NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _______________
No. 24-1606 _______________
UNITED STATES OF AMERICA; STATE OF CALIFORNIA; STATE OF GEORGIA; STATE OF INDIANA; STATE OF MINNESOTA; STATE OF MISSOURI; STATE OF NEW JERSEY; STATE OF NORTH CAROLINA; STATE OF TENNESSEE; STATE OF WISCONSIN; COMMONWEALTH OF MASSACHUSETTS; COMMONWEALTH OF VIRGINIA EX REL.; PHILLIP HUNTER
v.
FILLMORE CAPITAL PARTNERS, LLC; FILLMORE STRATEGIC MANAGEMENT, LLC; FILLMORE STRATEGIC INVESTORS, LLC; DRUMM INVESTORS, LLC; GGNSC HOLDINGS, LLC; GOLDEN GATE NATIONAL SENIOR CARE, LLC; GGNSC EQUITY HOLDINGS, LLC; GGNSC ADMINISTRATIVE SERVICES, LLC; GGNSC CLINICAL SERVICES, LLC; BEVERLY ENTERPRISES, INC.; BEVERLY HEALTH AND REHABILITATION SERVICES, INC.
Phillip Hunter, Appellant _______________
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:15-cv-02134) District Judge: Honorable Chad F. Kenney _______________
Submitted Under Third Circuit L.A.R. 34.1(a) November 5, 2024
BEFORE: KRAUSE, SCIRICA, and RENDELL, Circuit Judges.
(Filed: April 1, 2025) _____________
OPINION* _______________
RENDELL, Circuit Judge.
Appellees Fillmore Capital Partners LLC and its affiliates (collectively “Golden
Living”) operate nursing homes across the United States. Appellant Phillip Hunter
brought this qui tam action alleging that Golden Living engaged in fraud and violated the
False Claims Act (“FCA”) and various state laws by submitting inflated claims for
payment to Medicare and Medicaid. The District Court granted Golden Living’s motion
to dismiss Hunter’s complaint, concluding that he failed to meet the heightened pleading
standard for fraud under Federal Rule of Civil Procedure 9(b) and failed to allege a prima
facie case under the FCA. We agree and will affirm.
I.
Golden Living operates 273 nursing homes across the country, including Golden
Living-Riverchase in Birmingham, Alabama. Hunter, a registered nurse, worked at this
facility as a weekend supervisor and weekday treatment nurse from December 2006 until
he resigned in February 2007. Hunter claims that, in his two months at the nursing home,
he learned that Golden Living engaged in a years-long scheme to overbill Medicare and
Medicaid at each of its facilities. This alleged scheme involved Golden Living
intentionally admitting high-acuity residents who required more intensive care while
* This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not constitute binding precedent.
2 simultaneously understaffing the facilities. Although Golden Living billed Medicare and
Medicaid for providing care to these high-acuity residents, Hunter alleges that Golden
Living could not and, thus, did not provide adequate care to the residents. This, he
alleges, rendered Golden Living’s requests for payment fraudulent under the FCA and
state law.
In 2015, Hunter filed a sealed Complaint against eleven entities alleging violations
of the FCA.1 From 2015 to July 2023, the United States filed over a dozen motions to
continue to seal the Complaint while it investigated Hunter’s claims. The United States
ultimately declined to intervene. Hunter then filed an Amended Complaint asserting five
counts for violations of the federal FCA and twenty-three counts for state law violations.
Later, the Amended Complaint was unsealed.
Golden Living filed a motion to dismiss the Amended Complaint and the District
Court granted it. In opposing the motion to dismiss, Hunter principally relied on three
categories of allegations to support his prima facie case under the FCA. First, Hunter
cited reports that he commissioned from “workload experts, database experts, computer
simulation experts, and industrial engineers.” J.A. 117 (footnote omitted). These reports,
he urged, showed that Golden Living’s submissions to Medicare and Medicaid for
payments were fraudulent because they included material misrepresentations that were
based on “mathematical[] and human[] impossib[ilities].” Id. Second, Hunter relied
upon affidavits from two nurses employed at other Golden Living facilities describing
Golden Living disputes that it controls or operates all eleven named entities. Because 1
we will affirm the District Court’s order, we need not resolve this dispute.
3 understaffing and purported overbilling. Third, Hunter cited his personal experience at
Golden Living’s Birmingham facility, as well as his letter of resignation, in which he
described an “[i]nadequate number of staff” and inability to treat residents adequately as
reasons for his resignation. J.A. 63.
The District Court found these allegations insufficient to meet his burden of
pleading a prima facie case of fraud under Federal Rule of Civil Procedure 9(b) and
further concluded that because Hunter failed to state an FCA claim under Federal Rule of
Civil Procedure 12(b)(6), it would not “exercise supplemental jurisdiction over Plaintiff’s
state law claims.” United States ex rel. Hunter v. Fillmore Cap. Partners, LLC, No. 15-
2134, 2024 WL 1051971, at *10 (E.D. Pa. Mar. 11, 2024). Hunter appealed.
II.2
On appeal, Hunter essentially advances two arguments in favor of reversal: (1) the
District Court erroneously imposed a higher pleading standard than required under
Federal Rule of Civil Procedure 9(b), and (2) the District Court failed to accept the
allegations in the Amended Complaint as true and draw all reasonable inferences in his
favor as required under Federal Rule of Civil Procedure 12(b)(6). We reject both
arguments.
2 The District Court had jurisdiction under 28 U.S.C §§ 1331 and 1367. We have jurisdiction under 28 U.S.C. § 1291. We review a district court’s grant of a motion to dismiss de novo. Howard Hess Dental Lab’ys Inc. v. Dentsply Int’l, Inc., 602 F.3d 237, 246 (3d Cir. 2010).
4 A.
Hunter first urges that the District Court erred in finding his allegations
insufficiently particular under Federal Rule of Civil Procedure 9(b). An FCA plaintiff
must comply with Federal Rule of Civil Procedure 9(b) and plead his fraud claims with
particularity. United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 n.9 (3d Cir.
2004) (citing United States ex rel. LaCorte v. SmithKline Beecham Clinical Lab’ys, Inc.,
149 F.3d 227, 234 (3d Cir. 1998)). To meet the pleading standard of Federal Rule of
Civil Procedure 9(b), the plaintiff must allege “particular details of a scheme to submit
false claims paired with reliable indicia that lead to a strong inference that claims were
actually submitted.” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 156 (3d Cir.
2014) (emphasis added) (citations and internal quotation marks omitted). While a
plaintiff need not produce “representative samples” of the alleged fraudulent conduct, id.
at 156, he must allege the “who, what, when, where, and how” of the fraudulent scheme,
United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294,
307 (3d Cir. 2016) (citation and internal quotation marks omitted). However, “an
inference of illegality based on facts that could plausibly have either a legal or illegal
explanation would be insufficient to meet Rule 9(b)’s burden, because . . . the possibility
of a legitimate explanation undermines the strength of the inference of illegality.” United
States v. Omnicare, Inc., 903 F.3d 78, 92 (3d Cir. 2018) (emphasis added) (citing Foglia,
754 F.3d at 158).
The District Court concluded that while Hunter “satisfied the first element of the
Foglia test by making allegations of a scheme, . . . he . . . failed to satisfy the second
5 element [in that] he ha[d] not alleged ‘reliable indicia’ of fraud that lead to a ‘strong
inference that claims were actually submitted.’” Hunter, 2024 WL 1051971, at *5
(quoting Foglia, 754 F.3d at 156). In reaching this conclusion, the District Court
carefully considered the allegations Hunter cited as “reliable indicia of fraud.” Id. It
determined that these allegations were too “vague,” otherwise “insufficient to provide
reliable indicia of fraud,” id., or in some cases, entirely inconsistent with Hunter’s claim
of fraud. We agree.
Hunter urges, as he did in opposing the motion to dismiss below, that his experts’
reports, which were submitted with his pleadings, constitute “mathematical evidence of
the knowing and deliberate execution of fraud.” Appellant Br. 25. This, he further
claims, supports a strong inference of fraud. But the District Court correctly considered
these reports and concluded that even if it “accept[ed] the experts’ conclusions at face
value,” the reports “provide[] no more than [proof of a] ‘mere opportunity for fraud.’”
Hunter, 2024 WL 1051971, at *6 (quoting United States ex rel. Gohil v. Sanofi-Aventis
U.S. Inc., 96 F. Supp. 3d 504, 517 (E.D. Pa. 2015)). That is, while the reports may
support the proposition that “there were not sufficient employees to perform all the
necessary work” for the given number of residents, this only supports that it was possible
for Golden Living to commit fraud, not that it was probable. Id. As the District Court
noted, Hunter did not allege that “he provided his experts with the claims actually billed
at all 273 facilities in question.” Id. The existence of “the very real ‘possibility of [the]
legitimate explanation’ that [Golden Living] pushed their employees hard and only billed
for work performed ‘undermines the strength of the inference of illegality.’” Id. (quoting
6 Omnicare, 903 F.3d 78, 92 (3d Cir. 2018)). Indeed, as the District Court recognized,
Golden Living has a financial incentive in minimizing, to the extent permitted by law and
regulation, staffing and overhead costs to maximize its profits. Thus, the existence of a
legitimate business explanation for Golden Living’s low staffing decision militates
against any “strong inference” of fraud in this case as required by Foglia.
Hunter’s allegations regarding his personal experience and references to his
resignation letter also do not suffice as reliable indicia of fraud. The District Court
astutely recognized that, his personal experience “working at a Golden Living facility,”
contrary to his urging, highlighted “his failure to allege reliable indicia of fraud.” Id. at
*5. Hunter’s allegation that “he performed more work than he was supposed to and
stayed late on multiple occasions,” id., supports the opposite inference that despite
Golden Living’s high number of high acuity residents, Golden Living provided
appropriate services, though at a high cost to staff morale. See also J.A. 63 (alleging that
Hunter “stay[ed] late” to ensure appropriate treatment was provided to his residents). As
the District Court further observed “[o]verwork alone does not equate to false claims
being submitted.” Hunter, 2024 WL 1051971, at *5 (emphasis added). And other
allegations based on his experience were too vague. The District Court concluded, and
we agree, that Hunter’s personal complaints “amount[ed] to generalized concerns about
improper documentation made to unidentified administrators . . . at unspecified times,
and . . . vague complaints that the care services provided to residents . . . were not
consistent with accepted standards of medical practice.” Hunter, 2024 WL 1051971, at
*5 (citations and quotation marks omitted).
7 Finally, two affidavits that Hunter submitted as part of his Amended Complaint
fail to support his claims. Both affidavits provide cumulative allegations of understaffing
and inadequate patient care. However, as the District Court explained, inadequate care is
insufficient to sustain a worthless services claim under the FCA. Furthermore, neither
affidavit describes the affiants’ personal experiences or knowledge of submitting false
claims as a part of a larger scheme. While Hunter emphasizes that one affiant explained
that “documentation was routinely filled in with nothing but guesswork or false entries to
comply with the paperwork demands by management,” this allegation is too vague. J.A.
121. The affiant did not identify examples of false claims, what forms were used to
falsify the claims, or the specific residential locations implicated by these false claims.
Although relators need not “identify a specific claim for payment” to allege a FCA
violation, Foglia, 754 F.3d at 156, Foglia’s second element requires a greater degree of
factual detail than these affidavits provide.
In short, we agree with the District Court that the allegations Hunter has set forth
in his Amended Complaint are not “reliable indicia” of fraud sufficient to support a
“strong inference that claims were actually submitted.” Id. (quoting Grubbs, 565 F.3d at
190) (internal quotation marks omitted).
B.
Next, Hunter contends the District Court erred in dismissing Hunter’s complaint
for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In reviewing a
motion to dismiss, we accept as true a complaint’s factual allegations and view them in
the light most favorable to the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224,
8 233 (3d Cir. 2008). We must “consider only the complaint, exhibits attached to the
complaint, matters of public record, as well as undisputably authentic documents if the
complainant’s claims are based upon these documents.” Mayer v. Belichick, 605 F.3d
223, 230 (3d Cir. 2010).
To establish a prima facie case under the FCA, a relator must show “(1) the
defendant presented or caused to be presented to an agent of the United States a claim for
payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was
false or fraudulent.” Zimmer, 386 F.3d at 242 (quoting Hutchins v. Wilentz, Goldman &
Spitzer, 253 F.3d 176, 182 (3d Cir. 2001)). To satisfy the falsity element, a claim can be
factually or legally false. Factually false claims “misrepresent[] what goods or services
that [the claimant] allegedly provided to the government.” United States ex rel. Wilkins v.
United Health Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011), overruled on other grounds
by, Universal Health Servs., Inc. v. United States, 579 U.S. 176 (2016). Legally false
claims involve a claimant who “knowingly falsely certifies that it has complied with a
statute or regulation the compliance with which is a condition for Government payment.”
Id. Knowledge is defined as “actual knowledge,” “deliberate indifference of the truth or
falsity of the information,” or “reckless disregard of the truth or falsity of the
information.” 31 U.S.C. § 3729(b)(1)(A).
The District Court concluded that Hunter failed to state a prima facie FCA claim
because he did not allege facts to support either factual or legal falsity under either false
claims theory. We agree.
9 1.
First, Hunter’s Amended Complaint fails to allege factual falsity on an “inflated
claims” theory, see Hunter, 2024 WL 1051971, at *7-8, or “worthless services” theory,
see id. at *8-9. As the District Court concluded that Hunter failed to meet his standard of
pleading fraud with particularity under Federal Rule of Civil Procedure 9(b), it easily
concluded that Hunter also failed to plead facts to support either theory of factual falsity.
While the District Court recognized that Hunter made “substantial allegations of
understaffing . . . . [, he failed] to take the next step and allege that [Golden Living]
submitted false claims.” Id. at *7 (emphasis added). Instead, Hunter merely “revert[ed]
to the same conclusory formulas that simply restate the element of falsity.” Id. at *8. In
essence, the “allegations [we]re [insufficient] . . . pleadings on information and belief.”
Id. (concluding that “[Hunter’s] vague allegations of mistreatment of patients are not
specific enough to allege falsity under Rule 9(b).”).
2.
Hunter’s Amended Complaint also fails to allege either legal falsity or implied
legal falsity. Express false certifications occur when a claimant “falsely certif[ies] that it
is in compliance with regulations which are prerequisites to Government payment in
connection with the claim for payment of federal funds.” Wilkins, 659 F.3d at 305.
Implied false certifications “attach[] when a claimant seeks and makes a claim for
payment from the Government without disclosing that it violated regulations that affected
its eligibility for payment.” Id.
10 First, Hunter fails to allege express false certification because he has failed to
allege factual falsity. Although he urges that he has sufficiently plead legal falsity by
alleging “a clear picture of the circumstances that constitute the falsity of the claims
[Golden Living] submitted,” as the District Court wrote, his failure to allege factual
falsity also dooms his claim of express legal falsity. Appellant Br. 39. Hunter does not
allege who submitted fraudulent claims, what the fraudulent claims said, specific
locations where the fraudulent claims occurred, or which patients were impacted by the
fraudulent claims. See Moore, 812 F.3d at 307.
Second, Hunter fails to allege implied false certification because he likewise made
generalized and conclusory claims that Defendants “violated . . . existing regulations by
failing to comply with the staffing regulations.” Hunter, 2024 WL 1051971, at *10. The
District Court concluded in the alternative, and we agree, that “[e]ven if false
certifications were made, [Hunter] ha[d] not sufficiently alleged that those certifications
were material” to the government’s decision to pay the claims. Id. Instead, Hunter relied
on “boilerplate language” to support his claims without explaining whether violations of
the language had any impact on the government’s payment decision. Id.
Because Hunter has failed to allege the falsity element of an FCA claim, the
allegations of his Amended Complaint are insufficient to survive a Rule 12(b)(6) motion.
III.
For these reasons, we will affirm the order of the District Court.