United States Ex Rel. Sanford Gross v. Aids Research Alliance-Chicago, Roberta Luskin-Hawk, Thomas Klein, Ross Slotten, Neel French, Patricia Dixon, and Catholic Health Partners
Docket: 04-2566
Court: Court of Appeals for the Seventh Circuit; July 6, 2005; Federal Appellate Court
Sanford Gross, a participant in an NIH-funded AIDS research study conducted by the AIDS Research Alliance-Chicago, filed a qui tam lawsuit under the False Claims Act (FCA) against the Alliance, several medical professionals, and Catholic Health Partners, which acted as the Institutional Review Board. Gross alleged that the defendants submitted false claims to the government by certifying compliance with federal regulations and study protocols, despite not adhering to them. The district court dismissed Gross's original and amended complaints for failing to meet the fraud pleading standards of Rule 9(b) and for lacking sufficient allegations to support a claim under Rule 12(b)(6), particularly regarding the knowledge element of the false claims. Additionally, the court cited a jurisdictional bar under 31 U.S.C. § 3730(e)(4)(A) against claims based on publicly disclosed information unless the relator is the original source. The appellate court affirmed the dismissal, noting that the second amended complaint did not specify the false statements made with knowledge of their falsity or demonstrate that government payment was contingent on compliance certification, both critical for a viable FCA claim. The complaint contained extensive allegations but lacked the required specificity and legal foundation.
The second amended complaint alleges negligence and mismanagement by the defendants, highlighting issues such as improper medication prescriptions, failure to monitor viral load, inadequate record-keeping, and lack of proper informed consent. These actions reportedly led to noncompliance with federal regulations and study protocols. Catholic Health Partners is claimed to have violated regulations associated with other federal grants and received a warning letter from the FDA regarding its IRB operations in December 2002.
Regarding false claims, the complaint asserts that the defendants submitted various unspecified forms and reports to the government, claiming these constituted certifications of compliance necessary for grant payments. However, the complaint does not detail the forms' contents or their relation to grant payments, only alleging that the defendants made false claims to retain and obtain federal funds.
The legal framework under the False Claims Act (FCA) is outlined, indicating that claims must satisfy heightened pleading standards due to the statute's focus on fraud rather than negligence. It identifies three essential elements for an FCA claim: a false statement made to receive government funds, knowledge of its falsity, and that the false certification of compliance was a prerequisite for payment. Relevant case law is cited to support these requirements.
In Lamers, the court upheld summary judgment against the FCA relator, determining that minor technical regulatory violations do not render a claim "false" under the FCA, as such violations undermine the notion of intentional deceit to obtain government payments. The district court relied on this precedent to dismiss Gross's second amended complaint, but the current case is at the pleading stage, and Gross's alleged violations seem to exceed mere technical issues.
The primary deficiency in Gross's complaint relates to the first element of the FCA claim, which requires that the fraudulent statement aims to induce payment from the government. Specifically, Gross failed to meet the specificity required by Rule 9(b), providing only vague references to various forms and reports submitted to the government without detailing their purpose, content, or connection to the payment of study funds. The complaint lacks clarity on when payments were made or how the alleged false statements would influence government funding decisions.
The court noted that generalized allegations of certification of regulatory compliance do not satisfy the "who, what, when, where, and how" requirement of fraud pleading. Citing Garst, where a relator similarly struggled with specificity and clarity in pleading fraud, the court emphasized that Gross's second amended complaint also fails to adequately link specific allegations of deceit to any claim for payment, thus not fulfilling the requirements of both Rule 8 and Rule 9(b).
Gross's second amended complaint fails to establish that any specific certification of regulatory compliance was a prerequisite for receiving government funds, rendering the claim insufficient under Rule 12(b)(6). For a False Claims Act (FCA) allegation based on false certifications to be actionable, such certifications must be tied to government payments, which Gross did not specify. During oral arguments, counsel argued that the complaint's reference to the "regulatory framework" implied a connection between the alleged false certifications and government payments; however, this assumption placed an unreasonable burden on the district judge to interpret complex regulations. The complaint does not directly link any false claims to actual or potential government funding. Additionally, Gross's claim related to a 2002 warning letter was barred by § 3730(e)(4)(A), which restricts jurisdiction over claims based on publicly disclosed information unless the plaintiff is the original source of that information. Since Gross did not assert original source status regarding the warning letter, the district court's judgment was upheld.
