No Details? No Way: EDNY Dismisses Relators’ Non-Intervened Claims for Rule 9(b) Failures

In a case spanning more than a decade, with multiple complaints and a partial government intervention, a district court in the Eastern District of New York (EDNY) recently granted defendants’ motion to dismiss relators’ non-intervened claims, concluding that relators failed to plead their nationwide and state claims with sufficient particularity under Fed. R. Civ. P. 9(b). U.S. ex rel. Pepe M.D. & Sherman M.D. v. Fresenius Med. Care Holdings et al., No. 14-CV-03505 (LDH) (ST), 2024 WL 4635236 (E.D.N.Y. Oct. 31, 2024).

The litigation began in June 2014, when the relators — a board-certified internist and a kidney specialist — filed their qui tam complaint under seal against the defendants — which included Fresenius Vascular Care, Inc. (Fresenius), a clinic network for interventional radiology, and its Vice President of Operations, Defendant Miller. The complaint alleged that defendants engaged in a fraudulent scheme of self-referring patients to their own clinics and healthcare facilities, and generating false patient records and false reimbursement claims to Medicare. The government investigated over the course of several years, and the United States and certain states ultimately filed their own complaints-in-intervention. Certain defendants then moved to dismiss relators’ claims under Rules 12(b)(6) and 9(b). The court granted the motion and dismissed the non-intervened claims.

First, with respect to relators’ nationwide FCA claims, the court found that relators’ 105-page complaint “fail[ed] to plead facts supporting a strong inference of fraud,” and did not “connect[] the alleged conduct to ‘specific claims [that] were indeed submitted’ to the government.” Specifically, the court found that relators’ allegations regarding Defendant Miller’s industry presentations, and their allegations regarding defendants’ financial incentive policies, were too generalized and speculative to support a sufficiently strong inference of fraud. The court was similarly unmoved by relators’ presentation of aggregated physician-level Medicare Part B data, finding that relators “fail[ed] to adduce facts specifying that any of the payments reflected in this generalized data was the product of a false claim submitted to the government.” The court also observed that relators identified patient examples from only New York and New Jersey, which could not reasonably support the court’s extrapolation to a nationwide fraud, and the court declined relators’ invitation to infer that the existence of a one-minute video on Fresenius’ website meant that the examination it depicted was performed throughout the country and bore a sufficient connection to purportedly false claims. Although the Second Circuit permits allegations of fraud to be based on “information and belief when facts are peculiarly within the opposing party’s knowledge” and the plaintiff “adduce[s] specific facts supporting a strong inference of fraud,” the court found that relators were unable to satisfy even this “relaxed pleading standard” and dismissed their nationwide FCA claims.

Second, the court rejected relators’ non-intervened state law claims, finding that they too failed the Rule 9(b) particularity requirement, which “applies with equal force to state law claims.” Relators failed to allege fraudulent conduct in any of the 15 non-intervening states, and relators could not leverage their deficient allegations of a nationwide scheme to support their weak state law claims.

Finally, the court dismissed relators’ nationwide and state law claims against Defendant Miller, finding that relators failed to allege any facts connecting him to any alleged fraud in any of the non-intervening states. Relators claimed that Miller was the “architect” of the alleged fraud, but the facts they pled to support their claim — namely, that he was appointed to a senior leadership position within the clinic network, that he had a conversation with one of the relators during which he referenced self-referrals, and that he presented at industry conferences on certain procedures — did not support a “strong inference” that he facilitated or was engaged in any purported national scheme resulting in the submission of false claims to the government.

The Fresenius decision is a reminder that Rule 9(b) has teeth: even in circuits with more relaxed particularity pleading standards for FCA plaintiffs, relators cannot get by with claims of fraud and nationwide misconduct supported by generalized, speculative, and conclusory allegations.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.