The Need for “Particularity” in Qui Tam Cases

Health Care   |   Qui Tam/Whistleblower Defense   |   March 1, 2017
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The False Claims Act encourages individuals, known as “relators,” to report knowledge of fraud against the government.  The Act incentivizes relators (and their lawyers) by promising them a bounty for suing to recover damages for the fraud.  Specifically, the relator receives a percentage of any amount recovered in a false claims case, whether by judgment or settlement.  But there is a constant tension between encouraging plaintiffs to bring cases alleging fraud, on the one hand, and protecting defendants from frivolous cases, on the other hand.

The decision in U.S. ex rel. Jallali v. Sun Healthcare Grp., 2015 WL 10687577 (S.D. Fla. Sept. 17, 2015), aff ’d sub nom. Jallali v. Sun Healthcare Grp., 2016 WL 3564248 (11th Cir. July 1, 2016), illustrates how the Rule 9(b) requirement, that a plaintiff allege fraud with particularity in the initial complaint, helps strike this important balance.  The relator in Jallali worked as a Therapy Program Manager and a Director of Rehab and Therapy at Miami-based Sun Healthcare Group.  She alleged Sun Healthcare employees changed patient records and engaged in other improper documentation practices.  She also alleged that the organization violated the Anti-Kickback statute by paying employees for falsifying records.  Rather than specifically allege that the defendants actually submitted false claims to the government or that the government made any payments based on the alleged fraudulent activity, the relator generally alleged that she “had a reliable indication that claims were fraudulently submitted to Medicare for payments by Defendant[s].”

The trial court dismissed the relator’s case with prejudice.[1] The court observed that Rule 9(b) requires fraud to be alleged with particularity.  In a False Claims Act case, the complaint must state the time, place, and substance of the defendant’s alleged fraud, including the “who, what, where, when, and how of any specific false claim for payment.” Because the complaint failed to identify any false claim for payment submitted, or specific certification of compliance made, to the government, the court ruled that the relator failed to connect the alleged fraudulent scheme to particular instances of fraud or misrepresentation.  Id. at *9.  The heightened pleading requirement for fraud is intended to prevent parties from filing lawsuits merely so they can conduct discovery to determine whether a claim exists.  Id.

The trial court noted that certain “indicia of reliability” can help propel a relator over Rule 9(b)’s strict pleading hurdle.  “Without direct evidence of claims submitted to the government, a relator could, nevertheless, survive a Rule 9(b) challenge by showing that he or she held a position and performed a work function that allows him or her to allege with specificity and from personal knowledge that false claims were submitted for payment.” Id. at *6.  The court, however, refused to infer that claim submissions must have been submitted to the government.  The court reasoned that this alternate method of pleading claim submissions did not “relax” the Eleventh Circuit’s strict requirement that relators plead fraud with particularity.  Id.  Successful allegations demonstrating the requisite indicia of reliability assert the relator’s direct, first-hand knowledge of the defendant’s billing practices related to submissions for payment to the government.

Affirming the trial court’s dismissal, the Eleventh Circuit issued a two-page opinion reiterating its long-standing precedent that, to state a claim for relief, relators must allege the submission of a false claim for payment to the government with particularity.  Jallali, 2016 WL 3564248, at *1-2.

Fortunately for qui tam defendants faced with a potentially frivolous suit, Jallali upholds exacting Eleventh Circuit precedent for specificity in False Claims Act complaints.  Relators seeking to recover a bounty for identifying fraud against the government must have specific facts that would support all of the elements of the case, including the submission of a false claim to the government for payment.



[1] After dismissing the relator’s federal False Claims Act counts with prejudice, the court dismissed the relator’s common law claims for lack of standing.

Republished with permission by the Hillsborough County Bar Association Lawyer Magazine.



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