Academic journal article Case Western Reserve Law Review

Relaxing Rule 9(b): Why False Claims Act Relators Should Be Held to a Flexible Pleading Standard

Academic journal article Case Western Reserve Law Review

Relaxing Rule 9(b): Why False Claims Act Relators Should Be Held to a Flexible Pleading Standard

Article excerpt

Contents  Introduction I.  Overview of the False Claims Act & the Pleading       Requirement      A. The False Claims Act      B. The Rule 9(b) Pleading Standard II.  Circuit Court Application of the Rule 9(B) Standard      A. The Representative Samples Approach      B. The Status of the Relator Approach      C. The Flexible Approach III. A More Flexible Standard Fulfills the Purpose Behind      Rule 9(B) and Provides Fair Access to the Judicial System      For Relators      A. A Flexible Application of Rule 9(b) Provides Notice to the         Defendant and Does Not Unfairly Prejudice Relators      B. The Test         1. Prong One: Details of the Overall Scheme         2. Prong Two: Indicia of Reliability         3. The Status of the Relator Approach Should be Rejected      C. Courts Have Accepted a More Flexible Application of Rule 9(b)         in Other Instances of Alleged Fraud Conclusion 

Introduction

A nurse believes that her employer, a hospital, is defrauding the government by submitting claims to Medicare and Medicaid for services the hospital never provided. In her complaint, the nurse alleges that the hospital participated in duplicative and unnecessary testing of patients and duplicative billing for blood draws. She also includes factual references to her personal conversations about the hospital's policies with other employees, descriptions and technical codes for medical tests of the type that she alleged were falsely submitted, and the testing histories of two actual patients. However, she cannot provide billing numbers, specific dates, or copies of any bill that was sent to the government, for these false claims. Instead, she has personal, firsthand knowledge of the submission of the false claims--her supervisors informed her of the details of the scheme to induce her to participate in the fraud.

Based on the facts given above, the Eleventh Circuit would likely find her complaint insufficient due to lack of details about the actual false claims submitted, such as dates and amounts. (1) On the other hand, the Fifth Circuit would probably find her complaint sufficient because her personal knowledge of the scheme provides indicia of reliability that the false claims were actually submitted. (2)

An engineer wishes to bring a suit for falsely certifying and shipping parts that did not meet the government's specifications against a company that manufactures equipment for the armed forces. He works for a competitor of this company, so he has no personal knowledge of the fraudulent acts or access to any of the company's invoices or billing information. In his complaint, the engineer alleges which specific parts were shipped and paid for by the government. He also provides information about the contract between the company and the government. He alleges that the company must have submitted at least one false claim or the government would not have paid for the inadequate equipment.

Without details of the actual false claims submitted--such as copies of invoices--the Eleventh Circuit would likely find the engineer's complaint insufficient. (3) The Fifth Circuit may also find his complaint insufficient because, even though he provided details of the overall scheme to submit false claims to the government, he did not provide any other indicia of reliability to support his claims. (4) However, the Seventh Circuit would likely find the complaint sufficient because it provided enough detail of the overall scheme to infer that the false claims were actually submitted. (5)

These hypotheticals illustrate the division among the circuit courts in deciding cases brought under the False Claims Act (FCA). (6) The FCA is aimed at uncovering fraud against the United States Government through suits brought by private citizens called relators. While Federal Rule of Civil Procedure 9(b), (7) which requires a heightened pleading standard in instances of fraud, governs complaints under the FCA, the circuit courts are split in their application of Rule 9(b) to this scenario. …

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