Appellate Waiver, Record-Citation Defaults, and Harmless-Error Affirmance in FCA/FATA Scienter Litigation

1. Introduction

This qui tam action was brought by relator La Frontera Center, Inc. (“Relator”), an Arizona behavioral health provider, alleging that United Behavioral Health and affiliated entities (“Defendants”) violated the federal False Claims Act (“FCA”) and several New Mexico analog statutes, including the Fraud Against Taxpayers Act (“FATA”). The dispute arose out of New Mexico’s statewide behavioral health managed-care contract and a later fraud investigation that led to the suspension of certain New Mexico providers and the use of Arizona providers (including Relator) to fill service gaps.

The litigation ultimately turned less on the operational turmoil alleged by Relator and more on proof requirements at summary judgment and on appeal—especially (i) the scienter (“knowingly”) element in FCA/FATA claims after United States ex rel. Schutte v. SuperValu Inc., (ii) the need to identify record evidence with specificity, and (iii) the consequences of failing to challenge alternative, independently sufficient grounds for a district court’s ruling.

Key Issues

• Reverse false claims (FCA/FATA): Did Defendants “knowingly” and improperly avoid an obligation to pay funds to the government?
• Fraudulent inducement (FATA): Did Defendants “knowingly” misrepresent capacity/ability in the RFP response so that later payment claims became tainted?
• Appellate preservation: Did Relator waive issues by not challenging the district court’s alternative scienter holdings and by failing to cite specific record evidence?
• Harmless error: Even if Count I (FCA) was wrongly dismissed on limitations/public-disclosure grounds, was any error harmless given the identical scienter element already resolved against Relator on Count V (FATA)?

2. Summary of the Opinion

The Tenth Circuit affirmed across the board. It upheld summary judgment for Defendants on the remaining reverse-false-claims counts (Counts II & III) because Relator failed to properly challenge the district court’s alternative scienter ruling and failed to point to record evidence establishing “knowing” conduct. It affirmed summary judgment on the fraudulent-inducement FATA count (Count V) because Relator did not cite specific evidentiary materials showing Defendants’ subjective knowledge of falsity at the time statements were made. Finally, it declined to reach the statute-of-limitations and public-disclosure-bar grounds for dismissal of the FCA claim (Count I), holding that any error was harmless because the same scienter deficiency that defeated Count V would defeat Count I as well.

3. Analysis

3.1 Precedents Cited (and How They Drove the Result)

A. Summary-judgment framework and evidentiary burdens

• Cillo v. City of Greenwood Vill. (quoting Tabor v. Hilti, Inc. and citing Montgomery v. City of Ardmore and Copelin-Brown v. N.M. State Pers. Off.) supplied the de novo standard of review, the requirement to view evidence in the nonmovant’s favor, and Rule 56’s “no genuine dispute of material fact” threshold.
• Trainor v. Apollo Metal Specialties, Inc. (citing Hom v. Squire) framed the burden-shifting: once Defendants show the absence of a genuine issue, the nonmovant must “set forth specific facts” showing a triable issue.

These authorities mattered because Relator repeatedly relied on general allegations and attorney argument rather than pinpointing admissible evidence creating a fact issue on scienter.

B. Reverse false claims and scienter as subjective after SuperValu

• United States ex rel. Barrick v. Parker-Migliorini Int'l, LLC provided the Tenth Circuit’s baseline description of “reverse” false claims: liability for wrongly avoiding payments owed to the government, and that the “improperly avoids” prong may not require a false record or statement.
• United States ex rel. Schutte v. SuperValu Inc. supplied the controlling scienter lens: the focus is on “knowledge and subjective beliefs,” and “what the defendant knew” when presenting the claim—not what an objectively reasonable person might have believed.

The panel treated scienter as the decisive element: even if an obligation arguably existed, Relator still had to produce evidence that Defendants subjectively knew (or were deliberately ignorant/reckless) that they were improperly avoiding that obligation.

C. Appellate waiver when alternative grounds go unchallenged

• SCO Grp., Inc. v. Novell, Inc. was central: when a district court rests on alternative, independently sufficient bases, an appellant must challenge each; failure to do so waives review.
• Nixon v. City & Cnty. of Denver reinforced the appellant’s burden to show the district court was wrong.
• Starkey ex rel. A.B. v. Boulder Cnty. Soc. Servs. confirmed that an unchallenged alternative ground allows affirmance.
• Adler v. Wal-Mart Stores, Inc. supplied a related principle: bald assertions and inadequate record citations do not justify reversal.

These cases supplied the doctrinal lever to affirm Counts II and III without reaching the obligation question: Relator focused its opening brief on “obligation” and largely bypassed the district court’s alternative scienter holding—an independently sufficient ground.

D. The record-citation rule: appellate courts will not hunt for evidence

• Gross v. Burggraf Const. Co. (quoting Thomas v. Wichita Coca-Cola Bottling Co.) held that a party must cite specific evidentiary materials (affidavits, deposition transcript pages, exhibits). Courts will not search the record for “dormant evidence.”
• United States v. Dunkel was invoked for the “no rummaging” principle: undeveloped assertions do not substitute for argument and evidence.
• Thomas v. Wichita Coca-Cola Bottling Co. (citing Celotex Corp. v. Catrett and Phillips v. Calhoun) emphasized that counsel’s allegations in briefs cannot defeat summary judgment.

This line of cases controlled Count V: Relator gestured to “emails” and “post-contractual” evidence but did not identify the specific record materials needed to create a genuine dispute over Defendants’ subjective knowledge at the relevant time.

E. Reply-brief limitations

• Bronson v. Swensen (citing Exum v. U.S. Olympic Comm. and Gross v. Burggraf Const. Co., and joined by references to Burke v. Regalado and In re Syngenta AG MIR 162 Corn Litig.) supported the refusal to consider arguments inadequately presented in the opening brief.
• Headrick v. Rockwell Int'l Corp. provided the rationales: fairness to the appellee and protection of the court’s deliberative process.

The panel used these authorities to reject Relator’s attempt to repair the evidentiary and argument deficiencies in its reply brief.

F. Fraudulent inducement doctrine referenced but not reached on the merits

• U.S. ex rel. Marcus v. Hess was cited for the proposition that once a contract is fraudulently induced, subsequent payment claims may be actionable.
• U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc. was cited to underscore the prerequisite: there must be an original fraudulent inducement for downstream claims to be tainted.

The panel effectively treated these cases as beside the point because Relator could not first establish evidence of “knowing” falsity when the RFP statements were made.

G. FCA/FATA symmetry and harmless error

• State ex rel. Foy v. Austin Cap. Mgmt., Ltd. and State ex rel. King v. Behav. Home Care, Inc. supported the proposition that New Mexico courts often rely on federal FCA case law to interpret FATA due to analogous language.
• Bridges v. Wilson (invoking Fed. R. Civ. P. 61 and quoting Wills v. Brown Univ.) supplied the harmless-error approach: a “realistic assessment” of whether the outcome would differ absent the error.
• Est. of Davis v. Wells Fargo Bank was cited as supportive authority for affirming on harmlessness where an independent defect would defeat the claim anyway.

This cluster of authorities enabled the court to avoid the FCA Count I’s contested defenses (limitations and public disclosure): once Count V failed on scienter, and scienter is identical under FCA and FATA (a point Relator conceded), any error dismissing Count I was “harmless.”

3.2 Legal Reasoning

A. Counts II & III (reverse FCA and reverse FATA): affirmance via waiver of the scienter issue

The district court granted summary judgment for two independent reasons: (1) no established “obligation” to pay funds at the relevant time, and (2) no evidence Defendants “knowingly” avoided any obligation. On appeal, Relator trained its argument on the “obligation” prong and did not meaningfully address the alternative scienter holding with record-based proof. Applying SCO Grp., Inc. v. Novell, Inc. and Starkey ex rel. A.B. v. Boulder Cnty. Soc. Servs., the panel treated the scienter holding as unchallenged and independently sufficient—thus affirming without reaching the obligation question.

Notably, the panel also tied scienter to United States ex rel. Schutte v. SuperValu Inc.: the relevant inquiry is Defendants’ subjective knowledge and beliefs at the time. Even a strong “obligation” argument would not cure the absence of evidence that Defendants subjectively knew they were improperly withholding/avoiding payment.

B. Count V (FATA fraudulent inducement): failure to cite record evidence of subjective falsity

Relator argued that Defendants misrepresented capability in the RFP response, and that subsequent claims were therefore “fraudulently induced.” The district court found no triable issue that Defendants knew their statements were false when made. On appeal, Relator chiefly argued the district court should have considered “post-contractual” evidence (e.g., emails), but failed to cite specific record items and pages. Under Gross v. Burggraf Const. Co. and Thomas v. Wichita Coca-Cola Bottling Co., this omission was fatal: appellate courts do not comb the record to locate evidence.

Relator’s attempt to fix this in a reply brief ran into Bronson v. Swensen and Headrick v. Rockwell Int'l Corp.. Even then, the reply brief citations pointed largely to briefing and pleadings, not admissible evidence. The panel also noted an additional obstacle: the district court had excluded certain email evidence on procedural grounds, and Relator did not challenge those alternative exclusionary rulings—another path to affirmance under Starkey ex rel. A.B. v. Boulder Cnty. Soc. Servs..

C. Count I (FCA claim dismissed on limitations/public disclosure): harmlessness because scienter fails anyway

The district court dismissed Count I on statute-of-limitations and public-disclosure grounds. The panel declined to review those defenses because it found any potential error harmless. Relying on the textual parallelism between FCA and FATA and state interpretive decisions such as State ex rel. Foy v. Austin Cap. Mgmt., Ltd. and State ex rel. King v. Behav. Home Care, Inc., the court reasoned that “knowingly” is defined identically and applied similarly. Since Relator’s Count I and Count V were premised on the same alleged misrepresentations and inducement theory—and Count V failed for lack of evidence of “knowing” falsity—Count I would fail for the same reason. Under Bridges v. Wilson and Fed. R. Civ. P. 61, the alleged dismissal errors did not affect substantial rights because the outcome would not realistically change.

3.3 Impact

A. For FCA/FATA litigants (especially relators)

• Scienter proof must be granular and contemporaneous: After United States ex rel. Schutte v. SuperValu Inc., parties should expect courts to demand record evidence of what the defendant subjectively believed at the time—emails, meeting notes, testimony, internal guidance, warnings, and escalation decisions, properly cited.
• Reverse false claims remain obligation-plus-scienter cases: Even where an “obligation” is debatable, the scienter issue can independently dispose of the case if the record does not show knowing avoidance.
• Fraudulent inducement theories still require a proven “initial fraud”: U.S. ex rel. Marcus v. Hess can expand liability to later claims, but U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc. underscores that the first step—knowing misrepresentation at contract formation—must be supported by evidence.

B. For appellate practice in the Tenth Circuit

• Challenge every independent ground: The decision is a cautionary example of SCO Grp., Inc. v. Novell, Inc. waiver doctrine in action.
• Cite the record precisely: The court reiterated it will not act as a fact-finder or record-searcher (Gross v. Burggraf Const. Co.; Thomas v. Wichita Coca-Cola Bottling Co.).
• Reply briefs cannot rescue an opening brief: Bronson v. Swensen and Headrick v. Rockwell Int'l Corp. remain major barriers to “late” arguments and citations.
• Harmless error can narrow appellate review: If one dispositive element (here, scienter) defeats multiple aligned claims, other issues (limitations, public disclosure) may never be reached (Bridges v. Wilson).

4. Complex Concepts Simplified

• Qui tam: A private whistleblower (“relator”) sues on behalf of the government and may receive a share of any recovery.
• Reverse false claim: A claim that the defendant unlawfully avoided paying money to the government (as opposed to unlawfully taking money from it). See United States ex rel. Barrick v. Parker-Migliorini Int'l, LLC.
• Scienter (“knowingly”): Under FCA/FATA, liability requires actual knowledge, deliberate ignorance, or reckless disregard. After United States ex rel. Schutte v. SuperValu Inc., courts focus on what the defendant subjectively believed—not what a reasonable person might have believed.
• Fraudulent inducement: If a contract is obtained by fraud, later payment requests under that contract may be treated as false. But only if the initial fraud is proven. See U.S. ex rel. Marcus v. Hess; U.S. ex rel. Bettis v. Odebrecht Contractors of Cal., Inc..
• Alternative grounds / waiver on appeal: If the district court gives two independent reasons for a decision, the appellant must attack both. Failing to challenge one can forfeit the appeal. See SCO Grp., Inc. v. Novell, Inc..
• Harmless error: Even if a district court made a mistake, the appellate court will affirm if the outcome would realistically be the same anyway. See Bridges v. Wilson.

5. Conclusion

Although styled as a nonprecedential disposition, the opinion offers a clear, practice-shaping message for FCA/FATA litigation and appeals: scienter is often the linchpin, and it must be supported by precise, record-cited evidence of subjective knowledge as required by United States ex rel. Schutte v. SuperValu Inc.. Procedurally, the decision underscores two recurring appellate gatekeepers in the Tenth Circuit—(1) waiver when an appellant fails to challenge alternative, independently sufficient grounds (SCO Grp., Inc. v. Novell, Inc.), and (2) strict enforcement of record-citation requirements (Gross v. Burggraf Const. Co.; Thomas v. Wichita Coca-Cola Bottling Co.). Finally, it demonstrates how harmless-error review (Bridges v. Wilson) can allow an appellate court to bypass contested defenses (limitations and public disclosure) when an aligned claim already fails on a common dispositive element.