Sarafoglou v. Weill Medical College

OPINION
03 Civ. 6761 (DC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA
:
ex rel. KYRIAKIE SARAFOGLOU,
:
Plaintiff,
:
– against –
:
WEILL MEDICAL COLLEGE OF CORNELL
:
UNIVERSITY, NEW YORK-PRESBYTERIAN
HOSPITAL, ANTONIO M. GOTTO, JR.,
M.D., BARBARA PIFEL, MARIA I. NEW, :
M.D., LAUREN BEAMUD, SUSANNA
CUNNINGHAM-RUNDLES, NOEL MACLAREN, :
M.D., GREGORY SISKIND, M.D.,
MICHAEL WAJNRAJCH, M.D., MADELEINE :
HARBISON, M.D., PATRICIA GIARDINA,
M.D., and JAMES BUSSEL, M.D.,
:
:
Defendants.
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APPEARANCES:
(See last page)
CHIN, D.J.

In September 2003, plaintiff Kyriakie Sarafoglou
brought a qui tam action on behalf of the United States,
alleging, inter alia, that defendants violated the False Claims
Act (the “FCA”), 31 U.S.C. § 3729 et seq., by (1) submitting
false claims to obtain federal research funds, and (2)
retaliating against her when she expressed concerns to her
supervisors about the false claims. After two years of
investigating the allegations, the United States partially
intervened in the case in June 2005.
At the same time that the United States decided to
intervene, it also reached a settlement with defendant Weill
Medical College of Cornell University (“Cornell Medical”).

(Tiska Ex. H). The settlement released Cornell Medical and the
individual defendants from certain claims under the FCA. (Id. ¶
III.3). Defendant New York-Presbyterian Hospital (“NYPH”), an
affiliate of Cornell Medical, was not covered by the settlement
agreement. (Id.). Because the case was brought by Dr.
Sarafoglou under the qui tam provisions of the FCA, she received
a share of the settlement.
Notwithstanding the settlement, Dr. Sarafoglou served
an amended complaint against defendants in October 2005, pursuing
claims that she asserted were not covered by the settlement
agreement. (Compl. ¶¶ 11, 13).1
Defendants move to dismiss the first amended complaint,
arguing, inter alia, that plaintiff’s claims: (1) are barred
under the principles of res judicata; and (2) do not meet the
pleading standards imposed by Rule 9(b) of the Federal Rules of
Civil Procedure.
Defendants’ motions to dismiss are granted in part and
denied in part.

BACKGROUND

A.

The FCA
Under the qui tam provisions of the FCA, private
persons may bring civil actions for violations of § 3729(a).
These suits are brought in the name of the Government and the
plaintiff, or “relator,” must provide the Government with a copy

“Compl.” refers to the First Amended Complaint, which
1
was filed on October 28, 2005.

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of the complaint and written disclosure of all material evidence
and information. 31 U.S.C. § 3730(b)(2). The complaint remains
under seal for at least 60 days; during that time the Government
decides to either: a) proceed with the action; or b) decline to
take over the action, leaving the relator with the right to
conduct the action. 31 U.S.C. § 3730(b)(4). “Partial
interventions are allowed,” United States v. St. Joseph’s Reg’l
Health Ctr., 240 F. Supp. 2d 882, 888 (W.D. Ark. 2002) (citing
United States ex rel. O’Keefe v. McDonnell Douglas Corp., 918 F.
Supp. 1338 (E.D. Mo. 1996)), where the Government intervenes as
to certain claims, see, e.g., United States ex rel. Tillson v.
Lockheed Martin Energy Sys., Inc., No. Civ. A. 5:00CV-39-M, Civ.
A. 5:99CV-170-M, 2004 WL 2403114, at *3 (W.D. Ky. Sept. 30,
2004), or as to certain defendants, see, e.g., Klaczak v. Consol.
Med. Transp. Inc., No. 96 C 6502, 2005 WL 1564981, at *1 (N.D.
Ill. May 26, 2005). If the prosecution is successful, the
relator is entitled to receive some of the proceeds. 31 U.S.C. §
3730(d).
Facts
B.

For purposes of this motion to dismiss, the facts as
alleged in the amended complaint are assumed to be true.
Federal Funding for Clinical Research
1.
Each year, the federal government distributes more than
$1 billion in research funds to a network of general clinical
research centers (“GCRCs”). (Compl. ¶ 4). The funds are
distributed through a division of the National Institutes of
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Health (“NIH”) to provide clinical researchers and scientists
with resources to conduct research to improve human health. (Id.
¶¶ 4, 5).

To obtain federal funding, a GCRC must submit an
application to the NIH. GCRCs are funded in five-year cycles,
with continued funding dependent upon competitive renewals. (Id.
¶ 32). Each year during the five-year cycle, however, the entity
receiving the research grant must apply for approval for
continuation of the grant. (Id.). The amount of funding is
determined by the applicant’s projections of the activity
expected for each research protocol. (Id. ¶ 35).
From 1968 to 2004, Cornell Medical operated a GCRC
called the Children’s Clinical Research Center (the “CCRC”).
(Id. ¶ 7). Focusing on pediatric clinical research, Cornell
Medical received a grant from the NIH for approximately $23
million for the period December 1, 1998 through November 30, 2003
(NIH Grant No. 5M01RR006020) (“Grant 5M0”). (Id. ¶ 32). Cornell
Medical also received a grant of approximately $2.6 million for
the period July 1, 1997 through June 30, 2002 for certain
clinical research projects on androgen metabolism (NIH Grant No.
HD00072) (“Grant HD0”). (Id.). In all, Cornell Medical received
at least $25 million in federal funding from 1998 to 2003. (Id.
¶ 7).

2.

False Claims to Obtain Federal Funds
Defendants submitted false claims to obtain federal
funding by: (1) knowingly overstating the projected activity of

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certain research protocols to obtain more funding (id. ¶¶ 41-74);
(2) knowingly miscategorizing research patients, both by
enrolling certain patients under specific research protocols —
even though they did not meet the medical criteria for inclusion
— and also by assigning patients the wrong billing category (id.
¶¶ 75-99); and (3) knowingly misusing grant funds designated for
certain laboratories in violation of NIH guidelines (id. ¶¶ 100-
05).

3.

Retaliation
Shortly after joining the CCRC as an assistant
professor of Pediatric Medicine in July 2001, Dr. Sarafoglou
uncovered the misuse of NIH resources by the CCRC. (Id. ¶¶ 10,
106, 110). As a result, in spring 2002, plaintiff presented her
concerns to Dr. New, then program director of the CCRC and Dr.
Sarafoglou’s direct supervisor. (Id. ¶ 111). After plaintiff
presented these concerns, Dr. New and Cornell Medical “exclud[ed]
her from meetings, solicit[ed] complaints about her from other
individuals within the CCRC and NYPH, and recommend[ed] that she
receive an ‘administrative referral’ that would blemish her
career.” (Id. ¶ 112).
In addition to speaking to Dr. New about her concerns,
on or about September 10, 2002, plaintiff submitted an internal
complaint to Dr. Gerald M. Loughlin, who had replaced Dr. New as
chair of the Pediatric Department of NYPH. (Id. ¶ 114). The
submission detailed the CCRC’s misuse of government funds.
(Id.). This submission led Dr. David Hajjar, vice provost and

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dean of the Graduate School of Medical Sciences at Cornell
Medical, to appoint Dr. Adam Asch to investigate Dr. Sarafoglou’s
allegations. (Id. ¶ 116).
During this investigation, Dr. New routinely blocked
Dr. Sarafoglou’s patients’ appointments, removed her from the
pediatric endocrinology division attending on-call schedule, and
referred metabolic patients to doctors at other hospitals instead
of to her. (Id. ¶ 117). Moreover, plaintiff no longer received
timely notice of institutional regulatory meetings, and she was
locked out of file drawers in her office that contained basic
information necessary to her duties as the research subject
advocate at the CCRC. (Id.). Dr. Sarafoglou’s complaints of
retaliation to Dr. Loughlin went unheeded. (Id. ¶ 118).
On November 4, 2002, a report was issued by Dr. Asch on
the investigation (the “Asch Report”), concluding that there was
no merit to Dr. Sarafoglou’s allegations. (Id. ¶ 119). Dr.
Sarafoglou submitted a response to Dr. Hajjar refuting the
findings of the Asch Report, and urging Dr. Hajjar to revisit the
issues raised in the investigation. (Id. ¶ 121). On December
12, 2002, Dr. Loughlin of Cornell Medical notified Dr. Sarafoglou
that she was being removed from her position as research subject
advocate. (Id. ¶ 122).
On January 7, 2003, plaintiff filed a complaint with
the NIH alleging misconduct and financial fraud. (Id. ¶ 123).
Soon after, Dr. Sarafoglou was relieved from her position within
the Division of Pediatric Endocrinology and was reassigned to

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Cornell Medical’s resident group practice. (Id. ¶ 124). This
constituted a demotion that impaired plaintiff’s ability to
conduct clinical research. (Id.). On July 1, 2003, Dr.
Sarafoglou was given written notice that her faculty appointment
as assistant professor of pediatrics at Cornell Medical would not
be renewed upon its expiration on June 30, 2004. (Id. ¶ 127).
Dr. Sarafoglou performed her duties in no less than a
satisfactory manner at all relevant times. (Id. ¶ 109).
C.
Procedural History
Plaintiff filed a sealed complaint against Cornell
Medical, the individual defendants, and NYPH under the qui tam
provisions of the FCA in September 2003 (the “Original
Complaint”). (Tiska Decl. Ex. D). The Original Complaint
alleged that the defendants made false statements to the United
States to obtain federal research funds (id. ¶¶ 31-103), and
further, that these defendants retaliated against Dr. Sarafoglou
when she told her supervisors that she was concerned about the
misrepresentations (id. ¶¶ 104-26).
In June 2005, approximately two years after the
Original Complaint was filed, the Government filed a Notice of
Election to Intervene, in which it notified the Court that it was
electing “to partially intervene and proceed with this action”
against Cornell Medical. (Tiska Decl. Ex. F). In its Complaint-
In-Intervention, the United States asserted claims against
Cornell Medical alone, for violations of the FCA, common law
fraud, unjust enrichment, and payment made under mistake of fact.

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(Tiska Decl. Ex. G. ¶¶ 134-56).
At the same time that the United States filed its
Notice of Election to Intervene, it also submitted a Stipulation
and Order of Settlement and Dismissal (the “Settlement
Agreement”) that it entered into with Cornell Medical. (Tiska
Decl. Ex. H). According to the Settlement Agreement, “the United
States and [Cornell Medical] mutually agree to reach a full and
final settlement and compromise of the claims that the United
States asserts against [Cornell Medical] based on the Covered
Conduct.” (Tiska Decl. Ex. H § II.F).
The Settlement Agreement defined “Covered Conduct” as
the conduct occurring during the period between December 1995
through November 2003 — when Cornell Medical applied to the NIH
for Grant 5M0 and allegedly submitted false statements and claims
in connection with that grant. (Id. at § II.C). The Settlement
Agreement also referenced the Complaint-In-Intervention for a
more descriptive account of the “Covered Conduct.” (Id.).
Neither the Settlement Agreement nor the Complaint-In-
Intervention addressed Cornell Medical’s conduct with respect to
retaliation. They also did not address any false claims in
connection with Grant HD0 for research projects on androgen
metabolism.
A few months after the settlement, in October 2005,
plaintiff filed the first amended complaint in this case.
Plaintiff asserts that she was bringing claims that had not been
resolved by the settlement between the United States and Cornell

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Medical. (Compl. ¶¶ 11-14). She asserts three counts against
defendants. Count One alleges false claims in violation of 31
U.S.C. §§ 3729(a)(1), (a)(2), and (a)(7) against all defendants.
(Id. ¶¶ 129-30). Count Two alleges conspiracy to submit false
claims in violation of 31 U.S.C. § 3729(a)(3) against all
defendants. (Id. ¶¶ 131-32). Count Three alleges retaliation in
violation of 31 U.S.C. § 3730(h), but only against Cornell
Medical, NYPH, Dr. New, and Dr. Gotto. (Id. ¶¶ 133-34).
Cornell Medical and the individual defendants jointly
move to dismiss. NYPH moves separately to dismiss.
DISCUSSION
Defendants argue that plaintiff’s claims should be
dismissed because: (1) they are barred by the doctrine of res
judicata, and (2) they have not been pled sufficiently. I
address the two arguments in turn.
Res Judicata
A.
Under the well-settled doctrine of res judicata, a
subsequent action is barred where: (1) the prior action concluded
with a final adjudication on the merits; (2) the prior claims and
the current claims involve the same parties or those in privity
with them; and (3) the claims asserted in the present action
were, or could have been, asserted in the prior action because
they arise from a common nucleus of operative fact. See Monahan
v. New York City Dep’t of Corr., 214 F.3d 275, 285 (2d Cir.
2000).

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In the qui tam context, the relator is in privity with
the Government. See, e.g., United States ex rel. Barajas v.
Northrop Corp., 147 F.3d 905, 910 (9th Cir. 1998) (“A qui tam
relator has Article III standing to sue only as a relator, on
behalf of the government. His standing is in the nature of an
assignee of the government’s claim.”) (citation omitted). Thus,
if res judicata is deemed applicable against the Government, then
a relator’s claims are foreclosed as well. Id.; United States
ex. rel. Barmak v. Sutter Corp. (Barmak I), No. 95 Civ. 7637
(KTD) (RLE), 2002 WL 987109, at *3 (S.D.N.Y. May 14, 2002)
(“regardless of the parties’ intent [in settling the claims], if
the government’s claims are barred, so are the relator’s”).
Applying the principles set forth, I review whether the
claims in the amended complaint are barred by res judicata.
1.
False Claims
a.
Cornell Medical
The claims against Cornell Medical in Count One of the
amended complaint are foreclosed, insofar as they are related to
Grant 5M0.

First, the Settlement Agreement with the resulting
dismissal, with prejudice, constituted a final judgment on the
merits. See, e.g., Marvel Characters, Inc. v. Simon, 310 F.3d
280, 287 (2d Cir. 2002) (“It is clear that a dismissal, with
prejudice, arising out of a settlement agreement operates as a
final judgment for res judicata purposes.”); Ragsdale v.
Rubbermaid, Inc., 193 F.3d 1235, 1238 (11th Cir. 1999) (finding a
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settlement agreement and executed stipulation of dismissal in qui
tam suit to be a final judgment in res judicata context); see
also Greenberg v. Bd. of Governors of the Fed. Reserve Sys., 968
F.2d 164, 168 (2d Cir. 1992) (“Settlements may also have
preclusive effect.”).
Second, the same parties are involved in both suits.
Cornell Medical was charged with false claims in both the
Government’s Complaint-In-Intervention as well as the plaintiff’s
current complaint. Moreover, the Government and Dr. Sarafoglou
are in privity, and thus, are considered to be the same party for
res judicata purposes.
Third, the false claims asserted in both the
Government’s Complaint-In-Intervention and the current complaint
arise from the same nucleus of operative fact. Specifically, the
conduct out of which the false claims arise primarily involves
Cornell Medical’s submission of false statements in its
application to the NIH for Grant 5M0.
The descriptions contained in both the Government’s
Complaint-In-Intervention as well as the Settlement Agreement
confirm that the first suit was based primarily on these false
statements. For example, the Complaint-In-Intervention describes
the suit as a civil action brought to recover damages “as a
result of [Cornell Medical’s] having knowingly presented or
caused to be presented to the United States false or fraudulent
claims for payment in connection with” Grant 5M0. (Tiska Decl.
Ex. G. ¶ 1). Similarly, the Settlement Agreement describes the

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”Covered Conduct” as the conduct during the period between
December 1995 through November 2003 when Cornell Medical applied
to the NIH for research Grant 5M0, and allegedly submitted false
statements and claims in connection with that grant. (Tiska
Decl. Ex. H. ¶ II.C).
Because the false claims from the current complaint all
arise from the same nucleus of operative fact, they are
foreclosed by the Settlement Agreement under principles of res
judicata. See Barajas, 147 F.3d at 910-11 (barring an FCA claim
under res judicata because it was part of the same transactional
nucleus of fact as a previous FCA claim brought by the
Government); Barmak I, 2002 WL 987109, at *3-4 (applying res
judicata to prohibit subsequent FCA claims in connection with
Medicare reimbursements that were part of the same transaction);
see also Ragsdale, 193 F.3d at 1240 (barring relator’s FCA
retaliatory discharge claim under res judicata because it arose
out of same nucleus of operative fact as his FCA qui tam claim).
Nevertheless, plaintiff asserts that the false claims
that she is bringing in her amended complaint were not covered by
the Complaint-In-Intervention or the settlement. (Compl. ¶¶ 11-
14). Her attempt at distinguishing them are to no avail. For
example, plaintiff argues that the Complaint-In-Intervention is
largely based on Cornell Medical’s violation of the 33%
guideline, while the current complaint alleges greater
2

The 33% guideline refers to the rule that no single
2
group of researchers or category of research can expend more than
33% of the federal research funds provided to them in a grant.
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misconduct. (Plaintiff’s Brief (“Pl. Br.”) at 18-19). Plaintiff
proceeds to give a laundry list of the allegedly greater
misconduct, including, inter alia, the fact that “research funded
by the pharmaceutical companies were charged to the grant,” that
there was “misuse of the core laboratories material resources”
funded by the grant, and that there was “a broad scheme to
falsify outpatient information.” (Id. at 19). All of this,
however, is part of the broader claim that defendant submitted
false claims to obtain federal funds. Thus, the mere fact that
the plaintiff alleges greater misconduct in the amended complaint
is of no consequence because ultimately all the false claims in
the current complaint are based on the same nucleus of operative
fact. See, e.g., Waldman v. Vill. of Kiryas Joel, 207 F.3d 105,
110-11 (2d Cir. 2000) (“[C]ases consistently hold that the facts
essential to the barred second suit need not be the same as the
facts that were necessary to the first suit.”).
Thus, to the extent that the false claims against
Cornell Medical are based on Grant 5M0, they are foreclosed by
res judicata. Plaintiff does, however, set forth allegations
with respect to a different federal grant — Grant HD0, which
funded clinical research projects on androgen metabolism.
(Compl. ¶ 33). To the extent that plaintiff’s false claims

(Tiska Decl. Ex. G. ¶ 13). The idea is that allowing one
discipline or researcher to expend more than 33% of the federal
funds would permit one researcher to dominate federal resources
at the expense of the federal government. (Id. ¶ 14). Thus,
applications and renewals for grants require that the institution
document its compliance with this guideline.
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relate to this grant, they are not barred by res judicata because
false statements and claims made in connection with a different
grant would not be part of the same transactional nucleus of
fact.

Individual Defendants
b.
Not only are the false claims based on Grant 5M0 barred
against Cornell Medical, but they are also barred against the
individual defendants because the Settlement Agreement expressly
released the individual defendants from liability. According to
the Settlement, the Government:
agrees to release [Cornell Medical] . . .
[its] subsidiaries and all of its current and
former officers, directors, trustees,
overseers and employees . . . from any civil
or administrative monetary claim the
[Government] has or may have against the
released persons and entities for the Covered
Conduct under the False Claims Act, 31 U.S.C.
§§ 3729-3733.
(Tiska Decl. Ex. H. § III.3).
Plaintiff argues that res judicata does not bar false
claims against the individual defendants because in the
Government’s Notice of Election to Intervene, it stated its
intention to only “partially intervene.” (Pl. Br. at 16-18).
But res judicata is applicable where a settlement
agreement releases defendants, even if they were not named
parties in the action. See Leptha Enters., Inc. v. Longenback,
No. 90 Civ. 7704 (KTD), 1991 WL 183373, at *2 (S.D.N.Y. Sept. 9,
1991) (“The defensive use of res judicata is not precluded when a
plaintiff settles a prior pending action knowing the present

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defendant’s role in the activities which formed the basis of the
prior suit but chose not to name that defendant as party to that
suit.”); see also Cahill v. Arthur Andersen & Co., 659 F. Supp.
1115, 1120-21 (S.D.N.Y. 1986). Thus, all the claims against the
individual defendants based on Grant 5M0 are foreclosed by res
judicata.

NYPH
c.
The Settlement Agreement provided explicitly that NYPH
was not released and that NYPH was not covered by its terms.
Thus, none of the claims against NYPH — including the false
claims, the conspiracy to submit false claims, and retaliation —
are barred by res judicata. The Settlement Agreement states in
relevant part that the Government:
agrees to release [Cornell Medical], its
predecessors, successors, parents, affiliates
(except NYPH) . . . from any civil or
administrative monetary claim the United
States has or may have against the released
persons and entities for the Covered Conduct
under the False Claims Act, 31 U.S.C. §§
3729-3733.
(Tiska Decl. Ex. H. § III.3) (emphasis added).
Accordingly, none of the claims against NYPH are
foreclosed by res judicata.
2.
Conspiracy to Submit False Claims Against Cornell
Medical and Individual Defendants
The claims in the Second Count of the amended complaint
— alleging the conspiracy to submit false claims in violation of
31 U.S.C. § 3729(a)(3) — are similarly barred under the doctrine
of res judicata because they arise from the same nucleus of
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operative fact as the false claims in the First Count. The res
judicata bar “extends both to issues actually decided in
determining the claim asserted in the first action and [to]
issues that could have been raised in the adjudication of that
claim.” See Greenberg, 968 F.2d at 168 (internal citation and
quotations omitted). Because the conspiracy to submit false
claims in connection with Grant 5M0 could have been alleged in
the first suit, this claim is now foreclosed, except as to NYPH.
Retaliation Claims Against Cornell Medical, Dr. New,
3.
Dr. Gotto, and NYPH
None of the retaliation claims alleged by plaintiff are
barred by res judicata because the Government never alleged any
retaliation claims in its Complaint-In-Intervention, and the
settlement never addressed any such claims.
Remaining Claims
C.
The following claims, therefore, are not barred by res
judicata: (1) Counts One and Two as to both grants with respect
to NYPH, and as to Grant HD0 with respect to Cornell Medical and
the individual defendants; and (2) Count Three as to Cornell
Medical, NYPH, and Drs. New and Gotto.
I review the remaining claims to determine whether they
have been sufficiently pled. I discuss Counts One and Two
together, addressing first the claims based on Grant HD0 and
second the claims based on Grant 5M0. I then discuss Count
Three.

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1.

Counts One and Two
a.
Grant HD0
Suits brought under the FCA must comply with Rule 9(b)
of the Federal Rules of Civil Procedure. See Gold v.
Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir.1995). Fed.
R. Civ. P. 9(b) provides that “[i]n all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall be
stated with particularity.” Fed. R. Civ. P. 9(b). Thus, to meet
the requirements of Rule 9(b), a complaint must “(1) specify the
statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements
were made, and (4) explain why the statements were fraudulent.”
Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.
1993). In short, a plaintiff must “set forth the who, what,
when, where and how of the alleged fraud.” United States ex rel.
Woods v. Empire Blue Cross and Blue Shield, No. 99 Civ. 4968
(DC), 2002 WL 1905899, at *4 (S.D.N.Y. Aug. 19, 2002) (citation
omitted).

Plaintiff asserts that she makes allegations of false
claims with respect to Grant HD0, whereby Cornell Medical
received approximately $2.6 million to fund research on androgen
metabolism. (Pl. Br. at 19). The amended complaint, however,
contains no allegations of substance concerning this grant. For
example, in the entire amended complaint, plaintiff only makes
one allegation in connection with this grant. She states that:

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In 1998, Cornell Medical submitted a grant
application requesting funds for a new
connective tissue lab, purportedly necessary
for 15 new protocols. The application was
approved. Dr. New also amended her $2.6
million grant to include significant reliance
and contributions from the connective tissue
lab.
(Compl. ¶ 103).
Nowhere in the amended complaint does plaintiff specify
when defendants submitted false claims or conspired to submit
false claims with respect to this grant. She simply states that
Dr. New amended the $2.6 million grant in reliance on a certain
research protocol. This falls far short of the “who, what, when,
where and how” that plaintiff is required to allege. Counts One
and Two are dismissed to the extent they are based on Grant HD0.
b.
Grant 5M0
The amended complaint also reveals that the allegations
against NYPH with respect to Grant 5M0 are sparse and do not
satisfy the heightened pleading standard under Rule 9(b).
Specifically, plaintiff makes two allegations against
NYPH regarding false claims. First, plaintiff asserts that no
projections for any non-research outpatient visits were made for
certain grant renewals. (Compl. ¶ 92). Second, plaintiff
alleges that in April 2002, tests were performed on private
patients in a federally-funded laboratory, but these patients
were still billed. (Id. ¶ 102). Accordingly, NYPH was
essentially earning profits at the expense of federal funds.

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Neither of these allegations meets the Rule 9(b)
heightened pleading standard. The allegations do not specify who
in NYPH was involved nor what NYPH’s actual role was in the
submission of these claims. Plaintiff attempts to bridge many of
these gaps by asserting that NYPH is “affiliated” with Cornell
Medical. (Id. ¶ 16). Allegations of mere affiliation, however,
are insufficient: plaintiff fails to allege what NYPH purportedly
did, how it was purportedly involved in the fraud, or why it
should be held responsible. Counts One and Two against NYPH are
therefore dismissed with respect to Grant 5M0.
2.
Count Three
The FCA contains a whistleblower provision, 31 U.S.C. §
3730(h), which was added in 1986 “to protect persons who assist
the discovery and prosecution of fraud and thus to improve the
federal government’s prospects of deterring and redressing
crime.” Neal v. Honeywell Inc., 33 F.3d 860, 861 (7th Cir.
1994). Section 3730(h) provides that:
Any employee who is discharged, demoted,
suspended, threatened, harassed, or in any
other manner discriminated against in the
terms and conditions of employment by his or
her employer because of lawful acts done by
the employee . . . in furtherance of an
action under this section, including
investigation for, initiation of, testimony
for, or assistance in an action filed or to
be filed under this section, shall be
entitled to all relief necessary to make the
employee whole.
31 U.S.C. § 3730(h).

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”To sustain an action under § 3730(h), a plaintiff must
prove (1) that he engaged in conduct protected under the statute,
(2) that defendants were aware of his conduct, and (3) that he
was terminated in retaliation for his conduct.” Moor-Jankowski
v. Bd. of Trustees of New York Univ., No. 96 Civ. 5997 (JFK),
1998 WL 474084, at *10 (S.D.N.Y. Aug. 10, 1998).
It is true that “protected conduct” as it applies to
the first element “is interpreted more narrowly when applied to
FCA claims than to common or state law retaliatory discharge
actions.” Id. At the same time, under the FCA, “protected
activity” should be interpreted broadly. See S. Rep. No. 345,
99th Cong., 2d Sess. 34 (1986), reprinted in 1986 U.S.C.C.A.N.
5266, 5299. “Therefore, an employee’s activities may be
protected even where an FCA suit has not been filed.” Faldetta
v. Lockheed Martin Corp., No. 98 Civ. 2614 (RCC), 2000 WL
1682759, at *12 (S.D.N.Y. Nov. 9, 2000). But the conduct must
have been in furtherance of an FCA action. Id. Moreover, only
employers can incur liability under this section. See, e.g.,
Yesudian ex rel. United States v. Howard Univ., 270 F.3d 969, 972
(D.C. Cir. 2001) (“Section 3730(h) plainly mentions only the
’employer’ as incurring liability”).
a.
Cornell Medical
Plaintiff has sufficiently alleged a retaliation claim
against Cornell Medical. First, plaintiff alleges that she
engaged in protected conduct under the statute. For example, in
the amended complaint, plaintiff asserts that she became aware of

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the false claims and statements in connection with the federal
grant applications, and that she made her concerns regarding the
false submissions known to Dr. New, the program director of the
CCRC at that time. (Compl. ¶¶ 110-11). Although merely
informing a supervisor of a problem is not enough to constitute
protected conduct under the FCA, see, e.g., Shekoyan v. Sibley
Intern., 409 F.3d 414, 423 (D.C. Cir. 2005), plaintiff here took
additional steps.
Specifically, plaintiff also alleges that she submitted
an internal complaint with supporting documentation to Dr.
Loughlin, detailing the misuse of government funds by the CCRC,
and that she supplemented the complaint on several occasions.
(Compl. ¶ 114-15); see Fanslow v. Chicago Mfg. Ctr., Inc., 384
F.3d 469, 481-82 (7th Cir. 2004) (finding employee’s internal
complaints within corporation may be considered protected conduct
for purposes of FCA retaliation claim). Taken together, these
two events demonstrate that plaintiff appeared to be directing
her conduct “at exposing a fraud upon the government.” Moor-
Jankowski, 1998 WL 474084, at *10 (stating that to satisfy first
prong of FCA retaliation claim, “the plaintiff must demonstrate
that her investigation, inquiries, and/or testimony were directed
at exposing fraud upon the government”).
Second, plaintiff further alleges that defendants knew
she was investigating Cornell Medical’s false submissions.
(Compl. ¶¶ 111, 114-16). Dr. Sarafoglou made her concerns known
to her supervisors, and to Dr. Loughlin. Thus, defendants’

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argument that they had no notice that plaintiff was engaging in
protected conduct is unconvincing. (Def. Br. at 33). Plaintiff
not only confronted Dr. New of the CCRC with her concerns, but
she also presented these concerns to Cornell Medical’s Scientific
Advisory Committee (“SAC”) and the Institutional Review Board
(“IRB”). (Compl. ¶ 111). In fact, Dr. Hajjar, the vice provost
and dean of Cornell Medical, even appointed Dr. Adam Asch to
investigate Dr. Sarafoglou’s allegations regarding the misuse of
government funds. (Id. ¶ 116).
Third, plaintiff alleges that she was retaliated
against for her protected conduct. (Compl. ¶¶ 112, 117, 122,
127, 128). Specifically, plaintiff asserts that in response to
raising her concerns to Dr. New and Cornell Medical, she was
excluded from meetings, Dr. New and Cornell Medical solicited
complaints against her, and they recommended that she receive an
“administrative referral” that would blemish her career. (Id. ¶
112). She also alleges that once she filed an internal
complaint, Dr. New engaged in further acts of retaliation,
including, among other things, routinely blocking her patients’
appointments, removing her from the pediatric endocrinology
division attending on-call schedule, and referring metabolic
patients to doctors at other hospitals instead of to her. (Id. ¶
117). And finally, plaintiff alleges that she was retaliated
against when she was formally removed from her position as the
research subject advocate at CCRC (id. ¶ 122), and when she was
given written notice that her faculty appointment would not be

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renewed upon its expiration (id. ¶ 127).
In sum, the Court concludes that the retaliation claim
against Cornell Medical has been sufficiently pled to survive
this motion to dismiss.
b.
Dr. New and Dr. Gotto
Although plaintiff’s retaliation claim against Cornell
Medical is sufficient to withstand dismissal, her retaliation
claims against Dr. New and Dr. Gotto cannot survive because
neither of them was her “employer,” and only employers can incur
liability under § 3730(h). See, e.g., Shekoyan, 409 F.3d at 423.
Here, Dr. Sarafoglou’s employer is Cornell Medical and NYPH, not
Dr. New or Dr. Gotto. (Compl. ¶ 15). Dr. New and Dr. Gotto were
her supervisors, but for purposes of the FCA, supervisors are not
employers subject to liability under § 3730(h). See, e.g.,
Yesudian, 270 F.3d at 972 (“Section 3730(h) plainly mentions only
the ’employer’ as incurring liability, and the word ’employer’
does not normally apply to a supervisor in his individual
capacity.”); Pollak v. Bd. of Trustees of the Univ. of Ill., No.
99 C 710, 2004 WL 1470028, at *3 (N.D. Ill. June 30, 2004)
(noting that courts have uniformly held that “supervisors . . .
do not qualify as ’employers’ subject to liability under the
FCA”).

NYPH
c.
Plaintiff has sufficiently alleged a retaliation claim
against NYPH. First, plaintiff alleges that she was an employee
of NYPH (Compl. ¶ 15), who engaged in protected conduct by filing
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an internal complaint to NYPH concerning the hospital’s improper
use of federal funds (id. ¶ 114). NYPH tries to argue that
plaintiff cannot consider herself an employee of NYPH because she
was merely an “assistant attending physician.” (NYPH Reply Brief
(“NYPH Reply”) at 6). At this stage of the proceedings, however,
I must take plaintiff’s allegations as true. Hence, NYPH’s
argument that plaintiff was not an employee of NYPH does not help
its cause. Of course, NYPH may renew this argument at the
summary judgment stage if plaintiff is unable to adduce proof of
an employment relationship with NYPH.
Second, plaintiff alleges that NYPH was aware of her
conduct. For example, she states that she filed an internal
complaint with Dr. Loughlin — the chair of the Pediatric
Department of NYPH — about the hospital’s improper use of funds.
(Id. ¶ 114).
Third, plaintiff also alleges that she was retaliated
against as a result of her protected conduct. Specifically, she
states that she was removed from her position within the Division
of Pediatric Endocrinology at NYPH. (Id. ¶ 124).
Accordingly, plaintiff’s retaliation claim against NYPH
states a claim upon which relief may be granted.
CONCLUSION
For the foregoing reasons, defendants’ motions to
dismiss are granted in part and denied in part. Defendants’
motions are granted as to all claims except the retaliation
claims against Cornell Medical and NYPH. As plaintiff has

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