Ninth Circuit Cautions Against Allowing Relators to Assert Expansive Claims Based Only On Specific Incidents of Alleged Wrongdoing

In a ruling earlier this week, the Ninth Circuit emphasized the demanding standard Federal Rule of Civil Procedure 9(b)’s particularity requirement imposes on qui tam relators alleging fraud, particularly when seeking to pursue an expansive scope of claims based on limited information.  In United States ex rel. Driscoll v. Todd Spencer M.D. Medical Group, Inc., No. 13-17624 (9th Cir. Aug. 9, 2016), a former radiologist employed by the defendant medical group, alleged that the group and its principal violated the FCA by submitting claims to Medicare for “unnecessary CT scans” and, separately, by “unbundling” single procedures into multiple claims to “increase billings artificially.”  Id. (slip op. at 3).  The relator alleged that this conduct persisted for at period of several years, from at least 2007 to 2010, and perhaps longer.  United States ex rel. Driscoll v. Todd Spencer M.D. Med. Grp., Inc., No. 1:11-cv-1776, 2013 WL 6243858, *5 (E.D. Cal. Dec. 3, 2013).  After allowing the relator one opportunity to amend his complaint, the district court dismissed the first amended complaint with prejudice, concluding that these allegations were insufficiently specific to withstand Rule 9(b)’s particularity requirement.  Id.

In an unpublished opinion a panel of the Ninth Circuit disagreed, holding that some of the allegations were “sufficiently specific that Defendants can answer the complaint and defend against the charges.”  United States ex rel. Driscoll, No. 13-17624 (slip op. at 3).  For example, the complaint alleged that the relator “personally observed unnecessary CT exams of the abdomen and pelvis” on “December 14, 2007.”  Id.  It also alleged that the relator was instructed in “December 2009” to “‘unbundle’ a procedure before billing”—specifically, to “break one single medical study into five component parts.”  Id.  The Ninth Circuit determined that these “detailed, representative examples” were sufficiently specific to satisfy Rule 9(b).

However, the appellate court expressed concern that the relator attempted to use these specific allegations regarding particular individual incidents to support a much broader claim that the defendants performed “thousands” of “fraudulent” tests over a period of many years—“much longer than the three years” during which relator actually worked for the defendants.  Id. (slip op. at 4).  The Court remanded the case to permit the relator another opportunity to amend the complaint, but emphasized that he must “narrow the scope of the complaint so that the litigation will be manageable.”  Id.

The ruling serves as an important reminder that even when a complaint alleges a particular incident of fraud with the specificity required by Rule 9(b), this may not be sufficient—without more—to support a claim that a pattern of fraudulent activity persisted over a broader period of time, particularly when the allegations suggest the relator lacks personal knowledge of such conduct.