need not” do so “where amendment would be
futile.” Bryant v. Dupree, 252 F.3d 1161, 1163 (11th Cir. 2001). Amendment is futile
where “the complaint as amended is still subject to dismissal.” Hall v. United Insurance
Co., 367 F.3d 1255, 1263 (11th Cir. 2004). A complaint may be stricken where the legal
theories it alleges are “so vague or ambiguous as to render a response difficult.” Starship
Enterprises of Atlanta, Inc. v. Coweta County, Ga., 708 F.3d 1243, 1250 n. 7 (11th Cir.
2013) (internal quotation marks omitted). Facing such an ambiguous complaint, a district
court is obligated to strike it and order repleader lest the court “allow, if not tacitly
encourage” a “massive waste of judicial and private resources.” Id. (citation omitted).
A complaint must be legally, as well as factually, sufficient. Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). Although there is not always a bright line between law and facts,
a complaint will generally be legally sufficient if the essential elements of a cause of
action are pleaded, and it is factually sufficient if the facts alleged, presumed true,
plausibly establish that the plaintiff will be able to prove the elements of his claim and
thus be entitled to relief. The significance of a particular fact depends on its relationship
to the elements of plaintiff’s cause of action. Cf. FED. R. EVID. 401 (a fact is relevant if
it is of consequence in an action).
FED R. CIV. P. 9(b) imposes a heightened pleading standard, requiring that
allegations of fraud be described with “particularity.” In short, this means that the
complaint must describe the who, what, when, where, and how of each element of a fraud
claim, except scienter. See Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir.
2004). If a complaint’s factual sufficiency under Rule 8 is assessed in light of the
essential elements of a claim, it
follows ineluctably that the heightened factual
specificity required by Rule 9(b) should also be assessed in light of the required
elements of a claim.
While the elements of a cause of action need not be treated as an incantation, one
most efficient way to assess the factual sufficiency of
complaint—especially one that must be examined under a microscope per Rule
9(b)—would be to quickly recite the elements of the plaintiff’s claim and then determine
whether the necessary details are included. Alas, neither Creighton nor Beauty Basics
have discussed the elements of a claim under the False Claims Act. Beauty Basics has
instead attempted to point out how this or that factual allegation lacks specificity, and
Creighton has replied that this or that allegation is sufficiently specific.
Where the legal theories underpinning a complaint are clear, it may not be a
problem to point out this or that allegation and argue that it is insufficient; the gap in the
complaint should be obvious. On the other hand, a complaint founded on an unclear legal
theory presents a problem of Chicxulub magnitude: the relevance of a given fact is
difficult to ascertain. Cf. Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955, 979
(11th Cir. 2008)1 (describing clarity and definition in complaints as fundamental
premises of the Rules of Civil Procedure). Creighton’s complaint presents such a
problem, because in a single count, she asserts a violation(s?) of 31 U.S.C. §
3729(a)(1)(A) and (B). These are distinct theories of liability with different elements,
so their inclusion in a single count violates Rule 10(b).
Creighton makes no effort to explain how her “facts applicable to all counts”
satisfy the elements of her alternative theories; instead, she offers a series of legal
conclusions—which do nothing to fortify a complaint against dismissal. Ruling on 9(b)
objections seems premature when the plaintiff’s legal theory is unknown; evaluating the
9(b) objection would require the district court to examine a range of claims, hypothesize
how the facts as alleged might satisfy (or not) each element of every claim, select the
theories that have sufficient support under Rule 8, and then re-examine the facts to see
whether there is sufficient factual matter to satisfy Rule 9. This would be a tremendous
waste of judicial resources, taxpayer money, and come at a great cost to other litigants,
especially “those who have no other forum for the vindication of their rights,” Davis, 516
F.3d at 982, while yielding a windfall (and perhaps ultimately treble damages) to the
plaintiff and her counsel.
LaCroix v. Western Dist. of Kentucky, 627 F. App’x 816 (11th Cir. 2015) suggests that
Davis was abrogated by Twombly and Iqbal, although the court of appeals did not explain why.
The court will allow Creighton to file a motion to amend her complaint within
seven days of the effective date of the order below, provided she attaches a third amended
complaint to the motion. If she fails to make this filing within this de adline, this
case will be dismissed with prejudice.
Creighton’s third amended complaint must comply with Rule 10(b), setting forth
each claim for relief in a separate count. Moreover, the complaint must include the who,
what, when, where, and how for each eleme nt, except scienter, of each claim for relief.
The previous sentence should be taken literally; Creighton’s fourth attempt at drafting
a complaint would benefit from some structure. The recitation of elements and
supporting facts must appear in each count for relief. A general recitation of facts is not
prohibited, but incorporating those facts by reference into each count for relief is
insufficient. For Creighton’s edification, the following is a brief primer on liability under
the 2009 amendments to the False Claims Act.
The elements of a claim under 29 U.S.C. § 3729(a)(1)(A) (assuming the claim is
presented directly to the government) are: “(1) a false or fraudulent claim; (2) which was
presented, or caused to be presented, by the defendant to the United States for payment
or approval; (3) with the knowledge that the claim was false.” United States v. R&F
Properties of Lake County, Inc., 433 F.3d 1349, 1355 (11th Cir. 2005). Although R&F
Properties, decided in 2005, predates the 2009 amendment to the False Claims Act, the
elements of a direct false claim submitted to a government officer were unchanged by
that amendment. See 1 JOHN T. BOESE, CIVIL FA LSE C LA IM S
QUI TAM ACTIONS §
2.01[B], at 2-28 (4th ed. 2012).
To be liable under subparagraph 3729(a)(1)(B), there must be an underlying
violation of subparagraph 3729(a)(1)(A). Id. § 2.01[D] at 2-34. To state a claim under
subparagraph (b), the relator must allege that 1) the defendant makes, uses, or causes to
used or made a record or statement, 2) which is false, 3) with knowledge of its falsity,
4) and the statement is material to the false claim. 31 U.S.C. § 3729(a)(1)(B); BOESE §
2.01[D] at 2-35. “[T]he term ‘material’ means having a natural tendency to influence, or
be capable of influencing, the payment or receipt of money or property.”
Express and implied false certifications do not create independent claims for
relief; they are species of false claims. Under either of those theories, “the certification
of compliance must be both a prerequisite to obtaining a government benefit and a sine
qua non of receipt of government funding.” Urquilla-Diaz v. Kaplan University, 780
F.3d 1039, 1052 (11th Cir. 2015) (citation and internal quotation marks omitted). “Mere
regulatory violations do not give rise to a viable FCA action.” Id.
The proposed complaint does not comply with Rule 8(a)(2), 8(d), or 10(b).
Amendment would be futile, because the court would immediately strike the amended
complaint. The motion is DENIED.
DONE and ORDERED this 10th day of May, 2016.
VIRGINIA EMERSON HOPKINS
United States District Judge
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