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Overcoming a Rule 9(b) Challenge in the 11th Circuit

by | Nov 7, 2013 | Whistleblowers

After a qui tam complaint is filed, the Department of Justice investigates the relator’s allegations and then decides whether to intervene and join the action, or whether to decline. If the government declines to join in the lawsuit, the relator and his or her counsel may decide to proceed forward with the case on their own.

So what are some of the challenges a relator faces when moving forward with a declined case?

If the government declines to intervene in a relator’s case, one of the challenges the relator may likely face if he or she decides to continue to litigate is a defendant’s motion to dismiss asserting failure to satisfy Rule 9(b). Claims brought under the False Claims Act must be stated with particularity pursuant to Rule 9(b) of the Federal Rules of Civil Procedure. Particularity means that “a plaintiff must plead ‘facts as to time, place, and substance of the defendant’s alleged fraud,’ specifically ‘the details of the defendant[‘s] allegedly fraudulent acts, when they occurred, and who engaged in them.” United States ex rel. Clausen v. Laboratory Corporation of America, 290 F.3d 1301, 1310 (11th Cir. 2002).

The consequences of a Rule 9(b) challenge depend on the law of the Circuit in which the relator’s complaint has been filed. For example, in the Eleventh Circuit defendants often argue that a complaint cannot survive Rule 9(b) scrutiny under the Clausen case and its progeny if there are no facts to support the allegations that false claims were presented to the Government. It is true that one way relators can satisfy Rule 9(b) is to identify specific false claims. However, even though some defendants attempt to assert otherwise, relators should note that the law in the Eleventh Circuit does not require that complaints identify specific false claims, only that they contain “some indicia of reliability” to support the allegation that false claims were submitted.  Clausen, at 1311.

In Clausen, the court held that the Rule 9(b) standard applies to claims brought under the False Claims Act and requires details of both the false claim and the submission of that claim.  Id. at 1311.  In dismissing the complaint because the relator—a corporate outsider who had never worked for the defendant—offered no “stated reason for his belief [that] the claims requesting illegal payments must have been submitted, were likely submitted, or should have been submitted to the Government,” the court determined that “some indicia of reliability must be given in the complaint to support the allegation of an actual false claim for payment being made to the Government.” Id. at 1311.  (emphasis added).  The court further explained that “indicia of reliability” can be found in the actual dates or dollar amounts of fraudulent submissions or even “second-hand information about billing practices.”  Id. at 1312.

Since the Clausen ruling, the Eleventh Circuit and the district courts have interpreted and applied the “some indicia of reliability” language to subsequent False Claims cases.  See Cade v. Progressive Cmty. Healthcare, Inc., 2011 WL 2837648 at *7 (“the Eleventh Circuit itself has moved away from Clausen’s most exacting language, accepting less billing detail in a case where particular allegations of a scheme offered indicia of reliability that bills were presented.” )  In Hill v. Morehouse Med. Assocs., Inc., 2003 WL 22019936 (11th Cir. Aug.15, 2003), it was determined that “Rule 9(b)’s heightened pleading standard may be applied less stringently … when specific factual information about the fraud is peculiarly within the defendant’s knowledge or control.” Id. at *4 (internal citations omitted).  The relator in Hill did not plead any specific details about how the defendants submitted false claims to the Government, but because she had been employed in the billing and coding department, she “was privy to [the defendant’s] files, computer systems, and internal billing practices that [were] vital to her legal theory,” and “witnessed firsthand the alleged fraudulent submissions.” Id. at *4–5.  Her allegations, therefore, possessed the necessary “indicia of reliability” to satisfy ClausenHill, at *4-5.

In United States ex rel. Walker v. R & F Properties of Lake County, Inc., 433 F.3d 1349 (2005), the court ruled that in cases involving a corporate insider with particularized information regarding the alleged fraudulent schemes, Rule 9(b) can be satisfied without identifying any individual false claims. There is no requirement that actual hospital records be attached to the complaint. Walker involved a nurse practitioner who had worked for the defendant, and the complaint did not plead with particularity that the defendant had submitted a false claim.  Id. at 1360.  Instead, the relator’s beliefs were inferred from the circumstantial evidence of the defendant’s billing practices combined with conversations between the relator and other employees of the defendant.  Id.   Finding that the complaint survived Rule 9(b) scrutiny, the court distinguished Walker from Clausen because, among other things, the Walker relator was not a corporate outsider, and that the nature of her employment with the defendant gave rise to allegations that were “sufficient to explain [why] she believed” the defendant submitted false claims for services.  Id.; see also U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 2012 WL 555200, at *10 (11th Cir. 2012) (interpreting Walker to hold that “we are more tolerant toward complaints that leave out some particularities of the submissions of a false claim if the complaint also alleges personal knowledge or participation in the fraudulent conduct.”).

It is true that identification of the specific false claims submitted is extremely beneficial to the success of a relator’s case. Yet, relators for various reasons may not be in possession of documents or other evidence that constitute or identify the actual false claims submitted. A relator does not have to automatically abandon his attempt to litigate a case simply because he does not have copies of the specific false claims submitted by the defendant.  If a relator can satisfy the indicia of reliability standard, then he can survive a Rule 9(b) challenge by the defendant and he can continue to pursue his case.

If you believe you have information regarding fraud against the government and are considering bringing a False Claims Act case, please contact James Hoyer for an evaluation of your claims. Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

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