United States of America Ex Rel. Richard G. Schmidt, M.d v. Zimmer, Inc

PRECEDENTIAL
UNITED STATES COURT
OF APPEALS
FOR THE THIRD CIRCUIT
NO. 03-3695
UNITED STATES OF AMERICA
EX REL.
RICHARD G. SCHMIDT, M.D.
v.
ZIMMER, INC; MERCY HEALTH
SYSTEM, d/b/a, t/a MERCY
FITZGERALD HOSPITAL;
MERCY HOSPITAL OF
PHILADELPHIA, a/k/a/
MISERICORDIA HOSPITAL;
MERCY HAVERFORD HOSPITAL;
MERCY COMMUNITY HOSPITAL;
MERCY SUBURBAN HOSPITAL;
MERCY CATHOLIC MEDICAL
CENTER
Richard G. Schmidt,
Appellant
On Appeal From the United States
District Court
For the Eastern District of Pennsylvania
(D.C. Civil Action No. 00-cv-01044)
District Judge: Hon. Eduardo C.
Robreno
Argued April 15, 2004
BEFORE: RENDELL, STAPLETON,
and LAY,* Circuit Judges
(Opinion Filed: October 6, 2004)
Richard A. Sprague
Joseph A. Podraza, Jr. (Argued)
Sprague & Sprague
135 South 19th Street
Wellington Building, Suite 400
Philadelphia, PA 19103
and
Martin I. Twersky
H. Laddie Montague, Jr.
Berger & Montague
1622 Locust Street
Philadelphia, PA 19103
Attorneys for Appellant
Steven L. Jackson (Argued)
Baker & Daniels
111 East Wayne Street, Suite 800
Fort Wayne, IN 46802
and
Joan A. Yue
Reed Smith
1650 Market Street
2500 One Liberty Place
Philadelphia, PA 19103
Attorneys for Appellee Zimmer, Inc.
* Hon. Donald P. Lay, United States
Circuit Judge for the Eighth Circuit, sitting
by designation.

-- 1 of 15 --

2
OPINION OF THE COURT
STAPLETON, Circuit Judge:
Richard G. Schmidt, M.D.
(“Schmidt”), an orthopedic surgeon in
Bala Cynwyd, Pennsylvania, brought this
qui tam action pursuant to the False
Claims Act (“FCA”), 31 U.S.C. §§ 3729 et
seq., against defendant Zimmer, Inc.
(“Zimmer”), a manufacturer, seller, and
distributor of orthopedic implants. The
District Court dismissed Schmidt’s
complaint for failure to state a claim under
Rule 12(b)(6) of the Federal Rules of Civil
Procedure. We will reverse the judgment
of the District Court.
I.
In his first amended complaint,
which is at issue in this appeal, Schmidt
purported to allege FCA violations against
both Zimmer and Mercy Health Systems
(“Mercy”).1 In particular, Schmidt alleged
that Zimmer entered into a contract with
Premier Purchasing Partners (“Premier”),
an organization which acts as a purchasing
agent for a group of entities, including
Mercy, that provide medical services for
which reimbursement may be sought under
the M e d ic a re p ro g ra m (“Prem ier
Participants”). The contract committed
Zimmer to provide orthopedic implants to
the Premier Participants for a period of
five years.
Under this contract, the Premier
Participants were rewarded if they
purchased Zimmer’s products in sufficient
numbers to increase Zimmer’s market
share. Among these rewards was a
“conversion incentive.” This incentive
was intended to compensate the Premier
Participants for purchasing implants from
Zimmer rather than its competitors. Under
the “conversion incentive,” when a
Premier Participant purchased more than
the total number of implants it had
purchased the year before, each additional
implant could be purchased for a reduced
price of $200. In addition, the contract
allegedly provided that each Premier
Participant would receive a 2% bonus on
implant purchases if the Premier
Participant met the pre-set market share
and volume purchase commitments.
Finally, the contract allegedly provided for
additional incentives “targeted to offset the
costs associated with com petitive
conversion.” Each Premier Participant
would forfeit the foregoing rewards if they
failed to meet the commitments pre-set by
Zimmer.
Schmidt further alleged that the
1Mercy is a Pennsylvania corporation
that owns and operates hospitals and other
health care facilities, including Mercy
Fitzgerald Hospital, Mercy Hospital of
Philadelphia a/k/a Misericordia Hospital,
Mercy Haverford Hospital, Mercy
Community Hospital, Mercy Catholic
Medical Center, and Mercy Suburban
Hospital.

-- 2 of 15 --

3
rewards provided under the contract were
paid to Mercy and the other Premier
Participants “in cash or cash equivalents,”
and that these payments are a classic
example of “kickbacks.” Moreover, it was
alleged that Zimmer and Mercy induced
certain of its physicians and orthopedic
departments to assist in meeting Zimmer’s
prescribed volume and market share levels
by sharing with them all or part of the
rewards received from Zimmer under the
contract.
According to Schmidt, each
Premier Participant reported its costs
associated with the purchase of orthopedic
implants in annual cost reports that were
submitted to the United States Government
under the Medicare program. The
reporting form, United States Department
of Health and Human Services’s Form
HCFA-2552, required a health care
provider to certify that the costs being
submitted were true and correct, and that
the provider had complied with all laws
and regulations regarding the provision of
health care services.2 Such certification,
2Specifically, Form HCFA-2552,
according to the first amended complaint,
provides that:
M i s r e p r e s e n ta t i o n o r
f a l s i f i c a t i o n o f a n y
information contained in
this cost report may be
punishable by criminal, civil
and administrative action,
fine and/or imprisonment
u n d e r f e d e r a l l a w .
Furthermore, if services
identified by this report
were provided or procured
through the payment directly
or indirectly of a kickback
or were otherwise illegal,
c r i m i n a l , c i v i l a n d
administrative action, fines,
and/or imprisonment may
result.
J.A. at 35-36. The form also requires the
following certification by an officer or
administrator of the health care provider:
I hereby certify that I have
read the above statement
and that I have examined the
accompanying electronically
filed or manually submitted
cost report and the Balance
Sheet and Statement of
Revenue and Expenses
prepared by . . . (Provider
Name(s) and Number(s)) for
the cost reporting period
beginning . . . and ending . .
. and that to the best of my
knowledge and belief it is a
true, correct and complete
statement prepared from the
books and records of the
provider in accordance with
applic able instruc tions,
except as noted. I further
certify that I am familiar
w i t h t h e l a w s a n d
regulations regarding the
provision of health care
services and that the

-- 3 of 15 --

4
Schmidt alleged, was a condition
precedent for Premier Participants to
obtain Medicare funds from the federal
government and to retain Medicare funds
advanced by the federal government.
Schmidt alleged that, despite these
requirements, the cost reports submitted by
Mercy and the other Premier Participants
did not disclose the rewards that they
allegedly received from Zimmer under the
contract.3 Schmidt further alleged that
Mercy and the other Premier Participants
also falsely certified on their cost reports
that they were in compliance with all laws
and regulations regarding the provision of
health care services.
According to Schmidt, the
remunerations paid by Zimmer to Mercy
and the other Premier Participants under
the contract were made in violation of the
federal Anti-Kickback Act, 42 U.S.C. §
1320a-7b. In particular, Mercy was
alleged to have violated § 1320a-7b(b)(1)
by knowingly and wilfully soliciting or
receiving such unlawful remunerations,
and Zimmer was alleged to have violated
§ 1320a-7b(b)(2) by knowingly and
wilfully paying or offering to pay such
unlawful remunerations.4 Both Mercy
services identified in
this cost report were
p r o v i d e d i n
c o m p l i a nc e wit h
s u c h l a w s a n d
regulations.
J.A. at 36.
3With the exception of Mercy,
Schmidt’s first amended complaint did not
identify any other Premier Participant who
was alleged to have filed a false Form
HCFA-2552 cost report. Nor did the
complaint indicate the number of cost
reports that were allegedly submitted by
Mercy or any other Premier Participant.
442 U.S.C. § 1320a-7b(b) provides, in
relevant part, that:
(1) whoever knowingly and
willfully solicits or receives
any remuneration (including
any kickback, bribe, or
rebate) directly or indirectly,
overtly or covertly, in cash
or in kind –
(A) in return for referring an
individual to a person for
the furnishing or arranging
for the furnishing of any
item or service for which
payment may be made in
whole or in part under a
Federal health care program,
or
(B) in return for purchasing,
l e a s in g , ord erin g, o r
a r r a n g i n g f o r o r
recommending purchasing,
leasing, or ordering any
good, facility, service, or
item for which payment may
be made in whole or in part
under a Federal health care
program,
shall be guilty of a felony
and upon conviction thereof,
shall be fined not more than

-- 4 of 15 --

5
and Zimmer were alleged to have violated
§ 1320a-7b(a)(3) by failing to disclose to
the federal government the allegedly
unlawful remunerations.5 $ 2 5 , 0 0 0 o r
imprisoned for not
more than five years,
or both.
(2) whoever knowingly and
willfully offers or pays any
remuneration (including any
kickback, bribe, or rebate)
directly or indirectly, overtly
or covertly, in cash or in
kind to any person to induce
such person –
(A) to refer an individual to
a person for the furnishing
or arrang ing for th e
furnishing of any item or
service for which payment
may be made in whole or in
part under a Federal health
care program, or
(B) to purchase, lease, order,
o r a r r a n g e f o r o r
recommend purchasing,
leasing, or ordering any
good, facility, service, or
item for which payment may
be made in whole or in part
under a Federal health care
program,
shall be guilty of a felony
and upon conviction thereof,
shall be fined not more than
$25,000 or imprisoned for
not more than five years, or
both.
In addition, § 1320a-7b(b)(3) provides
certain exceptions to, and safe harbors for,
acts within the scope of § 1320a-7b(b)(1)
and (2).
542 U.S.C.§ 1320a-7b(a)(3) provides, in
relevant part, that:
Whoever . . . having
k n o w l e d g e o f t h e
occurrence of any event
affecting (A) his initial or
continued right to any
[benefit or payment under a
Federal health care program
(as defined in subsection (f)
of this section)], or (B) the
initial or continued right to
any such benefit or payment
of any other individual in
whose behalf he has applied
for or is receiving such
benefit or payment, conceals
or fails to disclose such
event with an intent
fraudulently to secure such
benefit or payment either in
a greater amount or quantity
than is due or when no such
benefit or payment is
authorized, . . . shall (i) in
the case of such a statement,
representation, concealment,
failure, or conversion by any
person in connection with
the furnishing (by that
person) of items or services
for which payment is or may
be made under the program,

-- 5 of 15 --

6
Schmidt’s first amended complaint
also alleged that both Mercy and Zimmer
violated the Anti-Self-Referral Act (also
known as the “Stark Act”), 42 U.S.C. §
1395nn, by presenting, or causing to be
presented, Medicare reimbursement claims
for services furnished pursuant to
prohibited referrals.6 Specifically, the
complaint alleged that there was a
“financial relationship” between Mercy
and certain physicians that worked at
Mercy’s facilities, and that such a
relationship also existed between Mercy
and Zimmer. Despite these alleged
financial relationships, according to the
complaint, Mercy nonetheless unlawfully
sought Medicare reimbursements for
services furnished under prohibited
referrals.
Finally, based on these alleged
violations of the Anti-Kickback Act and
the Stark Act, Schmidt alleged that
Mercy’s certifications of compliance with
federal health care law, contained in its
annual cost reports submitted to the federal
be guilty of a felony
and upon conviction
thereof fined not
more than $25,000 or
imprisoned for not
more than five years
or both, or (ii) in the
case of such a
s t a t e m e n t ,
r e p r e s e n t a t i o n ,
concealment, failure,
c o n v e r s i o n , o r
provision of counsel
or assistance by any
other person, be
g u i l t y o f a
misdemeanor and
u p o n c o n v ic t i o n
thereof fined not
more than $10,000 or
imprisoned for not
more than one year,
or both.
6The Stark Act prohibits the
presentation of a claim to Medicare for a
designated health service by an entity
where the service was furnished pursuant
to a prohibited referral by a physician that
has a financial relationship with the entity.
See 42 U.S.C. § 1395nn(a). Under §
1395nn(a)(1)(A), a physician may not refer
Medicare patients to an entity for
“designated health services,” including
inpatient and outpatient hospital services,
if the referring physician has a nonexempt
“financial relationship” with such entity.
Under § 1395nn(a)(1)(B), the entity is
prohibited from presenting or causing to
be presented a Medicare claim for services
furnished pursuant to a prohibited referral.
With certain exceptions, “financial
relationship” is defined as (1) an
ownership or investment interest in the
entity, or (2) a compensation arrangement
with the entity. 42 U.S.C. § 1395nn(a)(2).
See generally United States ex rel.
Thompson v. Columbia/HCA Healthcare
Corp., 125 F.3d 899, 901-02 (5th Cir.
1997) (describing the operation of the
Stark Act).

-- 6 of 15 --

7
government on Form HCFA-2552, were
false. Mercy’s false certifications,
according to the complaint, constituted
violations of three provisions of the FCA,
rendering both Mercy and Zimmer liable:
(1) 31 U.S.C. § 3729(a)(1), which
prohibits knowingly presenting, or causing
to be presented, to an officer or employee
of the United States Government a false
claim for payment or approval, (2) §
3729(a)(2), which prohibits knowingly
making, using and/or causing to be made
or used a false record, claim, or statement
to get a false claim paid or approved by the
federal government, and (3) § 3729(a)(7),
barring false certifications intended to
conceal, avoid, or decrease an obligation
to refund Medicare payments made by the
federal government.
Both Mercy and Zimmer responded
to the complaint by filing a motion to
dismiss. Zimmer’s motion to dismiss was
granted with prejudice; Mercy’s motion
was granted without prejudice and
Schmidt was allowed to file a second
amended complaint against it. Ultimately,
Schmidt’s claim against Mercy was
settled, and he filed this appeal of the
order granting Zimmer’s motion to
dismiss.
The District Court explained its
decision to dismiss Schmidt’s FCA claim
against Zimmer in the following manner:
It is undisputed that Zimmer
never submitted any cost
reports: Zimmer could be
liable under the FCA only if
it caused Mercy to submit
an allegedly false cost
report. But the Amended
Complaint does not allege
Z i m m e r r e v i e w e d ,
approved, or received copies
of Mercy’s cost reports or
p a r t i c i p a t e d i n t h e ir
preparation; nor does it
allege Zimmer certified the
truthfulness of Mercy’s cost
reports.
Courts have found a party
caused the submission of a
false claim by another party
only where the non-
submitting party purposely
and intentionally duped the
submitting party to submit
the false claim.
J.A. at 6-7 (citing United States v.
Bornstein, 423 U.S. 303 (1976)).
II.
We exercise plenary review over
the District Court’s dismissal of a claim
for failure to state a cause of action under
Fed. R. Civ. P. 12(b)(6). Pinker v. Roche
Holdings Ltd., 292 F.3d 361, 374 n.7 (3d
Cir. 2002).7 “A court should not dismiss a
7The District Court had jurisdiction
over this case under 28 U.S.C. § 1331 and
31 U.S.C. § 3732, which specifically
confers jurisdiction for actions brought
under the FCA. We have jurisdiction over

-- 7 of 15 --

8
complaint under Rule 12(b)(6) for failure
to state a claim for relief ‘unless it appears
beyond doubt that the plaintiff can prove
no set of facts in support of his claims
which would entitle him to relief.’” Pryor
v. National Collegiate Athletic Ass’n, 288
F.3d 548, 559 (3d Cir. 2002) (quoting
Conley v. Gibson, 355 U.S. 41, 45-46
(1957)). “In evaluating the propriety of
the dismissal, we accept all factual
allegations as true, construe the complaint
in the light most favorable to the plaintiff,
and determine whether, under any
reasonable reading of the complaint, the
plaintiff may be entitled to relief.” Pinker,
292 F.3d at 374 n.7 (citing Colburn v.
Upper Darby Township, 838 F.2d 663,
665-66 (3d Cir.1988)).
III.
According to Zimmer, it is apparent
from the face of the first amended
complaint that its marketing program did
not violate the Anti-Kickback Act or the
Stark Act. Because it concluded that
Zimmer was not alleged to have caused the
presentation of a claim, the District Court
did not reach this issue, assuming without
deciding that violations of those Acts had
been alleged. Based on our reading of the
first amended complaint, it is not clear that
the alleged conduct of Zimmer passes
muster under the Anti-Kickback and Stark
Acts. We therefore conclude that these
issues cannot be resolved in the context of
a motion to dismiss. Accordingly, like the
District Court, we assume without
deciding for purposes of this appeal that
Zimmer’s marketing program violated
both Acts.
Zimmer insists that the Anti-
Kickback Act provides a safe harbor for
marketing programs offering discounts to
health care providers and that its program
was designed to take advantage of this safe
harbor. See 42 U.S.C. § 1320a-
7b(b)(3)(A); 42 C.F.R. § 1001.952(h).
When the record is fully developed, this
may turn out to be the case, but the
complaint alleged that the rewards given to
Mercy were paid to it in “cash or cash
equivalents” and this appears to be
inconsistent with Zimmer’s safe harbor
theory. See 42 C.F.R. § 1001.952(h)(5)(i)
(“The term discount does not include –
Cash payment or cash equivalents (except
that rebates as defined in [42 C.F.R. §
1001.952(h)(4)] may be in the form of a
check).”).
Similarly, we cannot say that it is
clear from the face of the complaint that
Zimm er’s marketing program was
consistent with the Stark Act. The
marketing scheme, according to the
complaint, allegedly involved both
Zimmer and Mercy sharing remunerations
with physicians at Mercy in order to
induce these physicians to help in meeting
Zimmer’s prescribed volume and market
share levels. In providing such help, these
this appeal pursuant to 28 U.S.C. § 1291
because the District Court’s Order and
Stipulation of Dismissal resulted in a final
decision.

-- 8 of 15 --

9
physicians allegedly made “prohibited
referrals” for Mercy to provide health
services for which Mercy then allegedly
s o u g h t M e d i c a r e r e i m b u r s e m e n t.
Inasmuch as the complaint alleges a
compensation arrangement, a referral for
services, and a Medicare claim for those
services, Zimmer’s marketing scheme does
not appear to be consistent with the Stark
Act. See 42 U.S.C. § 1395nn(a);
Columbia/HCA Healthcare, 125 F.3d at
901-02.
IV.
The FCA provides, in relevant part:
Any person who –
(1) knowingly presents, or
causes to be presented, to an
officer or employee of the
United States Government
or a member of the Armed
Forces of the United States a
false or fraudulent claim for
payment or approval;
(2) knowingly makes, uses,
or causes to be made or
used, a false record or
statement to get a false or
fraudulent claim paid or
a p p r o v e d b y t h e
Government;
(3) conspires to defraud the
government by getting a
false or fraudulent claim
allowed or paid; [or] . . .
(7) knowingly makes, uses,
or causes to be made or
used, a false record or
statement to conceal, avoid,
or decrease an obligation to
pay or transmit money or
property to the Government,
is liable to the United States
Government for a civil
penalty of not less than
$5,000 and not more than
$10,000, plus 3 times the
amount of damages which
the Government sustains
because of the act of that
person . . . .
31 U.S.C. § 3729(a). In this context, “the
terms ‘knowing’ and ‘knowingly’ mean
that a person, with respect to information
– (1) has actual knowledge of the
information; (2) acts in deliberate
ignorance of the truth or falsity of the
information; or (3) acts in reckless
disregard of the truth or falsity of the
information, and no proof of specific
intent to defraud is required.” 31 U.S.C. §
3729(b).8
8The term “claim” as used in the FCA is
defined as including “any request or
demand, whether under a contract or
otherwise, for money or property which is
made to a contractor, grantee, or other
recipient if the United States Government
provides any portion of the money or
property which is requested or demanded,
or if the Government will reimburse such
contractor, grantee, or other recipient for
any portion of the money or property
which is requested or demanded.” 31
U.S.C. § 3729(c).

-- 9 of 15 --

10
A suit to enforce the liability thus
created may be instituted in two ways:
T h e U n i t e d S t a t e s
Department of Justice may
file suit to collect damages
suffered as the result of
fraudulent claims which
cause government money to
be expended from the
United States Treasury.
Alternatively, a private
plaintiff may bring a qui tam
action on behalf of the
government to recover
losses incurred because of
fraudulent claims. 31 U.S.C.
§ 3730(b)(1). When a
private plaintiff brings a qui
tam action, the government
is permitted to intervene.
But the private plaintiff may
continue his suit even if the
government declines to
intervene. 31 U.S.C. §
3730(c)(1). If the qui tam
suit is ultimately successful,
the private plaintiff, known
as a relator, is entitled to up
to 30% of the funds the
government recovers. 31
U.S.C. § 3730(d).
Hutchins v. Wilentz, Goldman & Spitzer,
253 F.3d 176, 181-82 (3d Cir. 2001), cert.
denied, 536 U.S. 906 (2002). The United
States declined to intervene in this case
and Schmidt accordingly proceeded as a
qui tam relator.
To establish a prima facie claim
under 31 U.S.C. § 3729(a)(1), a plaintiff
must show that: “(1) the defendant
presented or caused to be presented to an
agent of the United States a claim for
payment; (2) the claim was false or
fraudulent; and (3) the defendant knew the
claim was false or fraudulent.” Hutchins,
253 F.3d at 182. In order to prove a claim
under § 3729(a)(2), a plaintiff must also
show that the defendant made or used (or
caused someone else to make or use) a
false record in order to cause the false
claim to be actually paid or approved. See
1 John T. Boese, Civil False Claims and
Qui Tam Actions § 2.01[B], at 2-20 (2d ed.
2003) (citing United States ex rel. Aakhus
v. DynCorp, Inc., 136 F.3d 676, 682 (10th
Cir. 1998)). Finally, a claim under §
3729(a)(7) requires a plaintiff to prove a
“reverse false claim”; that is, that the
defendant made or used (or caused
someone else to make or use) a false
record in order to avoid or decrease an
obligation to the federal government. See
Kennard v. Comstock Resources, Inc., 363
F.3d 1039, 1048 (10th Cir. 2004)
(“Pursuant to § 3729(a)(7), Relators are
required to allege that [the defendant] had
an existing, legal obligation to pay or
transmit money or property to the
Government and that [the defendant]
submitted false statements or records to
conceal, avoid, or decrease that
obl igati on.” ( i n t e r n a l q u o t a t i o n s
omitted)).9
9Moreover, we have held that FCA
claims must be pleaded with particularity

-- 10 of 15 --

11
In United States ex rel. Marcus v.
Hess, 317 U.S. 537 (1943), the Supreme
Court explained the purpose of the
provisions of the FCA extending its
coverage to those who “cause [a false
claim] to be presented” and to those who
“conspire” to obtain payment of such
claims:
T h e s e p r o v i s i o n s ,
considered together, indicate
a purpose to reach any
person who knowingly
assisted in causing the
government to pay claims
which were grounded in
fraud, without regard to
whether that person had
direct contractual relations
with the government.
317 U.S. at 544. This statement of
purpose structures the issue for decision
here: Can it fairly be said that Zimmer
knowingly assisted in causing the
government to pay claims which were
grounded in fraud? Construing the facts
alleged in the first amended complaint in a
light most favorable to Schmidt, we
conclude that it can.
“[A] false certification of
compliance [with applicable law] creates
liability [under the FCA] when
certification is a prerequisite to obtaining
a government benefit.” United States ex
rel. Hopper v. Anton, 91 F.3d 1261, 1266
(9th Cir. 1996); see Columbia/HCA
Healthcare, 125 F.3d at 902 (involving
alleged violations of the Anti-Kickback
and Stark Acts); Harrison v. Westinghouse
Savannah River Co., 176 F.3d 776, 787
(4th Cir. 1999). A certificate of
compliance with federal health care law is
a prerequisite to eligibility under the
Medicare program. See 42 C.F.R. §
4 1 3 . 2 4 ( f ) ( 4 ) ( i v ) ; C o l u m b i a / H C A
Healthcare, 125 F.3d at 902. It follows
that Schmidt alleged a violation of the
FCA when he alleged that Mercy certified
its compliance with federal health care law
knowing that certification to be false. The
issue for resolution is thus whether, under
the allegations of the complaint, Zimmer
in accordance with Fed. R. Civ. P. 9(b).
See United States ex rel. LaCorte v.
SmithKline Beecham Clinical Labs., Inc.,
149 F.3d 227, 234 (3d Cir. 1998). Here,
the District Court held that Schmidt’s first
amended complaint did not satisfy Rule
9(b) with respect to the FCA claim against
Mercy, but nonetheless expressed its belief
that the defects as to particularity could be
cured easily by amending the complaint to
specify the precise Form HCFA-2552 cost
reports that were alleged to be false. The
District Court subsequently held that
Schmidt’s second amended complaint
against Mercy was sufficient under Rule
9(b). We will therefore assume that
Schmidt’s first amended complaint with
respect to Zimmer was similarly deficient
under Rule 9(b), but that such deficiency
may be cured in the same manner as was
the second amended complaint. See Fed.
R. Civ. P. 15(a) (stating that leave to
amend “shall be freely given when justice
so requires”).

-- 11 of 15 --

12
knowingly assisted in Mercy’s false
certification.
It is true, as the District Court
stressed, that the amended complaint does
not allege that Zimmer “reviewed,
approved, or received copies of M ercy’s
cost reports or participated in their
preparation.” The case law indicates,
however, that a party may assist the filing
of a false claim in other ways.
In Hess, for example, a group of
electrical contractors had devised a scheme
under which they collusively bid contracts
being let by municipalities and school
districts that were participating in a federal
program providing federal funding. 317
U.S. at 539. Claims were submitted to the
government by the local sponsors and
there is no indication that the electrical
contractors participated in the preparation
or s u bm is si on o f t ho s e c la im s.
Nevertheless, because those contractors
had knowingly pursued a scheme that, if
successful, would ultimately result in the
submission of a false claim to the
government, they were held to have caused
those claims to be presented.
Similarly, in United States v.
Bornstein, 423 U.S. 303, 307 (1976), a
defendant subcontractor supplied a prime
contractor with falsely marked substandard
electron tubes, knowing that the tubes
would in turn be used in the manufacture
of radio kits sold by the prime contractor
to the United States. Although the precise
issue in the case was the number of
statutory forfeitures assessable against the
subcontractor under the FCA, the
subcontractor’s FCA liability itself was not
questioned. In fact, the Supreme Court,
citing to Hess, noted that “[i]t is settled
that the [FCA] . . . gives the United States
a cause of action against a subcontractor
who causes a prime contractor to submit a
false claim to the Government.” Id. at
309.
It does not appear from the opinion
of the Court in either Hess or Bornstein
that the party actually presenting the
claims to the government was aware of the
fraudulent conduct. This was not a matter
material to the Court’s analysis, however.
Given the Court’s view that the crucial
issue was whether the defendants
knowingly assisted in the presentation of
false claims, the knowledge and conduct of
the defendant were what mattered and the
outcome did not turn on whether the actual
presenters were “duped” or participated in
the fraudulent scheme.10 Accordingly, we
believe the District Court erred in
concluding that someone other than the
actual presenter cannot be responsible
under the FCA in the absence of duping.
Schmidt, like the plaintiffs in Hess
and Bornstein, alleges that Zimmer created
and pursued a marketing scheme that it
knew would, if successful, result in the
10By way of example, we are confident
that the subcontractor in Bornstein would
have been held no less culpable under the
FCA had the prime contractor known that
the electron tubes were falsely marked.

-- 12 of 15 --

13
submission by Mercy and others similarly
situated of compliance certifications
required by Medicare that Zimmer knew
would be false. If this conduct and this
knowledge were proven at trial, a jury
could conclude that Zimmer knowingly
caused Mercy’s false claims to be filed.
As we have indicated, Schmidt’s
complaint alleges that Zimmer came up
with a marketing program that it knew to
be in violation of the Anti-Kickback Act
and the Stark Act. The alleged targets of
this scheme were health care providers that
Zimmer knew to be participants in the
Medicare program. The complaint avers,
for example, that the purpose of the
conversion incentive prescribed in the
contract with Premier was intended to
“influence and obtain favorable treatment
from providers who participate in the
Medicare program by inducing them to
purchase Zimmer’s products and increase
Zimmer’s market share for orthopedic
implant hardware. . . .” JA at 38.
Moreover, it is a fair inference from the
alleged facts regarding Zimmer’s business
and knowledge of the relevant market that
Medicare participation was an important,
if not an essential, characteristic of the
Premier Participants. If Mercy and other
Premier Participants were unable to
maintain their eligibility to receive
Medicare funds, the purpose of Zimmer’s
marketing scheme – selling as many of it
impla nts as possible to Prem ier
Participants – would be thwarted. We
further regard it as a fair inference from
the facts alleged that Zimmer was aware
that Premier Participants could not
maintain their eligibility for Medicare
participation without certifying their
compliance with federal health law. Thus,
when read in a light most favorable to
Schmidt, one can reasonably infer from the
foregoing that Zimmer must have known
that Mercy could not purchase its implants,
receive kickbacks, and share those
kickbacks with its physicians, in the
manner provided by the contract unless
Mercy falsely certified itself to be in
compliance with federal law.
While it is true that Mercy allegedly
made its own decision to file a false
certification, this is not inconsistent with a
conclusion that Zimmer caused that filing.
In United States ex rel. Cantekin v. Univ.
of Pittsburgh, 192 F.3d 402, 416 (3d Cir.
1999), this Court applied ordinary
causation principles from negligence law
in determining responsibility under the
FCA. Under those principles, the
“intervention of a force which is a normal
consequence of a situation created by the
actor’s . . . conduct is not a superseding
cause of harm which such conduct has
been a substantial factor in bringing
about.” Restatement (Second) of Torts §
443.11 Thus, assuming that a jury were to
11The fact that Mercy’s alleged false
certification was an unlawful act does not
render it a superseding cause that absolves
Zimmer from responsibility. As § 448 of
the Restatement explains:
The act of a third person in
committing an intentional
t o r t o r c r i m e i s a

-- 13 of 15 --

14
conclude that Zimmer’s marketing scheme
was a substantial factor in bringing about
Mercy’s filing and that Mercy’s filing was
a normal consequence of the situation
created by that scheme, Zimmer could be
found to have caused, and thus be held
responsible for, that filing.12
We thus conclude, based on Hess
and Bornstein, that Schmidt’s first
amended complaint, to the extent it is
based on M ercy’s alleg ed fa lse
certification of compliance with federal
health care law, states a claim upon which
relief can be granted, and we will remand
for further proceedings.13 In doing so, it is
important to note the limits of our ruling.
Schmidt alleges that Mercy did not
disclose to Medicare the illegal
remunerations – i.e., that it made claims
for more than it in fact paid Zimmer. This
appears not to have been a part of
Zimmer’s marketing scheme and, indeed,
the Premier contract expressly provides
that:
Participating Members shall
disclose the specified dollar
value of discounts or
reductions in price under
any state or federal program
which provides cost or
charge-based reimbursement
superseding cause of
harm to another
resulting therefrom,
although the actor’s
negligent conduct
created a situation
which afforded an
opportunity to the
third p e r s o n to
commit such a tort or
crime, unless the
actor at the time of
his negligent conduct
realized or should
have realized the
likelihood that such a
situation might be
created, and that a
third person might
avail himself of the
o p p o r t u n i t y t o
commit such a tort or
crime.
Restatement (Second) of Torts § 448
(emphasis added).
12Further, as noted above, a jury finding
that Zimmer “knowingly” caused the filing
does not require scienter, but, rather, could
be based on mere passive disregard that
the jury finds to have been reckless. See
U.S.C. § 3729(b).
13We have limited our discussion to
addressing the specific ground cited by the
District Court for dismissing Schmidt’s
FCA claim against Zimmer. Although
raised by the parties, the District Court did
not reach the issues of whether Schmidt
may proceed against Zimmer with respect
to unnamed Premier Participants that were
also alleged to have filed false
certifications of compliance with
applicable law. It is more appropriate, we
believe, to reserve this issue for the
District Court’s consideration on remand.

-- 14 of 15 --

15
to s u ch P a r t i c i p atin g
Members for the Products
and services covered by this
Agreement in accordance
with applicable regulations.
J.A. at 121.
It thus appears that Zimmer was at
least aware of the possibility that Mercy
might file a false claim for more than it
paid Zimmer. But mere awareness that
another may, or even has, chosen to make
such a claim does not alone constitute
“causing a false claim to be presented.”
See United States ex rel. Shaver v. Lucas
Western Corp., 237 F.3d 932 (8th Cir.
2001). Indeed, we do not understand
Schmidt’s brief before us to argue that
Zimmer can be held liable under the FCA
for this alleged violation of that Act by
Mercy. Schmidt does claim, however, that
the certification of compliance with health
care law is a prerequisite to entitlement to
Medicare payments and that false
certifications of compliance were
necessary consequences of Zimmer’s
marketing scheme.
V.
The judgment of the District Court
will be reversed, and this matter will be
remanded for further p roceedings
consistent with this opinion.

-- 15 of 15 --