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United States v. Lang

United States District Court, E.D. North Carolina, Southern Division

April 21, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
CATHERINE ANN LANG, a/k/a "Catherine Lang", "Catherine Lang-Murgo" "Catherine A. Cashin", "Caterine Lang", "Cathy Duden", "Kathy Duden", "Cathy Lang", "Catherine McDowell", Defendant.

          ORDER

          TERRENCE W. BOYLE UNITED STATES DISTRICT JUDGE.

         This 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.

         BACKGROUND

         In its 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.

         The 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.

         The 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 refused repayment.

         The 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).

         DISCUSSION

         A Rule 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 570.

         Federal 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).

         The 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.

         I. False Claims Act claims

         The 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 ...

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