District Court Dismisses False Certification Claim For Failure to Adequately Plead “Condition of Payment”

By Scott Stein and Erik Ives

In the first in-depth application of the Third Circuit’s decision in United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, 2011 WL 2573390 (3d Cir. June 30, 2011)adopting the implied certification theory of liability, the United States District Court for the District of New Jersey dismissed at the pleading stage a relator’s claims under the federal False Claims Act (FCA) for failure adequately to plead that the defendant had violated a condition of payment. See Foglia v. Renal Ventures Management, LLC, No. 09-1552, Slip Op. (D.N.J. Nov. 23, 2011).

The Relator alleged that the Defendant (a dialysis care services company) failed to comply with New Jersey regulations concerning quality of patient care and facility staffing, and Center for Disease Control (CDC) standards concerning reuse of vials of the drug Zemplar. The Relator contended that these violations rendered each claim for payment of the drug legally false under a theory of express and/or implied false certification. The United States declined to intervene in the matter, and after the case was unsealed the defendant filed a motion for partial judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c).

The Court began its analysis by describing the false certification theory, as recently outlined by the Third Circuit in United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, 2011 WL 2573390 (3d Cir. June 30, 2011). In doing so, the Court focused on the Third Circuit’s holding that:

‘[T]o plead a claim upon which relief could be granted under a false certification theory, either express or implied, a plaintiff must show that compliance with the regulation which the defendant allegedly violated was a condition of payment from the Government.”

<em&ggt;Foglia, Slip Op. at 24-25 (quoting Wilkins, 2011 WL 2573390 at *11). Applying this condition of payment requirement to Relator’s pleadings under Fed. R. Civ. P. 8(a)(2) (requiring a “short and plain statement” of the claim entitling pleader to relief) and Fed. R. Civ. P. 9(b) (establishing heightened pleading requirements for claims implicating fraud), the Court held that Relator’s “merely conclusory” assertion that compliance with the federal and state regulations in question was a precondition of payment was legally insufficient. The Court explained that Relator’s failure to “cite any rule, regulation, contract, or other facts to demonstrate” this contention required dismissal of Relator’s claim on the pleadings. Foglia, Slip Op. at 25-29.

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