Rodriguez v. Our Lady Lourdes Med ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
12-30-2008
Rodriguez v. Our Lady Lourdes Med
Precedential or Non-Precedential: Precedential
Docket No. 06-5207
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-5207
RENEE RODRIGUEZ; BARBARA KING, In the Name of
the United States Government
Pursuant to the False Claims Act, 31
U.S.C. Section 3730, and Individually Pursuant to the New
Jersey Conscientious Employee Protection Act
Appellants
v.
OUR LADY OF LOURDES MEDICAL CENTER
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 06-cv-00129)
District Judge: Honorable Robert B. Kugler
Submitted Under Third Circuit LAR 34.1(a)
December 1, 2008
Before: AMBRO, WEIS, and VAN ANTWERPEN, Circuit
Judges
(filed: December 30, 2008)
Ross Begelman, Esquire
Marc M. Orlow, Esquire
Begelman & Orlow, P.C.
411 Route 70 East, Suite 245
Cherry Hill, NJ 08034
Counsel for Appellants
Brian Flaherty, Esquire
Gregory A. Lomax, Esquire
Drew Wixted, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
1940 Route 70 East, Suite 200
Cherry Hill, NJ 08003
Counsel for Appellee
OPINION OF THE COURT
AMBRO, Circuit Judge
Renee Rodriguez and Barbara King filed a qui tam
complaint pursuant to the False Claims Act, 31 U.S.C. § 3729
et seq., against their former employer, Our Lady of Lourdes
Medical Center (the “Medical Center”), a New Jersey health
2
care provider. The United States declined to intervene in the
action, and the District Court ultimately dismissed the complaint
for failure to state a claim for which relief can be granted.
Rodriguez and King then filed a notice of appeal 56 days after
the entry of judgment. We decide whether this appeal is subject
to the 30-day filing deadline that generally applies to civil suits
or the 60-day deadline that applies when the United States is a
party.
We hold that, though the United States declined to
intervene in the action, the 60-day deadline still applies and that
Rodriguez and King’s notice of appeal was therefore timely.
Nonetheless, we affirm the District Court’s dismissal on the
merits.
I. Facts and Procedural History
Rodriguez and King are licensed practical nurses who
were formerly employed by the Medical Center. In January
2006, they filed a qui tam complaint against the Center in the
District of New Jersey, alleging fraud on the Government in
violation of the False Claims Act.1 The allegations in the
1
“Qui tam actions have a long history and were used in
England before the foundation of this country.” United States
ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 509 (3d
Cir. 2007). The term “qui tam” itself is a shortening of “the
Latin phrase qui tam pro domino rege quam pro se ipso in hac
parte sequitur, which means ‘who pursues this action on our
3
complaint centered on the Bergan Lanning Health Center
(“Bergan Lanning”) in Camden, New Jersey. According to the
complaint, Bergan Lanning is jointly operated by the Medical
Center and the Camden County Department of Health and
Human Services and receives funding from the federal
Government. Rodriguez and King alleged that, while employed
by the Medical Center, they were assigned to do work with
outreach programs housed by Bergan Lanning that provide
medical services to the homeless and the uninsured working
poor.2 They asserted that, beginning in June 2004, beneficiaries
Lord the King’s behalf as well as his own.’” Vt. Agency of
Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 769
n.1 (2000). Under modern practice, qui tam actions are brought
by private plaintiffs on behalf of the Government in exchange
for some portion of any resulting damages award. See id. at
773–74.
Rodriguez and King’s complaint also alleged that they
were terminated from their employment for objecting to illegal
practices in violation of New Jersey’s Conscientious Employee
Protection Act, N.J. Stat Ann. § 34:19-1 et seq. The District
Court declined to exercise supplemental jurisdiction over this
claim when it dismissed the False Claims Act action, Rodriguez
v. Our Lady of Lourdes Med. Ctr., No. 06-0129, 2006 WL
3193838, at *2 (D.N.J. Nov. 1, 2006), and it is not before us.
2
According to the complaint, Rodriguez was assigned to
work with Project H.O.P.E. (Homeless Outreach Program
Enrichment), which provides health care and social services to
homeless individuals and families, while King was assigned to
4
of those programs could get prescriptions filled by persons who
were not licensed pharmacists under the New Jersey Pharmacy
Act, N.J. Stat. Ann. § 45:1-1 et seq.3 This, they contended,
amounted to a violation of the False Claims Act insofar as
“allowing non-licensed individuals . . . to dispense drugs in
violation [of New Jersey law] constitutes a false
certification . . . to get a claim paid or approved by the
Government.” Rodriguez and King’s Compl. ¶ 21.
Rodriguez and King filed their complaint under seal and
served a copy on the United States Government in accordance
with the requirements of the False Claims Act. 31 U.S.C. §
3730(b)(2). In February 2006, the Government declined to
intervene in the case and the District Court ordered the
complaint unsealed. Rodriguez v. Our Lady of Lourdes Med.
Ctr., No. 06-0129, 2006 WL 3193838, at *1 (D.N.J. Nov. 1,
2006). In May 2006, the Medical Center made a motion to
dismiss the complaint under either Federal Rule of Civil
Procedure 12(b)(6) or 9(b), contending that the complaint
neither stated a prima facie case under the False Claims Act nor
complied with the heightened pleading requirements that apply
to allegations of fraud. On November 1, 2006, the District
work with Community Health Practice, which serves as a
primary clinic to the uninsured working poor.
3
The New Jersey Pharmacy Act was repealed and
replaced by the New Jersey Pharmacy Practice Act, N.J. Stat.
Ann. § 45:14-40 et seq.
5
Court granted the motion to dismiss under Rule 12(b)(6).
Rodriguez, 2006 WL 3193838, at * 2. Rodriguez and King filed
a notice of appeal on December 27, 2006, 56 days later.
II. Jurisdiction
Before we can reach the merits, we must determine
whether Rodriguez and King’s appeal was timely.4 See Benn v.
First Judicial Dist. of Pennsylvania, 426 F.3d 233, 237 (3d Cir.
2005) (“Compliance with the Rules of Appellate Procedure for
proper filing of a notice of appeal is mandatory and
jurisdictional.”) (internal quotation marks omitted). The
timeliness of a notice of appeal is governed by Rule 4(a)(1) of
the Federal Rules of Appellate Procedure. This provides in
pertinent part:
(A) In a civil case, except as
provided in Rule[] 4(a)(1)(B), . . .
the notice of appeal . . . must be
filed . . . within 30 days after the
judgment or order appealed from is
entered.
(B) When the United States . . . is a
party, the notice of appeal may be
4
The District Court had jurisdiction under 28 U.S.C.
§ 1331.
6
filed by any party within 60 days
after the judgment or order
appealed from is entered.
Fed. R. App. P. 4(a)(1)(A), (B). Because the notice of appeal
here was filed 56 days after the District Court’s entry of
judgment, its timeliness hinges on whether the United States still
counts as a “party” to a private False Claims Act action for Rule
4(a)(1) purposes when it initially declines to intervene.
This is an issue of first impression for our Court and one
over which courts of appeals have split. The Courts of Appeals
for the Fifth, Seventh and Ninth Circuits apply the 60-day
deadline under these circumstances. See United States ex rel. Lu
v. Ou, 368 F.3d 773 (7th Cir. 2004); United States ex rel. Russell
v. Epic Healthcare Mgmt. Group, 193 F.3d 304 (5th Cir. 1999);
United States ex rel. Haycock v. Hughes Aircraft Co., 98 F.3d
1100 (9th Cir. 1996). The Courts of Appeals for the Second and
Tenth Circuits apply the 30-day deadline. See United States ex
rel. Eisenstein v. City of New York, 540 F.3d 94 (2d Cir. 2008);
United States ex rel. Petrofsky v. Van Cott, Bagley, Cornwall,
McCarthy, 588 F.2d 1327 (10th Cir. 1978) (per curiam).
What makes this issue difficult is the neither fish nor
fowl nature of the Government’s relationship to a qui tam action
7
under the False Claims Act.5 The Act empowers a private
litigant to bring an action “in the name of the Government.” 31
U.S.C. § 3730(b)(1). The private litigant must initially serve the
complaint on the Government under seal. § 3730(b)(2). The
Government then has 60 days to determine whether to “proceed
with the action, in which case the action shall be conducted by
[it],” or else decline to do so, “in which case the person bringing
the action shall have the right to conduct the action.”
§ 3730(b)(4)(A), (B).
Even when the Government declines to intervene
initially, it still retains the right to continue involvement in the
case in various ways. It may require that it “be served with
copies of all pleadings filed in the action,” and may, upon a
showing of “good cause,” intervene in the action “at a later
date.” § 3730(c)(3). Indeed, in this case, the Government, in
declining to take over the action, requested specifically that it be
served with all pleadings and sent all Orders issued by the
Court, and noted that it reserved the right to intervene at a later
date for good cause. Moreover, should the private False Claims
Act suit succeed, the Government is entitled to at least 70% of
the award. § 3730(d)(2). Finally, although this Court has not
yet ruled on the matter, most courts have held that the
Government retains the right to veto any settlement agreement
reached by a private False Claims Act plaintiff. See United
5
While not all qui tam actions are brought under the
False Claims Act, it is by far the most frequently used of those
laws that allow for such actions. See Stevens, 529 U.S. at 768.
8
States ex rel. Ridenour v. Kaiser-Hill Co., LLC, 397 F.3d 925,
931 n.8 (10th Cir. 2005); United States ex rel. Doyle v. Health
Possibilities, P.S.C., 207 F.3d 335, 339 (6th Cir. 2000); Searcy
v. Philips Elecs. N. Am. Corp., 117 F.3d 154, 159–160 (5th Cir.
1997). But see United States ex rel. Killingsworth v. Northrop
Corp., 25 F.3d 715, 722 (9th Cir. 1994) (holding that the
Government’s right to prevent a private plaintiff from
dismissing a False Claims Act suit without its consent only
applies during the initial 60-day period during which the
Government can elect to take over the action).
The question we face, then, is whether all of this is
enough to make the United States a “party” for Rule 4(a)(1)
purposes, even when it has initially conceded to a private party
“the right to conduct the action.” § 3730(b)(4)(B). In answering
this question, we do not find it dispositive to dwell on the
meaning of the word “party.” On the one hand, the United
States’ “name is on all the papers as the plaintiff,” Haycock, 98
F.3d at 1102, which certainly makes it look like a party to the
action, as does the fact that it stands to receive the bulk of any
award obtained, § 3730(d)(2). On the other hand, as the Court
of Appeals for the Second Circuit has noted, “[t]he inability to
participate without moving to intervene is . . . not consistent
with the principal characteristics of being a party to litigation.”
Eisenstein, 540 F.3d at 98; see also Petrofsky, 588 F.2d at 1329
(stating that a qui tam plaintiff’s proceeding in the name of the
United States is “merely a statutory formality”).
We do, however, join our colleagues in the Fifth, Seventh
9
and Ninth Circuits in finding significant that, even when it
declines to intervene, the United States remains a party to a qui
tam action in the literal sense, i.e., its name is on the caption.
See Ou, 368 F.3d at 775; Russell, 193 F.3d at 307–08; Haycock,
98 F.3d at 1102. Applying the shorter deadline may confuse
litigants who, based on a literal reading on Rule 4(a)(1), assume
that the longer deadline applies. It is especially important, when
interpreting procedural rules, that we avoid any reading likely to
cause confusion. See Fed. R. Civ. P. 1 (requiring that the
Federal Rules of Civil Procedure “be construed and
administered to secure the just, speedy, and inexpensive
determination of every action and proceeding”); Russell, 193
F.3d at 308 (reading Rule 1 of the Federal Rules of Civil
Procedure as “a charge to resist reading the Rules in a manner
that lays traps for the unwary”). Thus, considerations of clarity
for litigants cut in favor of applying the longer deadline. See
Ou, 368 F.3d at 775; Russell, 193 F.3d at 307–08; Haycock, 98
F.3d at 1102; Petrofsky, 588 F.2d at 1329 (Logan, J.,
dissenting).
In addition, the purpose underlying granting a longer
deadline when the United States is a party favors applying the
longer deadline under these circumstances. As the Russell Court
explained, the purpose of the extra time is to accommodate the
relative slowness of the “[G]overnment’s institutional
decisionmaking practices.” 193 F.3d at 306 (citing the Advisory
Committee’s Notes of 1946 to Federal Rule of Civil Procedure
73(a), the predecessor to Federal Rule of Appellate Procedure
4(a)). The Eisenstein Court reasoned that this suggests that the
10
30-day deadline is appropriate in this context, since, when the
Government is not actually controlling the litigation, its status
as a slow-moving institutional actor need not be taken into
account. 540 F.3d at 99. This ignores that, even when it
initially declines to take over the case, the Government still
retains the right to intervene in the action, albeit upon a showing
of “good cause.” 31 U.S.C. § 3730(c)(3). Accordingly, when
a private litigant loses a False Claims Act suit at the district
court, the Government retains the right to move to appeal. See
Searcy, 117 F.3d at 157 (holding that the Government can
appeal an adverse decision even without formally intervening
under § 3730(c)(3)). That means that the slowness of the
Government continues to be relevant to determining how long
the right to appeal should remain available.
In sum, we hold that Rule 4(a)(1)(B)’s 60-day deadline
for filing a notice of appeal applies to False Claims Act suits
even when the Government declines to intervene. Accordingly,
Rodriguez and King’s notice of appeal was timely, and we have
jurisdiction over the appeal under 28 U.S.C. § 1291.
III. Standard of Review
We review de novo a district court’s dismissal of an
action under Federal Rule of Civil Procedure 12(b)(6). Phillips
v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008). As
such, we will uphold the District Court’s dismissal only if,
accepting “all well pleaded factual allegations as true and
draw[ing] all reasonable inferences from such allegations in
11
favor of the complainant,” it is clear that Rodriguez and King
cannot prove a set of facts that would entitle them to relief.
Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir.
2003). Because our review is de novo, we may affirm the
District Court’s order on alternate grounds. See In re Paoli R.R.
Yard PCB Litig., 221 F.3d 449, 461 (3d Cir. 2000) (explaining
the nature of de novo review).
IV. Discussion
The False Claims Act imposes liability on any entity who
(1) knowingly presents, or causes
to be presented, to an officer or
employee of the United States
Government or a member of the
Armed Forces of the United States
a false or fraudulent claim for
payment or approval; [or]
(2) knowingly makes, uses, or
causes to be made or used, a false
record or statement to get a false or
fraudulent claim paid or approved
by the Government . . . .
31 U.S.C. § 3729(a)(1), (2). The District Court held that
Rodriguez and King “failed to allege that [the Medical Center]
violated [the False Claims Act] on the face of the complaint.”
12
Rodriguez, 2006 WL 3193838, at *2. The basis for this
conclusion was, presumably, that while the complaint alleged
that Bergan Lanning received federal funding, it did not describe
any actual instances of false claims being submitted.
Rodriguez and King argue that they were not required to
assert any specific false claim submissions because their
complaint proceeded under a “false certification” theory of False
Claims Act liability. Under that theory, an entity is liable for
falsely representing itself as having complied with applicable
regulations in connection with the receipt of federal funds. See
United States ex rel. Quinn v. Omnicare Inc., 382 F.3d 432, 441
(3d Cir. 2004). Under the most expansive version of this
t h e o r y— th e “ im p lie d f a ls e c e rtif ic a tio n th e o ry”
version—liability can attach even when the entity receiving
funds has not expressly certified that it complied with the
regulations it violated; all that is required is that the entity has
received payment from the Government without disclosing that
it has violated regulations that affect its eligibility for payment.
See id. at 441–42; United States ex rel. Mikes v. Straus, 274 F.3d
687, 699 (2d Cir. 2001). That is Rodriguez and King’s theory
here—that the Medical Center submitted claims for payment to
the federal Government while at the same time violating,
without disclosing, applicable rules with respect to the
dispensing of prescription drugs.
The District Court declined to address Rodriguez and
King’s false certification argument, concluding that it was first
raised in their Reply to the Medical Center’s motion to dismiss,
13
not in their pleadings, and thus could not be considered in
addressing a Rule 12(b)(6) motion. Rodriguez, 2006 WL
3193838, at *2. That was not a generous reading of Rodriguez
and King’s complaint. The complaint did assert that “[t]he
practice of allowing non-licensed individuals who only ha[ve]
a degree in social work to dispense drugs in violation of [New
Jersey law] constitutes a false certification, record or statement
to get a claim paid or approved by the Government.” Rodriguez
and King’s Compl. ¶ 21. That was plausibly sufficient to invoke
the false certification theory.
But even granting that Rodriguez and King’s complaint
asserted a false certification theory of False Claims Act liability,
the District Court’s dismissal was nonetheless appropriate. Our
Court has yet to adopt in a holding the false certification theory,
either in its express or implied version.6 Quinn, 382 F.3d at 441.
Yet again we can avoid this issue, for even were we to adopt the
implied false certification theory here it would not affect the
disposition of this case. That is because Rodriguez and King’s
complaint failed to assert the elements necessary to succeed
under that theory.
6
While Quinn included an extensive discussion of the
false certification theory of False Claims Act liability, it did not
explicitly adopt it. 382 F.3d at 441–43. Rather, it held that,
even assuming the applicability of that theory, the plaintiff could
not prevail under it because he did not show that the specific
drugs dispensed contrary to applicable regulations had been paid
for by the Government. Id. at 443.
14
What Rodriguez and King argue is that by alleging both
that Bergan Lanning receives federal funding and that, at
various times, pharmaceuticals have been dispensed by Bergan
Lanning employees who are not licensed to do so under New
Jersey law, they adequately pled a False Claims Act violation
under an implied false certification theory. But that is incorrect.
To state a claim under that theory it is necessary to allege not
only a receipt of federal funds and a failure to comply with
applicable regulations, but also that payment of the federal funds
was in some way conditioned on compliance with those
regulations. See Quinn, 382 F.3d at 441; Mikes, 274 F.3d at
697; United States ex rel. Siewick v. Jamieson Sci. & Eng’g,
Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000). Otherwise, the
False Claims Act would be turned into “a blunt instrument to
enforce compliance with all . . . regulations” rather than “only
those regulations that are a precondition to payment.” Mikes,
274 F.3d at 699.
Rodriguez and King argue that our Court weakened this
requirement in Quinn. It is true that in Quinn we expressed
approval, in dicta, for the plaintiff’s argument that “a finding of
[False Claims Act] liability, based on an implied certification
theory, should not be limited to situations where the underlying
regulation or statute expressly states that compliance is a
condition of payment.” 382 F.3d at 432. Nonetheless, we still
indicated that a plaintiff must show that the alleged violations
would be relevant to “the [G]overnment’s disbursement
decisions.” Id. at 433 (quoting Mikes, 274 F.3d at 697).
15
That is what is missing from Rodriguez and King’s
complaint—any suggestion that Bergan Lanning’s alleged
receipt of federal funds was linked to compliance with New
Jersey law regulating eligibility to dispense prescription drugs.
Without that step, we hold that there can be no False Claims Act
liability for the Medical Center, even assuming that
prescriptions were filled at Bergan Lanning by persons not
eligible to do so. In their brief, Rodriguez and King contend
that “it is axiomatic that [the Medical Center] in connection with
its grant submission and seeking Medicaid reimbursement must
certify . . . , whether it be express or implied, that it is complying
with the New Jersey Pharmacy Act and Regulations in
connection with the provision of the pharmaceutical services
specified under the Act.” Rodriguez and King’s Br. 5–6. But
they were required to spell out that connection in their
complaint, rather than relying on the Court to find it.
Accordingly, dismissal under Rule 12(b)(6) was warranted.
V. Conclusion
Rodriguez and King’s appeal was timely, as we hold a
60-day appeal period exists in this case. However, as their
complaint failed to assert a link between the Medical Center’s
alleged regulatory violations and its receipt of Government
funds, it did not state a violation of the False Claims Act. We
therefore affirm the District Court’s dismissal of the suit.
16