Rule 9(b)

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The Department of Justice (DOJ) recently released its report detailing the settlements and judgments obtained in 2019 from civil cases involving fraud and abuse claims.  As in years past, the substantial majority of these settlements and judgments—$2.1 billion of the $3 billion total—were the result of qui tam whistleblower lawsuits filed under the False Claims Act (FCA).

Following the government’s intervention decision, the first test for many of these qui tam lawsuits is surviving a motion to dismiss.  Because FCA suits allege fraud against the government, they must be pleaded with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure.  This post discusses recent developments to those standards from 2019.

Courts have held that to satisfy Rule 9(b), FCA complaints must include a detailed description of the alleged fraud scheme and facts to show the scheme resulted in a request for reimbursement from the government.  A failure on either account will result in dismissal.

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This is the second post of a two-part discussion of FCA pleading standards and discusses the pleading requirements for connecting a fraudulent scheme to the submission of false claims.  Read our previous post on the requirements for pleading the details of a fraudulent scheme.

Pleading Submission of False Claims

Most courts require FCA plaintiffs to round out their FCA pleadings with allegations that false claims were submitted to the government as a result of the alleged fraud scheme.  Some courts require plaintiffs to identify specific representative examples, while others permit the pleading of “reliable indicia” leading to a “strong inference” that claims were actually submitted.

Pleading Actual Claims  

The U.S. District Court for the District of Massachusetts recently laid out the level of detail generally expected for pleading the submission of actual false claims.  In U.S. ex rel. Wollman v. General Hospital Corporation, it held the relator made insufficient allegations of actual claims submitted as part of a fraudulent billing scheme involving overlapping surgeries when the complaint included “no dates, identification numbers, amounts, services, individuals involved, or length of time” for any of the surgeries at issue.

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This is the first post of a two-part discussion of FCA pleading standards and discusses the requirements for pleading the details of a fraudulent scheme. Read our post on the pleading requirements for connecting a fraudulent scheme to the submission of false claims.

The False Claims Act (FCA) continues to be the federal government’s primary civil enforcement tool for imposing liability on healthcare providers who defraud federal healthcare programs.  A significant portion of FCA litigation is initiated through the filing of sealed qui tam complaints by relators on behalf of the United States.  When these complaints are unsealed, whether the government intervenes or not, their first hurdle is often surviving a motion to dismiss.  Because actions under the FCA allege fraud against the government, courts require allegations sufficient to satisfy Rule 9(b) of the Federal Rules of Civil Procedure.

Determining whether an FCA complaint satisfies Rule 9(b) turns on two related questions: Does it contain an adequate description of the alleged fraud scheme? If so, does it connect that scheme to false claims submitted to the government?

This post discusses the requirements for adequately pleading a fraudulent scheme.  We have also written a follow-up post discussing the requirements for connecting that scheme to the submission of actual false claims.  To follow our discussion of recent developments in FCA pleading standards, subscribe to this blog.

Pleading Details of a Fraudulent Scheme

Generally speaking, courts agree that in order to pass muster, FCA complaints must include all of the details one would expect to find in the first paragraph of a newspaper article—that is, the “who, what, when, where and how” of the alleged fraud.  While meeting this standard may seem simple enough, courts continue to grapple with the nuances and difficulties associated with pleading fraud with the requisite specificity.

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On January 14, 2019, Intermountain Healthcare, Inc. and Intermountain Medical Center (Intermountain) filed a petition for writ of certiorari with the U.S. Supreme Court.  Intermountain’s petition comes after the U.S. Court of Appeals for the Tenth Circuit reversed a district court’s grant of Intermountain’s motion to dismiss.  In relevant part, the district court concluded that the relator failed to identify any company employees with knowledge of the alleged fraud or when any employees knew about the fraud.  The Tenth Circuit reversed, holding that the relator need not allege those facts because they were in the defendant’s exclusive control and that allegations of knowledge need only be pleaded generally.

Intermountain’s petition raises two questions:

  • Can a plaintiff avoid Federal Rule of Civil Procedure 9(b)’s pleading requirements by asserting that only the defendant possesses the information needed to meet those requirements?
  • Do the False Claims Act’s (FCA) qui tam provisions violate the Appointments Clause of Article II of the U.S. Constitution?

Both questions have previously appeared in petitions for writ of certiorari, but neither question has been addressed by the Supreme Court.  See, e.g., Petition for Writ of Certiorari, U.S. ex rel. Joshi v. St. Luke’s Hospital, Inc. (denied Oct. 2, 2006); Petition for Writ of Certiorari, GPM Gas Corp. et al. v. U.S. ex rel. Grynberg (denied Apr. 22, 2002).

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On December 26, 2018, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in United States ex rel. Grant v. United Airlines affirming dismissal of the relator’s False Claims Act (FCA) allegations on the grounds that the complaint failed to plead presentment of a false claim with sufficient particularity under Rule 9(b). In the same opinion, however, the court revived the relator’s retaliation claim on the grounds that the relator satisfied the lower standard of Rule 8(a) applicable to retaliation claims, which are not claims of fraud.

Presentment Must Follow from Conduct Alleged in Complaint

The court affirmed dismissal of the relator’s substantive FCA claims because it held that the relator failed to adequately plead presentment under Rule 9(b) in either of the two ways that the Fourth Circuit has recognized as acceptable:

  1. By alleging with particularity that specific false claims actually were presented to the government for payment, including by describing the time, place, and contents of the false representation; the person making the false representation; and what was obtained by making this representation
  2. By alleging a pattern of conduct that would “necessarily have led to a false claim being submitted”

The court focused its analysis on whether the complaint was adequately pleaded under the latter of those two options. The relator was a former maintenance technician of United Airlines who was a second-tier subcontractor on a government contract for the repair and maintenance of military aircraft. His complaint alleged that United Airlines was specifically subcontracted to repair, overhaul and inspect certain airplane engines and was required to do its work in compliance with certain regulations. The complaint alleged that United Airlines violated the FCA by failing to comply with the required regulations in completing work on these airplane engines.…
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Since the 2016 Supreme Court decision in Universal Services Inc. v. United States ex rel. Escobar, courts have wrestled with exactly how to apply the unanimous decision. This post highlights developments across the country in numerous substantive areas addressed in the Escobar decision. If you need a refresher on the Escobar decision, see our previous post explaining the major elements of the case.
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Recently, in United States ex. rel. Ibanez v. Bristol-Meyers Squibb Co., No. 16-3154 (Oct. 27, 2017), the Sixth Circuit Court of Appeals affirmed a decision by the U.S. District Court for the Southern District of Ohio to dismiss an FCA complaint brought by two relators on behalf of the government, finding that the complaint lacked the particularity required under Rule 9(b) of the Federal Rules of Civil Procedure.

Former Employees Accused Company of Improperly Promoting Medication

The qui tam action was brought by two former employees of Bristol-Meyers Squibb Co., who alleged that the company, along with co-defendant Otsuka America Pharmaceutical, Inc., had engaged in a scheme to encourage healthcare providers to prescribe the antipsychotic drug Abilify for certain unapproved or “off-label” uses and that some of the resulting prescriptions were paid for by government programs.

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The U.S. Court of Appeals for the Sixth Circuit recently heard oral argument in connection with a decision by the U.S. District Court for the Eastern District of Tennessee that primarily raised two FCA questions:

  1. Did the relator’s amended complaint satisfy the FCA’s first-to-file rule?
  2. Did the amended complaint adequately plead fraud under Rule 9(b) of the Federal Rules of Civil Procedure? U.S. ex rel. Armes v. Garman, 2016 WL 3562062 (E.D. Tenn. June 24, 2016).

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The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions considering the level of specificity required of a relator under Rule 9(b) in pleading the alleged FCA fraud scheme.
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The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions requiring relators to plead actual claims to satisfy the requirements of Rule 9(b) in order to avoid dismissal.

Federal courts have continued to examine the particularity of the pleading required by Rule 9(b) in the context of FCA claims. Although courts generally agree that a relator must plead the “who, what, when, where, and how” of the alleged fraud, the manner in which courts have applied this standard and the types of allegations considered sufficient to satisfy Rule 9(b) continues to vary significantly.

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