Supreme Court Loathe to Get Particular About "Particularity"
Avoiding one of the stickier wickets of FCA jurisprudence, the Supreme Court on Monday denied a petition for certiorari seeking clarity on the proper application of Federal Rule of Civil Procedure 9(b), which requires that fraud allegations be pled "with particularity." The petition, filed in United States ex rel. Chase v. Chapters Health System Inc. (No. 17-1477) out of the Eleventh Circuit, pressed the Supreme Court to assess whether Rule 9(b) requires a relator to allege specific false or fraudulent claims presented for payment as opposed to a general "scheme" to submit such claims.
Earlier this spring, the Supreme Court also denied certiorari in the First Circuit case Medical Devise Business Services, Inc. v. United States ex rel. Nargol (No. 17-1108), which turned on the issue of whether a relator lacking "insider information" could nevertheless satisfy Rule 9(b) by alleging "generalized misconduct statistically likely to produce some false claims."
These petitions and others like them raise an important question around how much latitude courts should extend to relators bringing qui tam actions with anything less than a full quiver of specific fact allegations. Under a strict reading of Rule 9(b), FCA claims that fail to allege essential elements of fraud with particularity—the "who, what, when, where, and how"—should not be permitted to proceed. Nevertheless, lower courts struggle to apply this standard with consistency absent Supreme Court guidance.
Diverging interpretations of Rule 9(b) are easy to find. For instance, last year the Central District of Illinois flatly rejected a relator's "information and belief" pleadings in United States ex rel. Jarvis v. Alamo Group (IL), Inc. No. 14-cv-2318, 2017 WL 6485792 (C.D. Ill. July 6, 2017). That relator was the Vice President of Engineering for defendant Alamo Group (IL), Inc., who asserted "on information and belief" that defendant regularly sold lawnmowers to the government with false and exaggerated gearbox horsepower ratings. Because the relator failed to identify a specific claim submitted by defendant to the government, the court rejected the pleading as an unacceptable "sue first, ask questions later" tactic, even though the relator did not have access to some of the information needed to fill in the gaps. Citing Seventh Circuit precedent, the Central District of Illinois reasoned that a relator without particular knowledge is no better help to the government than "any other citizen," and is therefore entitled to no special leniency.
By contrast, the District of Massachusetts in United States ex rel. Allen v. Alere Home Monitoring, Inc., No. 16-cv-11372, 2018 WL 4119667 (D. Mass. Aug. 29, 2018), relied on the First Circuit's Nargol decision to hold that a relator satisfied Rule 9(b) upon alleging that he had been told by a medical device manufacturer's representative that training was conducted through DVD tutorials rather than face-to-face, as required by regulation. Although the relator could not identify any claims actually submitted to the government for devices provided with improper training, the District of Massachusetts decided the allegations "would plausibly result in a false claim" and let the case proceed.
In light of this uncertainty, Supreme Court guidance on the metes and bounds of Rule 9(b) is essential. Whether the Court is simply waiting for the right case remains to be seen.
© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.