The “Particularity” With Which Relators Need to Plead Under The False Claims Act

Joseph Ho, MPH

Associate Editor

Loyola University Chicago School of Law, JD 2022

The False Claims Act (“FCA”) is one of the United States Government’s most powerful tools for fighting fraud. In fact, the Department of Justice recovered nearly $1.8 billion under the FCA for health care fraud and $1.6 billion in FCA qui tam relator cases in the 2020 fiscal year. Keeping the enforcement of fraud in mind, underlying all FCA qui tam suits is successfully pleading with particularity under Federal Rule of Civil Procedure 9(b). This requirement has led many U.S. District Courts to dismiss qui tam cases at the pleading stage and U.S. Courts of Appeals to affirm those decisions. The upshot is that amid changes to the Stark Law and Anti-Kickback law, the continuation of COVID-19 related fraud, and the continuing splits in the Federal Circuit regarding pleading standards, the ground may begin to shift for compliance officers, attorneys, and general counsels in health care organizations.

The standard

The FCA is governed by 31 U.S.C. § 3729. Moreover, a qui tam lawsuit involves enforcing the statute through a private individual known as a “relator” and suing on behalf of the United States. Procedurally, the Department of Justice, at its discretion, will typically make an appearance and litigate the claim on behalf of the relator.

In Universal Health Services, Inc. v. United States et al. ex rel. Escobar et al., Justice Clarence Thomas wrote that “[t]he False Claims Act is not “an all-purpose antifraud statute[.]” While it may not be an all-encompassing statute, the necessity to bring a qui tam suit under the FCA requires pleading with particularity under Federal Rule of Civil Procedure 9(b). A recent Eighth Circuit Court of Appeals decision is instructive. In United States ex rel. Benaissa v. Trinity Health, the Eight Circuit said that pleading with particularity requires the complaint to “plead such facts as time, place, and content of the defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when acts occurred, who engaged in them, and what was obtained as a result.”

In that case, the District Court of North Dakota initially granted the defendant’s motion to dismiss the relators’ FCA claim that alleged the defendant violated the federal Stark and Anti-Kickback law when it paid physicians for referrals. On appeal, the Eighth Circuit affirmed and found that the generalized allegations were insufficient under Rule 9(b). It noted that pleading requires reliable “indicia that lead to a strong inference that claims were actually submitted” under the ‘knowingly presenting a false claim’ provision of the statute and “a connection between the alleged fraud and an actual claim made payable to the government” under the ‘knowingly makes a materially false claim’ provision of the statute.

Looking forward

Notably, even with the newly published final rules regarding Stark and Anti-Kickback Law, the pleading standard will continue to challenge relators. On January 19, 2021, the Office of Inspector General’s Anti-Kickback Law and most of the new Stark Law final rules went into effect. Since the rules are relatively new, there are no published cases that address pleading. Arguably, the changes may limit lawsuits that relators can bring because of the new safe harbor protections. Notwithstanding, because the final rules are separate from the procedural issue, it should not impact the current standard to plead a violation of the FCA.

Moreover, COVID-19 related fraud may garner an increase in the filing of FCA violations. At the Federal Bar Association Qui Tam Conference on February 17, 2021, Acting Assistant Attorney General Brian M. Boynton discussed an overview of the Civil Division’s current FCA enforcement priorities. These priorities included pandemic-related fraud, opioids, fraud targeting seniors, electronic health records, telehealth, and cybersecurity. Notably, Boynton said that “qui tams will continue to be an essential source of new leads, and the Department will continue to rely on whistleblowers to help root out the misuse and abuse of taxpayer funds.”

Notwithstanding, the United States Supreme Court added to the confusion regarding the particularity with which to plead when it denied hearing an appeal on the standard stemming from a decision in the Eighth Circuit in United States ex rel. Strubbe v. Crawford County Memorial Hospital. While the ground continues to shift, compliance officers and general counsels at health care organizations will need to continue their responsibilities of auditing, monitoring, and updating their policies and procedures during these unprecedented and uncertain times.