Rejecting "gestalt" theory of false claims, Northern District of Illinois dismisses qui tam suit

by Ben Vernia | April 12th, 2011

In an April 6 decision in U.S. ex rel. Wildhirt v. AARS Forever, Inc., Northern District of Illinois Judge Gary Feinerman granted the defendants’ motion to dismiss a qui tam for lack of particularity, and wrongful termination claims for lack of a nexus to a False Claims Act action, but granted them leave to amend. The case was brought by two former employees of a respiratory therapy and durable medical equipment provider to the VA, Medicare, and Medicaid. The relators came to believe during their employment that the company’s failure to adhere to VA contractual and Medicare and Medicaid program standards rendered virtually all of the company’s claims false. They complained to management, they alleged, and were terminated for abandoning their jobs (a basis the state employment agency credited in a decision).

Reviewing the company’s motion under Rule 9(b)’s particularity requirement, Judge Feinerman concluded that the complaint failed to allege specific false claims. The Seventh Circuit, he reasoned, had already rejected “gestalt” allegations that all claims of a company during a period of time were false as a consequence of wrongful conduct. He acknowledged that the complaint was, at points, specific regarding the company’s alleged violations, but even then, it failed to allege specific false claims. The relators had attached two exhibits to their complaint: one, a collection of credit card invoices showing VA payments to the defendants, the other, a set of delivery tickets documenting deliveries of equipment to three Medicare or Medicaid patients. But the exhibits were not themselves claims for payment, nor linked to any specific claim for payment, and so were inadequate, Judge Feinerman wrote.

With respect to the wrongful termination claim, he noted that although the women alleged they had complained about the company’s conduct to their supervisors, there was nothing to connect these complaints to a potential False Claims Act suit, and nothing to put the company on notice that it was facing such a case. Nor did the complaint allege that they were terminated because they were planning or investigating a lawsuit, just that they were terminated because they were trying to get the company to improve the quality of the care it delivered. “This allegation, if true, shows that Relators are admirable people who were treated poorly by their employer, but it fails to show that they were retaliated against in violation of the FCA or IWRPA [the Illinois Whistleblower Reward and Protection Act, 740 ILCS 175/1],” Judge Feinerman concluded.

Because he found that it was “not inconceivable” that the relators could amend their complaint to properly meet the pleading standards, he granted them leave to amend.

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