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FCA Qui Notes
March 13, 2019

Eighth Circuit Breathes New Life into Rule 9(b)

Qui Notes: Unlocking the False Claims Act

Adding to the already-muddled case law regarding precisely what must be pleaded with particularity under Rule 9(b), in a 2-1 decision, the Eighth Circuit recently breathed life into the requirement that a relator who does not identify representative false claims must nonetheless at least plead facts that provide "reliable indicia that lead to a strong inference that claims were actually submitted." In United States ex rel. Strubbe v. Crawford County Memorial Hospital, 915 F.3d 1158 (2019), the majority held that even alleged statements by management that certain policies were enacted for billing and cost reimbursement purposes showed only a "possibility" that claims were submitted, which is insufficient under Rule 9(b) to plead a False Claims Act claim.

Relators in Strubbe worked as EMTs and paramedics for an Iowa hospital. They alleged (among other things) that the hospital required paramedics to perform breathing treatments previously provided by nursing staff and document each treatment as having taken 30 minutes, regardless of the shorter actual duration, for the purpose of inflating Medicare billings. According to relators, hospital management told employees this change was for "billing" and "cost reimbursement purposes." Relators further alleged that the hospital billed certain services even though the individuals providing the services were not properly licensed to do so. The district court dismissed for failure to plead the submission of a false claim with particularity under Rule 9(b).

The Eighth Circuit affirmed. Under that court's 2014 decision in United States ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.2d 914, a relator need not plead representative examples of false claims (which relators in Strubbe did not), but may alternatively plead "the particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted." The court in Strubbe held that while relators pleaded "some details of the fraudulent scheme," the complaint lacked facts giving rise to a strong inference that claims were submitted. The court reasoned that relators did not have access to the hospital's billing records or personal knowledge of its billing practices or system, and at best the allegations "show[ed] the possibility that [the hospital] submitted claims." A strongly worded dissent argued that the majority's decision created a nearly insurmountable pleading requirement for relators who did not work in billing-related jobs, writing that such individuals could not satisfy Rule 9(b) "short of . . . committing criminal activity by illegally accessing the [company's] billing records." The dissent also expressed concern that a company could "effectively eliminate any civil liability for false claims by eliminating access to financial information."

As we have blogged about previously, circuits remain split on whether Rule 9(b) requires that a relator identify specific invoices submitted to the government, or whether the relator need only provide sufficiently reliable information to suggest that false claims were submitted. Although the Eighth Circuit still falls in the latter camp, Strubbe moves it a bit closer to the line, and is likely to increase calls for the Supreme Court finally to resolve the Rule 9(b) split.

© Arnold & Porter Kaye Scholer LLP 2019. 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.