Barbara Senters v. Quest Diagnostics, Inc.

24-12998 Opinion of the Court 3 Relator sued Quest under seal on behalf of the United States and the State of Georgia, alleging that Quest violated the False Claims Act (FCA), 31 U.S.C. § 3729, the Georgia False Medicaid Claims Act, O.C.G.A. § 49-4-168.1, and the Georgia Medical Assistance Act, O.C.G.A. § 49-4-146.1.

As Relator alleged, the scheme involved custom lab panels created by Quest's sales representatives to be implemented in doc- tors' offices by Quest employees. Relator further alleges that in creating these custom panels, Quest made it difficult for doctors to know which tests were included in the custom panel and thus dif- ficult to understand what tests were ordered. As a result, when the physicians selected the custom panels, they unknowingly ordered tests that were not determined to be medically necessary for their patients, and then Quest billed the government for those unneces- sary tests.

Because Quest, not the doctor's offices or hospitals, submits the claim for reimbursement to the government, it must submit a Center for Medicare & Medicaid Services Form 1500 (CMS Form 1500). CMS Form 1500 requires a provider, here Quest, to ex- pressly certify that the claim being submitted "complies with all Medicare and/or Medicaid laws, regulations" and that the services listed on the form "were medically indicated and necessary for the health of the patient." To submit the CMS Form 1500, Quest had to submit a Medicare Enrollment Application, Form CMS-855B, which requires that Quest agree to abide by federal laws and

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4 Opinion of the Court 24-12998 regulations along with certifying that Quest would not "knowingly present . . . a false or fraudulent claim for payment by Medicare."

In July 2011, Relator's action was administratively closed pending the United States's decision on whether to intervene. Very little activity occurred on the district court docket, but inves- tigations occurred. In October 2020, the United States declined to intervene. In February 2021, Relator filed a third amended com- plaint (TAC) that was not under seal. In the TAC, the crux of Re- lator's claim was that Quest submitted false claims and false state- ments that lab tests were medically necessary and eligible for reim- bursement and that Quest certified on its CMS Form 1500 that it complied with all Medicare laws for payment.

Quest moved to dismiss. The district court granted the mo- tion because under Federal Rule of Civil Procedure 9(b), it found that Relator had not pled with particularity that "a specific fraudu- lent claim was in fact submitted to the government." But based on Relator's representations that she had 75 hours of investigative re- cording that would allow her to plead her claims with more detail, the district court granted Relator leave to file the FAC. Unlike in the TAC, Relator alleged in the FAC that Quest submitted requests for payment of services, that Quest did not know whether the lab tests were medically necessary, and that de- spite this lack of knowledge, Quest certified on its CMS Form 1500 that it complied with all Medicare laws for payment. Quest again moved to dismiss.

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24-12998 Opinion of the Court 5 The district court granted Quest's motion to dismiss, finding that "Relator fail[ed] to plead the falsity element with particularity and so fail[ed] to plead that an actual false claim was submitted to the government." In relying on the express certification theory, the court explained that "Relator must plead a representative false claim in which the services rendered were not 'medically indicated and necessary for the health of the patient' and where the claim was submitted to the government for payment." And Relator failed to do so because the FAC does not provide any particular details about the only representative claim submitted to the gov- ernment. Instead, Relator used inferences because of the alleged

"shady nature of the scheme." At the end, the district court ex- plained that "this case must come to a close" and did not give Re- lator leave to amend.¹Relator timely appealed.

II. Standard of Review

"We review a dismissal with prejudice for failure to state a claim under the False Claims Act de novo." Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1050 (11th Cir. 2015). We take the allegations in the complaint as true and draw all reasonable inferences in Rela- tor's favor. Id.

III. Analysis

On appeal, Relator argues that the district court erred in dis- missing the FAC because it alleged with the requisite particularity

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6 Opinion of the Court 24-12998 a false claim violation under 31 U.S.C. § 3729. Relator also argues that the district court should have allowed Relator to amend her complaint. We address each argument in turn.

A. Dismissal of FAC

"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] knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.'" United States ex rel. Phalp v. Lincare Holdings, Inc., 857 F.3d 1148, 1154 (11th Cir. 2017) (quoting 31 U.S.C. § 3729(a)(1)(A)-(B)). Section 3729(a)(1) imposes liability for vari- ous acts, and relevant for our purposes, it imposes liability for pre- sentment and false statements. 31 U.S.C. § 3729(a)(1)(A)-(B).

"To state a § 3729(a)(1)(A) presentment claim, a complaint must allege (1) a false claim, (2) that the defendant presented, or caused to be presented, for payment or approval, (3) with knowledge that the claim was false. United States ex rel. 84Partners, LLC v. Nuflo, Inc., 79 F.4th 1353, 1359 (11th Cir. 2023) (emphasis added). "To state a § 3729(a)(1)(B) false-statement claim, a com- plaint must allege (1) the defendant made, or caused to be made, a false statement, (2) the defendant knew the statement was false, and (3) the statement was material to a false claim." Id. (emphasis added). "[A]n essential element that must be alleged in a False Claims Act complaint is the actual presentment or payment of a false claim." Id. at 1360 (emphasis added). "Standing alone, a

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24-12998 Opinion of the Court 7 fraudulent scheme, no matter how egregious, is not enough; there must be an actual false claim." Id.

When alleging an FCA violation, a relator's complaint must meet the heightened pleading standard of Federal Rule of Civil Pro- cedure 9(b). United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1357 (11th Cir. 2006). Rule 9 (b) requires that a party "alleging fraud or mistake . . . must state with particularity the circum- stances constituting fraud or mistake." "[T]he particularity stand- ard in qui tam actions requires the relator to allege the actual sub- mission of a false claim." Olhausen v. Arriva Med., LLC, 124 F.4th 851, 860 (11th Cir. 2024) (per curiam) (internal quotation marks omitted and alteration adopted). "It is not enough to plead gener- ally that false claims were submitted, nor may a relator merely

"point to 'improper practices of the defendant' to support 'the in- ference that fraudulent claims were submitted' because 'submis- sion cannot be inferred from the circumstances.'" Id. at 860-61 (al- terations adopted). Rather, a relator must "allege the 'who,' 'what,' 'where,' 'when,' and 'how' of fraudulent submissions to the government." Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir. 2005) (per curiam).

Here, Relator asserts that the FAC contained an exemplar sample of a false claim that shows a violation under 31 U.S.C. § 3729, under three theories of liability: (1) express false certifica- tion theory, (2) implied false certification theory, and (3) fraudulent inducement theory. Relator expends considerable ink on these dif- ferent theories. But she misses the mark. No matter which theory

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8 Opinion of the Court 24-12998 she pursues, her FAC rises and falls with the fact that she failed to plead with particularity that a false claim was submitted to the gov- ernment.

As an example, Relator's exemplar sample for Patient Y shows that the doctor ordered a custom panel and that panel was submitted to the government for reimbursement using the CMS Form 1500, which required a certification that the services listed on the form "were medically indicated and necessary for the health of the patient." Then Relator alleges that Quest did not know if the services were medically necessary. But that is a blanket allegation with no particular facts to show why the custom panel for Patient Y was not medically necessary and why, therefore, any certification to the contrary was false. Like the district court noted, "Relator provided no factual allegations to indicate that doctors later discov- ered, or even now believe, that they were tricked or confused into ordering medically unnecessary tests or tests that they did not in- tend to order."

Relator tries to work around this issue by pointing to per- sonal knowledge about the alleged fraudulent claims, including Pa- tient Y's custom panel. See United States ex rel. Matheny v. Medco Health Sols., Inc., 671 F.3d 1217, 1230 (11th Cir. 2012) ("[W]e are more tolerant toward complaints that leave out some particulari- ties of the submissions of a false claim if the complaint also alleges personal knowledge or participation in the fraudulent conduct."). We recognize that Relator's job gave her access to the claims being submitted to the government and that she reviewed the claims

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24-12998 Opinion of the Court 9 billed to the government, but Relator must still provide particular facts about a representative false claim. Previously, we found that relators with "managerial positions" who attended "monthly finan- cial review meetings" could not satisfy the Rule 9(b) particularity requirements because "the relators failed to explain how their ac- cess to possibly relevant information translated to knowledge of actual tainted claims presented to the government." Carrel v. AIDS Healthcare Found., Inc., 898 F.3d 1267, 1277-78 (11th Cir. 2018). Relator's complaint suffers from the same flaw. The FAC alleged that Relator had access to Quest's billing system and con- firmed from her review of those systems that Quest was submitting claims to the government, but she does not allege any facts that show those label panels "were medically indicated and necessary for the health of the patient." Those allegations cannot satisfy Rule 9(b)'s particularity requirement because even with "direct knowledge of the defendants' billing and patient records," Relator

"failed to provide any specific details regarding either the dates on or the frequency with which the defendants submitted false claims, the amounts of those claims, or the patients whose treatment served as the basis for the claims." United States ex rel. Sanchez v. Lymphatx, Inc., 596 F.3d 1300, 1302 (11th Cir. 2010) (per curiam). Nor did Relator claim to have observed the submission of an actual false claim; nor did she personally participate in submitting false claims. See Matheny, 671 F.3d at 1230. Thus, Relator's access and knowledge does not help Relator satisfy the heightened particular- ity requirement.

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10 Opinion of the Court 24-12998 Although we construe all facts in favor of Relator, we "de- cline to make inferences about the submission of fraudulent claims because such an assumption would strip all meaning from Rule 9(b)'s requirements of specificity." Corsello, 428 F.3d at 1013 (inter- nal quotation marks omitted and alteration adopted). B. Leave to Amend

Relator did not file a motion asking for leave to file a fifth amended complaint but asked in her response to Quest's motion to dismiss. The district court did not address this request but dis- missed the case with prejudice. On appeal, Relator argues that the district court erred in entering a dismissal with prejudice because the district court did not make a finding of delay or willful conduct such that lesser sanctions were not appropriate. But as Quest notes, the district court did not dismiss the case as a sanction for litigation misconduct. The district court dismissed the case with prejudice because the case had been happening for over fourteen years with several complaints where Relator ultimately failed to plead a false claim with particularity as required. The district court did not err. See Corsello, 428 F.3d at 1014.

IV. Conclusion

The district court's dismissal of the FAC with prejudice is affirmed.

AFFIRMED.

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