US ex rel. Mikes v. Straus, No. 92 Civ. 2754 (VLB).

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Writing for the Court: Harold Burke, Duel & Holland, Greenwich, CT, for plaintiff
• Citation: 853 F. Supp. 115
• Parties: UNITED STATES ex rel. Patricia S. MIKES and Patricia S. Mikes individually, Plaintiffs, v. Marc J. STRAUS, Jeffrey M. Ambinder and Eliot L. Friedman, Defendants.
• Decision Date: 26 May 1994
• Docket Number: No. 92 Civ. 2754 (VLB).

853 F. Supp. 115

UNITED STATES ex rel. Patricia S. MIKES and Patricia S. Mikes individually, Plaintiffs,
v.
Marc J. STRAUS, Jeffrey M. Ambinder and Eliot L. Friedman, Defendants.

No. 92 Civ. 2754 (VLB).

United States District Court, S.D. New York.

May 26, 1994.

853 F. Supp. 116

COPYRIGHT MATERIAL OMITTED

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Kay K. Gardiner, Asst. U.S. Atty., New York City, for the U.S

Harold Burke, Duel & Holland, Greenwich, CT, for plaintiff.

Mary Beth Kilgannon and Larry Lebowitz, Meiselman, Farber, Packman & Eberz, P.C., Mt. Kisco, NY, for defendants.

MEMORANDUM ORDER

VINCENT L. BRODERICK, District Judge.

I

This case presents questions relating to the federal "Qui Tam" statute (31 U.S.C. § 3730). In particular the issues raise here include (1) the degree of specificity required for private suits against government contractors brought by current or former employees and similar parties where the United States has declined to proceed, and (2) the circumstances under which such "Qui Tam" suits can be combined with claims under state "whistleblower" protection provisions.

This suit was brought by plaintiff Patricia S. Mikes¹ under the federal Qui Tam statute (31 U.S.C. § 3730) against the defendant physicians by whom plaintiff had been employed, alleging that diagnostic tests paid for by Medicare were improperly conducted. Plaintiff also asserts that defendants have failed to pay withholding taxes, dismissed her for complaining about the improprieties, and owe her back wages.

The Qui Tam statute permits a party discovering fraud against the United States as defined in 31 U.S.C. § 3729 to bring the matter to the attention of the Attorney General, who may pursue a suit for the benefit of the United States, and alternatively, if the Attorney General declines, a private plaintiff may, as here, proceed. In United States ex rel. Mikes v. Straus, 846 F.Supp. 21 (S.D.N.Y.1994), defendants were given access to governmental progress reports concerning the case, which contained no confidential material requiring secrecy.

Defendants have moved to dismiss the complaint and for other relief. The motion to dismiss is granted without prejudice to the filing of an amended complaint within 45 days in accordance with this memorandum order should plaintiff elect to do so; this case will be dismissed upon the expiration of such period if no amended complaint is filed. Decision on defendants' other applications is reserved pending the filing of any amended complaint.

II

Under Fed.R.Civ.P. 8(a) a complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." While evidence need not be pleaded, sufficient specificity to show entitlement to relief if the assertions are proved is necessary. See Volvo North America Corp. v. Men's International Tennis Council, 857 F.2d 55 (2d Cir.1988); Barnes Landfill v. Town of Highland, 802 F.Supp. 1087 (S.D.N.Y.1992). Mere generalities are insufficient. See Marcus, "The Revival of Fact Pleading Under the Federal Rules of Civil Procedure," 86 Colum.L.Rev. 433 (1986).

Plaintiff suggests that these requirements be relaxed in the case of privately initiated Qui Tam suits for the benefit of the United States because of the importance of the objectives of the statute. These uniform standards, however, like other provisions of the Federal Rules of Civil Procedure apply to Qui Tam complaints, which must contain sufficient facts to make out a claim, particularly where information within the knowledge of a plaintiff is involved. Cooper v. Blue Cross, 19 F.3d 562 (11th Cir.1994).

These requirements are, indeed, applicable to all civil actions in the federal courts, Leatherman v. Tarrant County, ___ U.S. ___, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993), and cannot be diluted because of the importance of any particular type of claim. Plaintiff's assertions that a more lenient standard of pleading should apply to private

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Qui Tam suits than to other civil suits in federal court cannot survive Leatherman, which recognizes that all federal cases are important and must both be properly pleaded, and be permitted to proceed if a claim is stated

Special pleading requirements for particular statutes would not only destroy the uniformity of the Federal Rules, which recognize that all federal lawsuits authorized by Congress are important, but create serious distortions within the domain of types of suits deemed especially important. The more important a societal objective the greater the risk that its invocation will become grounds for permitting abuse of procedures necessary to assure fairness to all involved in disputes related to such objectives.

Abuse of Medicare, Medicaid and similar funds by service providers is inherent in a third party payment system under which the recipients of the service have little or no incentive or ability to hold down costs and have difficulty in monitoring the quality of the service. See Rose-Ackerman, "Social Services and the Market," 83 Colum.L.Rev. 1405 (1983); Improper Practice, Commodity Import Program, U.S. Foreign Aid, Hearings before the Permanent Subcommittee on Investigations, Senate Committee on Government Operations, 90th Cong, 1st & 2d Sess (1967, 1968).

In the present instance, health and safety of Medicare patients as well as governmental monies are at stake. Thus, if plaintiff's assertions that defendants are ignoring risks of medically hazardous practices in their business have merit, it is imperative that corrective action be taken. At the same time, the provision of health services will also suffer if unfounded claims can be asserted leading to full litigation with its attendant costs and risks if no significant basis for the charges is articulated.

Fortunately, private Qui Tam lawsuits with their critical advantages and accompanying risks, while an important avenue for assuring rectitude in such matters, are not the only means of protecting the public. An additional safeguard against erecting an undue barrier against lawsuits aimed at abuse is provided by the fact that the United States must — and here did — examine the plaintiff's claims initially and determine not to proceed before a private suit ensues.

This permits the court to apply standard, orthodox and uniform pleading requirements with respect to specificity without fear that, in doing so, risks to health or safety are ignored. It is thus important that Qui Tam suits be allowed to proceed where meritorious, and equally that they not be used to transmute employment disputes initiated for other reasons into daunting damage claims making it hazardous for an employer to exercise essential discipline required for a workplace to function. An adequately detailed complaint is an essential device for determining which characterization is most applicable to a case.

III

Under Fed.R.Civ.P. 9(b), in "all averments of fraud," the "circumstances shall be stated with particularity." The core of plaintiff's complaint is contained in paragraph 9, which refers to "incomplete and inaccurate" lung function tests, without indicating in what respects the tests were incomplete or inaccurate, or the nature of any indications to that effect observed by plaintiff. It is asserted that spirometry was uniformly billed "in many cases when it was in fact not required," but no facts supporting this conclusory statement are provided. Plaintiff, while alleging that unnecessary tests were performed, states that "patients requiring comprehensive lung function tests were not referred out to other laboratories or physicians in order for these tests to be performed." No facts concerning what types of patients required such comprehensive tests is provided. Plaintiff states that spirometry was not properly conducted and proper calibration and other equipment was absent without setting forth what proper steps were not taken or what equipment was necessary and absent.

In order for an amended complaint with regard to these claims to survive, plaintiff must alleged facts, not conclusions. For one and only one example, if a patient with a given number of cubic centimeters of breath

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output per breathing cycle requires or does not require a given type of testing which differs from what was provided, such facts and how defendants' practice differed from applicable norms must be set forth

A plaintiff is not required to provide at the complaint stage information unavailable to the pleader,...