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Rule 9(b)

02 September 2021

Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality

Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.

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13 July 2021

D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory

On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139.  The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract.  In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms.  IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement.  The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided.  According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.

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19 May 2021

Eleventh Circuit Rejects Argument That Mathematical Probability Suffices To Allege The Existence of False Claims, Affirming Dismissal For Failure To Satisfy Rule 9(b)

On April 26, 2021, the Eleventh Circuit affirmed the dismissal with prejudice of a qui tam action brought by two former employees of a Georgia hospice provider and associated medical providers.  The Court held that the relators did not plead with sufficient particularity under Rule 9(b) that the defendant had submitted a false claim to the government.  Estate of Debbie Helmly, et al. v. Bethany Hospice and Palliative Care of Coastal Georgia, LLC, et al., No. 20-11624 (11th Cir. Apr. 26, 2021).

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11 June 2020

Fifth Circuit Affirms Dismissal of FCA Case Based on Inadequate Pleading of Upcoded Claims

On May 28, 2020, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal with prejudice of a False Claims Act suit brought against Baylor Scott & White Health (“Baylor”), a network of acute care hospitals.  The suit, brought by Integra Med Analytics, alleged that Baylor submitted $61.8 million in fraudulent claims to Medicare by using unsupported “higher-value” diagnosis codes to inflate Medicare reimbursements.  The U.S. government previously declined to intervene in the suit.

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22 October 2019

Court Dismisses DOJ Complaint Alleging Improper Auto-Refill and Co-Payment Waiver for Lack of Particularity

On September 30, 2019, a judge in the United States District Court for the Northern District of Illinois granted a motion to dismiss in an intervened FCA qui tam suit, finding that the relators, the United States, and the state of Illinois failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims. The suit targeted an entity referred to as C&M Specialty Pharmacy (“C&M”), which provides specialized medication for complex medical conditions.

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05 August 2019

Eleventh Circuit Holds That It Is Relator’s Burden To Prove Lack of Fair Market Value As An Essential Element of AKS-Based Claims

Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value.  See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019).  Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance.  In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.

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17 May 2019

Recent Illinois Appellate Court Decision Applies Narrow Interpretation of Public Disclosure Bar

In a recent decision, the First District of the Illinois Appellate Court reversed the dismissal of a complaint brought pursuant to the Illinois False Claims Act (the “IFCA”). The circuit court had held that relators satisfied the public disclosure bar because their claims were not substantially the same as publicly disclosed allegations or transactions, but that relators had failed to plead their claim with specificity. The First District agreed with the circuit court’s ruling regarding the public disclosure bar, but found that the circuit court had erred in holding that relators had failed to state a claim. This decision is the third Illinois Appellate Court decision in the last thirteen months reversing dismissals of IFCA actions (see People ex rel. Lindblom v. Sears Brands, LLC et al., No. 1-17-1468 (Ill. App. Ct), and Phone Recovery Services of Illinois, LLC ex rel. State of Illinois v. Ameritech Illinois Metro, Inc. et al., No. 1-17-0968 (Ill. App. Ct.)), and the language used by the court reflects a high threshold for dismissal.

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02 May 2019

Supreme Court Considers Whether to Weigh In on Rule 9(b)’s Particularity Requirement and Constitutionality of the FCA’s Qui Tam Provisions

As we previously reported, in U.S. ex rel. Polukoff v. St. Mark’s Hospital, 895 F.3d 730 (10th Cir. 2018), the Tenth Circuit reversed a district court’s dismissal of qui tam claims, reasoning that the relator’s allegations satisfied Rule 9(b). In so holding, the Tenth Circuit “excuse[d] deficiencies that result from the plaintiff’s inability to obtain information within the defendant’s exclusive control.” Earlier this year, Defendant Intermountain Health Care filed a petition for a writ of certiorari, and the Supreme Court recently requested a response from Relator and the United States.

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28 February 2019

Government Sufficiently Pleads Florida Pharmacy Owner Caused Submission of False Claims through Kickback Scheme; Suit Will Go Forward

The U.S. District Court for the Northern District of Florida recently held that a False Claims Act suit can proceed against a Florida pharmacy and its owner, rejecting in particular the owner’s arguments that the complaint did not sufficiently allege that he acted with improper intent or caused the submission of false claims.

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19 February 2019

8th Circuit Reaffirms FRCP 9(b)’s Demanding Pleading Standard

The U.S. Court of Appeals for the Eighth Circuit joined a growing trend among courts in tightening False Claims Act (“FCA”) pleading requirements, affirming the dismissal of a qui tam action brought against a nonprofit hospital because the relators failed to meet the “particularity” standard set forth under Rule 9(b) of the Federal Rules of Civil Procedure. In doing so, the court reminded FCA litigants that Rule 9(b) requires either “representative samples” of false claims plead with adequate specificity, or particular details of a scheme to submit false claims paired with reliable indicia that they were submitted. United States ex rel. Strubbe v. Crawford Cnty. Mem’l Hosp., No 18-1022, 2019 WL 512190 (8th Cir. Feb. 11, 2019).  (more…)

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