Eleventh Circuit Tackles Contentious Rule 9(b) Issue

As we have reported in a previous post, Florida-based Health Management Associates, Inc. is facing extreme liability under the False Claims Act stemming from allegations that emergency room physicians were offered kickbacks and financial incentives for admitting a certain number of patients per day – notwithstanding the lack of medical necessity for inpatient care. On appeal, HMA is seeking redress from the United States Court of Appeals for the Eleventh District – particularly with regard to the applicability of Federal Rule of Civil Procedure 9(b).

On appeal, the Eleventh Circuit opted to uphold the case in part, and reverse the case in other parts. In sum, parts of the relator’s action have been reinstated for further consideration. To better understand the procedural flow of the case, it helps to review the portions of the lawsuit considered by the Court. More specifically, the Court was reviewing certain claims made by the relator limited to events occurring in 2007, 2008, and 2009. Of those years, the Court opted to reverse the decision by the U.S. District Court for the Middle District of Florida with regard to events occurring in 2007, and upheld the District Court’s dismissal of events occurring in 2008 and 2009. The following explains the Court’s reasoning for upholding the relator’s claims for fraud occurring in 2007 only.

Court considers applicability of Rule 9(b)

Federal Rule of Civil Procedure 9(b) imposes a heightened pleading requirement on cases involving fraud. In general, civil plaintiffs must submit a complaint containing short, plain factual allegations that are specific enough to put the defendant on notice of the plaintiff’s assertions. However, with regard to fraud, Rule 9(b) requires the submission of more specific evidence in the complaint. The exact level of specificity required is the source of a major debate – and near-equal split – between the federal Courts of Appeal.

In the case against HMA, the Court concluded that the specificity requirements of Rule 9(b) with regard to False Claims Act cases must be applied using a “nuanced, case-by-case approach.” The Court also reminded the parties that there are no “bright line rules” with regard to the pleading requirements, and went on to consider whether the relator had included enough information in his original complaint to support his claims of fraud occurring in 2007.

In 2007, the relator was employed by HMA as Vice President and the CEO of one of HMA’s hospitals. Pursuant to this position, the relator became intimately aware of the alleged kickback scheme occurring in this Southeastern United States-based hospital chain. The relator left this position in 2008, and filed his whistleblower lawsuit shortly thereafter.

The Court pointed out that the relator did not include a single detail about any specific claim of intentional fraud in his complaint for any of the years mentioned in the lawsuit. However, the Circuit Court ultimately held that the relator’s position within the defendant’s company in 2007 would have rendered him competent to make the assertions made in his whistleblower lawsuit. However, his assertions of fraud covering 2008 and 2009 were dismissed because the relator was no longer in a position to have any adequate knowledge of the alleged fraud within HMA’s hospital system.

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