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How Specific Must a Whistleblower Be in Pleading an FCA Claim?

MelaleucaAlternifoliaEssOil.jpgThe Federal Rules of Civil Procedure (FRCP) require any party claiming fraud to provide specific allegations in their complaint. This includes lawsuits brought under the False Claims Act (FCA), which by definition include allegations of fraud. Last year, the Third Circuit Court of Appeals considered the question of how specific a plaintiff’s allegations must be in a qui tam FCA lawsuit. Foglia v. Renal Ventures Mgt., LLC, 754 F.3d 153 (3rd Cir. 2014). The court held that the plaintiff met the FRCP’s requirement of “particularity.”

The plaintiff is a registered nurse who worked for the defendant, a dialysis care services company, from March 2007 until his termination in November 2008. He filed a qui tam FCA complaint in April 2009. After the United States declined to intervene, the plaintiff filed an amended complaint, followed by a second amended complaint. He alleged that the defendant falsely certified compliance with state quality-of-care regulations, submitted fraudulent reimbursement claims for the drug Zemplar, and reused Zemplar vials intended for single use. He also claimed retaliation, although that claim was not addressed by the appellate court.

The defendant moved the district court to dismiss the second amended complaint under FRCP 12(b)(6), arguing that the plaintiff had not met FRCP 9(b)‘s heightened pleading requirements for fraud claims. The district court granted the motion and dismissed the lawsuit with prejudice. It found that the plaintiff had failed to provide a “representative sample” of false claims submitted by the defendant. Foglia, 754 F.3d at 155. The plaintiff appealed the dismissal of the claim related to overbilling for Zemplar.

The Third Circuit began its analysis by determining “what Rule 9(b) requires of an FCA claimant,” id., something it had never specifically addressed before. FRCP 9(b) requires a party claiming fraud or mistake to “state with particularity the circumstances constituting fraud or mistake.” Four circuits—the Fourth, Sixth, Eighth, and Eleventh—have held that a plaintiff must provide “representative samples” of alleged fraud, “specifying the time, place, and content of the acts and the identity of the actors.” Id. Three other circuits—the First, Fifth, and Ninth—only require a plaintiff to provide “particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” Id. at 156, quoting U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009). The Third Circuit opted to follow the “nuanced” approach of the First, Fifth, and Ninth Circuits. Foglia, 754 F.3d at 156-57.

Applying this standard, the court found that the plaintiff had met FRCP 9(b)’s heightened pleading requirements but noted that it is a “close case.” Id. at 158. The plaintiff presented inventory and patient logs showing that the defendant was using more Zemplar than would be available from the number of single-use vials it had ordered, unless it was “harvesting unused Zemplar from previously used vials.” Id. The court held that this did not establish the “strong inference” required by FRCP 9(b) but ruled for the plaintiff for two reasons: (1) the evidence gave the defendant adequate notice of the claims against it, and (2) the evidence that would resolve any ambiguity was in the defendant’s sole possession.

The attorneys at Stone & Magnanini are committed to protecting whistleblowers’ rights while helping them assert claims of healthcare and other types of fraud. To learn more about how to report healthcare fraud, or to schedule a free and confidential consultation with a member of our healthcare fraud team, contact us today online or at (973) 218-1111.

More Blog Posts:

The First-to-File Fight, Whistleblower Legal Update Blog, January 23, 2015
Better Know a Fraud: DaVita Healthcare Partners, Inc. Kickbacks, Whistleblower Legal Update Blog, January 20, 2015
The False Claims Act in 2014: A Year in Review, Whistleblower Legal Update Blog, January 15, 2015
Photo credit: By Itineranttrader (Own work) [Public domain], via Wikimedia Commons.