UNITED STATES, ex rel. CHARLES LOBEL v. Express Scripts, Inc. Charles Lobel

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 09-1047
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UNITED STATES, ex rel.
CHARLES LOBEL,
v.
EXPRESS SCRIPTS, INC.
CHARLES LOBEL,
Appellant.
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On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 05-cv-02707)
District Judge: Honorable John P. Fullam
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Submitted Under Third Circuit LAR 34.1(a)
October 29, 2009
Before: SLOVITER, FUENTES, and HARDIMAN, Circuit Judges.
(Filed: November 10, 2009)
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OPINION OF THE COURT
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The District Court had jurisdiction under 28 U.S.C. § 1331 and 31 U.S.C.1
§ 3732(a). We have jurisdiction under 28 U.S.C. § 1291.
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HARDIMAN, Circuit Judge.
Charles Lobel appeals from a judgment of the District Court dismissing his
amended complaint pursuant to the False Claims Act, 31 U.S.C. § 3729, for failure to
state a claim. We will affirm.
I.
Because we write for the parties, we recount only the essential facts. Lobel was
employed as a pharmacist by Defendant Express Scripts, Inc. (ESI). ESI is an
independent pharmacy benefit manager that provided mail order prescriptions to
participants in the Department of Defense’s TRICARE health program. Following his
termination in May 2005, Lobel sued ESI claiming the company failed to comply with 21
C.F.R. § 1306.05, which requires that all prescriptions for controlled substances be dated,
signed, and bear the registration number of the medical practitioner.
After the Government declined to intervene in the case, ESI moved to dismiss
Lobel’s amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. The District Court granted ESI’s motion and Lobel filed this timely appeal,
claiming that his amended complaint adequately pleaded violations of sections
3729(a)(1)-(2) of the False Claims Act under theories of express and implied
certification.1

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II.
As both parties correctly note, to state a claim for false certification of compliance
with a regulation, a relator under the False Claims Act must allege that: (1) defendant
violated the regulation; (2) defendant certified its compliance with the regulation to a
federal payor in spite of its violation of the regulation; and (3) defendant’s certification of
compliance was a condition of payment. Rodriguez v. Our Lady of Lourdes Med. Ctr.,
552 F.3d 297, 304 (3d Cir. 2008). In considering Lobel’s express and implied
certification claims in this appeal, we focus on the third factor.
We reject Lobel’s express certification claim out of hand. His amended complaint
fails to identify a single claim submitted by ESI in which it represented falsely to the
Government that it complied with regulations that affect its eligibility for payment. This
is plainly insufficient under Rodriguez. See id. at 303.
Although not as specious as his express certification claim, Lobel’s implied
certification argument suffers from obvious defects. First, Lobel challenges the District
Court’s judgment by relying upon the incorrect legal standard. At pages 9, 10, and 20 of
his brief, Lobel relies on the Supreme Court’s decision in Conley v. Gibson, 355 U.S. 41
(1957). As ESI rightly counters, the Supreme Court overruled Conley in Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555-57 (2007). Moreover, as the Supreme Court made
clear last term: “bare assertions,” “legal conclusions,” and “formulaic recitation[s] of the
elements of a cause of action” are “not entitled to the assumption of truth.” Ashcroft v.

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In his Reply Brief, Lobel argues for the first time that the Fraud Enforcement and2
Recovery Act of 2009 has changed the standard. It is well established that arguments not
raised in an appellant’s opening brief are waived. See, e.g., United States v. Pelullo, 399
F.3d 197, 222 (3d Cir. 2005). Even had this argument not been waived, it suffers from
the same defect as the argument we rejected on the merits.
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Iqbal, 129 S. Ct. 1937, 1950-51 (2009). Lobel’s failure even to cite Twombly and Iqbal
in either of his two briefs is a telling omission. When Lobel’s amended complaint is
analyzed under the more exacting standard established by those cases, it falls well short.
Lobel cites seven paragraphs of his amended complaint to support his argument
that he stated a claim upon which relief may be granted. Two of these seven
paragraphs—paragraphs 18 and 24—merely quote the False Claims Act and 21 C.F.R.
§ 1306.05. Four other paragraphs—paragraphs 17, 25, 26, and 27—allege in conclusory
fashion that ESI violated the False Claims Act by submitting claims for prescriptions
filled in violation of § 1306.05. Under Iqbal, these conclusory allegations are not
presumed to be true. 129 S.Ct. at 1950. Likewise, paragraph 28, which alleges
materiality, is a legal conclusion which the District Court was not obliged to accept as
true. Id. at 1949. In addition to these factual deficiencies, after reviewing the record, we2
agree with ESI that the violation of § 1306.05 Lobel alleges cannot, as a matter of law,
give rise to liability under the False Claims Act because compliance with the regulation is
not a “condition of payment.” See Rodriguez, 552 F.3d at 304.
III.
For the foregoing reasons, we will affirm the judgment of the District Court.

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