205 F.Supp.3d 276
E.D.N.Y2016Background
- Relators (former employees) filed a qui tam action accusing Northern Adult Daily Health Care Center and its manager Galena Deverman of submitting Medicaid claims for substandard, discriminatory, and sometimes non‑existent adult day health services.
- Allegations include failure to provide required nursing/social services and therapy, poor supervision (wandering registrants), discriminatory treatment of African‑American and Latino registrants, misuse of funds to support a Russian social club, and billing for services not provided.
- The State separately settled related claims with the operator (Northern Manor / Northern Metropolitan) for $6.5 million and agreed to close the facility; the United States and New York declined to intervene in the qui tam.
- Relators amended their complaint, attaching representative Recipient Claim Detail Reports for 16 registrants and asserting FCA and NYFCA claims under several theories (factually false claims, express/implied false certifications), plus retaliation (FCA/NYFCA/NY Labor Law §741) and NYCHRL discrimination/retaliation claims.
- Court reviewed Rule 12(b)(6) and Rule 9(b) standards, applied Universal Health Servs. v. Escobar (materiality for implied‑certification claims), and: (1) denied dismissal of FCA/NYFCA claims under §§ 3729(a)(1)(A)/(B) and NYFCA §§ 189(1)(a)/(b) (Rule 9(b) satisfied by representative samples), (2) dismissed reverse‑false‑claim counts under § 3729(a)(1)(G) and NYFCA § 189(1)(g), (3) dismissed some retaliation and NYCHRL claims as time‑barred or insufficiently alleged, and (4) granted leave to amend on implied‑certification theory.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FCA/NYFCA claims were pleaded with Rule 9(b) particularity | Relators: alleged scheme plus 16 representative false‑claim examples (dates, service codes, attendance) give fair notice | Northern Adult: complaint lacks critical billing details linking submitted claims to defendant and lacks the "how" | Denied: representative samples and details suffice at this stage; Rule 9(b) satisfied for §§ 3729(a)(1)(A)/(B) and NYFCA parallels |
| Whether reverse false‑claim claims under § 3729(a)(1)(G) / NYFCA § 189(1)(g) survive | Relators: alleged schemes imply obligations to repay or conceal obligations | Northern Adult: complaint contains no allegation of present obligation to pay or of false records reducing an obligation | Granted: reverse false‑claim counts dismissed for failure to allege an obligation or false records concealing/decreasing it |
| Whether implied‑false‑certification theory supports liability post‑Escobar (materiality) | Relators: claims coded by service and certification to comply with Title VI/DOH support implied certification | Northern Adult: cited regulations are conditions of participation, not payment; compliance not shown to be material to payment | Mixed: court dismisses implied‑certification allegations as pled (Relators failed to allege materiality per Universal Health Servs.) but grants leave to amend to allege materiality |
| Whether retaliation / whistleblower & NYCHRL claims survive (notice, timing, sufficiency) | Relators: internal complaints to management put employer on notice and led to demotions/constructive discharge; added NYCHRL counts in amended complaint | Northern Adult: lack of notice of intent to bring FCA suit, insufficient causal or temporal link, many claims time‑barred under NY Labor Law §741 and NYCHRL statute of limitations | Mixed: retaliation claims under FCA/NYFCA survive as to Lee and Luckie; Gonzalez’s FCA/NYFCA retaliation and all §741 claims dismissed as insufficient or time‑barred; NYCHRL claims dismissed for Lee, allowed for Luckie and Gonzalez (timeliness/relate‑back analysis varied) |
Key Cases Cited
- Meilleur v. Strong, 682 F.3d 56 (2d Cir. 2012) (Rule 4(m) service/dismissal authority)
- Tsirelman v. Daines, 794 F.3d 310 (2d Cir. 2015) (Rule 12(b)(6) standard accepting factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to assumption of truth)
- Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (express/implied certification framework for FCA falsity)
- Universal Health Servs. v. U.S. ex rel. Escobar, 579 U.S. -- (2016) (materiality standard for implied‑certification FCA claims)