United States of America ex rel. Liesa Kyer v. Thomas Health System, Inc. et al

Filing 74

MEMORANDUM OPINION AND ORDER granting Defendants' 56 JOINT MOTION to Dismiss 52 First Amended Complaint, as more fully set forth herein; directing the Clerk to post a copy of this published opinion on the court's website, www.wvsd.uscourts.gov. Signed by Judge Joseph R. Goodwin on 11/7/2024. (cc: counsel of record; any unrepresented party) (skm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

UNITED STATES OF AMERICA EX REL. LIESA KYER,
Plaintiff,
v.

CIVIL ACTION NO. 2:20-cv-00732

THOMAS HEALTH SYSTEM, INC., et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the court is a Joint Motion to Dismiss Relator’s First
Amended Complaint, filed by Defendants Charleston Hospital, Inc., Herbert J.
Thomas Memorial Hospital Association, THS Physicians Partners, Inc., Thomas
Health System, Inc., and Brian Ulery (“Defendants”), [ECF No. 56]. Relator Liesa
Kyer (“Relator”) responded, [ECF No. 60], and Defendants timely replied, [ECF No.
61]. For the reasons stated herein, Defendants’ Motion to Dismiss is GRANTED.
I.

Background
On November 9, 2020, Relator Liesa Kyer—who worked as a nurse at

Thomas Memorial Hospital for several years—initiated this lawsuit on behalf of the
United States of America against Defendants under the qui tam provisions of the
False Claims Act, 31 U.S.C. §§ 3729-33 (“FCA”), for alleged violations of the FCA,
the Stark Law, 42 U.S.C. § 1395nn, and the Anti-Kickback Statute, 42 U.S.C. §§
1320a-7a(a)(7) and 1320a-7b(b) (“AKS”). [ECF No. 2, ¶¶ 1, 5]. After the United

States received several extensions of time to consider whether it would elect to
intervene and take over prosecution of this case, see [ECF Nos. 7, 11, 14, 17, 21], the
United States ultimately notified the court on July 3, 2023, that it would not be
intervening at that time but reserved the right to do so at a later date, [ECF No. 22,
at 2]. 1 Defendants filed a Motion to Dismiss the original Complaint on January 5,
2024. [ECF No. 36]. That motion was denied as moot, [ECF No. 53], after Relator
filed the operative First Amended Complaint on March 1, 2024, [ECF No. 52],
within the amendment period allowed under the Scheduling Order, [ECF No. 50]. In
her First Amended Complaint, Relator brings four causes of action under the FCA:
(1) presentment of false claims to the United States for payment or approval, in
violation of 31 U.S.C. § 3729(a)(1)(A); (2) using false statements material to the
payment of false of fraudulent claims, in violation of 31 U.S.C. § 3729(a)(1)(B); (3)
conspiracy between Defendants to commit a violation of the FCA, in violation of 31
U.S.C. § 3729(a)(1)(C); and (4) making, using, or causing 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 concealing or knowingly and improperly avoiding
or decreasing an obligation to pay or transmit money or property to the
Government, in violation of 31 U.S.C. § 3729(a)(1)(G). [ECF No. 52, ¶¶ 276–302].
Specifically, Relator alleges that starting in 2013, Thomas Health System,
Inc. (“Thomas Health”), through its subsidiaries Thomas Memorial Hospital and St.
Francis Hospital (together, “Thomas Health Hospitals”) and THS Physician

1

Page number references reflect CM/ECF page numbers.

2

Partners, Inc. (“THSPP”), and at the direction of Defendant Ulery, violated the
Stark Law and the Anti-Kickback Statute (AKS).
Defendants filed the instant Motion to Dismiss on April 16, 2024, [ECF No.
56], arguing that the Amended Complaint should be dismissed because Relator (1)
failed to file the amendment under seal pursuant to 31 U.S.C. § 3730(b)(2), and (2)
failed to state a claim upon which relief may be granted under Rule 12(b)(6), in part
because her FCA allegations were not pleaded with the level of particularity
required by Federal Rule of Civil Procedure 9(b), [ECF No. 57, at 4]. Relator
responded in opposition on May 21, 2024, [ECF No. 60], and Defendants replied on
June 4, 2024. [ECF No. 61]. On September 12, 2024, I ordered the parties to file
additional briefing on the impact of Loper Bright Enterprises v. Raimondo to this
case, [ECF No. 63]. 144 S. Ct. 2244 (2024). The parties timely filed the requested
briefs, [ECF Nos. 66, 67], and their responses, [ECF Nos. 69, 70]. The Government,
having an opportunity to file Loper Bright briefing as well, did not. The matter is
ripe for review.
II.

Legal Standard
A. Motion to Dismiss under 12(b)(6)
A motion to dismiss filed under Rule 12(b)(6) tests the legal sufficiency of a

complaint or pleading. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). In
resolving a motion to dismiss under Rule 12, the court may not consider “matters
outside the pleadings,” Fed. R. Civ. P. 12(d). Specifically, the court considers only

3

those “documents attached or incorporated into the complaint,” E.I. du Pont de

Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011).
Generally, a pleading under the Federal Rules of Civil Procedure requires
only “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). “When ruling on a motion to dismiss, courts must
accept as true all of the factual allegations contained in the complaint and draw all
reasonable inferences in favor of the plaintiff.” Farnsworth v. Loved Ones in Home

Care, LLC, No. 2:18-CV-01334, 2019 WL 956806, at *1 (S.D. W. Va. Feb. 27, 2019)
(citing E.I. du Pont de Nemours & Co., 637 F.3d at 440). These factual allegations,
taken as true, must “state a claim to relief that is plausible on its face.” Robertson v.

Sea Pines Real Est. Cos., Inc., 679 F.3d 278, 288 (4th Cir. 2012) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). The plausibility standard is not a probability
requirement, but “asks for more than a sheer possibility that a defendant has acted
unlawfully.” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
556 (2007)). Although “the complaint must contain sufficient facts to state a claim
that is plausible on its face, it nevertheless need only give the defendant fair notice
of what the claim is and the grounds on which it rests.” Hall v. DIRECTV, LLC, 846
F.3d 757, 777 (4th Cir. 2017). Thus, “a complaint is to be construed liberally so as to
do substantial justice.” Id.
B. Rule 9(b) Particularity Pleading Standard
“In addition to meeting the plausibility standard of Iqbal, fraud claims under
the [FCA] must be pleaded with particularity pursuant to Rule 9(b) of the Federal

4

Rules of Civil Procedure.” United States ex rel. Nathan v. Takeda Pharms. N. Am.,

Inc., 707 F.3d 451, 455 (4th Cir. 2013) (citing Harrison, 176 F.3d at 783–85). Rule
9(b) provides that when a party alleges fraud, that party must state the allegedly
fraudulent circumstances “with particularity.” Fed. R. Civ. P. 9(b). FCA plaintiffs are
required to “at a minimum, describe ‘the time, place, and contents of the false
representations, as well as the identity of the person making the misrepresentation
and what he obtained thereby.’” United States ex rel. Wilson v. Kellogg Brown &

Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (quoting Harrison, 176 F.3d at 784
(internal quotations omitted)). “These facts are often referred to as the ‘who, what,
when, where, and how’ of the alleged fraud.” Id. at 379 (quoting United States ex

rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 384 (5th Cir. 2003))
(internal quotations omitted). A lack of compliance with Rule 9(b)’s particularity
standard is treated in this circuit as a failure to state a claim under Fed. R. Civ. P.
12(b)(6). United States ex rel. Taylor v. Boyko, 39 F.4th 177, 189 (4th Cir. 2022).
The Supreme Court has cautioned that the FCA “was not designed to punish
every type of fraud committed upon the government.” Harrison, 176 F.3d at 785
(citing United States v. McNinch, 356 U.S. 595, 599 (1958)). Rather, “the critical
question” in analyzing FCA claims is “whether the defendant caused a false claim to
be presented to the government, because liability . . . attaches only to a claim
actually presented to the government for payment, not to the underlying fraudulent
scheme.” Allegations that do not “involve an integrated scheme in which

5

presentment of a claim for payment was a necessary result” will be “insufficient
because they are inherently speculative in nature.” Id. at 461.
“In these Rule 9(b) cases, the particularity standard is steep.” United States

ex rel. Nicholson v. Medcom Carolinas, Inc., 42 F.4th 185, 196 (4th Cir. 2022). While
the Fourth Circuit requires “significant detail” in fraud claims, it nonetheless states
that courts should “hesitate to dismiss a complaint under Rule 9(b)” if they are
“satisfied ‘(1) that the defendant has been made aware of the particular
circumstances for which [it] will have to prepare a defense at trial, and (2) that
plaintiff has substantial prediscovery evidence of those facts.’” Id. at 195 (quoting

Harrison, 176 F.3d at 784, 789).
C. The False Claims Act
The FCA imposes liability on “any person” who “knowingly presents, or
causes to be presented, a false or fraudulent claim for payment or approval” or who
“knowingly makes, uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A), (B). Under the
FCA’s qui tam provision, private persons—called relators—may file complaints of
violations of the FCA on the government's behalf. Id. § 3730(b)(1). In general, a
relator bringing an FCA claim is required to satisfy four elements: “(1) there was a
false statement or fraudulent course of conduct; (2) made or carried out with the
requisite scienter; (3) that was material; and (4) that caused the government to pay
out money or to forfeit moneys due (i.e., that involved a ‘claim’).” Harrison, F.3d 776

6

at 788. “Failure to adequately allege any of these elements dooms a claim.” Taylor,
39 F.4th at 188 (citing Harrison, 176 F.3d at 788).
A relator bringing a qui tam action for violation of the FCA must file the
original complaint in camera, with it remaining under seal for at least sixty days
while the United States decides whether to intervene and proceed with the action.
31 U.S.C. § 3730(b)(2). If the United States notifies the court and the relator that it
declines to intervene, the complaint and docket are then unsealed. Id. § 3730(b)(4).
The relator subsequently litigates the case against the defendant. Id. If the relator
succeeds in litigating or settling the action, she is entitled to receive “an amount
which the court decides is reasonable for collecting the civil penalty and damages,”
which “shall be not less than 25 percent and not more than 30 percent of the
proceeds of the action or settlement and shall be paid out of such proceeds.” Id. §
3730(d)(2). This includes reasonable expenses, attorneys’ fees, and costs from the
defendant. Id.
III.

Discussion

A. Failure to File under Seal Pursuant to 31 U.S.C. § 3730(b)(2)

Defendants first argue that the FCA’s sealing requirements apply equally to
both original complaints and to amended complaints “where the amended complaint
adds new claims for relief or new or substantially different allegations of fraud.”
[ECF No. 57, at 5 (citing United States ex rel. Davis v. Prince, 766 F. Supp. 2d 679,
684 (E.D. Va. 2011))]. Because Defendants claim that the Amended Complaint
“contains an incredible number of new and substantially different allegations of

7

fraud,” Defendants contend that Relator was required to file her Amended
Complaint under seal, id., and that her failure to do so requires this court to dismiss
Relator’s qui tam action with prejudice. Id. at 4 (citing Davis, 766 F. Supp. 2d at
682–83). I disagree.
Indeed, the sealing requirement under § 3730(b)(2) of the FCA is mandatory
for original complaints. See State Farm Fire & Cas. Co. v. United States ex rel.

Rigsby, 580 U.S. 26, 33 (2016) (stating that § 3730(b)(2)’s language “creates a
mandatory rule the relator must follow”). Courts disagree, however, as to whether
this applies equally to amended complaints, particularly ones filed after the initial
seal has been lifted. Compare Davis, 766 F. Supp. 2d at 683–84 (holding that the
term “complaint” as used in the FCA’s sealing provision applies to amended
complaints), with United States ex rel. Milam v. Regents of Univ. of Cal., 912 F.
Supp. 868, 890 (D. Md. 1995) (holding that “[n]either the [FCA] nor any relevant
case law imposed upon [relator] the duty to file any amendment to [the] complaint
in camera and under seal”), and United States ex rel. Williams v. Landmark Hosp.

of Athens, LLC, 676 F. Supp. 3d 1323, 1337 (M.D. Ga. 2023) (holding that “the
sealing requirements of § 3730(b)(2) do not apply to amended qui tam complaints
when the Government has had an opportunity to consider intervention and the
proposed amendment expands or explains existing claims but does not add new
claims”).
I adopt the view held by many courts that the issue turns on whether the
filing of the amended complaint frustrates the primary purpose of the sealing

8

requirement: “to allay the Government’s concern that a relator filing a civil
complaint would alert defendants to a pending federal criminal investigation.” State

Farm, 580 U.S. at 34 (citing S. Rep. No. 99-345, at 23–24 (1986)). After a case has
been unsealed, it can hardly be argued that requiring an amended complaint be
filed under seal would further this purpose. This case was initially filed under seal
when it originated four years ago. Since that time, the Government has had ample
opportunity to review Relator’s FCA claims against Defendants and determine
whether to pursue its own prosecution of those claims. Defendants are aware of the
Relator’s claims, as well as the Government’s knowledge of Relator’s allegations and
investigation into those allegations. There is, therefore, little risk of alerting
Defendants to a pending federal criminal investigation by way of the allegations
made in the Amended Complaint. For these reasons, I FIND that the Amended
Complaint was not required to be filed under seal.
B. Count I: Presentment of False Claims under the FCA

Next, Defendants argue that Relator’s Amended Complaint fails to plausibly
and particularly allege fraud under Federal Rules of Civil Procedure 12(b)(6) and
9(b). [ECF No. 57, at 7–9]. I agree that under Rule 9(b), Count I is not pled with the
required particularity.
The FCA imposes liability on anyone who “knowingly presents, or causes to
be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. §
3729(a)(1)(A). Generally, an FCA relator must allege four elements: (1) there was a
false statement or fraudulent conduct (2) with the required scienter, (3) the false

9

statement or fraudulent conduct was material, and (4) caused the government to
forfeit or pay out money due. Harrison v. Westinghouse Savannah River Co., 176
F.3d 776, 788 (4th Cir. 1999). To survive a motion to dismiss, Relator’s Amended
Complaint must allege Defendants’ violative conduct with particularity as required
by Rule 9(b) of the Federal Rules of Civil Procedure.
This complaint suffers from two fatal flaws. First, the complaint alleges that
the “Defendants”—which includes four separate legal entities and one legal officer
of those entities—all individually engaged in conduct violative of the FCA. Second,
the complaint fails to connect any claim made to the Government to the alleged
compensation scheme. Either one is sufficient to dismiss under Rule 9(b).
1. “Defendants” Grouping Deficiency
At a minimum, a plaintiff must “describe the time, place and contents of false
representations, as well as the identity of the person making the misrepresentation
and what he obtained thereby.” United States ex rel. Nathan v. Takeda

Pharmaceuticals North America, Inc., 707 F.3d at 455–56 (citing United States ex
rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)). A Rule
9(b) analysis is not cursory, rather, well-detailed complaints are required to “prevent
frivolous suits, stop fraud actions where everything is learned after discovery . . .,
and to protect defendants’ reputations.” United States ex rel. Nicholson v. MedCom

Carolinas, Inc., 42 F.4th 185, 195 (4th Cir. 2022). In short, the “standard is steep.”
Id.

10

Relator’s complaint largely alleges that Defendants, collectively and without
any distinction, engaged in violative conduct. See [ECF No. 52]. The term
“Defendants” is sometimes used to describe all the named defendants. Id. ¶¶ 1, 3–5,
123 n.6, 130–32, 134, 137, 147–52, 155. Other times, the term “Defendants” is used
to describe the entity defendants (excluding the officer defendant Mr. Ulery). Id. ¶¶
51, 81, VI., 261, 264, 276, 266. A different collection of Defendants is termed
“Thomas Health Hospitals” which is used to describe the hospital entities (excluding
Mr. Ulery and THSPP). Id. ¶¶ 69, 122, 130, 137, 148, 239–40. Still, other times
“Defendants” appears to mean only THSPP and/or THSPP corporate officer Mr.
Ulery. Id. ¶¶ 219, 221, 227, 229, 232, 234, 235, 241a.–g.. Regardless, throughout the
complaint Relator uses “THSPP,” “Defendants,” and “Thomas Health Hospitals” in

the same paragraph. Id. ¶¶ 100, 114, 130, 147, 148, 200 n.20, 268, 269, 257, 259.
My point is this: Relator’s voluminous pleading has an identity problem. A
thorough reading of the complaint leaves more questions than answers, and each
question sounds like, “Who did what exactly?” The Counts at the end of the 82-page
complaint lead one to believe that every Defendant engaged in specific, identifiable
(but also somehow identical) conduct that leads to liability. That cannot be. Surely,
Mr. Ulery’s conduct and THSPP’s conduct must be differentiated to give rise to
liability. Further, on my reading, the “entity defendants” engaged in completely
identical conduct, but the exact steps they took remain unclear.
Of course, something is alleged to have happened at the hands of someone.
That general understanding, however, is not enough under Rule 9(b). Relator must

11

plead the “who, what, when, where, and how” of alleged fraud. United States ex rel.

Taylor v. Boyko, 39 F.4th 177, 189 (4th Cir. 2022). The specific “who” tied to a “what”
is missing from Relator’s complaint and becomes more obscure as the complaint
goes on.
One need only look to the complaint. In Relator’s table of contents, no
individual defendant is singled out, but “Defendants” generally start eight different
headings and subheadings. [ECF No. 52, at 2–3] (“Defendants Paid Remuneration
to THSPP and THSPP Physicians.” “Defendants Submitted and Caused the
Submission of False Claims.”). That is reflective of the complaint’s failure to walk
through each defendant’s conduct. Paragraph 152 uses “Defendants” to mean some
smaller subset of the entities. Id. ¶ 152. (“Defendants paid Dr. Jogenpally well
above industry standards as reflected in data reports from the Medical Group
Management Association (“MGMA”), and Defendants sought to conceal this through
a deferred compensation . . .”). Paragraph 164 mentions “defendants’ internal
documents” but does not clarify whose documents they are. Id. ¶¶ 164, 170, 173,
176.
The enumerated Counts in the complaint similarly gloss over the differences
between Defendants. Id. at 80–84. I understand that Relator “realleges and
incorporates by reference” the entirety of the complaint for each Count, but that
kind of blunderbuss pleading obfuscates the claims. What remains in the Count
sections is nothing more than legal conclusions broadly alleging “Defendants’
conduct,” Defendants’ knowledge, and “Defendants’ violations.” Id. ¶¶ 279–82.

12

I agree with Defendants that Relator cannot succeed on alleging a general
“group” of Defendants. [ECF No. 57, at 7]. Under Rule 9(b) an FCA Relator must
identify, with particularity, “each individual’s culpable conduct; defendants cannot
be grouped together without specification of which defendant committed which
wrong.” United States ex rel. Ahumada v. NISH, 756 F.3d 268, 281 n.9 (citing

Arnlund v. Smith, 210 F. Supp. 2d 755, 760 (E.D. Va. 2002)); United States ex rel. v.
Sheldon v. Forest Laboratories, LLC, No. ELH-14-25355, 2024 WL 4544567, at *18
(D. Md. Oct. 22, 2024);

United States v. Gwinn, No. 5:06-cv-00267, 2008 WL

867927, at *10 (S.D. W. Va. Mar. 31, 2008). Because Relator has failed to plead with
particularity, her complaint must be dismissed.
2. Scheme-Claim Connection Deficiency
Relator also fails to establish that the alleged private scheme caused the
alleged false claims submitted to the Government. My concern lies somewhere
between the presentment requirement of the FCA, classic causation ideas, and the
great burden defendants face in litigating FCA claims.
Classic causation and the presentment requirement go hand-in-hand. In
considering presentment, “allegations of a fraudulent scheme” are not enough to
survive a particularity analysis. Nathan, 707 F.3d at 456. Instead, “the critical
question is whether the defendant caused a false claim to be presented to the
government, because liability under the Act attaches only to a claim actually
presented to the government for payment, not to the underlying fraudulent
scheme.” Id.

13

Presentment itself can be pled in two ways: (1) Relator can allege that
specific false claims were actually “presented to the government for payment,” or (2)
Relator can allege a “pattern of conduct” that necessarily leads to the submission of
false claims to the government. Boyko, 39 F. 4th at 196. Both require particularity.

Id. Of course, Relator attached 32 pages of alleged claims to her complaint in
Appendices A–C. [ECF No. 52]. These claims are not particular.
Each Appendix suffers from some flaw. Appendix A offers no indication of the
kind of service provided in the alleged referral. Id. Similarly, Appendix A suggests
that a single defendant, THSPP, is the billing entity for each referral, but that
would fail to allege that any of the other four named defendants submitted any
claim to the Government. Most of all, the complaint fails to allege (or even explain)
the appendices, their meaning, or what exactly they allege. Appendix B and
Appendix C suffer similar fates in a descending amount of alleged information.
Finding that the claims are not particular enough under Rule 9(b), Relator’s
claims only survive if the alleged scheme “necessarily” leads to the submission of
false claims. Boyko, 39 F. 4th at 196. I also find this unsatisfied.
To be sure, Relator asserts that each and every claim is the result of an
allegedly fraudulent compensation scheme, but I am not convinced that these

claims are the result of the alleged scheme. More than that, I am not convinced that
Relator has particularly alleged that these claims must have necessarily come from
some violative scheme. Nathan, 707 F.3d at 457. Even under the most generous
reading, Relator alleges two separate and unconnected things: (1) a compensation

14

plan existing between Defendants and physicians in some arrangement and (2)
claims submitted to the Government. Nothing in the complaint leads me to believe,
or even helps me guess, that these claims are necessarily false. When a complaint
like this fails to “connect the dots” between “the alleged false claims and
government payment,” Relator fails to meet Rule 9(b)’s heightened pleading
standard. United States ex rel. Grant v. United Airlines, Inc., 912 F.3d 190, 199 (4th
Cir. 2018).
I am not an outlier in this approach, the Fourth Circuit has maintained the
strict expectations of FCA claimants. Nathan, 707 F.3d at 457; Boyko, 39 F.4th at
189; Grant, 912 F.3d at 199. At the motion to dismiss stage, Relator “may not
merely describe a private scheme” and then “without any stated reason” allege that
false “claims requesting illegal payments must have been submitted.” Grant, 912
F.3d at 199 (citing Nathan, 707 F. 3d at 457). That does not mean that Relator need
only allege that some claims were submitted—rather, Relator must also allege that
the claims submitted to the government were (1) false claims, (2) requesting
payment, (3) submitted to the government, (4) necessarily as a result of the alleged
scheme. 2 That is the extent of Fourth Circuit precedent.
Some may describe this approach as unreasonably harsh, but “harshness”
must be balanced by the fraud pleading standard. United States v. McNinch, 356
U.S. 595, 599 (1958) (The Court has cautioned that the “False Claims Act was not
designed to reach every kind of fraud practiced on the Government.”). Aside from
2 The fourth element being the key factor in linking the alleged scheme to allegedly false claims,

essentially some inkling of causation.

15

Rule 12(b)(6) and Rule 9(b), why must claims under the False Claims Act be
analyzed at such a demanding standard? First, FCA claims operate at high stakes. 3
Lasting through time since the Civil War, the FCA has empowered private persons
to sue an alleged violator and “protect the funds and property of the Government.”

Polansky, 599 U.S. at 424. Bringing the Government’s damages claim, a relator may
receive up to 30% of a successful recovery. Id. at 425. But bringing a claim is
cumbersome. A relator must first file under seal, the Government must be apprised
of her complaint, and then the Government is given as much time as it needs (“good
cause”) to decide if it will intervene. 31 U.S.C. § 3730(b). Even if it does not
intervene at that point, the Government can intervene later and even move to
dismiss the suit, against the relator’s wishes. Id. § 3730(c); Polansky, 599 U.S. at
438. The statute on its face—and the Court’s interpretation—makes clear that FCA
guardrails are necessary for such high-octane litigation.
Second, FCA claims have exploded in popularity. 4 In 1987, only 31 qui tam
cases were filed, but by 2023 more than 700 were filed in the fiscal year. 5 Money,
naturally, is a motivating factor for both the government and private relators. 6
3 Constitutionally, in fact, the stakes are so high that three Supreme Court Justices have expressed

doubt that the qui tam provision of the False Claims Act is constitutional under Article II. United
States ex rel. Polansky v. Exec. Health Resources, Inc., 599 U.S. 419, 442–43 (Kavanaugh, Barrett,
Js., concurring and Thomas, J., dissenting).
4 Press Release, U.S. Dep’t of Justice, False Claims Act Settlements and Judgments Exceed $2.68
Billion in Fiscal Year 2023 (Feb. 22, 2024), https://www.justice.gov/opa/pr/false-claims-actsettlements-and-judgments-exceed-268-billion-fiscal-year-2023 (“False Claims Act Press Release”).
5
Civil
Division,
U.S.
Dep’t
of
Justice,
Fraud
Statistics
Fiscal
Year
2023,
https://www.justice.gov/opa/media/1339306/dl?inline.
6 Look at the False Claims Act settlements in West Virginia alone. Wheeling Hospital agreed to pay
the Government $50 million to settle a Stark Law-based FCA claim. Wheeling Hospital agrees to $50
million settlement concerning Medicare fraud claims, MetroNews (Sept. 9, 2020),
https://wvmetronews.com/2020/09/09/wheeling-hospital-agrees-on-50-million-settlement-concerningmedicare-fraud-claims/. The Pain Center of West Virginia settled with the Government for $750,000

16

Celebrating more than $2.68 billion worth of FCA damages recovery, the
Department of Justice (DOJ) has exalted FCA claims for “rooting out fraud,
ensuring that public funds are spent properly, and safeguarding critical government
programs.” False Claims Act Press Release. The 2022–23 fiscal year represented the
highest number of settlements and judgments of FCA cases in history for the DOJ.

Id. More than half, according to the Government, related to matters in the health
care industry, and the total FCA recovery to date is beyond $75 billion. Id. Surely
this popular legal mechanism for massive economic recovery must be subject to a
serious, demanding standard.
My final concern, however, is the litigation burden on defendants when a
relator alleges a “scheme” unconnected to claims. This concern, like my others, is
rooted in Rule 9(b). Nicholson, 42 F.4th at 195 (Particularity is required to “prevent
frivolous suits, stop fraud actions” where everything must be learned in discovery,
and “to protect defendants’ reputations.”). The “standard is steep,” and relaxing the
standard in any way amplifies the burden on law-abiding defendants. Id. at 196.
to resolve Medicare fraud allegations. Pain Center of West Virginia Settles $750,000 False Claims
WVNews
(Sept.
26,
2024),
Case
Over
Medicare
Fraud
Allegations,
https://www.wvnews.com/news/wvnews/pain-center-of-west-virginia-settles-750-000-false-claims-actcase-over-medicare-fraud/article_9ebc0e78-7c10-11ef-9285-3be98de50e4d.html. Internet provider
Frontier West Virginia Inc. agreed to pay nearly $18 million to the Government to settle FCA claims.
Daniel Seiden, Frontier Broadband Company Inks $18 Million Whistleblower Accord, Bloomberg
Law (May 24, 2023), https://news.bloomberglaw.com/federal-contracting/frontier-whistleblower-have18-million-deal-to-end-fraud-suit. Weirton Medical Center settled Stark Law allegations by agreeing
to pay $1.5 million to the Government. Craig Howell, WMC to pay $1.5 million in settlement
Weirton
Daily
Times
(July
8,
2022),
agreement
with
DOJ,
https://www.weirtondailytimes.com/news/local-news/2022/07/wmc-to-pay-1-5-million-in-settlementagreement-with-doj/. Eye Consultants of Huntington Inc. paid nearly $1 million to the Government
to settle allegations of fraudulent Medicare and Medicaid claims. Nearly $1M health care fraud
allegations settlement announced by Southern West Virginia U.S. attorney, WVNews (Sept. 6, 2022),
https://www.wvnews.com/news/wvnews/nearly-1m-health-care-fraud-allegations-settlementannounced-by-southern-west-virginia-u-s-attorney/article_60b72b14-2dff-11ed-bf7d7f75bdaa88dd.html.

Act

17

But some circuits have taken a lenient approach to False Claims Act
complaints. 7 Under the lenient approach, a complaint survives if it particularly
alleges a private scheme, even without representative samples of the alleged false
claims. Foglia v. Renal Ventures Management, LLC, 754 F.3d 153, 157–58 (3d Cir.
2014) (holding that a particularly alleged “scheme to submit false claims” was
enough to give the defendant “notice” as required by Rule 9(b)); United States ex

rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914, 917–18 (8th Cir.
2014) (adopting the lenient approach because a relator that particularly alleges a
fraudulent scheme need not always state “the contents of a bill”); United States ex

rel. Gelbman v. City of New York, 790 Fed. Appx. 244, 248 (2d Cir. 2019) (“Of course,
a qui tam complaint need not always allege, based on personal knowledge, the
actual submission of false claims to the federal government.”). According to those
circuit courts, stretching Rule 9(b) to this degree achieves notice without
overburdening the relator and moves the case into discovery. United States ex rel.

Grubbs v. Kanneganti, 565 F.3d 180, 190–91 (5th Cir. 2009) (alleging a scheme that
strongly infers the submission of claims “gives defendants adequate notice”); Foglia,
754 F. 3d at 157–58 (Although allegations of an “opportunity for fraud” are not

Getting Particular: Finding the Appropriate False Claims Act Pleading
Standard Post-Nathan v. Takeda Pharmaceuticals, 13 Geo. J.L. & Pub. Pol’y 129, 137–41 (2015)
7 Vann Bentley, Note,

(cataloging the First, Third, Fifth, Seventh, and Ninth Circuit’s more lenient Rule 9(b) pleading
standard); Michael Lockman, Comment, In Defense of a Strict Pleading Standard for False Claims
Act Whistleblowers, 82 U. Chi. L. Rev. 1559 (2015) (arguing against the lenient approach because (1)
a relaxed standard has not helped fraud enforcement, (2) information asymmetry between the
defendant and relator has become less of an issue, and (3) a relator still has significant incentive to
file a claim); Sara A. Smoter, Note, Relaxing Rule 9(b): Why False Claims Act Relators Should be
Held to a Flexible Pleading Standard, 66 Case W. Res. L. Rev. 235, 246–49 (2015) (reviewing the
different approaches and concluding that the “flexible” approach most appropriately fulfills the
purpose of Rule 9(b)).

18

enough, detailed allegations of a scheme to submit false claims is sufficient “to give
[the defendant] notice of the charges against it, as required by Rule 9(b).”).
The standard is certainly appealing—faced with a nearly 100-page complaint,
30 pages of allegedly false claims, and allegations of a private scheme, a district
court might feel comfortable denying a motion to dismiss and letting discovery slow
walk into a settlement. Grubbs, 565 F.3d at 190–91 (holding that alleged claims are
not necessary for the “ticket to federal discovery,” and the district court should use
its “vigilant hand” to make discovery “pointed and efficient”).
I am not so comfortable. A long complaint is not always a particular
complaint. United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376–
78 (holding that a third amended complaint with 400 numbered paragraphs and
almost a hundred attachments “fail[ed] to link” the allegations of deceit “to any
claim for payment”). Nor is a long complaint a ticket to discovery. United States ex

rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1313 n.24 (11th Cir.
2002) (when a plaintiff fails to plead the minimum elements of her claim but
survives a motion to dismiss, she is enabled to “learn the complaint’s bare essentials
through discovery and may needlessly harm a defendants’ goodwill and
reputation”).
To conclude, I recognize that the standard split is about whether a relator
must allege the false claims actually submitted to the government, not whether the
claims alleged are sufficiently particular. This distinction, Relator argues, is
favorable to her because she did in fact attach pages of allegedly false claims. [ECF

19

No. 60, at 26 n.13]. The distinction, however, is illusory and does little to push the
complaint into particularity. I see no difference between a relator that alleges a
fraudulent scheme without any representative claims and a relator that alleges a
fraudulent scheme next to—and disconnected from—a series of allegedly false
claims. Both allege a fraudulent scheme, but neither “connect the dots” between the
scheme and claims submitted to the Government. Grant, 912 F.3d at 199. Neither
satisfy Rule 9(b).
For these reasons, Defendants’ Motion to Dismiss, [ECF No. 56], is
GRANTED as it relates to Count One.
C. Count II: Using False Statements Material to False Claims Paid Under

the FCA

In Count Two, Relator alleges that Defendants made false statements in
connection with the false claims for payment that they made to the United States.
[ECF No. 52, ¶ 284]. The FCA prohibits any person who “knowingly makes, uses, or
causes to be made or used, a false record or statement material to a false or
fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). This has been called a “false-record-orstatement” claim. Harrison, 176 F.3d at 788. Count Two does not require
“presentment” of the claim to the government, as opposed to the claim in Count
One. In this circuit, however, both claims require the same four elements.

Nicholson, 42 F.4th at 193 (“Both a presentment claim and a false-record-orstatement claim under the False Claims Act require four elements.”).

20

Because I found that Relator failed to particularly allege Count One, I
similarly find that the fraud of Count Two has not been particularly pled. Therefore,
Defendants’ motion to dismiss as to Count Two is GRANTED.
D. Count III: Conspiracy Under the FCA

The particularity flaws of Relator’s complaint similarly doom Count Three,
but Relator also failed to plausibly allege this count under Rule 12(b)(6). In Count
Three, Relator alleges that Defendants conspired with each other to violate the
FCA. [ECF No. 52, ¶ 291]. The FCA prohibits any person who “conspires to commit
a violation” of other FCA provisions, including the two from the previous counts. 31
U.S.C. § 3729(a)(1)(C). To state a claim for conspiracy to violate the FCA, a plaintiff
must show that the conspirators intended “to defraud the Government.” Allison

Engine Co., Inc. v. United States ex rel. Sanders, 552 U.S. 662, 672 (2008);
Nicholson, 42 F.4th at 193. 8
Here, under Rule 12(b)(6), is where Relator’s claim fails. While Relator
alleges that Defendants knew that their conduct would violate the FCA, Relator
does not allege that Defendants had a “meeting of the minds” in which they
“intended to defraud the government.” United States ex rel. Godfrey v. KBR, Inc.,
360 Fed. Appx. 407, 413 (4th Cir. 2010). Relator provides no factual allegations to
support a finding that Defendants were engaged in a conspiracy and instead only
states such as a legal conclusion. [ECF No. 52, ¶¶ 291, 294]. Legal conclusions are

I note that this is a higher standard than the mental state required under the FCA provisions of
Counts One and Two.

8

21

not entitled to the same presumption of truth as plausible factual allegations.

Twombly, 550 U.S. at 555.
Therein lies the problem; FCA conspiracy requires allegations of a “meeting
of the minds” with an intent “to defraud the Government.” Godfrey, 260 Fed. Appx.
at 413; Allison Engine Co., Inc., 552 U.S. at 672. At best, Relator alleges that
Defendants all engaged in simultaneous conduct. Relator, however, has not alleged
with sufficient plausibility or particularity that a meeting of the minds occurred
wherein Defendants agreed on their intent to defraud the Government. Thus,
Relator’s Count Three must be dismissed. Therefore, Defendants’ Motion to Dismiss
is GRANTED as to Count III.
E. Count IV: Obligation to Pay Money to the Government Under the FCA

Like the other counts, Count Four cannot survive motion to dismiss under
the particularity standard, however, Relator also failed to plausibly allege this
count under Rule 12(b)(6). In Count Four, Relator alleges that Defendants
improperly avoided or decreased their obligation to pay money to the government.
The FCA makes liable any person who “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.” 31 U.S.C. § 3729(a)(1)(G). This is known as
the “reverse false claim” provision of the FCA which covers persons or entities who
avoid their obligation to pay the Government through the submission or

22

concealment of a false claim. Miller v. United States ex rel. Miller, 110 F.4th 533,
542 (2d Cir. 2024); Pencheng Si v. Laogai Rsch. Found., 71 F. Supp. 3d 73, 88
(D.D.C. 2014); United States v. Walgreen Co., 711 F. Supp. 3d 601, 612–13 (W.D. Va.
2024). Obligation is defined as “an established duty, whether or not fixed, arising
from an express or implied contractual, grantor-grantee, or licensor-licensee
relationship, from a fee-based or similar relationship, from statute or regulation, or
from the retention of any overpayment.” 31 U.S.C. § 3729(b)(3).
Count Four fails on 12(b)(6) analysis. It appears that Relator’s complaint
alleges that Defendants—by submitting allegedly false claims to the Government—
avoided repayment to the Government of overpaid funds. Essentially, Relator
alleges that violation of FCA provisions 3729(a)(1)(A) and (a)(1)(B) (Counts I and II)
automatically constitutes a violation of FCA provision 3729(a)(1)(G) (Count IV). The
FCA does not contain a two-for-one deal.
Without more, the reverse false claims would be redundant to the preceding
false claims. United States ex rel. Harbit v. Consultants in Gastroenterology, P.A.,
No. 3:19-cv-03403-JMC, 2021 WL 1197124, at *8 (D.S.C. Mar. 30, 2021) (When a
relator alleges that a defendant overcharged the Government and failed to repay,
“courts have consistently dismissed the [reverse FCA] claim as redundant.”)
(quoting United States ex rel. Integra Med Analytics LLC v. Providence Health &

Servs., No. CV 17-1694 PSG (SSx), 2019 WL 3282619, at *22 (C.D. Cal. July 16,
2019) (reversed on other grounds)). Relator’s allegations for the reverse false claim
count rests completely on the identical facts that allegedly support Counts One and

23

Two; however, a traditional false claim action cannot simultaneously give rise to a
reverse false claim action. United States v. Lab’y Corp. of Am. Holdings, No. 9:14-cv3699-RMG, 2019 WL 236799, at *3 (D.S.C. Jan. 16, 2019) (“it is well settled that
‘reverse false claims may not be based on the same conduct as a plaintiff’s claims’”)
(quoting United States ex rel. Branscome v. Blue Ridge Home Health Servs., Inc.,
No. 7:16CV00087, 2018 WL 1309734, at *5 (W.D. Va. Mar. 13, 2018)). To accept
Relator’s Count Four as well-plead would be to merge FCA provisions (A), (B), and
(G) such that “there would be nothing ‘reverse’ about” a reverse false claim.

Pencheng Si, 71 F. Supp. 3d. at 97.
This is not to say that provision (G) has no utility; however, in this case,
Relator cannot take advantage of it. Under the statute, Relator must plausibly and
particularly allege that Defendants (1) knowingly submitted a false statement or
record to the Government in connection to (2) a specific obligation Defendants had
to pay/repay the Government. The second element is not plausibly alleged.
In fact, the second element is barely mentioned at all. The word “obligation”
only appears in Relator’s First Amended Complaint when she recites the basic
requirements under the FCA. [ECF No. 52, ¶¶ 4, 16, 250, 293, 295, 298–300].
Defendants’ specific obligation to repay the government is neither alleged nor
explained. A 60-day window to repay the Government for overpaid claims is alleged
exactly once, in Paragraph 301, but it is nothing more than part of a legal
conclusion. Twombly, 550 U.S. at 555 (To survive a motion to dismiss, a complaint
“requires more than labels and conclusions.”). Relator offers no specific allegations

24

of any obligation that Defendants owed the Government. Thus, Relator’s Count
Four must be dismissed under Rule 12(b)(6). United States v. Carranza, No. 1:22-cv189 (AJT/IDD), 2022 WL 3226191, at *7 (E.D. Va. July 1, 2022) (dismissing a
reverse false claim action because the relator failed to “allege any obligation owed
by Defendants to the government” and “only alleg[ed] the formulaic recitation of the
elements of the claim”). For these reasons, Defendants’ Motion to Dismiss is
GRANTED as it relates to Count IV.
IV.

Conclusion
Allegations of fraud precede serious and often disastrous consequences. That

is why fraud must be pled with particularity, describing the alleged conduct with
sufficient detail. Of course, a plaintiff need not prove her case at the pleading stage.
But I cannot, and I will not, drag a defendant into discovery when a complaint fails
to allege the details of fraud—causally linked together—to form a plausible and
particular claim. Relator’s complaint does not meet this bar, and Defendants should
not be subject to further litigation under the shadow of a haphazardly pled 82-page
complaint.
For the foregoing reasons, Defendants’ Motion to Dismiss, [ECF No. 56], is
GRANTED. The court DIRECTS the Clerk to send a copy of this Order to counsel of
record, including that of the United States, and any unrepresented party. The court
further DIRECTS the Clerk to post a copy of this published opinion on the court’s
website, www.wvsd.uscourts.gov.
ENTER:

25

November 7, 2024