Section 3729(a)(1)(B) of the False Claims Act requires a plaintiff to allege with particularity the actual submission of a claim to the U.S. government. The Eleventh Circuit has now held that this requirement can be satisfied by alleging that the defendant’s external audit showed that at least some false claims were submitted, even where the plaintiff is not personally involved in making the claims. Olhausen v. Arriva Medical, LLC, 2024 WL 5181896 (11th Cir. Dec. 20, 2024).
Olhausen involved a qui tam action filed by a former executive of Arriva Medical, LLC (a provider of mail-order diabetic-testing supplies and other medical products) against Arriva and its related entities. The Center for Medicare and Medicare Services (“CMS”) awarded Arriva a Durable Medical Equipment, Prosthetics/Orthotics and Supplies competitive bidding contract (the “Contract”) to provide Medicare beneficiaries with mail-order diabetic supplies. Arriva’s parent company purchased a separate entity that operated a call center and billing operations in the Philippines. It used the Philippines-based entity to service beneficiaries in the United States, including handling most initial intake calls, reorders, doctor-prescriptions orders, and medical records requests. Though operations were housed in the Philippines, Arriva made it appear as though its Florida office was processing the claims.
The executive’s suit alleged that the entities violated Section 3729(a)(1)(A) and (a)(1)(B) of the False Claims Act. Specifically, he alleged, Arriva provided supplies without obtaining the “required” assignment-of-benefits signatures from beneficiaries, though the company allegedly represented that it had signatures on files. Without an assignment of benefits, Medicare pays the beneficiary rather than the supplier. Arriva regularly hired an outside consulting firm to internally audit its claims to CMS. In 2013, the audit found that for some orders, Arriva had an assignment of benefits on file for the beneficiary for only 53% of those orders despite its representations to CMS.
The executive also alleged a conspiracy amongst the entities to submit false Medicare claims by failing to disclose or accredit certain call center locations that processed claims for payment. Only suppliers that comply with quality standards specified by accreditation organizations may furnish items to the government. The executive alleged that the Arriva locations in the Philippines, Arizona, and Tennessee operated as undisclosed suppliers.
The defendants moved to dismiss. The district court granted the motion, holding that the executive failed to plead with the level of particularity required under Federal Rule of Civil Procedure 9(b) his allegations.
In a per curiam opinion by Judges Wilson, Rosenbaum, and Covington (sitting by designation from the Middle District of Florida), the Eleventh Circuit first addressed whether the executive had to plead with particularity that an alleged false claim was submitted under Section 3729(a)(1)(B). The court explained that, in recent years, it has held that the actual presentment or payment of a false claim is an essential element that must be alleged in complaints litigants bring under the False Claims Act, meaning the complaint must allege facts about the time, place, substance, and details about the fraud. There must be, the court noted, some indicia of reliability to support the allegation of an actual false claim for payment being made to the government.
The court then turned to whether the complaint pled with particularity that the defendants submitted allegedly false claims. The court held that the complaint sufficiently alleged the who, what, where, when, and how required to satisfy Rule 9(b)’s particularity requirements. The complaint alleged that the defendants submitted claims for products to CMS that they knew, at least for part of the time period, that they had falsely and knowingly represented that they had assignments of benefits on file. The court explained that the audit findings were critical to finding that the complaint satisfied Rule 9(b)’s particularity requirements.
The court also addressed the executive’s claim that the defendants failed to identify service-providing locations. The court held that to prevail on his claims, the executive must show (1) that the items were covered under the Contract, and (2) the allegedly undisclosed or unaccredited locations. The court held that the plaintiff failed to satisfy either of these elements. First, the court held that the audit allegations did not provide the sufficient details for the conspiracy claim because the products analyzed in the audit were not products sold under the Contract. Second, the court held that the audit was not location specific, so there was no way of knowing whether the audit findings were linked to any undisclosed or unaccredited locations. Accordingly, the court vacated the district court’s dismissal of some claims, but it affirmed the dismissal of the conspiracy claim.