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 will take 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.
While analyzing the circumstances of fraud is necessarily a case-by-case analysis, courts have applied decidedly different approaches to examining certain components of a fraudulent scheme, including the “who” and “when” requirements.
Several cases demonstrated the nuances in pleading the appropriate “who” with particularity in FCA complaints against a corporation. In United States v. Sanford-Brown, Ltd., 788 F.3d 696 (7th Cir. 2015), which involved claims against a college and its corporate parent, the Seventh Circuit held that allegations against the “Defendants” in general were insufficient to allow claims against the parent company to proceed.
With regard to the particularity required when identifying individuals who were involved in perpetuating a fraud alleged against a corporation, district courts have reached different results. In U.S. ex rel. Modglin v. DJO Global Inc., 2015 WL 4111709 (C.D. Cal. May 8, 2015), a district court held it was insufficient to identify relevant actors as employees or “personnel” of the defendant company; rather, “[a]t a minimum, relators must identify the [relevant individuals] by their job titles and/or responsibilities.” In U.S. ex. rel. Cieszyksi v. LifeWatch Services, Inc., 2015 WL 6153937 (N.D. Ill. Oct. 19, 2015), however, the district court held the complaint sufficiently identified “LifeWatch generally as the entity responsible” and did not need to “identify by name or position each person involved in submitting the alleged false claims.” See also U.S. ex rel. Gates v. Austal, U.S.A. LLC, 2015 WL 5782284 (S.D. Ala. Aug. 10, 2015) (complaint dismissed for failure to identify specific claim when relators did not identify who submitted relevant cost reports and invoices).
Several courts also drew distinctions with respect to the particularity required in pleading “when” a fraudulent scheme occurred. While one district court noted that a plaintiff can “plead a reasonable range of dates” to survive Rule 9(b), Modglin, 2015 WL 4111709, at *18, another noted the Fifth Circuit held that a relator did not sufficiently plead “when” the relevant claims were submitted even though he asserted “defendants submitted nearly $4 million of false invoices to the government between 2009 and 2011,” U.S. ex rel. Gage v. Davis S.R. Aviation, LLC, 2015 WL 4237682 (5th Cir. July 14, 2015).
Finally, courts also addressed the requirements for pleading the “what” and “how” components of FCA allegations based on a failure to comply with applicable regulations or guidelines. For example, the Fifth Circuit upheld the dismissal of claims against a defense contractor based on an implied certification theory when the relator alleged only that the defendant violated Federal Acquisition Regulation and Defense Federal Acquisition Regulation provisions but failed to specify which provisions were incorporated into the relevant contract. Gage, 2015 WL 4237682, at *627. Similarly, in U.S. ex rel. Gohil v. Sanofi-Aventis U.S. Inc., 96 F. Supp. 3d 504, 519 (E.D. Penn. 2015), a district court upheld a dismissal of FCA claims based on allegations of off-label marketing when the “allegations only specify off-label uses which were medically accepted indications” during the relevant time periods.