Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—11th Cir.: Court dismisses three of four FCA claims for lack of specificity, (Apr 17, 2025)

By Sherri M. Schroeder, J.D.

In a concurring opinion, the judge also took a shot across the bow at shotgun pleadings.

The appeals court for the Eleventh Circuit has reiterated the specificity requirements for the heightened pleading standard under Rule 9(b) of the Federal Rules of Civil Procedure (FRCP). A former employee of Lincare, Inc. and its subsidiary Optigen, Inc. originally filed a qui tam action against the suppliers of respiratory therapy equipment. The Relator, later joined by another former employee, alleged that the companies violated the False Claims Act (FCA) and its Anti-Kickback Statute by upcoding durable medical equipment, making kickback arrangements, waiving co-pays, and shipping unordered supplies in violation of Tricare requirements. After a district court dismissed all claims, the Eleventh Circuit found that the claims concerning upcoding were pleaded with sufficient specificity to withstand a motion to dismiss, but the others were not. Therefore, the appellate panel reversed the dismissal of the upcoding claims and remanded them for further proceedings but affirmed the dismissal of all other claims. Then, in a concurring opinion, one judge flagged a “foundational pleading defect” unreached by the district court by noting that the complaint was a shotgun pleading that ran counter to the purpose of the FRCP; he also noted the costs of such pleadings and what should be done when faced with one (Vargas v. Lincare, Inc., No. 24-11080 (11th Cir. Apr. 16, 2025)).

“Schemes.” The Relators alleged:

• Upcoding: An improper billing scheme wherein Optigen billed continuous positive airway pressure (CPAP) batteries, chargers, and cables under a code designated for ventilator accessories, allowing them to obtain reimbursement for items that should not have been covered;

• Waiver: A waiver scheme involving the routine waiver of patient co-pays wherein Optigen included a pre-filled waiver form in every new patient’s CPAP setup package without obtaining evidence of financial hardship;

• Shipment: An automatic shipment scheme wherein Optigen bypassed the request requirement for shipments of CPAP supplies, instead shipping replacement supplies at regular intervals whether the patient wanted them or not; and

• Kickbacks: An illegal kickback scheme wherein Optigen paid “setup fees” to contract field technicians who installed the equipment, structuring its payment to secure as many referrals as possible and courting referring providers with meals, gifts, and other incentives.

Pleading sufficiency. The court first dealt with the one alleged scheme it found to have been sufficiently pleaded under Rule 9(b)—the upcoding scheme. Here, the companies argued that the Relators had no firsthand knowledge of the claims, making their assertions based on “information and belief.” However, the court found that the Relators alleged they audited the patient files, including billing correspondence and authorizations for payment and that this “kind of hands-on access to primary records gives them the type of inside information that are sufficient at the pleading stage.” Because the Relators identified specific claims, with dates, amounts, and billing codes their claims were alleged with the required particularity, according to the court. Next, the companies claimed that because Tricare lacked a specific billing code for CPAP batteries, it allowed providers to use ventilator battery codes instead. Here, the court found that argument to be premature. There was no dispute that the billing codes used were expressly designated for ventilator—not CPAP—batteries and accessories and that there was a code for miscellaneous equipment not otherwise covered. Instead, the dispute was over whether the government knowingly allowed providers to use ventilator codes for CPAP devices, which in the eyes of the court was a factual dispute and not grounds for dismissal at the motion-to-dismiss stage. Therefore, the court found the district court erred in dismissing these claims.

As to the other three claims, however, the court found otherwise. According to the court, “the FCA does not impose liability for preparations for fraud, it penalizes the actual submission of false claims.” In the case at hand, the Relators failed to identify any specific claims submitted to Tricare in connection with any of the alleged schemes, any specific patients affected, or any direct knowledge of fraudulent billing. “The [R]elators provided no claim numbers, no billing codes, no dates, and no reimbursement amounts to satisfy Rule 9(b)’s requirements,” stated the court. Because the Relators failed to allege facts that showed Optigen had actually submitted false claims to the government, the court found that the district court had properly dismissed the other three claims.

Shotgun pleading. In a concurring opinion, the same judge stated that the Realtors’ complaint asserted just one count under the FCA, but they should have pleaded four distinct fraud claims—something noted about many of the amended complaints at issue by previous judges. According to the court, “The fourth amended complaint is a shotgun pleading—something we have condemned time and again. It ‘lumps multiple claims together in one count’ and forces courts to play detective rather than umpire.” (citation omitted) Such shotgun pleadings are not tolerated because they are counter to the purpose of the FRCP, stated the court. “Separating claims into different counts allows courts to test each claim on the pleadings, strike the deficient ones, and let the rest proceed,” the court declared. The court also highlighted what it believes to be the cost of this tactic: “First, it burdens courts, which must untangle the claims just to figure out what is at issue. Second, it burdens defendants, who must guess at what they should defend against. Third, it burdens the appellate process, where we are asked to review a complaint the plaintiffs never bothered to clarify.” The court then advised that when confronted with a shotgun complaint, defendants should move under Rule 12(e) for a more definite statement. A district court “should sua sponte strike it—early and firmly.” “Striking shotgun complaints at the outset spares everyone wasted time, money, and motion practice,” concluded the court.

The case is No. 24-11080.

Judge: Tjoflat, G.

Attorneys: Monica Evan Miller (Cuneo, Gilbert & Laduca, LLP) for Jaime Vargas and Francis R. Alvarez. Nathan M. Berman (Zuckerman Spaeder, LLP) for Lincare, Inc. and Optigen, Inc.

Companies: Lincare, Inc.; Optigen, Inc.

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