United States Ex Rel. Takemoto v. Nationwide Mutual Insurance Co., 674 F. App'x 92

Background

Relator Kent Takemoto, owner of a Medicare Secondary Payer (MSP) compliance company, brought a qui tam suit under the False Claims Act (FCA) alleging that multiple insurers, self-insureds, and third-party administrators failed to satisfy Medicare reimbursement obligations under the MSPA.
Defendants included numerous insurance companies, employers, and claims administrators; the complaint grouped defendants and alleged widespread failure to repay Medicare conditional payments tied to settlements, judgments, or awards involving Medicare beneficiaries.
The district court dismissed the complaint under Fed. R. Civ. P. 12(b)(6) for failure to plead facts showing each defendant’s specific reimbursement obligation to CMS, and denied leave to amend the complaint.
Relator appealed dismissal and denial of leave to amend; the Second Circuit reviewed dismissal de novo and denial of leave for abuse of discretion.
The Second Circuit affirmed, holding the complaint failed to plead plausible individualized reimbursement obligations and that the proposed amendment gave no basis to show how defects would be cured.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether complaint sufficiently pleaded defendants’ MSPA reimbursement obligations (essential element of reverse-FCA claim)	Takemoto argued allegations about large numbers of Medicare beneficiaries and frequent settlements permitted group pleading and a plausible inference that defendants had reimbursement obligations	Defendants argued complaint lacked any concrete facts linking CMS conditional payments, beneficiaries, payment dates/amounts, or settlements to particular defendants	Held: Dismissed. Complaint failed to plead facts creating a plausible inference of an individualized reimbursement obligation for any defendant; group pleading inadequate
Whether FCA liability can be premised on alleged failure to implement MSPA compliance programs	Takemoto contended defendants had an obligation to have adequate MSPA compliance procedures that could ground liability	Defendants argued a compliance program is not an ‘‘obligation to pay or transmit money’’ under the FCA and does not create reimbursement liability	Held: Rejected. Statutory language targets an obligation to pay money; failure to implement compliance programs is not an FCA reimbursement obligation
Whether dismissal should have been under the heightened Rule 9(b) standard versus Rule 8(a)	Takemoto implicitly sought relief without meeting Rule 9(b) particularity, arguing group allegations were sufficient	Defendants maintained reverse-FCA claims require particularized allegations (aligned with fraud-pleading principles)	Held: Court did not resolve Rule 9(b) applicability; dismissal affirmed because allegations failed even Rule 8(a) pleading standards
Whether denial of leave to amend was an abuse of discretion	Takemoto argued he should be allowed to amend to cure defects	Defendants argued proposed amendment offered no specifics or plausible cure	Held: Denial affirmed. Proposed amendment gave no clue how defects would be cured, so denial was not an abuse of discretion

Key Cases Cited

Barrows v. Burwell, 777 F.3d 106 (2d Cir.) (standard for de novo review of Rule 12(b)(6) dismissal)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160 (2d Cir.) (limits on group pleading; standard for leave to amend review)
Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106 (2d Cir.) (insufficient allegations cannot survive Rule 12(b)(6))
Bishop v. Wells Fargo & Co., 823 F.3d 35 (2d Cir.) (FCA claims and Rule 9(b) heightened pleading discussion)
Gold v. Morrison-Knudsen Co., 68 F.3d 1475 (9th Cir.) (fraud claims require particularity under Rule 9(b))
Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir.) (elements of fraud by omission)