US ex rel. Haile Nicholson v. Medcom Carolinas, Inc., No. 21-1290 (4th Cir. 2022)

While working for a company that makes skin grafts, Plaintiff caught wind of a kickback scheme operating in a Veterans Administration hospital. The scheme involved the sale of skin grafts to the VA by commission-based salespeople who were paid based on how much they sold. If true, that would likely violate the Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b, which would then make each commission-induced sale a violation of the False Claims Act, 31 U.S.C. Section 3729 et seq. So Plaintiff brought a qui tam suit as a False Claims Act relator on behalf of the United States government and an analogous state-law claim under North Carolina law.
 
After the United States declined to intervene in the suit, Plaintiff prosecuted it. Because he used conclusory language in his original Complaint, the district court dismissed the Complaint with prejudice for failure to state a fraud claim with particularity under Federal Rule of Civil Procedure 9(b).
 
The Fourth Circuit agreed with the district court’s dismissal of the original Complaint for a lack of particularity. Given that it is largely made up of conclusory allegations, the original Complaint may even have failed Rule 8’s lower standard of plausibility. The court also found that the district court did not abuse its discretion in denying leave to amend for bad faith. Although the court affirmed the district court’s decision, because the district court did not take jurisdiction over the state-law claim, the court modified the decision to clarify that the state-law claim should be dismissed without prejudice.