Michael McElligott v. McKesson Corporation

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 10, 2022
• Docket: 21-15477
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 10 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MICHAEL MCELLIGOTT; CARL No. 21-15477 KELLEY, D.C. No. 4:19-cv-02233-DMR Plaintiffs-Appellants,

and MEMORANDUM*

UNITED STATES OF AMERICA,

Plaintiff,

v.

MCKESSON CORPORATION, a Delaware corporation,

Defendant-Appellee.

Appeal from the United States District Court for the Northern District of California Donna M. Ryu, Magistrate Judge, Presiding

Submitted February 14, 2022** San Francisco, California

Before: GOULD and RAWLINSON, Circuit Judges, and ADELMAN,*** District

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Judge.

Relators Michael McElligott and Carl Kelley (Relators) appeal the district

court’s dismissal of their claims under the False Claims Act (FCA), 31 U.S.C.

§§ 3729–33, against McKesson Corporation without leave to amend. We have

jurisdiction, 28 U.S.C. § 1291, and affirm.

We review de novo the dismissal of claims under the FCA and assume the

facts as alleged in Relators’ second amended complaint are true. United States ex

rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 898 (9th Cir. 2017). We “examine

only whether [R]elators’ allegations support a cause of action under the False

Claims Act under the theories presented,” id., applying the heightened pleading

standards of Federal Rule of Civil Procedure 9(b), see Ebeid ex rel. United States

v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). We review a district court’s denial

of leave to amend for abuse of discretion but conduct de novo review of an order

finding a proposed amendment futile. See Cohen v. ConAgra Brands, Inc., 16 F.4th

1283, 1287 (9th Cir. 2021).

1. Relators first contend that the second amended complaint adequately

alleges that McKesson “knowingly present[ed], or cause[d] to be presented, a false

or fraudulent claim for payment or approval,” by making an express false

*** The Honorable Lynn S. Adelman, United States District Judge for the Eastern District of Wisconsin, sitting by designation.

2 certification. 31 U.S.C. § 3729(a)(1)(A). To plead a claim for express false

certification, a complaint must allege facts from which it may reasonably be

inferred that the defendant submitted a claim for payment to the government in

which it expressly certified that it had complied with a specific law or provision of

the contract with which it knew it had not complied. United States ex rel. Silingo v.

WellPoint, Inc., 904 F.3d 667, 675–76 (9th Cir. 2018). Here, the complaint

contains no such allegations.

2. Relators next contend that the second amended complaint adequately

alleges that McKesson violated the FCA by making implied false certifications. To

state a claim based on an implied false certification, the complaint must allege two

elements: (1) “the claim does not merely request payment, but also makes specific

representations about the goods or services provided”; and (2) “the defendant’s

failure to disclose noncompliance with material statutory, regulatory, or contractual

requirements makes those representations misleading half-truths.” Universal

Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 190 (2016); see

also United States ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 1018 (9th Cir.

2018) (concluding that, under Ninth Circuit precedent, relators must satisfy

Escobar’s two elements to prevail on an implied false certification theory). Here,

the second amended complaint does not allege that, in its claims for payment,

McKesson made specific representations about the medical supplies it provided

3 that were rendered misleading half-truths by its failure to disclose noncompliance

with material statutory, regulatory, or contractual requirements. Although the

complaint alleges that McKesson’s claims did not disclose that it delivered the

medical supplies through a supply chain that did not comply with various laws

regulating controlled substances, the complaint does not allege that McKesson

made any “specific representations” in its claims for payment that were rendered

half-truths by this nondisclosure. As far as the complaint reveals, McKesson

represented nothing more in its claims for payment than that it delivered certain

medical supplies on certain dates. The complaint does not allege that those

representations were false, and McKesson’s failure to disclose that the supplies

were delivered through a noncompliant supply chain did not render misleading the

representation that the supplies were delivered.

3. The second amended complaint also fails to allege materiality. In the

context of false certification claims, “[a] misrepresentation about compliance with

a statutory, regulatory, or contractual requirement must be material to the

Government’s payment decision in order to be actionable.” Escobar, 579 U.S. at

181. Here, nothing in the complaint gives rise to a reasonable inference that the

security of McKesson’s supply chain was material to the government’s decision to

pay for medical supplies that McKesson actually delivered. Although the

complaint alleges that the contract contained a provision requiring McKesson to

4 obey all laws, the complaint does not allege that compliance with this provision

was designated as a condition of payment for goods delivered; nor does it allege

other facts from which it could reasonably be inferred that the government deemed

noncompliance with the “obey all laws” provision relevant to its decision to pay

for goods delivered. Id. at 192–96.

4. The district court did not abuse its discretion in denying leave to amend. It

is readily apparent that the court denied leave to amend because the amendments

would have been futile, Roth v. Garcia Marquez, 942 F.2d 617, 628–29 (9th Cir.

1991), and Relators do not identify any amendments that could have cured the

deficiencies in the second amended complaint.

AFFIRMED.