The Burden of Proof: Pleading a Case under the Federal False Claims Act

South Carolina Whistleblower LawyerAny court case demands a certain burden of proof, and suits brought under the federal False Claims Act (FCA) are no different in that regard. However, with the FCA, it’s not enough to suggest the possibility of fraud; when you bring an FCA case, the claims must be pled with reasonable particularity under the Federal Rules of Civil Procedure’s Rule 9(b).

Because false claims cases have the potential to be extremely complex, clear links must be demonstrated among the parties involved. To complicate matters further, Rule 9(b) is often interpreted more strictly or less strictly, depending on the circuit court in which your FCA case is heard. We will explain Rule 9(b) and the differences between circuits using both hypothetical situations and actual cases.

But first—how well do you know the FCA?

The FCA: Successful with Distinguished Roots

The federal False Claims Act (FCA) stretches back to President Abraham Lincoln, who brought the first whistleblower law into effect in order to stop Civil War contractor fraud. Because of this, the False Claims Act is often referred to as the “Lincoln Law.” The Act has gone through a number of changes over the years; many expansions of, and additions to, the law have taken place since the Eighties.

Any ordinary citizen can bring a whistleblower case under the FCA. Cases that you can bring on behalf of the government—because the government is being defrauded—are referred to as qui tam cases, and the person bringing the case is called the relator. Depending on the circumstances, as a whistleblower you can be eligible to receive between 15 and 30 percent of what is recovered, plus certain expenses, if the government declines to join your case. If the government intervenes in your case, the award will be between 15 and 25 percent of the recovery.

Liability under the False Claims Act is based on whether a person (or persons):

  • Has knowingly submitted, or caused to be submitted, a false/fraudulent claim for approval or payment
  • Has knowingly made or used, or caused to be made or used, a false statement or record that is related to a false/fraudulent claim
  • Has colluded to violate the FCA
  • Has knowingly delivered, or caused to be delivered, an amount less than the money or property that is due to the government
  • Has certified that an amount of money or property to be given to the government is accurate without knowing that the relevant information on the receipt is fully accurate
  • Has knowingly bought or received property from the government from a person who has no authorization to sell it
  • Has knowingly used or made, or caused to be used or made, a false statement or record involving obligations of money or property to the government, or has knowingly decreased or concealed obligations to pay or send money or property to the government.

Examples of cases you can bring under the FCA include:

  • Submitting claims (bills) for misrepresented, defective, or nonexistent goods or services
  • Acquiring a government contract by use of falsifications, bribes, or kickbacks
  • Violating the reimbursement requirements of Medicare, Medicaid, or TRICARE (formerly CHAMPUS)
  • Certifying compliance with claims law when the company is not in compliance.

You are subject to certain time limitations if you bring a qui tam case under the FCA. Filing must happen within six years of when the fraud occurred, or within three years following the time when the government knew (or should have known) that the fraud occurred, but not later than 10 years after the wrongdoing.

The success of the False Claims Act is evidenced by the fact that over $35 billion has been recovered since 1986. Almost $9 billion was recovered in 2012 and 2013 together. Mandatory triple damages, mandatory civil penalties (up to $21,563 for each false claim), contractor liability (liability for causing a false claim to be submitted, even if the company did not directly submit a false claim), and compelling whistleblower incentives encourage people to step forward.

However, if a case does not satisfy certain legal standards, including the failure to plead a case with reasonable particularity, it can be dismissed. If the case is dismissed with prejudice, it can never be brought again. Therefore, it is imperative that a False Claims Act case be pled with sufficient particularity in accordance with Rule 9(b).

What Are the Definitions of Reasonable Particularity and FRCP Rule 9(b)?

Reasonable particularity, in general, means that enough details are provided to suit the purposes of the specific situation. For example, to claim a lost item, you would have to supply enough details (particular descriptions) so that the person holding the item would reasonably assume that you are the owner of the item.

In court, the complaint must have sufficient details to support the pleading-with-particularity requirement of the Federal Rules of Civil Procedure’s Rule 9(b) [FRCP Rule 9(b)]. When it comes to allegations of fraud, all such allegations must be pled with particularity, including qui tam actions. Essentially, this means that specific false claims must be fleshed out with adequate information.

The U.S. Circuits are split on the strictness with which they apply Rule 9(b) to qui tam false claims cases. Among the Circuits, the requirement that “a plaintiff must plead both the particular details of a fraudulent scheme and details that identify particular false claims for payment that were submitted to the government,” resulting in a more strict interpretation, is followed by the Fourth, Sixth, Eighth, and Eleventh Circuits. South Carolina is in the Fourth Circuit.

However, a looser interpretation of Rule 9(b) is generally applied by the Third, Fifth, and Ninth Circuits when it comes to pleading a false claims case. Specific details that are paired with the strong probability that claims were actually submitted can be sufficient to satisfy the pleading-with-particularity requirement.

Understanding Reasonable Particularity and FRCP Rule 9(b)

Two hypothetical cases may make the differing interpretations of particularity more understandable to you.

First case: A medical worker believes that false claims for services that were never provided are being submitted to Medicare and Medicaid by the hospital where she works . The worker alleges that the hospital submitted duplicate bills for certain lab tests, providing details from personal conversations with other employees about hospital policies, diagnostic codes and descriptions for the lab tests that were allegedly falsely submitted, along with two patients’ testing histories. However, the medical worker cannot supply specific dates, billing numbers, or copies of any bills allegedly falsely submitted to the government. What the worker does have is firsthand knowledge of the submission of false claims from a supervisor, who provided details of the scheme in an effort to entice the worker to participate.

What might the courts do? It’s likely that the Eleventh Circuit would declare the complaint as having insufficient particularity because of lack of details regarding the dates and amounts submitted. On the other hand, the Fifth Circuit would likely find that the complaint had sufficient particularity, because the firsthand knowledge of the scheme, paired with other details, provides a strong probability that false claims were truly submitted.

Second case: A technical worker believes that defense industry parts not meeting government specifications were certified by a company as compliant and wants to bring a qui tam suit. The worker is employed by the company’s competitor and thus has no firsthand knowledge of acts of fraud, nor any access to invoices or other billing information. The allegations in the complaint brought by the technical worker specifies which parts were shipped and reimbursed by the government. The worker also provides contract details involving the company and the government, alleging that the company must have presented at least one false claim. Otherwise, the government would not have reimbursed for defective parts.

In this situation, the Eleventh Circuit would be most likely to find the complaint insufficient. But so might the Fifth Circuit. That’s because, even though details were provided of the overall fraudulent scheme, the worker did not submit any other reliable data that could support the claims, such as the firsthand knowledge mentioned in the first case, above. However, it is possible that some circuit courts might find the pleading-with-particularity standard satisfied because the complaint offered sufficient details of the overall fraudulent scheme.

Two real-life cases might also shed some light on the issue of pleading with particularity.

Case: Takeda Pharmaceuticals

The Fourth Circuit includes South Carolina, so the case of United States ex rel. Nathan v. Takeda Pharms. N. Am., Inc., from 2013 is of interest. The relator’s information included aggregate data on expenditures for one of four drugs. No effort appeared to be made to identify either those who submitted claims or those who were government program payers. Nor were circumstances, times, or amounts specified. In this case, the Fourth Circuit found the material presented by the relator to be insufficient.

Case: Rolls-Royce Corp.

A less strict pleading standard is demonstrated in the Seventh Circuit case United States ex rel. Lusby v. Rolls-Royce Corp. (2009). The Court concluded that, because “a relator is unlikely to have [billing] documents unless he works in the defendant’s accounting department, [a requirement to allege specific false claims] takes a big bite out of qui tam litigation.” In other words, the looser interpretation of Rule 9(b) won the day, using details paired with probability of false claims submission as being sufficient to satisfy the pleading-with-particularity requirement.

The Call to Relax Rule 9(b) in Whistleblower Cases

Some have argued for a general relaxing of Rule 9(b), arguing that greater flexibility more accurately represents Rule 9(b)’s purpose by providing fair access for all relators to judicial remedies. If all courts applied the same standards in qui tam cases by providing a uniform test regarding pleading standards, Rule 9(b) would still be satisfied without placing an undue burden on relators.

For example, in United States ex rel. Foglia v. Renal Ventures Management LLC, (2014), the Third Circuit indicated that a less stringent standard satisfies the true purpose of Rule 9(b), because doing so still provides fair notice of a plaintiff’s claims to the defendant(s) yet does not prejudice the relator. The defendant(s) are often the possessors of the records that demonstrate that the allegations of false claims are not true, should that be the case. Thus the defendant(s) will be able to mount an adequate defense.

Now—suppose you are thinking of bringing a qui tam case. . .

What Happens If I Fail to Meet the Pleading Requirements in My Qui Tam Case?

If you bring a qui tam suit but fail to meet the pleading requirement with your initial complaint, often you can try again by filing for leave to amend the complaint. Note that the court is not required to grant you a leave to amend beyond the first time. But it is much better to have all your information included in the complaint the first time through so that you can jump the Rule 9(b) hurdle successfully. It’s best to rely on your attorney in such matters, because they will know how strict the particular circuit court is likely to be in their interpretation of FRCP Rule 9(b).

Government Intervention is Crucial

Having sufficient information that is detailed and substantiated is critical to convincing the government to join your case. Cases in which the government intervenes are settled or won more than 90 percent of the time. Cases in which the government declines to intervene are settled or won only about 20 percent of the time. The Department of Justice intervenes in around 25 percent of whistleblower cases. It is important to be part of that 25 percent, and including information in your complaint that handily meets the pleading-with-particularity requirements will improve your chances of success.

Blowing the Whistle? We Can Help You with Your Next Step.

If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.

Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.

For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.


Request Consultation