United States District Court, E.D. North Carolina, Southern Division
TERRENCE W. BOYLE UNITED STATES DISTRICT JUDGE.
cause comes before the Court on defendant's motion to
dismiss pursuant to Rules 9(b) and 12(b)(6) of the Federal
Rules of Civil Procedure. The appropriate responses and
replies have been filed, and a hearing was held on the motion
before the undersigned on March 15, 2017, at Raleigh, North
Carolina. For the reasons discussed below, defendant's
motion is granted and this action is dismissed.
amended complaint, plaintiff, the government, alleges as
follows. On or around March 21, 2001, defendant completed an
application for social security disability benefits with a
purported disability onset date of July 30, 2000. Defendant
represented that the conditions which limited her ability to
work were severe low back and neck pain, right hemiparesis,
traumatic brain injury, poor concentration, headaches, PTSD,
and depression; these conditions were allegedly attributable
to an automobile accident which occurred on July 30, 2000.
Defendant's application was approved in July 2001.
Defendant received monthly social security benefits from
August 2001 to January 2012. In August 2001, defendant
applied for child's disability benefits on behalf of her
son and requested to be the approved payee for her son's
benefits. Defendant's application for child's
disability benefits was also approved and defendant received
monthly social security benefits for her son from August 2001
to January 2006; payment of defendant's son's
benefits was conditioned on defendant's own eligibility
for social security disability benefits.
government alleges that, shortly after defendant began to
receive social security disability benefits on behalf of
herself and her son, defendant's medical condition
improved such that she would have been able to work and,
additionally, that defendant began engaging in substantial
gainful activity, both of which would disqualify her from
receiving disability benefits. Specifically, the government
alleges that in April 2002 Unburied Treasure by the Sea,
Inc., an art gallery, was incorporated in North Carolina,
with defendant's son listed as president and
defendant's sister listed as secretary/treasurer. A
newspaper article published in June 2002 identified defendant
as the owner of Unburied Treasure. In July 2004,
defendant's sister completed a report of continuing
disability on behalf of defendant indicating that defendant
continued to be disabled because she required assistance
"due to continuing visual impairment." [DE 11]. In
2004 and 2005, defendant discussed in online forums both the
art gallery and her work with stained glass. In 2007,
defendant was listed as teacher of a stamping program and a
yoga class at the Surf City Community Center. In November
2011, defendant returned a work activity report indicating
that she had not worked since July 2000 and that she was then
currently employed as a yoga instructor but that she had not
started working yet. Between tax years 2002 and 2008,
Unburied Treasure received during its highest grossing year
(2003) $33, 148 in gross receipts and during its lowest
grossing year (2008) $3, 432 in gross receipts.
amended complaint alleges that defendant knowingly accepted
social security benefits to which she was not entitled for
herself totaling $179, 567 from April 2003 through January
2012 and for her son totaling $27, 023 from April 2003
through February 2006. The Social Security Administration has
made a demand to defendant for repayment and defendant has
government raises three claims under the False Claims Act:
for submission of false claims under 31 U.S.C. §
3729(a)(1)(A), for false statements to get a claim paid under
31 U.S.C. § 3729(a)(1)(B), and for concealment or
avoidance of an obligation to pay or transmit money to the
United States under 31 U.S.C. § 3729(a)(1)(G). Also
alleged are common law claims for payment by mistake of fact
and for unjust enrichment/restitution. The government seeks
an amount equal to the money mistakenly paid to defendant
plus interest as well as treble damages, the costs of
investigation and prosecution, and civil penalties for each
false claim as allowed by law. Defendant has moved to dismiss
the complaint against her for failure to plead facts with
particularity sufficient to state claims upon which relief
can be granted. Fed.R.Civ.P. 9(b);, 12(b)(6).
12(b)(6) motion tests the legal sufficiency of the complaint.
Papasan v. Allain, 478 U.S. 265, 283 (1986). When
acting on a motion to dismiss under Rule 12(b)(6), "the
court should accept as true all well-pleaded allegations and
should view the complaint in a light most favorable to the
plaintiff." Mylan Labs., Inc. v. Matkari, 7
F.3d 1130, 1134 (4th Cir.1993). A complaint must allege
enough facts to state a claim for relief that is facially
plausible. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007). Facial plausibility means that the facts
pled "allow the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged,
" and mere recitals of the elements of a cause of action
supported by conclusory statements do not suffice.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
complaint must be dismissed if the factual allegations do not
nudge the plaintiffs claims "across the line from
conceivable to plausible." Twombly, 550 U.S. at
Rule of Civil Procedure 9(b) imposes a heightened pleading
standard on claims of fraud or mistake, requiring a party to
"state with particularity the circumstances constituting
fraud or mistake, " but allowing state of mind to be
pled generally. Fed R. Civ. P. 9(b). "These facts are
often 'referred to as the 'who, what, when, where,
and how' of the alleged fraud.'" United
States ex rel. Wilson v. Kellogg Brown & Root, Inc.,
525 F.3d 370, 379 (4th Cir. 2008) (citation omitted).
However, "[a] court should hesitate to dismiss a
complaint under Rule 9(b) if the court is satisfied (1) that
the defendant has been made aware of the particular
circumstances for which she will have to prepare a defense at
trial, and (2) that plaintiff has substantial prediscovery
evidence of those facts." United States ex rel.
Harrison v. Westinghouse Savannah River Co., 176 F.3d
776, 784 (4th Cir. 1999) (Harrison I).
first question for the Court is whether the government has
pleaded with sufficient specificity to allow it to seek to
recover treble damages and penalties for alleged overpayment
of social security disability benefits. The second question
is whether the remedial scheme contemplated by the Social
Security Act would preempt the government's attempt to
rely on the common law to recover the alleged overpayment.
The Court addresses each question in turn.
False Claims Act claims
False Claims Act (FCA) was enacted following the Civil War to
address fraud by contractors perpetrated during the war.
United States v. Bornstein, 423 U.S. 303, 309
(1976). The focus of the FCA
remains on those who present or directly induce the
submission of false or fraudulent claims. See 31 U.S.C.
§ 3729(a) (imposing civil liability on "any person
who ... knowingly presents, or causes to be presented, a
false or fraudulent claim for payment or approval"). A
"claim" now includes direct requests to the
Government for payment as well as reimbursement requests made
to the recipients of federal funds under federal benefits
programs. See § 3729(b)(2)(A). The Act's scienter
requirement defines "knowing" and
"knowingly" to mean that a person has "actual
knowledge of the information, " "acts in deliberate
ignorance of the truth or falsity of the information, "
or "acts in reckless disregard of the truth or falsity
of the information." § 3729(b)(1)(A). And the Act
defines "material" to mean "having a ...