U.S. Gross v. Aids Research Alliance-Chi.

• Decision Date: 06 July 2005
• Docket Number: No. 04-2566.,04-2566.
• Citation: 415 F.3d 601
• Parties: UNITED STATES ex rel. Sanford GROSS, Plaintiff-Appellant, v. AIDS RESEARCH ALLIANCE-CHICAGO, Roberta Luskin-Hawk, Thomas Klein, Ross Slotten, Neel French, Patricia Dixon, and Catholic Health Partners, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 601

415 F.3d 601

UNITED STATES ex rel. Sanford GROSS, Plaintiff-Appellant, v. AIDS RESEARCH ALLIANCE-CHICAGO, Roberta Luskin-Hawk, Thomas Klein, Ross Slotten, Neel French, Patricia Dixon, and Catholic Health Partners, Defendants-Appellees.

No. 04-2566.

United States Court of Appeals, Seventh Circuit.

Argued December 8, 2004.

Decided July 6, 2005.

Christopher N. Mammel (argued), Childress Duffy Goldblatt, Chicago, IL, for Plaintiff-Appellant.

Jannis E. Goodnow, Lord Bissell & Brook, Chicago, IL, Michael P. Bruyere (argued), Lord Bissell & Brook, Atlanta, GA, David B. Honig, Hall, Render, Killian, Heath & Lyman, Indianapolis, IN, for Defendants-Appellees.

Before FLAUM, Chief Judge, and POSNER and SYKES, Circuit Judges.

SYKES, Circuit Judge.

Sanford Gross was a subject in an AIDS research study funded by the National Institutes of Health ("NIH") and conducted by the AIDS Research Alliance-Chicago ("the Alliance"). Catholic Health Partners acted as the Institutional Review Board for the study. Gross brought a claim on behalf of the United States under the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a), alleging various acts of negligence and mismanagement by the Alliance, several of its participating medical professionals, and Catholic Health Partners. Gross alleged that the defendants submitted various forms and reports to the government during the course of the study and these constituted "certifications" that the study was being conducted in compliance with federal regulations, grant study protocols, and "Good Clinical Practices," when, in fact, it was not. These are the alleged "false claims" that form the basis of Gross's action under § 3729(a).

The district court dismissed the original and amended complaints for failure to plead fraud with particularity as required by Rule 9(b), and dismissed the second amended complaint pursuant to Rule 12(b)(6) for failure to state a claim. The latter ruling was based largely on what the district court saw as insufficiencies in the allegations regarding the knowledge element of a § 3729(a) claim. See United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018-19 (7th Cir.1999). The district court also invoked the jurisdictional bar in 31 U.S.C. § 3730(e)(4)(A), which precludes qui tam FCA claims premised upon publicly disclosed information unless "the person bringing the claim is an original source of the information."

We affirm, although on somewhat different reasoning. The second amended complaint fails under Rule 9(b) because it does not allege to the required degree of particularity the false statement or statements made by the defendants, with knowledge of their falsity, for the purpose of obtaining payment from the government. In addition, the second amended complaint fails under Rule 12(b)(6) because it does not allege that payment by the government was conditioned upon certification of regulatory compliance, a necessary component of a qui tam FCA claim premised upon false certification of compliance with federal statutes and regulations.

I. Facts

The second amended complaint is 42 pages long and contains 163 numbered paragraphs, some of which have numerous lettered subparts. We sketch only the pertinent allegations here. The NIH sponsored a research study on an "off-label investigational new drug" for the treatment of AIDS. The Alliance was one of 15 participating agencies, and Gross was a participant in the study from October 1998 to December 1999. Catholic Health Partners acted as the Institutional Review Board for Alliance's participation in the study, and the individual named defendants are participating physicians and a nurse. The Alliance was awarded approximately $3.7 million in NIH funding for its participation in the study.

The second amended complaint contains numerous allegations of negligence, mismanagement, and poor oversight of the study, including, for example: prescription of medication known to reduce the effectiveness of the study drug; allowing Gross's viral load to spike dramatically; failure to maintain adequate study records; and failure to obtain proper informed consent. These lapses caused the defendants to be noncompliant with a laundry list of federal regulations (there is no need to recite them here), various study protocols, and "Good Clinical Practices." The second amended complaint also alleges that Catholic Health Partners participated in "other federal grants" and was out of compliance with certain federal regulations in connection with these unspecified "other grants." The pleading alleges that on December 9, 2002, the Federal Drug Administration sent Catholic Health Partners a warning letter temporarily suspending its participation in an unrelated study for "violating regulations governing the composition, operation, and responsibilities of an IRB."

As to the alleged false claims in particular, the second amended complaint alleges that the defendants submitted various "forms, written reports and study results" to the government, including (but not limited to): Form PHS 398; Form PHS 2590; Form FDA 1572; CPCRA Form 704; "Financial Service Requests"; "Consent Forms"; "DAIDS Investigator of Record Agreement"; and "initial and continuing review records." Apart from these cryptic acronyms and generalized references to form titles, the forms are not described any further; their purpose or content is not identified, nor is there any indication when they were filed vis-á-vis any grant payments. The second amended complaint does not describe how the filing of any of these forms related to payment of grant money. Instead, it alleges that "[i]ndividually, and in cumulative effect, the forms, written reports, and study results submitted by the defendants constituted certifications of compliance with all requirements and conditions of the research grant." There is also a general allegation that "[d]efendants, individually and in conspiracy, have knowingly made false or fraudulent claims and certifications to justify retention of federal funds already received and to induce payment of additional federal funds."

II. Discussion

The FCA is an anti-fraud statute and claims under it are subject to the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376 (7th Cir.2003) (Rule 9(b) applies "because the False Claims Act condemns fraud but not negligent errors or omissions.") As is pertinent here, the FCA imposes liability against any person who "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)(2). An FCA claim under § 3729(a)(2) has three essential elements: (1) the defendant made a statement in order to receive money from the government, (2) the statement was false, and (3) the defendant knew it was false. 31 U.S.C. § 3729(a)(2); Lamers, 168 F.3d at 1018. An FCA claim premised upon an alleged false certification of compliance with statutory or regulatory requirements also requires that the certification of compliance be a condition of or prerequisite to government payment. United States ex rel. Mikes v. Straus, 274 F.3d 687, 697 (2d Cir.2001); United States ex rel. Siewick v. Jamieson Science & Engineering, Inc., 214 F.3d 1372, 1376 (D.C.Cir.2000); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 786-87 (4th Cir.1999); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997); United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-67 (9th Cir.1996).

In Lamers, this court affirmed summary judgment against the FCA relator on the second and third elements of the claim, concluding that minor technical regulatory violations do not make a claim "false" for purposes of the FCA; the existence of mere technical regulatory violations tends to undercut any notion that a prior representation of regulatory compliance was knowingly and falsely made in order to deceive the government. Lamers, 168 F.3d at 1019; see also United States ex rel. Luckey v. Baxter Healthcare Corp., 183 F.3d 730, 733 (7th Cir.1999). The district court relied on Lamers to conclude that the second amended complaint failed to state a claim. Lamers was a summary judgment case, however; here we are at the pleading stage, and the violations Gross has alleged appear on their face to go beyond the "minor technical violations" at issue in Lamers.

In our view, the insufficiencies in Gross's second amended...