United States Provides Supreme Court With Its View of False Claims Act Pleading Standard
February 27, 2014
On Tuesday, the United States filed an Amicus Curiae Brief on a closely watched petition for certiorari. The Department of Justice articulated the government’s view of the proper standard for pleading fraud in a False Claims Act case. The petition in United States ex rel. Nathan v. Takeda Pharms. N. Am. asked the Court to resolve the Circuit conflict on whether an FCA relator must identify specific false claims with particularity to satisfy the pleading requirement of Fed. R. Civ. P. 9(b). The government’s brief ultimately argued that the Supreme Court should deny certiorari and let the lower courts continue to hash this issue out.
In Nathan, the relator alleged the defendant company promoted one of its drugs for off-label uses, and argued that allegations of a fraudulent scheme supporting the inference that false claims were presented to the government is sufficient. The Fourth Circuit affirmed the dismissal of the complaint, holding that when a defendant’s actions “could have led, but need not necessarily have led, to the submission of false claims, a relator must allege with particularity that specific false claims were presented to the government for payment.” Nathan, 707 F.3d 451 (4th Cir. 2013).
Relator filed a petition for certiorari, arguing that the Supreme Court should resolve a split among the Circuits. The FCA requires a false claim for payment to the government; it is not enough to simply allege a fraudulent scheme. Some courts have therefore held that particular allegations of the false claims presented to the government are necessary, something often not within relator’s knowledge. Other courts have found details of a fraudulent scheme and reliable indicia leading to an inference that claims were submitted to be sufficient.
The Supreme Court raised speculation that it would take this case in October 2013, when it asked the United States to file a brief stating the government position. The United States had previously declined to intervene.
The government’s brief recognized that there is a split in the Circuits, with some courts having a per se rule requiring specific allegations of particular false claims. The government argued that this approach is wrong, and that the correct rule is that “a qui tam complaint satisfies Rule 9(b) if it contains detailed allegations supporting a plausible inference that false claims were submitted to the government, even if the complaint does not identify specific requests for payment.”
The government concluded, however, that the Court should deny the petition, for a few reasons. First, it argued that the complaint was dismissed below not just for lack of specificity, but also for lack of plausibility, so the case should not go forward under any 9(b) standard. Also, even in Circuits holding to the per se view, the government found cases taking a more relaxed view, so it argued that the disagreement among the lower courts is uncertain and needs further development.
On why the per se rule is wrong, the government referenced the role Congress intended relators to play in the detection and remediation of fraud against the United States, and argued that a rigid rule hinders that role. The government also noted that it has any needed claim information, so a per se rule improperly attaches dispositive significance to the relator’s awareness of details that are already known to the government. This highlights the fact that a per se rule requiring particularity of claim information is typically not a problem for the government when it intervenes, since it has the claim information. It is more a problem for the relator in a declined case. This could be one reason that the government does not see a strong need for the Supreme Court to decide this issue, in addition to possible concerns that a ruling could sweep broadly to other FCA issues.
The Supreme Court now has the government’s position on the proper pleading standard. The United States does not want the Supreme Court to grant certiorari, but False Claims Act practitioners will be watching closely to see if the Justices decide that they do want to take the case and decide the Circuit split.