New York District Court Adds to Rule 9(b) Confusion

As we have reported in previous posts, Federal Rule of Civil Procedure 9(b) has emerged as an obstacle in some jurisdictions when applied to the pleadings submitted in False Claims Act cases. In sum, Rule 9(b) imposes heightened specificity requirements in certain federal filings. The rule is often applied in negligence cases, and specifically mentions fraud filings as within its purview. However, courts across the United States are split on exactly how specific False Claims Act pleadings must be, with some Circuits holding that Rule 9(b) does not apply to False Claims Act cases at all. Other Circuits have held that Rule 9(b) requires itemized, explicit, specific examples, at a transactional level, of intentional fraud in order for a False Claims Act case to survive a motion to dismiss.

In today’s case, another federal district court has added to the confusion, dismissing a relator’s complaint alleging healthcare fraud for failure to meet the heightened pleading standards of Rule 9(b).

Details of the Case Against Hospital for Special Surgery

In the case, several relators from an entity known as Corporate Compliance Associates commenced a False Claims Act case against the Hospital for Special Surgery, its former Chief Executive Officer, and an outside billing company for alleged violations of the federal and New York False Claims Acts, as well as the Stark Law. The relators’ evidence was obtained from the hospital’s Chief Compliance Officer and allegedly contained information to suggest the defendants sought to increase patient referrals by paying kickbacks to several contract physicians. The allegations centered on allegations of salary increases tied to referral volume, and payments provided for allegedly non-existent teaching responsibilities. The allegations, however, did not survive defendants’ motions to dismiss under Rule 9(b) and Rule 12(b)(6) (which addresses civil complaints that do not allege actionable assertions).

In response to defendants’ motions, the court dismissed the relators’ claims for “failure to plead the claims with the required particularity,” holding that “it is insufficient to allege a fraudulent scheme unless the complaint alleges with particularity the existence and content of false claims.”

The case is situated in the Second Circuit, a circuit that has not directly addressed the Rule 9(b) issue. However, several other circuits have issued opinions on the level of specificity required when alleging fraud under the False Claims Act. For instance, the Ninth Circuit requires a lower pleading requirement. An FCA case in the Ninth Circuit will survive a 9(b) challenge so long as the evidence advanced is sufficient to show fraud to a reasonable certainty. Other Circuits, including the False Claims Act-heavy Fourth Circuit, adhere to the stricter standard requiring itemized proof of fraud for each claim alleged.

The Supreme Court has yet to issue an opinion on the issue; however, it has granted writ of certiorari in a closely-watched Rule 9(b) case. Stay tuned for a possible resolution to this issue in an upcoming term.

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