17‐178‐cv United States of America ex rel. Tessler v. City of New York

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 5th day of October, two thousand seventeen.

PRESENT: DENNY CHIN, CHRISTOPHER F. DRONEY, Circuit Judges, JANE A. RESTANI, Judge.*

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UNITED STATES OF AMERICA ex rel. AKIVA TESSLER, Plaintiff‐Appellant,

FELIX GONZALEZ, Plaintiff,

v. 17‐178‐cv

* Jane A. Restani, Judge for the United States Court of International Trade, sitting by designation.

CITY OF NEW YORK, Defendant‐Appellee.

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FOR PLAINTIFF‐APPELLANT: AKIVA TESSLER, pro se, New York, New York.

FOR DEFENDANT‐APPELLEE: DEBO P. ADEGBILE, Boyd M. Johnson III, David W. Ogden, Saurabh H. Sanghvi, Wilmer Cutler Pickering Hale and Dorr LLP, New York, New York and Washington, DC.

Zachary W. Carter, Corporation Counsel of the City of New York, New York, New York.

Appeal from a judgment of the United States District Court for the

Southern District of New York (Furman, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Plaintiff‐appellant Akiva Tessler, proceeding pro se, appeals from a

judgment entered December 20, 2016, dismissing his qui tam action brought under the

False Claims Act (the ʺFCAʺ), 31 U.S.C. §§ 3729–3733, against defendant‐appellee City of

New York (the ʺCityʺ). Tesslerʹs second amended complaint (the ʺSACʺ) asserted two

categories of claims. First, it alleged that the City failed to recoup overpayments of

benefits for the Supplemental Nutrition Assistance Program and Temporary Assistance 2 for Needy Families Program, as required by statute and regulations, and then sought

reimbursement for those overpayments from the Government (the ʺaid‐to‐continue

claimsʺ). Second, it alleged that the City failed to redetermine the eligibility of

recipients to participate in a Medicare Savings Program (the ʺMSP claimsʺ). By opinion

and order entered December 16, 2016, the district court granted the Cityʹs motion to

dismiss the SAC for failure to state a claim. We assume the partiesʹ familiarity with the

underlying facts, the procedural history of the case, and the issues on appeal.

We review de novo the dismissal of a complaint pursuant to Federal Rule of

Civil Procedure 12(b)(6), accepting all factual allegations as true and drawing all

reasonable inferences in the plaintiffʹs favor. Biro v. Conde Nast,

(2d

Cir. 2015). The complaint must plead ʺenough facts to state a claim to relief that is

plausible on its face.ʺ Bell Atl. Corp. v. Twombly,

(2007); see also Ashcroft

v. Iqbal,

(2009). Although a court must accept as true all factual

allegations in the complaint, that requirement does not apply to legal conclusions.

Iqbal,

.

The FCA imposes civil liability on ʺany person who . . . knowingly

presents, or causes to be presented, a false or fraudulent claim for payment or approval.ʺ

(a). ʺ[F]raud under the FCA has two components: the defendant must

submit or cause the submission of a claim for payment to the government, and the claim

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for payment must itself be false or fraudulent.ʺ United States ex rel. Chorches as Trustee for

Bankr. Estate of Fabula v. Am. Med. Response, Inc. (ʺFabulaʺ),

(2d Cir. 2017)

(alteration in original) (quoting Hagerty ex rel. United States v. Cyberonics, Inc.,

(1st Cir. 2016)).

FCA complaints are subject to Federal Rule of Civil Procedure 9(b), which

provides that ʺ[i]n alleging fraud . . . , a party must state with particularity the

circumstances constituting fraud.ʺ Fabula,

(alteration in original) (quoting

Fed. R. Civ. P. 9(b)). ʺThat ordinarily requires a complaint alleging fraud to (1) specify

the statements that the plaintiff contends were fraudulent, (2) identify the speaker,

(3) state where and when the statements were made, and (4) explain why the statements

were fraudulent.ʺ

(citation and quotation marks omitted). To comply with Rule

9(b), the complaint must be supported by more than ʺconclusory statementsʺ or

ʺhypotheses,ʺ and it must set forth ʺparticularized allegations of fact.ʺ See United States

ex rel. Ladas v. Exelis, Inc.,

, 26–27 (2d Cir. 2016). Rule 9(b) permits scienter to

be averred generally, but ʺwe have repeatedly required plaintiffs to plead the factual

basis which gives rise to a strong inference of fraudulent intent.ʺ OʹBrien v. Natʹl Prop.

Analysts Partners,

, 676 (2d Cir. 1991) (internal quotation marks omitted); see

also Universal Health Servs., Inc. v. United States ex rel. Escobar,

(2016)

(observing that FCAʹs scienter requirement is ʺrigorousʺ).

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I. Aid‐to‐Continue Claims

We agree with the district court that the SACʹs aid‐to‐continue claims

failed to include particularized allegations of fact sufficient to satisfy Rule 9(b). The

SAC alleges in conclusory fashion that there was a ʺcustom and practiceʺ at the City of

not recouping aid‐to‐continue benefits, but it fails to provide particularized facts to

support that assertion. Tessler does not, for example, set forth the origins or details of

the custom and practice or identify the employees who purportedly implement it.

Tessler provides a list of 28 hearings in which he observed that the recipient lost and

alleges that the benefits were ʺrequired to be recoupedʺ and ʺexceeded any relevant

thresholds,ʺ as well as statistics from a database showing few fair hearings addressing

recoupment. Appellantʹs Br. 24. But the SAC does not contain any details as to why

these benefits were required to be recouped. Moreover, as the district court noted,

under applicable law and guidelines, the City is not obligated to recoup overpayments

unless they exceed certain thresholds. See

(e)(2)(i); N.Y.S. Office of

Temporary and Disability Assistance, Administrative Directive 05‐ADM‐15 (Sept. 6,

2005), available at https://otda.ny.gov/policy/directives/2005/ADM/05‐ADM‐15.pdf; 18

N.Y.C.R.R. § 352.31(d)(5).

In Fabula, we clarified that a relator who has personal knowledge that

records are falsified need not necessarily have personal knowledge that those records

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were actually submitted where the factual allegations made it highly plausible that the

employer submitted falsified records. 865 F.3d at 82‐86. Fabula, an emergency

medical technician, alleged that his employer directed him to falsify patient care reports

for ambulance transports so that they would qualify for Medicare reimbursement. Id. at

76‐77. Fabula had no access to his employerʹs billing department and therefore could

not personally verify whether any of his reports were actually submitted to the

Government. Id. at 82. We held that Fabula could plead submission on information

and belief because submissions were uniquely within his employerʹs knowledge and

control and Fabulaʹs factual allegations made it highly plausible that Fabulaʹs employer

submitted the falsified records. Id. at 83‐86.

Unlike Fabula, however, Tessler fails to plausibly allege that the City

submitted false or fraudulent claims for payment. Tessler lacked personal knowledge

that the City failed to recoup the aid‐to‐continue overpayments to those recipients, and

that the City submitted claims for federal reimbursement for any unrecouped

overpayments. The SAC alleges only ʺhypothesesʺ and conclusory allegations. For

these reasons, the SAC fails to plead the aid‐to‐continue claims with particularity as

required by Rule 9(b).

II. MSP Claims

As to the MSP claims, the SAC does not set forth a sufficient factual basis to

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give rise to a strong inference of fraudulent intent. See OʹBrien, 936 F.2d at 676. Tessler

asserted that the Cityʹs failure to redetermine recipientsʹ eligibility for MSP benefits was

ʺknowing and/or intentional, and/or [resulted from] reckless disregard and/or deliberate

ignorance.ʺ J.A. 67. The district court, however, was not required to credit those legal

conclusions. See Iqbal,

. While the SAC alleges that the City knew it

failed to recertify over one thousand MSP recipients, the allegations do not support a

strong inference of fraudulent intent; indeed, the SAC does not plausibly allege that

anyone at the City knew, or was reckless in not knowing, that the City was causing false

claims to be presented to the federal government on behalf of individuals who were

ineligible to receive benefits. Tesslerʹs MSP claims thus fall short of Rule 9(b) and FCA

scienter requirements.

III. Denial of Leave to Amend

A district court ʺhas broad discretion in determining whether to grant

leave to amendʺ and leave ʺshould generally be denied in instances of futility . . . [or]

repeated failure to cure deficiencies by amendments previously allowed.ʺ Ladas,

(citation and quotation marks omitted). We review the district courtʹs futility

finding de novo and its decision to deny leave to amend a complaint for abuse of

discretion. Balintulo v. Ford Motor Co.,

(2d Cir. 2015). Tesslerʹs

ʺcontention that the District Court abused its discretion in not permitting an amendment

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that was never requested is frivolous.ʺ Horoshko v. Citibank, N.A.,

, 249–50

(2d Cir. 2004). Further, Tessler failed ʺto explain how [he] proposed to amend the

complaint to cure its defects.ʺ See F5 Capital v. Pappas,

(2d Cir. 2017).

Moreover, Tessler had three opportunities to present his complaint and there is no

indication that a third amended complaint would address the aforementioned issues.

For these reasons, it was not an abuse of discretion for the district court to deny Tessler

an opportunity to further amend.

We have considered Tesslerʹs remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the district courtʹs judgment.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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