No “Relaxed” Pleading Standard for False Claims Act Relators, Says Sixth Circuit

No “Relaxed” Pleading Standard for False Claims Act Relators, Says Sixth Circuit

Health Care
March 30, 2017

In United States ex rel. Hirt v. Walgreen Company, the United States Court of Appeals for the Sixth Circuit recently affirmed the dismissal of a pharmacy owner’s False Claims Act (“FCA”) lawsuit because he failed to plead his fraud claims with particularity. In so doing, the Court clarified a gray area in its prior case law: the Court instructed that FCA relators like this pharmacy owner are not entitled to a “relaxed” pleading standard.

In this case, the owner of two local pharmacies claimed that a nearby Walgreens offered $25 gift cards to lure away his customers and then submitted the resulting prescription drug claims from Medicare and Medicaid recipients to the government in violation of the FCA. The district court granted Walgreens’ motion to dismiss, for among other reasons, failure to plead fraud with particularity as Federal Rule of Civil Procedure 9(b) requires.

The realtor’s downfall was that he failed to identify even a single false claim. Missing from his complaint were the names or initials of any customers affected by the alleged scheme, the dates on which they filled prescriptions at Walgreens, and the dates on which Walgreens filed the purported reimbursement claims with the government. The Court was left to infer these essential elements from the relator’s claim that his customers switched their business. The Court rejected that invitation, stating that “inferences and implications are not what Rule 9(b) requires. It demands specifics—at least if the claimant wishes to raise allegations of fraud against someone.”

The Court explained that in a handful of prior cases, it had raised the possibility of “relaxing” the requirement that a relator identify at least one false claim with particularity. In Hirt, the Court made clear that it “had no more authority to ‘relax’ the pleading standard established by Civil Rule 9(b) than [it did] to increase it. Only by following the highly reticulated procedures laid out in the Rules Enabling Act can anyone modify the Civil Rules, whether in the direction of relaxing them or tightening them.” The Court concluded that “[t]o the extent the words of Civil Rule 9(b) need elaboration, and it's not obvious that they do, the most that can be said is that ‘particular’ allegations of fraud may demand different things in different contexts.” Because the relator had not met the particularity requirement, the Court affirmed the dismissal of his lawsuit.

Read the Court’s opinion here. ​

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