When it comes to filing a complaint under the False Claims Act, there exists a split in the law over the level of specificity required in the factual allegations. The issue, which is considered ripe for Supreme Court review, has sharply divided the federal Circuit Courts and has resulted in an uneven and unpredictable application of the law. On the one side are circuits like the Fourth, Sixth, Eighth, and Eleventh that hold plaintiffs asserting fraud under the False Claims Act must specifically itemize and describe each act of fraud in the complaint. Failure to do so will result in a dismissal under Federal Rule of Civil Procedure 12(b)(6) – which allows a party to motion for the dismissal of a lawsuit if it does not state a claim upon which relief can be granted.
Other circuits, like the First, Fifth, Seventh, and Ninth, have held that it would create an undue burden on plaintiffs to have to plead with such particularity each act of fraud, and it is sufficient for plaintiffs to give the “particular details” of the alleged fraud.
At the crux of the pleadings debate is the applicability of Federal Rule of Civil Procedure 9(b), which demands when “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
Third Circuit Examines the Issue in Foglia
The facts of today’s case involve allegations brought forth by a registered nurse formerly employed by a dialysis company known as Renal Ventures. As is the case is in so many healthcare fraud lawsuits, the relator alleged that Renal Ventures engaged in a systematic scheme to defraud the government by overcharging for the drug Zemplar. Allegedly, Renal Ventures would submit invoices for reimbursement to government healthcare programs like Medicare or Medicaid on behalf of patients taking this drug for amounts higher than the actual cost of the medication.
After filing his complaint in the federal District Court, it was promptly dismissed due to the court’s opinion that the relator had failed to set forth enough specific facts in his petition as required by Rule 9(b). Specifically, the trial court judge stated that the realtor failed to provide a “representative sample” or to identify “representative samples of specific false claims to the government.” Presumably, the court required submission of invoices and documentation showing that Renal Ventures submitted false claims to the government, as well as details surrounding the submission of the invoice and the alleged fraud involved.
As a result of the dismissal, the relator appealed his case to the U.S. Court of Appeals for the Third Circuit – which saw the case differently. The Court’s opinion acknowledges the sharp split among jurisdictions, and sets forth its understanding of the applicability of Rule 9(b) to cases under the False Claims Act. Specifically, the Court held that a plaintiff’s claim will withstand a motion to dismiss under Rule 12(b)(6) as long as the facts alleged would lead “to a strong inference that claims were actually submitted.”
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