False Claims Act – Pleading Special Matters

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7^th Circuit Court of Appeals

Case Name: United States of America ex rel. John Mamalakis v. Anesthetix Management, et al.,

Case No.: 19-3117

Officials: SYKES, Chief Judge, and HAMILTON and ST. EVE, Circuit Judges.

Focus: False Claims Act – Pleading Special Matters

Dr. John Mamalakis, a Wisconsin anesthesiologist, filed this qui tam lawsuit under the False Claims Act, 31 U.S.C. §§ 3729 et seq., alleging that Anesthetix Management LLC, his former employer, fraudulently billed Medicare and Medicaid for services performed by its anesthesiologists. His central allegation is that the anesthesiologists regularly billed the government using the code for “medically directed” services when their services qualified for payment only at the lower rate for services that are “medically supervised.” A magistrate judge dismissed the case, ruling that the complaint did not provide enough factual particularity to satisfy Rule 9(b)’s heightened pleading standard for fraud claims. FED. R. CIV. P. 9(b). The judge gave Mamalakis a chance to amend, directing him to provide representative examples of the alleged fraudulent billing.

Mamalakis obliged, filing an amended complaint that included ten specific examples of inflated billing. Each example identified a particular procedure and anesthesiologist and provided details about how the services did not qualify for payment at the medical-direction billing rate. Six of the ten examples included a specific allegation that the anesthesiologist billed the services using that code; the other four relied on general allegations regarding the group’s uniform policy of billing at the medical-direction rate.

The judge held that the amended complaint still fell short under Rule 9(b) and dismissed the case with prejudice. That was error. Although Rule 9(b) imposes a high pleading bar to protect defendants from baseless accusations of fraud, Mamalakis cleared it. The ten examples, read in context with the other allegations in the amended complaint, provide sufficient particularity about the alleged fraudulent billing to survive dismissal. We reverse and remand for further proceedings.

Reversed and remanded

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Derek A Hawkins is Corporate Counsel, at Salesforce.