UNITED STATES OF AMERICA et al v. COMMUNITY INTEGRATION SUPPORT SERVICES, LLC et al

Filing 48

ORDER granting in part and denying in part 37 Motion to Dismiss for Failure to State a Claim; denying 40 Motion for Attorney Fees. The Motion is GRANTED as to Relators' claims against Mr. Paul, and all claims against Mr. Paul are DISMISSED 5; The Motion is DENIED as to Relators' FCA and IFCA claims against CISS (Counts One through Four), and those claims SHALL PROCEED against CISS only; The Motion is GRANTED as to Relators' retaliation claim (Count Six), which is DISMISSED; and No partial final judgment will enter at this time. ***SEE ORDER FOR ADDITIONAL INFORMATION*** Signed by Judge Jane Magnus-Stinson on 7/25/2022. (JDC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES OF AMERICA and
)
STATE OF INDIANA, ex rel. SWINEY, STEWART, and )
GARNER,
)
)
Plaintiffs and Qui Tam )
Relators,
)
)
v.
)
)
COMMUNITY INTEGRATION SUPPORT SERVICES,
)
LLC and TIMOTHY PAUL,
)
)
Defendants.
)

No. 1:20-cv-00717-JMS-TAB

ORDER
Relators Rosemarie Swiney, Tonya Stewart, and Arthia Garner (collectively, "Relators")
filed this case, on behalf of the United States and the State of Indiana, against Defendants
Community Integration Support Services, LLC ("CISS") and Timothy Paul for alleged violations
of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a)(l)(A), et seq., and the Indiana Medicaid
False Claims and Whistleblower Protection Act ("IFCA"), Ind. Code § 5-11-5.7-1, et seq. [Filing
No. 1.] Defendants have filed a Motion to Dismiss under Federal Rules of Civil Procedure 9(b)
and 12(b)(6). [Filing No. 37.] Additionally, Mr. Paul has separately filed a Motion for Attorneys'
Fees under 31 U.S.C. § 3730(d)(4). [Filing No. 40.] Both motions have been fully briefed and are
ripe for the Court's review.
I.

MOTION TO DISMISS
Defendants have moved to dismiss each of the Relators' claims pursuant to Rules 9(b)
and 12(b)(6). [Filing No. 38.] The Court will address each of Defendants' arguments in turn.

1

A. Standard of Review
Under Rule 12(b)(6), a party may move to dismiss a claim that does not state a right to
relief. The Federal Rules of Civil Procedure require that a complaint provide the defendant with
"fair notice of what the . . . claim is and the grounds upon which it rests." Erickson v. Pardus, 551
U.S. 89, 93 (2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007.)). In reviewing
the sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all
permissible inferences in favor of the plaintiff. See Active Disposal Inc. v. City of Darien, 635
F.3d 883, 886 (7th Cir. 2011). A Rule 12(b)(6) motion to dismiss asks whether the complaint
"contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on
its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). The
Court may not accept legal conclusions or conclusory allegations as sufficient to state a claim for
relief. See McCauley v. City of Chicago, 671 F.3d 611, 617 (7th Cir. 2011). Factual allegations
must plausibly state an entitlement to relief "to a degree that rises above the speculative level."
Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This plausibility determination is "a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense." Id.
Relators' FCA and IFCA claims are governed by the heightened pleading standard
governing fraud claims imposed by Federal Rule of Civil Procedure 9, which provides: "[i]n
alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud
or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged
generally." Fed. R. Civ. P. 9(b). The particularity requirement requires the plaintiff to allege "the
who, what, when, where, and how: the first paragraph of any newspaper story." United States v.
Lockheed–Martin Corp., 328 F.3d 374, 376 (7th Cir. 2003) (citation omitted).

2

B. Background
The following factual allegations are taken from the Complaint and are accepted as true
solely for the purpose of this Order.
1. Relators' Employment by CISS
CISS provides support services for individuals with intellectual and developmental
disabilities, which allow those individuals to "live independently." [Filing No. 1 at 2.] Mr. Paul
is the owner and operator of CISS. [Filing No. 1 at 2.] CISS participates in the Medicare and
Medicaid waiver programs. [Filing No. 1 at 3.]
Relators are each former or current CISS employees. [Filing No. 1 at 2-3.] Ms. Garner is
a Direct Service Provider ("DSP") for CISS, which entails "the direct provision of assistance
services to CISS client[s]." [Filing No. 1 at 3.] Ms. Stewart was a Program Coordinator for CISS,
which involved the supervision of DSPs and some direct services to CISS clients. [Filing No. 1 at
3.] Ms. Swiney was a Senior Program Director, which involved managing both the Program
Coordinators and the DSPs. [Filing No. 1 at 3.] Ms. Swiney "only occasionally" provided direct
services to CISS clients. [Filing No. 1 at 3.] Ms. Swiney was Ms. Stewart's immediate supervisor.
[Filing No. 1 at 3.]
2. Relators' Discovery of CISS' Alleged Fraudulent Activities
In August 2018, Ms. Stewart was at work when she overheard someone say, "[t]here aren't
any time sheets or narrative notes for these patients" or "words to that effect." [Filing No. 1 at 3.]
Ms. Stewart inquired "what the problem was" from CISS Human Resources Director Catherine
Johnson, who replied, "[d]on't laugh, you're in this too!" [Filing No. 1 at 3.] Ms. Stewart then
realized that invoices were being submitted to the Medicare and Medicaid waiver programs for inhome services that she "supposedly" provided. [Filing No. 1 at 3.] Ms. Stewart raised this issue

3

with Ms. Swiney, and the two began reviewing records. [Filing No. 1 at 3.] During their review,
Ms. Stewart and Ms. Swiney found "at least five" CISS clients that had been billed for direct
support services that Ms. Swiney or Ms. Stewart had allegedly performed but, in actuality, neither
had performed those services. [Filing No. 1 at 3-4.] Additionally, the review by Ms. Stewart and
Ms. Swiney indicated that CISS had billed for transportation services for patients that were not
transported. [Filing No. 1 at 4.]
Specifically, CISS billed over 120 hours for unperformed services for a single patient, T.B.,
in a single month. 1 [Filing No. 1 at 4.] From August 29 to September 27, 2018, CISS indicated
that Ms. Swiney performed "6.5 hours of 'residential habilitation level I' services" for T.B. on
nineteen separate days. [Filing No. 1 at 4.] However, Ms. Swiney did not perform these services,
nor could she have because T.B. was "actually in a day program, and could not have been provided
with services by CISS." [Filing No. 1 at 4.] From September 29 to October 31, 2018, CISS again
billed for "6.5 hours of 'residential habilitation level I' services" allegedly performed by Ms.
Swiney for T.B., yet T.B. remained in a "day program." [Filing No. 1 at 4.] CISS records further
indicated that between July 15 and July 20, 2018, Ms. Swiney transported CISS client M.S. six
times, but Ms. Swiney did not transport M.S. "at all." [Filing No. 1 at 4.]
Ms. Stewart also heard from "some" of the DSPs that she supervises that they observed
invoices claiming that they performed services that they did not perform. [Filing No. 1 at 4.]
Specifically, CISS records reflected that Ms. Garner had performed services with client V.H. for
fourteen days during a period that Ms. Garner was not performing services for CISS and V.H. was
not a CISS client. [Filing No. 1 at 4.] Additionally, CISS records indicated claims for Ms. Garner

1

Relators' Complaint refers to CISS clients by their initials rather than their full names for privacy,
[Filing No. 1 at 4], and therefore the Court will do the same in this Order.
4

performing transportation services over the weekend. [Filing No. 1 at 4-5.] However, Ms. Garner
does not work during the weekend and does not perform transportation services. [Filing No. 1 at
5.]
3. CISS' Alleged Retaliation against Ms. Stewart and Ms. Swiney
In "late October," Ms. Stewart reported these irregularities to the Government. [Filing No.
1 at 5.] She was either suspended or terminated "[a]lmost immediately thereafter." 2 [Filing No. 1
at 5.] In "early November," CISS terminated Ms. Swiney's employment. [Filing No. 1 at 5.]
Relators allege, upon information and belief, that each of the observed reporting irregularities were
"submitted as claims by CISS." [Filing No. 1 at 5.]
C. Procedural History
Relators filed their Complaint on behalf of the United States of America and the State of
Indiana on March 5, 2020. [Filing No. 1.] Relators assert that Defendants violated the FCA and
the IFCA by presenting false claims and utilizing false records or statements, which are material
to a false claim, to seek payment from the Indiana Medicaid program. [Filing No. 1 at 5-8.]
Relators also assert that Defendants committed retaliation in violation of the IFCA by
"discharging, demoting, suspending, threatening, harassing, or otherwise discriminating" against
Ms. Swiney and Ms. Stewart because of their "lawful acts in furtherance of efforts to stop
violations of Ind. Code 5-11-5.7-1, et seq." [Filing No. 1 at 9.] On October 4, 2021, the United
States declined to intervene in the present case. [Filing No. 30.] The State of Indiana has not
indicated a position regarding intervention. [See Filing No. 31.]

2

It is unclear from the record whether Ms. Stewart was suspended or terminated after reporting
CISS' alleged misconduct to the Government. [Compare Filing No. 1 at 5 ("CISS suspended [Ms.]
Stewart") with Filing No. 39 at 11 ("Here, [Ms.] Stewart alleges that she reported the false claims
to the government in late October 2018, and was terminated 'almost immediately thereafter'").]
5

D. Discussion
Defendants filed a Motion to Dismiss, seeking the dismissal of all of Relators' claims.
[Filing No. 37.] Defendants argue that dismissal is appropriate for two reasons. [Filing No. 38.]
First, Defendants argue that Relators' allegations fail to meet the heightened pleading requirements
for FCA claims under Rule 9(b). [Filing No. 38 at 5-10.] Specifically, Defendants argue that FCA
claims require particularized allegations of the alleged false claims, and that Relators' allegations
lack an "essential element" of an FCA claim because they failed to identify "the who, what, when,
where, or how relating to any claim submitted to the government." [Filing No. 38 at 6.]
Defendants argue that while Relators assert "internal record-keeping discrepancies," Relators do
not allege any detail regarding which false claims were submitted for repayment from the
Government. [Filing No. 38 at 7-8.] Further, Defendants argue that Relators failed to allege any
specific facts regarding Mr. Paul other than "alleging, upon information and belief, that he owns
and manages CISS." [Filing No. 38 at 10.] Second, Defendants argue that Relators' claim for
retaliation does not meet the pleading standard under Rule 8 because "Relators allege only that
they reported irregularities to the government, and subsequently were suspended or terminated,"
but fail to allege any "operative facts about who at CISS would have known about their alleged
communications with the government, which person made the decision to suspend or terminate
their employment, or that that person was motivated by the alleged protected activity." [Filing No.
38 at 11.] Accordingly, Defendants argue dismissal is appropriate.
Relators respond that they did assert their false claim allegations with particularity because
they set forth "specific records, identifying specific clients, and providing specific, albeit general,
time frames," for services that Relators knew had not been provided, but for which "invoices had
been submitted for payment." [Filing No. 39 at 8-9.] Regarding their retaliation claim, Relators

6

respond that they have pled sufficient information because "[o]ne can reasonably infer based on
the near immediacy of [Ms. Stewart's] termination [relative to when she reported the false claims
to the Government], that she was terminated because of her protected conduct – reporting the false
claims to the government" and "after CISS terminated [Ms.] Stewart for her decision to report the
false claims, the company looked further into what had happened, and learned that [Ms.] Swiney
had played a major role in the disclosure of the false claims, and then terminated [Ms.] Swiney
shortly after [Ms.] Stewart's termination." [Filing No. 39 at 11.]
Defendants reply that "[t]elling the difference between an attempt at an operative factual
allegation, versus a boilerplate recitation of elements, can sometimes be difficult" but, here,
Relators' allegations amount to "pure boilerplate, threadbare recitals of elements, and legal
conclusions." [Filing No. 41 at 2.] Defendants argue that the remaining allegations assert that
CISS clients were "billed" or that CISS "made claims" for services that purportedly were not
provided, but Relators failed to allege that CISS submitted or billed these claims to the
Government. [Filing No. 41 at 3-4.] Defendants further argue that "[i]n addition to never alleging
a false claim being presented to the government, Relators seek to hide their lack of particularity
behind the passive voice." [Filing No. 41 at 5.] Regarding the retaliation claims, Defendants argue
that "Relators offer nothing more than speculation grounded in a post hoc ergo propter hoc
fallacy," and the Seventh Circuit has rejected "suspicious timing" arguments in support of
retaliation claims. [Filing No. 41 at 7.] Finally, Defendants argue that Relators did not justify
naming Mr. Paul as a Defendant and "have all but conceded that they [leveled] a charge of
defrauding the government against [Mr.] Paul for no legitimate reason whatsoever." [Filing No.
41 at 8.]

7

1. The FCA and the IFCA
The FCA imposes "significant penalties" on those who defraud the Government. Universal
Health Servs., Inc. v. United States, 579 U.S. 176, 180 (2016). While the FCA "was not designed
to reach every kind of fraud practiced on the Government," United States v. McNinch, 356 U.S.
595, 599 (1958), it does impose civil and criminal liability for specifically enumerated acts of
fraud. See 31 U.S.C. § 3729(a)(1); Universal Health Servs. Inc., 579 U.S. at 182. The FCA
provides, in relevant part, that:
any person who:
(A) knowingly presents, or causes to be presented, a false or fraudulent
claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim; [or]
****
(G) knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to
the Government, or knowingly conceals or knowingly and improperly
avoids or decreases an obligation to pay or transmit money or property to
the Government
is liable to the United States Government for a civil penalty of not less than $5,000
and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation
Adjustment Act of 1990 plus 3 times the amount of damages which the Government
sustains because of the act of that person.
31 U.S.C. § 3729(a)(1) (internal citation omitted).
For purposes of the FCA, the term "claim":
(A) means any request or demand, whether under a contract or otherwise,
for money or property and whether or not the United States has title to the
money or property, that -(i) is presented to an officer, employee, or agent of the United States;
or
(ii) is made to a contractor, grantee, or other recipient, if the money
or property is to be spent or used on the Government's behalf or to

8

advance a Government program or interest, and if the United States
Government -(I) provides or has provided any portion of the money or
property requested or demanded; or
(II) will reimburse such contractor, grantee, or other
recipient for any portion of the money or property which is
requested or demanded; and
(B) does not include requests or demands for money or property that the
Government has paid to an individual as compensation for Federal
employment or as an income subsidy with no restrictions on that
individual's use of the money or property.
31 U.S.C. § 3729(b)(2). The IFCA is the nearly identical Indiana state law equivalent of the FCA.
See Ind. Code § 5-11-5-7.1-2 et. seq. Because courts generally apply the same pleading standard
for both federal and state FCA claims, see, e.g., United States ex rel. Robinson v. HealthNet, Inc.,
2022 WL 623373, at *2 (S.D. Ind. 2022); United States v. Wagoner, 2018 WL 4539819 (N.D. Ind.
2018); United States ex rel. Goldberg v. Rush Univ. Med. Ctr., 929 F.Supp.2d 807, 816 (N.D. Ill.
2013); United States ex rel. Upton v. Family Health Network, Inc., 900 F.Supp.2d 821, 828 (N.D.
Ill. 2012), the Court will address Relators' federal and state claims simultaneously.
2. The Heightened Pleading Standard for FCA Claims
As a general rule, a complaint must contain "sufficient factual matter" to state a facially
plausible claim to relief—one that "allows the court to draw the reasonable inference" that the
defendant committed the alleged misconduct. Ashcroft, 556 U.S. at 678 (quoting Twombly, 550
U.S. at 570). "'Plausibility' is not a synonym for 'probability' in this context, but it asks for 'more
than a sheer possibility that a defendant has acted unlawfully.'" W. Bend Mut. Ins. Co. v.
Schumacher, 844 F.3d 670, 675 (7th Cir. 2016) (quoting Bible v. United Student Aid Funds, Inc.,
799 F.3d 633, 639 (7th Cir. 2015)). Therefore, "[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice." Ashcroft, 556 U.S. at 678.
(quoting Twombly, 550 U.S. at 555).

9

However, because the FCA is an anti-fraud statute, Relators' claims are subject to the
heightened pleading requirements of Rule 9(b). United States ex rel. Gross. v. AIDS Research
All.-Chi., 415 F.3d 601, 604 (7th Cir. 2005). Accordingly, Relators must "state with particularity
the circumstances constituting fraud or mistake." Pirelli Armstrong Tire Corp. Retiree Medical
Benefits Trust v. Walgreen Co., 631 F.3d 436, 441 (7th Cir. 2011). In adding "flesh to the bones
of the word particularity," the Seventh Circuit has "often incanted that a plaintiff ordinarily must
describe the who, what, when, where, and how of the fraud—the first paragraph of any newspaper
story." Id. at 441-42.
The heightened pleading requirement for a fraud claim serves three primary purposes: (1)
protecting a defendant from "the stigmatic injury that potentially results from allegations of fraud";
(2) minimizing "strike suits" and "fishing expeditions"; and (3) providing notice of the claim to
the adverse party. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d
770, 776 (7th Cir. 2016); United States ex rel. Grenadyor v. Ukrainian Vill. Pharmacy, Inc., 772
F.3d 1102, 1105 (7th Cir. 2014) ("[A] public accusation of fraud can do great damage to a firm
before the firm is (if the accusation proves baseless) exonerated in litigation . . ."); Ackerman v.
Nw. Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999) ("The purpose (the defensible purpose,
anyway) of the heightened pleading requirement in fraud cases is to force the plaintiff to do more
than the usual investigation before filing his complaint . . . because fraud is frequently charged
irresponsibly by people who have suffered a loss and want to find someone to blame for it"). Fair
notice requires a plaintiff who pleads fraud to "reasonably notify the defendants of their purported
role in the scheme." Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1020 (7th Cir. 1992).
Relators allege two categories of misconduct by Defendants: (1) presentation of false
claims and false statements for payment from the Government, which Defendants failed to repay;

10

and (2) retaliation against Ms. Swiney and Ms. Stewart due to their "efforts to stop violations of"
the IFCA. [Filing No. 1 at 5-9.] The Court will address each of Relators' claims as alleged in the
Complaint.
3. Relators' Claims against Mr. Paul
Turning first to Relators' claims against Mr. Paul, the Court notes that the Complaint
contains no specific factual allegations regarding Mr. Paul except for a two-sentence jurisdictional
statement, which alleges:
Defendant [Mr.] Paul is a citizen of the State of Indiana, and on information is the
owner and manager of CISS. At all times relevant to this action, [Mr.] Paul has
resided in, and conducted business within the geographic boundaries of the
Southern District of Indiana, and has been responsible for the management and
financial practices of CISS.
[Filing No. 1 at 2.] While Relators refer to Defendants in the plural throughout their claims for
relief and directly refer to Mr. Paul in "Count 5: Filing False Medicaid Claims," there are no other
substantive factual allegations regarding Mr. Paul in the Complaint and Relators do not allege any
specific conduct that Mr. Paul undertook. [See Filing No. 1.] While Relators argue that the
"language of the claim is fully sufficient to put [Mr.] Paul on notice that he is a Defendant in this
case, and to let him know just what he is accused of," [Filing No. 42 at 1], the Court disagrees. 3
As discussed above, Relators were obligated to describe the "who, what, when, where, and
how" of the alleged fraud upon the Government. Pirelli, 631 F.3d at 441. In cases involving

3

Relators failed to respond to Defendants' argument regarding Mr. Paul and, instead, attempt to
use their response to Mr. Paul's Motion for Attorneys' Fees to advance arguments not previously
raised regarding why Mr. Paul should not be dismissed. [Filing No. 42.] Relator's attempt to assert
belated arguments is not well taken. Failure to respond to an argument ordinarily results in waiver.
Terry v. Gary Cmty. Sch. Corp., 910 F.3d 1000, 1009 (7th Cir. 2018); Bonte v. U.S. Bank, N.A.,
624 F.3d 461, 466 (7th Cir. 2010). Accordingly, a fee motion is an inappropriate time to advance
arguments that should have been raised in response to a Motion to Dismiss. The Court cautions
Relators' counsel against attempting to make extraneous and belated arguments in the future.
11

multiple defendants, the Complaint "should inform each defendant of the nature of his alleged
participation in the fraud." Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 778 (7th
Cir. 1994) (noting that "Rule 9(b) is not satisfied where the complaint vaguely attributes the alleged
fraudulent statements to 'defendants.'"); see also United States v. Walgreen Co., 417 F. Supp. 3d
1068, 1092–93 (N.D. Ill. 2019) (accord). A complaint should not "lump multiple defendants
together," but should "inform each defendant of the specific fraudulent acts that constitute the basis
of the action against the particular defendant." Vicom, 20 F.3d at 778.
Here, the Complaint is silent as to what Mr. Paul's role, if any, was in the alleged fraud.
Simply stating that he is the owner of CISS and that he is "responsible for the management and
financial practices of CISS" is insufficient to put Mr. Paul on notice of what fraud he allegedly
committed. Based on the allegations in the Complaint, Mr. Paul's purported involvement in the
alleged misconduct could fall anywhere between Mr. Paul serving as the primary individual
orchestrating and directing fraudulent submissions to the Government to Mr. Paul being
completely unaware of the alleged fraudulent activities. Based upon the Complaint, there is simply
no way to tell what Relators allege Mr. Paul did or did not do.
In short, the Complaint contains insufficient information to state a claim against Mr. Paul
under the heightened pleading requirements for fraud claims under Rule 9(b). Accordingly,
Defendants' Motion to Dismiss, [Filing No. 37], is GRANTED IN PART, and Relators' claims
against Mr. Paul are DISMISSED.
4. Relators' Claims against CISS
The Court now turns to Relators' remaining claims against CISS. The Court will first
address Relators' claims that CISS purportedly submitted false claims, records, or statements for
reimbursement under the Indiana Medicaid program (Counts One through Four). The Court will

12

then address Relators' claim that CISS retaliated against Ms. Swiney and Ms. Stewart for reporting
CISS' alleged misconduct to the Government (Count Six).
a.

Relators' FCA Claims against CISS

Turning to Relators' FCA claims against CISS, the Court finds it useful to return to the
"three essential elements" of an FCA claim: (1) the defendant made a false claim in order to receive
money from the Government; (2) the statement was false; and (3) the defendant knew it was false.
Gross, 415 F.3d at 604; 31 U.S.C. § 3729(a)(1)(B). Defendants' Motion centers around the first
element of an FCA claim and turns on whether Relators alleged that a false claim was made to the
Government. [Filing No. 38.]
While Relators' Complaint contains substantially more allegations regarding CISS' alleged
conduct than that of Mr. Paul, the only factual allegations concerning claim submission found in
the Complaint are:
•

"From [Ms.] Johnsons' remark, and other comments she heard, [Ms.] Stewart
came to realize that invoices were being submitted under the
Medicare/Medicaid waiver programs for in home services that [Ms.] Stewart
had supposedly provided to the patient." [Filing No. 1 at 3.]

•

"As a result of their initial review, [Ms.] Swiney and [Ms.] Stewart found at
least five CISS clients for whom invoices had been submitted for payment of
direct support services that either [Ms.] Swiney or [Ms.] Stewart had allegedly
provided." [Filing No. 1 at 3.]

•

"[Ms.] Stewart heard from some of the direct support providers who report to
her that they had also observed instances in which it appeared they were
identified as providing services that they did not provide, but which were still
invoiced for payment under the waiver program." [Filing No. 1 at 4.]

•

"On information and belief, all of the incidents witnessed and/or discovered by
[Relators] were submitted as claims by CISS." [Filing No. 1 at 5.]

The Seventh Circuit has explained that "a plaintiff does not need to present, or even include
allegations about, a specific document or bill that the defendants submitted to the Government"
13

when "the alleged facts necessarily led one to the conclusion that the defendant had presented
claims to the Government." Presser, 836 F.3d at 777. For example, in United States ex rel. Lusby
v. Rolls–Royce Corp., 570 F.3d 849 (7th Cir. 2009), the Seventh Circuit found that an engineer's
complaint sufficiently stated a claim under the FCA based upon the complaint's allegations that
engine parts were shipped that did not meet the Government's specifications, that the contract with
the Government required the employer to certify that the parts met certain specifications to receive
payment, and that payment was received. Id. at 853-854 (noting that it was "possible that military
procurement officers accepted and paid for the turbine blades without" the certification containing
false claims, but that the possibility was "remote"). Similarly, in Leveski v. ITT Educ. Servs., Inc.,
719 F.3d 818, 839 (7th Cir. 2013), the Seventh Circuit found that an employee of an educational
training institution adequately pled fraud by alleging that the institution failed to comply with
federal law, received funding, and "could only have received federal funding by certifying
compliance" with federal law. Finally, in Presser, 836 F.3d at 777, the Seventh Circuit found that
an employee's complaint was sufficient to support a fraud claim when her complaint alleged that
she was told by her employer that "almost all of [the employer's] patients were on Title 19," that
"they dealt with Medicare," and that the alleged fraudulent practices "were applied to all patients."
Taken together, Relators' allegations contain sufficient detail to infer that CISS presented
the alleged false claims to the Government for payment. Relators have alleged that their jobs
involved either managing DSPs or serving as a DSP directly, and that DSPs provide services under
the Indiana Medicaid waiver program. [Filing No. 1 at 3.] Relators further identified specific
CISS invoices for individual CISS clients (T.B., M.S., and V.H.) that Relators allege were not
provided as well as categories of services (transportation services rendered by Mr. Garner) that
Relators allege CISS billed for that were not actually rendered. [Filing No. 1 at 4.] While the

14

Complaint is not the absolute model of clarity, it is sufficient to plausibly that Relators' allegations
that false claims were "submitted" or "invoiced for payment under the waiver program" are
references to claim submission under the Indiana Medicaid program. [See Filing No. 1 at 3-5.] At
this stage in the litigation, it is enough that Relators' allegations identify the type of false statement,
state the basis for their allegations, and permit the inference that "at least one such" claim had been
submitted to the Government. Lusby, 570 F.3d at 854.
Defendants are correct that, generally, fraud allegations cannot be made upon information
and belief. However, the Seventh Circuit has recognized the need for some flexibility to this rule
in FCA cases in light of "information asymmetries that may prevent a plaintiff from offering more
detail." Pirelli, 631 F.3d at 443. Accordingly, the practice is permissible so long as: (1) the facts
constituting the fraud are not accessible to the plaintiff, and (2) the plaintiffs provide "the grounds
for [their] suspicions." Id. (quoting Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 924 (7th
Cir. 1992)). Here, Relators make only one fraud allegation upon information and belief, which
was that "each of the incidents witnessed and/or discovered by the Relators were submitted as
claims by CISS." [Filing No. 1 at 5.] However, Relators explain the context for this conclusion,
including: (1) conversations with Ms. Johnson and other CISS employees; (2) review of internal
CISS billing records; and (3) Relators' personal knowledge of CISS clients and the direct support
services that Relators directly did or did not provide [See Filing No. 1 at 3-5.]
The Court agrees with Defendants that allegations of sloppy internal record-keeping
practices alone are insufficient to support a claim under the FCA. However, Relators have alleged
more than just sloppy record keeping, and their allegations are sufficient to proceed at this stage
in the litigation. Accordingly, Defendants' Motion to Dismiss, [Filing No. 37], is DENIED IN

15

PART, and Counts One through Four under the FCA and the IFCA SHALL PROCEED against
CISS only.
b.

Relators' Retaliation Claim against CISS

The Court now turns to Relators' retaliation claim. To state a claim for retaliation, Relators
must allege that: (1) they engaged in protected conduct; (2) the employer had knowledge of such
conduct; and (3) their discharge was motivated, at least in part, by that conduct. See Brandon v.
Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F.3d 936, 944–45 (7th Cir. 2002). Relators must
further allege facts that "put [the] employer on notice of potential FCA litigation." Halasa v. ITT
Educ. Servs., Inc., 690 F.3d 844, 847 (7th Cir. 2012) (cleaned up).
Here, Relators allege that: (1) Ms. Stewart reported the alleged misconduct to the
Government; (2) almost immediately thereafter, CISS suspended Ms. Stewart; and (3) the
following month, CISS terminated Ms. Swiney. 4 [Filing No. 1 at 5.] In response to Defendants'
Motion, Relators allege that "[o]ne can reasonably infer, based on the near immediacy of [Ms.
Stewart's] termination, that she was terminated because of her protected conduct – reporting the
false claims to the government" and that, "after CISS terminated [Ms.] Stewart for her decision to
report the false claims, the company looked further into what had happened, and learned that [Ms.]
Swiney had played a major role in the disclosure of the false claims, and then terminated [Ms.]
Swiney shortly after [Ms.] Stewart's termination." [Filing No. 39 at 11.]
Perhaps Relators' conclusion would be a reasonable inference if it did not necessarily rest
upon factual details not alleged in the Complaint principally, that CISS was even aware that Ms.
Stewart had reported her allegations to the Government. Moreover, to reach Relators' conclusion
as to Mr. Swiney, the Court would be required to stack additional inferences on top of unpled

4

Relators do not allege that Ms. Garner was the victim of retaliation. [Filing No. 39.]
16

factual assertions, including that: (1) CISS was aware of Ms. Stewart's conduct; (2) after
terminating Ms. Stewart, CISS investigated Ms. Stewart's protected conduct; (3) CISS became
aware that Ms. Swiney also participated in Ms. Stewart's conduct; and (4) CISS terminated Ms.
Swiney, at least in part, due to her participation reporting CISS' alleged misconduct to the
Government. Even construing the Complaint in a light most favorable to Relators, this is simply
an inference too far.
"[A] retaliatory complaint must be dismissed if the employer did not know about the
whistleblower's protected conduct before it discharged [the whistleblower.]" Fanslow v. Chicago
Mfg. Ctr., Inc., 384 F.3d 469, 483 (7th Cir. 2004). Here, Relators have simply not alleged
sufficient information to infer a causal connection between Ms. Stewart's conduct and the
suspension or termination of Ms. Stewart and Ms. Swiney. Because Relators have failed to plead
a prima facie element of their retaliation claim, the Court GRANTS IN PART Defendants' Motion
to Dismiss, [Filing No. 37], and Relators' retaliation claim (Count Six) against CISS is
DISMISSED.
II.
MOTION FOR ATTORNEYS' FEES
In addition to Defendants' Motion to Dismiss, Mr. Paul has separately filed a Motion for
Attorneys' Fees under 31 U.S.C. § 3730(d)(4). [Filing No. 40.]
A. Standard of Review
The Court may award a prevailing defendant its reasonable attorneys' fees and expenses if:
(1) the Government does not proceed with the action; (2) the person bringing the action conducts
the action; and (3) the Court finds that "the claim of the person bringing the action was clearly
frivolous, clearly vexatious, or brought primarily for purposes of harassment." 31 U.S.C. §
3730(d)(4). This provision was intended to supplement Rule 11 and "create a strong disincentive
17

and send a clear message to those who might consider using the private enforcement provision of
[the FCA] for illegitimate purposes." See S. Rep. No. 99-345 at 29, 1986 U.S. Code Cong. &
Admin. News 5266, 5294. Circuit courts have advised that: "[a]n action is 'clearly frivolous' when
'the result is obvious or the [Relators'] arguments . . . . are wholly without merit.'" Barnes v. Clark
Cnty., 2022 WL 73052, at *1 (9th Cir. 2022) (quoting Pfingston v. Ronan Eng'g Co., 284 F.3d
999, 1005 (9th Cir. 2002)); U.S. ex rel. Ubl v. IIF Data Sols., 650 F.3d 445, 458 (4th Cir. 2011) (a
claim is frivolous if "the relator's claim, when viewed objectively, clearly had 'no reasonable
chance of success'"); U.S. ex rel Bain v. Georgia Gulf Corp., 208 F. App'x 280, 283 (5th Cir. 2006)
("A claim is frivolous if it has no arguable support in existing law or any reasonably based
suggestion for its extension."). A claim is vexatious or brought primarily for purposes of
harassment "when the plaintiff brings the action for an improper purpose, such as to annoy or
harass the defendant." Pfingston, 284 F.3d at 1006. An example of a vexatious claim may include
when the person bringing the action has previously engaged in "a pattern of conduct calculated to
harass [the defendant.]" Millner v. ITT Aerospace/Commc'ns Div. of ITT Corp., 124 F.3d 204 (7th
Cir. 1997).
B. Discussion
In support of his Motion for Attorneys' Fees, Mr. Paul argues that in their Motion to
Dismiss, Defendants pointed out "the complete lack of any substantive allegation supporting the
decision to name [Mr.] Paul as a defendant," but Relators' response offered "no argument or
justification" behind the inclusion of Mr. Paul. [Filing No. 40 at 1.] Mr. Paul argues that the
standard under 31 U.S.C. § 3730(d)(4) has been met because "Relators did not even attempt to
provide a justification for why [he] was publicly named as someone they claimed committed a
fraud against the government." [Filing No. 40 at 2.]

18

Relators respond that while they did not specifically refer to Mr. Paul "by name" in their
response to the Motion to Dismiss, this fact is irrelevant because the "language of the claim is fully
sufficient to put [Mr.] Paul on notice that he is a Defendant in this case, and to let him know just
what he is accused of." [Filing No. 42 at 1.] Relators further respond that "[s]ince CISS is a
corporate entity, it cannot 'engage' in any physical action; it can only act through its owners,
managers, and agents, and by alleging that [Mr.] Paul is the owner and/or manager of CISS, and
is responsible for its management and financial practices, the Relators are alleging that [Mr.] Paul,
personally, is the individual responsible for [CISS'] actions." [Filing No. 42 at 2.] Additionally,
Relators argue that a "fair" reading of the Complaint and their response to the Motion to Dismiss
refers to Defendants in the plural, and thus refers to both CISS and Mr. Paul. [Filing No. 42 at 23.] Finally, Relators argue that "[g]iven the Relators' allegations in the Complaint, in the unlikely
event the Court were to dismiss the claims against [Mr.] Paul, it would be an abuse of discretion
to award [Mr.] Paul attorney fees" because Relators claims against Mr. Paul are not "clearly
frivolous or clearly vexatious." [Filing No. 42 at 3-4.]
Mr. Paul replies that "Relators offer no argument based on any case or any provision of the
[FCA] that even suggests individual liability attaches to the owner of an entity alleged to have
submitted false claims to the government." [Filing No. 43 at 2.] Mr. Paul further contends that
Relators' argument that they referred to Defendants in the plural comes from "Relators' 'Legal
Allegations' section [which] contains pure legal boilerplate and rote recitation of elements," which
does not meet the heightened pleading standard for fraud, and that "Relators have waived or
conceded . . . [that they] had no lawful reason to name [Mr. Paul] as a fraud defendant, and yet
they did it anyway." [Filing No. 43 at 3.]

19

While Mr. Paul is now a prevailing party in this litigation, the Court disagrees that a fee
award is appropriate under the circumstances. Mr. Paul has offered no evidence that Relators
intended to harass him or otherwise brought this case for an improper purpose. The Seventh
Circuit, in Millner, 124 F.3d at 204, upheld the District Court's decision to award attorneys' fees
under 31 U.S.C. § 3730(d)(4), when it was clear that the relator's "only intent was to harass" the
defendant. Specifically, the Defendant in Millner "provided the court with a list of [the relator's]
previous acts against" it, which included: (1) picketing outside of the defendant's property for over
fifteen weeks; (2) a "defamatory letter-writing campaign directed" at elected officials; (3) previous
baseless charges filed with the National Labor Relations Board and the Equal Employment
Opportunity Commission; and (4) the relator's repeated admission during his deposition that "he
would continue to pursue [defendant] in any way he could." Id. The Seventh Circuit concluded
that "[c]learly, [the defendant] has shown that since [the relator's] termination he has pursued a
pattern of conduct calculated to harass [the defendant] and cause it as much harm as possible." Id.
The conduct at issue in the present case falls well below that in Millner. At worst, Relators'
conduct can be characterized as less than precise pleading, but it does not necessarily follow that
a fee award under 31 U.S.C. § 3730(d)(4) is appropriate in all circumstances of imperfect claim
articulation by a relator. An award of attorneys' fees under the FCA against the plaintiff is reserved
for "rare and special circumstances." Pfingston, 284 F.3d at 1006–07. Furthermore, the standard
for dismissal under Rule 12(b)(6) is not the same as the standard for attorneys' fees under the FCA.
Compare Fed. R. Civ. P. 12(b)(6) with 31 U.S.C. § 3730(d)(4). Although the Relators have not
"nudged [their] claims [against Mr. Paul] . . . across the line from conceivable to plausible" for the
purposes of defending a motion to dismiss, Ashcroft, 556 U.S. at 680, this does not necessarily
render those claims "clearly frivolous" under 31 U.S.C. § 3730(d)(4).

20

Absent additional

information on this issue from Mr. Paul, the Court is not prepared to determine that Relators' claims
are so lacking in merit as to be clearly frivolous, or that Relators acted in a clearly vexatious or
harassing manner.
Because the Court lacks a sufficient basis to determine that Relators intended to harass Mr.
Paul or otherwise brought this case for an improper purpose, Mr. Paul's Motion for Attorneys'
Fees, [Filing No. 40], is DENIED.
III.
CONCLUSION
For the foregoing reasons, the Court hereby orders as follows:
•

Defendants' Motion to Dismiss, [37], is GRANTED IN PART and DENIED
IN PART, as follows:
o The Motion is GRANTED as to Relators' claims against Mr. Paul, and all
claims against Mr. Paul are DISMISSED 5;
o The Motion is DENIED as to Relators' FCA and IFCA claims against CISS
(Counts One through Four), and those claims SHALL PROCEED against
CISS only;
o The Motion is GRANTED as to Relators' retaliation claim (Count Six),
which is DISMISSED; and
o No partial final judgment will enter at this time.

5

Pursuant to Federal Rule of Civil Procedure 15(a)(1)(B), a plaintiff may amend their complaint
once as a matter of course in response to a motion to dismiss. Brown v. Bowman, 2011 WL
1296274, *16 (N.D. Ind. 2011). The 2009 notes to that rule emphasize that this amendment "will
force the pleader to consider carefully and promptly the wisdom of amending to meet the
arguments in the motion." Here, Relators chose not to revise their allegations relating to their
retaliation claim or their claims against Mr. Paul despite being aware of Defendants' arguments in
support of dismissal and chose instead to brief the current Motion to Dismiss and adjudicate the
issues. Any future amendments are therefore subject to the provisions of subsection 15(a)(2),
which requires "the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2).
Rule 15 notes that the Court "should freely give leave when justice so requires." Fed. R. Civ. P.
15(a)(2). However, the Court will not grant leave to amend in instances of: (1) undue delay; (2)
bad faith or dilatory motive on the part of the movant; (3) repeated failure to cure deficiencies by
amendments previously allowed; (4) undue prejudice to the opposing party; or (5) futility. Foman
v. Davis, 371 U.S. 178, 182 (1962).
21

•

Mr. Paul's Motion for Attorneys' Fees, [40], is DENIED.

Date: 7/25/2022

Distribution via ECF only to all counsel of record

22