Defense—Federal Rule of Civil Procedure 9(b)

Defense—Federal Rule of Civil Procedure 9(b).

On March 31, 2014, the United States Supreme Court denied certiorari in the case United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al., No. 12-1349. The relator sought review of the Fourth Circuit’s dismissal of the FCA suit after finding that the relator failed to specifically state which false claims the defendant allegedly submitted to the government for payment. The Fourth Circuit rejected the relator’s argument that the relator need only allege the existence of a fraudulent scheme that supports the inference that false claims were presented to the government for payment. United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 707 F.3d 451, 457-58 (4th Cir. 2013). The Court’s refusal to review this cases leaves a split in the circuits over whether the relator must plead details of an actual false claim to survive Rule 9(b).

Nevertheless, the rationale of the Solicitor General’s briefing in Takeda has been persuasive to courts who are being asked whether Rule 9(b) requires qui tam relators to plead specific examples of allegedly false claims. For example, in June of this year, the D.C. Circuit rejected a defense argument that Rule 9(b) requires a relator to plead “representative examples” of the false claims. In doing so, the court (quoting language from the Solicitor General’s briefing in Takeda) stated that “[t]he federal government itself already has records of those payments and thus ‘rarely if ever needs a relator's assistance to identify claims for payment that have been submitted [.]’” United States ex rel. Heath v. AT & T, Inc., No. 14-7094, 2015 WL 3852180, at *11 (D.C. Cir. June 23, 2015) (citation omitted).

The bottom is line is that the proper application of Rule 9(b) continues to be hard-fought by litigants, and the Supreme Court will be called on again to resolve this question.

1. Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 (3d Cir. 2014)

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  The United States Court of Appeals for the Third Circuit recently rejected the strict approach taken by many federal circuit courts to Federal Rule of Civil Procedure 9(b) that requires a qui tam relator bringing a False Claims Act (FCA) case to plead details of false claims that were actually submitted to the government in order to survive dismissal.
  
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  In doing so, the Third Circuit stated that it was joining some other federal appeals courts that have taken what the court described as a “more nuanced” approach to Rule 9(b).
  
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  The Third Circuit ruled that, to avoid dismissal for failure to satisfy Rule 9(b), “it is sufficient for a plaintiff to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.”
  

1. Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011)

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  Complaints alleging FCA violations must comply with Rule 9(b)' s requirement that fraud be pled with particularity because “defendants accused of defrauding the federal government have the same protections as defendants sued for fraud in other contexts.”
  
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  Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”
  
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  The Rule's purpose is to alert defendants “as to the particulars of their alleged misconduct” so that they may respond.
  

1. Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993 (9th Cir. 2010).

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  The relator alleged inter alia that the defendants had violated Arizona common law prohibiting the corporate practice of medicine.  The court found the relator failed to plead these allegations with specificity as required by Federal Rule of Civil Procedure 9(b).
  
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  The court rejected the reasoning of other circuits that require a relator to identify specific false claims to survive a Rule 9(b) motion to dismiss. Rather, the court followed the reasoning of the Fifth Circuit in United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009), concluding “a plaintiff may, but need not, provide representative examples to establish the payment element of the prima facie case.  The rule 9(b) standard may be satisfied by pleading with particularity a reasonable basis to infer that the government either paid money or forfeited moneys due.”  Id. at *4 n.4.
  

1. United States ex rel. Laucirica v. Stryker Corp., No. 1:09-CV-63, 2010 WL 1798321 (W.D. Mich. May 3, 2010).

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  The relator pled a legal theory of Anti-Kickback Statute violations coupled with a false certification of compliance with applicable laws on Medicare reimbursement forms.  Id. at *2. His complaint, however, did “not actually allege that Defendants submitted a false claim; only that they must have done so.”  Id.
  
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  The court found Rule 9(b) requires FCA plaintiffs to plead the existence of a “particular false claim,” id. at *5, and relator “simply speculates that Dr. Parvataneni (whether by himself or through the healthcare organizations with which he worked) must have sought Medicare reimbursement over the years.”  Id.  This was found to be insufficient under Rule 9(b). 
  
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  The court also determined the Complaint failed to state a claim under Fed. R. Civ. P. 8(a)(2), as interpreted by Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). The court found under found the facts pled “could just as easily support an inference of legality as of illegality.  A medical device company’s funding of research and training is not per se illegal.  Legality depends on whether the funding was bona fide and in compliance with applicable rules . . . .  Nothing in Plaintiff’s allegations make the inference of illegal intent and conduct any more plausible than the inference of legal intent and conduct.” Id. at *5. 
  

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