United States of America ex rel v. Infante-Green et al

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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
UNITED STATES OF AMERICA,
ex
rel. OCEAN STATE TRANSIT, LLC,
d/b/a Student Transportation of
America, Inc.,
a Rhode Island limited
liability company
Plaintiff,
v.
ANGELICA INFANTE-GREEN,
in
her personal capacity, JOHN, AND
JANE DOES 1-5,
in their individual
capacities,
Defendants.
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C.A. No. 1:21-CV-00391-MSM-PAS
O R D E R
Mary S. McElroy, United States District Judge.
This matter is a qui tam suit brought by Ocean State Transit, LLC (“Ocean
State”) 	against 	the 	defendant 	Rhode 	Island 	Commissioner of 	Elementary 	and
Secondary Education Angélica Infante-Green (“the Commissioner”), alleging that she
violated the False Claims Act (“FCA”), 31 U.S.C. § 3729
et seq., by falsely certifying
that the Rhode Island Department of Elementary and Secondary Education (“RIDE”)
complied with certain federal COVID-19 relief statutes (namely, the CARES Act),
which 	required 	RIDE 	“to 	the 	greatest 	extent 	practicable, 	continue 	to 	pay 	its
employees and contractors during the period of any disruptions or closures related to
the coronavirus.”
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This Court granted the Commissioner’s Motion to Dismiss, resulting in a
judgment in her favor. (ECF Nos. 26 & 27.) Now, pursuant to Fed. R. Civ. P. 59(e),
Ocean States moves for the Court to alter or amend that judgment.
The granting of a motion under Rule 59(e) is “an extraordinary remedy which
should be used sparingly.”
	Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir.
2006). 	To prevail, the moving party must show “an intervening change in the
controlling law, a clear legal error, or newly discovered evidence.”
Soto-Padro v. Pub.
Bldgs. Auth., 675 F.3d 1, 9 (1st Cir. 2012). Here, among its arguments, Ocean State
argues a change in the controlling law, pointing to an opinion of the United States
Supreme Court,
United States ex rel. Schutte v. SuperValu Inc., 143 S. Ct. 1391
(2023), issued on June 1, 2023, after this Court’s April 28, 2023, granting of the
Commissioner’s Motion to Dismiss and entry of the judgment.
An FCA claim has two essential elements: (1) falsity of the claim and (2) a
scienter requirement—the defendant’s knowledge of the claim’s falsity.
Schutte, 143
S. Ct. at 1399. In
Schutte, the Supreme Court resolved a circuit split over whether,
on the scienter element, an FCA claimant must allege a statement or conduct that
represents an “objective falsehood.” 	The Supreme Court rejected the “objective
falsehood” requirement and held instead that the “FCA’s scienter element refers to
respondents’ knowledge and subjective beliefs—not to what an objectively reasonable
person may have known or believed.”
Id.
The plaintiffs in
Schutte brought qui tam actions under the FCA against retail
drug pharmacies, alleging that they knowingly overcharged Medicare and Medicaid
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when they sought reimbursement from those programs.
Id. at 1397-98. The Federal
Centers for Medicare and Medicaid Services regulations required the pharmacies
limit reimbursement to the “usual and customary charges [for the drug] to the general
public.”
	Id. at 1396. The defendant pharmacies reported their higher retail pricing
instead of their popular discounted pricing.
	Id. at 1397. 	The plaintiffs, however,
contended that the discounted pricing was the actual “usual and customary” pricing.
Id.
While the phrase “usual and customary” appeared open to interpretation, the
plaintiffs argued that the pharmacies were informed that their discounted prices
were their “usual and customary” prices, believed those prices were their “usual and
customary” prices, and hid their discounted prices from regulators and contractors.
Id. at 1398. 	In support of these arguments, the plaintiffs presented evidence in
response to the pharmacies’ motions for summary judgment that the pharmacies had
received notices from authorities that “usual and customary” refers to discounted
prices and the plaintiffs produced email exchanges between pharmacy executives
raising concerns about letting state agencies or pharmacy benefit managers find out
about discounted prices.
Id.
The district court, and the Seventh Circuit on appeal, held that the pharmacies
had submitted false claims by not reporting their discounted prices as their “usual
and customary” prices.
	Id. 	But, on the scienter element, the Seventh Circuit,
applying the “objective falsehood” standard, held that the pharmacies were “entitled
to summary judgment because their actions were consistent with an objectively
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reasonable interpretation of the phrase ‘usual and customary.’”
Id. at 1399. Applying
that standard, the Seventh Circuit “reasoned that the phrase
could have been
understood as referring to respondents’ retail prices, not their discounted prices—
even if the phrase, correctly understood, referred to their discounted prices. It thus
did not matter whether [the pharmacies] thought that their discounted prices were
actually their ‘usual and customary’ prices.”
	Id. 	What mattered was that someone
else, standing in defendants’ shoes, may have reasonably thought that it was
appropriate to report the retail prices as “usual and customary.”
Id.
The Supreme Court, however, held that the “FCA’s scienter element refers to
respondents’ knowledge and subjective beliefs—not to what an objectively reasonable
person may have known or believed.”
Id. Moreover, it did not matter that the phrase
“usual and customary” may be ambiguous because “such facial ambiguity alone is not
sufficient to preclude a finding that respondents knew their claims were false.”
	Id.
The FCA’s “standards focus primarily on what respondents thought and believed.”
Id. at 1400. Thus, while the phrase “usual and customary” may have been ambiguous
in isolation, “that ambiguity does not preclude respondents from having learned their
correct meaning—or, at least, becoming aware of a substantial likelihood of the terms’
correct meaning.”
Id. at 1402.
Here, in the Order granting the Commissioner’s Motion to Dismiss, this Court
applied the now-defunct objective falsehood standard, holding that Commissioner’s
argument that her certification that RIDE “shall to the greatest extent practicable”
continue to pay its contractors cannot constitute an objective falsehood “because she
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had an objectively reasonable interpretation of the terms of RIDE’s contract with
Ocean State that did not require payment” once the schools closed. 	(ECF No. 26 at
13.) 	But
Schutte instructs that the Court must consider what the Commissioner
herself knew and believed, not how an objectively reasonable person may have
interpreted the relevant obligations. 	Unlike
Schutte, which was an appeal of the
granting of the defendants’ motions for summary judgment, this case is at the motion
to dismiss stage. At this early pleading stage, the Court must accept as true the well-
pleaded facts.
	See Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir.
2007). 	Ocean State has asserted that the Commissioner knowingly and falsely
certified that RIDE would comply with the CARES Act requirement knowing that
RIDE would not comply. (ECF No. 1 at 14-15.) The plaintiffs therefore appropriately
state the scienter element of their FCA claim.
But the Commissioner argues, as this Court previously held, that the “greatest
extent practicable” requirement of the CARES Act has no discernable standard and
thus she could not have acted knowingly. In
Schutte, however, the focus was not the
ambiguity or lack of definition to the phrase “usual and customary” but on the
evidence presented as to what the pharmacies knew about the phrase “usual and
customary” before making their allegedly false certifications. 143 S. C.t at 1402. As
such, a dearth of clarity to the phrase “to the greatest extent practicable” is not—at
the pleadings stage—itself a reason that an FCA action must fail.
	See id. at 1399
(“[F]acial ambiguity alone is not sufficient to preclude a find that respondents knew
their claims were false.”).
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Further, although
Schutte did not directly address the falsity element, it did
indicate that falsity is intertwined with the scienter element. Particularly when the
scienter claim is based on actual knowledge, rather than deliberate indifference or
reckless disregard of the truth, “the scienter requirement of the FCA is plainly
directed to the falsity of the claims submitted.”
Id. at 1400 n.4. Here, Ocean State’s
allegations, which again the Court must accept as true at this early stage, are that
the Commissioner knowingly submitted false certifications.
In light of the Supreme Court’s holding in
Schutte, the Court GRANTS Ocean
State’s Motion to Alter or Amend Under Rule 59(e) (ECF No. 28) amends the
Memorandum and Order (ECF No. 26) consistent with this Order and VACATES the
judgment (ECF No. 27).
IT IS SO ORDERED.
_________________________________
Mary S. McElroy
United States District Judge
September 22, 2023
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