In bringing a claim under the False Claims Act (“FCA”), typically there are some sort of false or fraudulent statements made to the government. See 31 U.S.C. § 3729(a)(1)(A), (B). However, it should be noted that FCA claims may be committed by an affirmative misrepresentation or omission. See Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 1999 (2016) (“[T]he False Claims Act encompasses claims that make fraudulent misrepresentations, which include certain misleading omissions.”). False and misleading omissions can in fact be actionable under the False Claims Act.
Pleading Fraud by Omission with Particularity in Satisfaction of Rule 9(b)
All claims under the FCA must be pled with particularity: Federal Rule of Civil Procedure 9(b) requires that “[i]n alleging fraud . . . a party must state with particularity the circumstances constituting fraud.” Generally speaking, the “circumstances constituting fraud” that must be pled “include such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby.” Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir. 1982) (internal quotation marks omitted).
Unlike affirmatively fraudulent statements, misleading statements by omission “cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation. “ Flynn v. Everything Yogurt, 1993 WL 454355, at *9 (D. Md. Sept. 14, 1993).
Thus, in cases involving fraudulent omissions, a “[p]laintiff is unable to specify the time and place because no act occurred.” Weaver v. Chrysler Corp., 172 F.R.D. 96, 101 (S.D.N.Y. 1997); see also Daher v. G.D. Searle & Co., 695 F. Supp. 436, 440 (D. Minn. 1988) (“’[M]alicious silence’ is, by its very nature, difficult to plead with particularity.”).
Put differently, “[l]ike Sherlock Holmes’ dog that did not bark in the night, an actionable omission obviously cannot be particularized as to ‘the time, place, and contents of the false representations’ or ‘the identity of the person making the misrepresentation.’” Bonfield v. AAMCO Transmissions, Inc., 708 F. Supp. 867, 875 (N.D. Ill. 1989).
As one court explained, “[r]equiring a plaintiff to identify (or suffer dismissal) the precise time, place, and content of an event that (by definition) did not occur would effectively gut . . . laws prohibiting fraud-by-omission.” In re Whirlpool Corp. Front-Loading Washer Prod. Liab. Litig., 684 F. Supp. 2d 942, 961 (N.D. Ohio 2009).
Rule 9(b) Particularity Requirements are Relaxed in Some Jurisdictions
In light of the inherent difficulty in pleading identifying details of an omission, various courts have held that the “particularity requirements are less strictly applied with respect to claims of fraud by concealment.” Shaw v. Brown & Williamson Tobacco Corp., 973 F. Supp. 539, 552 (D. Md. 1997); see also Woodard v. Labrada, 2017 WL 3309765, at *8 (C.D. Cal. July 31, 2017) (“A fraud by omission or fraud by concealment claim can succeed without the same level of specificity required by a normal fraud claim.”) (internal quotation marks omitted); Hilkene v. WD-40 Co., 2005 WL 3050434, at *2 (D. Kan. Nov. 14, 2005) (agreeing that “Rule 9(b) cannot be rigidly applied to the alleged omissions in this case”); Asghari v. Volkswagen Grp. of Am., Inc., 42 F. Supp. 3d 1306, 1325 (C.D. Cal. 2013) (“When a claim rests on allegations of fraudulent omission, . . . the Rule 9(b) standard is somewhat relaxed because a plaintiff cannot plead either the specific time of [an] omission or the place, as he is not alleging an act, but a failure to act.”) (internal quotation marks omitted); Schwartz v. Pella Corp., 2014 WL 7264948, at *6 (D.S.C. Dec. 18, 2014) (“[M]any courts have recognized the difficulty of applying Rule 9(b)’s particularity requirement to fraudulent concealment or omission claims, and have instead applied a relaxed, less formulaic version of the rule.”).
Courts Have Fashioned Different “Tests” to Determine if Rule 9(b) is Met
Given the incompatibility between the customary “who, what, why, when and where” requirements of Rule 9(b) and pleading fraudulent omissions, courts have fashioned different tests to determine whether fraudulent omission claims are pled with the requisite particularity. For example:
-“In order to comply with the pleading requirements of Rule 9(b) with respect to fraud by omission, a plaintiff usually will be required to allege the following with reasonable particularity: (1) the relationship or situation giving rise to the duty to speak, (2) the event or events triggering the duty to speak, and/or the general time period over which the relationship arose and the fraudulent conduct occurred, (3) the general content of the information that was withheld and the reason for its materiality, (4) the identity of those under a duty who failed to make such disclosures, (5) what those defendant(s) gained by withholding information, (6) why plaintiff’s reliance on the omission was both reasonable and detrimental, and (7) the damages proximately flowing from such reliance.” Breeden v. Richmond Cmty. Coll., 171 F.R.D. 189, 195 (M.D.N.C. 1997).
-“In cases where the alleged fraud consists of an omission and the Plaintiff is unable to specify the time and place because no act occurred, the Complaint must still allege what the omissions were, the person responsible for failing to disclose, the context of the omission and the manner in which it misled Plaintiff, and what Defendant obtained through the fraud.” Weaver v. Chrysler Corp., 172 F.R.D. 96, 101 (S.D.N.Y. 1997).
-“[O]ther districts have recognized that ‘fraud by omission’ claims need not be pled with quite the same degree of specificity required of ‘affirmative fraud’ claims” but held that “even in a fraud-by-omission case, a plaintiff must show that the defendant had a duty to disclose but did not do so.” Sanford v. Maid-Rite Corp., 2014 WL 1608301, at *12 (D. Minn. Apr. 21, 2014) (internal quotation marks omitted), rev’d and remanded on other grounds, 816 F.3d 546 (8th Cir. 2016).
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