Second Circuit Sets False Claims Act Pleading Standard For Claim Information
July 31, 2017
Last week, the Second Circuit held that a False Claims Act relator does not have to plead details of specific alleged false billings or invoices to the government, as long as he can allege facts leading to a strong inference that specific claims were submitted and that information about them are peculiarly within the defendant’s knowledge.
In United States ex rel. Chorches v. American Medical Response, Inc., Paul Fabula was an emergency medical technician for AMR, the largest ambulance company in the United States. He alleged that AMR falsely certified ambulance transports as being medically necessary and submitted claims it knew were not medically reimbursable under Medicaid. He alleged that AMR routinely made EMTs and paramedics revise or re-create reports to include false statements demonstrating medical necessity in order to qualify for Medicaid reimbursement. Fabula subsequently declared bankruptcy, and the bankruptcy trustee became the relator.
Qui tam complaints, which allege fraud, are subject to Fed. R. Civ. P. 9(b)’s particularity requirement. The Second Circuit determined that relator had adequately alleged a scheme to defraud. Relator, however, admittedly did not have personal knowledge of exact billing numbers, dates, or amounts for claims submitted to the government.
The focus of the Second Circuit’s inquiry, therefore, was whether every qui tam complaint must allege specific identified false billings or invoices. The Court answered in the negative, holding that “a complaint can satisfy Rule 9(b)’s particularity requirement by making plausible allegations creating a strong inference that specific false claims were submitted to the government and that the information that would permit further identification of those claims is peculiarly within the opposing party’s knowledge.”
In Chorches, the Court found that the relator had met this standard by pleading sufficient facts, on personal knowledge, to demonstrate that billing information was peculiarly within the knowledge of AMR and that he was unable, without the benefit of discovery, to provide billing details for claims submitted by AMR to the government. Relator had also sufficiently alleged facts on personal knowledge supporting a scheme to defraud and a strong inference that false claims were actually submitted to the government.
This issue had been addressed by several other circuits, and in 2016, the Second Circuit noted a seeming circuit split on whether an FCA relator must allege the details of specific examples of actual false claims. In Chorches, however, the Court concluded that “reports of a circuit split are, like those prematurely reporting Mark Twain’s death, ‘greatly exaggerated.’” The Court then engaged in an extensive analysis of cases in other circuits, concluding that its pleading standard is fully consistent with both the emerging consensus in other circuits and its own precedents.
Several district courts in the Second Circuit have required a strict pleading of specific facts concerning individual billings or invoices to the government. Those decisions will now have to be re-examined in light of the pleading standard set by the Second Circuit in Chorches: “Rule 9(b) does not require that every qui tam complaint provide details of actual bills or invoices submitted to the government, so long as the relator makes plausible allegations . . . that lead to a strong inference that specific claims were indeed submitted and that information about the claims submitted are peculiarly within the opposing party’s knowledge.”
The Second Circuit also held in Chorches that the FCA’s public disclosure bar is not jurisdictional, and that an alleged refusal to falsify a patient report is sufficient at the pleading stage to qualify as protected activity for an FCA retaliation claim.