Flexible Rule 9(B) Standard Recently Applied By First And Fifth Circuits In FCA Cases Obviates Need For Legislative Change

A highly contentious topic in False Claims Act litigation is the

application of the pleading standard in Rule 9(b) of the Federal

Rules of Civil Procedure to qui tam complaints. Rule 9(b)

provides:

In alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or mistake.

Malice, intent, knowledge, and other conditions of a person's

mind may be alleged generally.

Relators' counsel argued for many years that this pleading

requirement did not apply to False Claims Act cases, but that

argument has been thoroughly discredited in every circuit.

See John T. Boese, Civil False Claims and Qui Tam

Actions § 5.04 (3d ed. 2006 & Supp. 2009-2). Failing to

eliminate the requirement to comply with Rule 9(b) in qui

tam cases in court, relators' lobbyists have strongly

pressed Congress to eliminate Rule 9(b)'s pleading requirements

in qui tam cases on the grounds that some courts have

applied the rule inflexibly to dismiss properly-pleaded FCA

complaints. See H.R. 1788, §4(e), 111th

Cong. (2009); H.R. 4854, §4, 110th Cong.

(2007).

Two recent circuit court decisions have interpreted Rule

9(b)'s specificity requirements in a manner that provides some

flexibility for plaintiffs pleading fraud in certain types of FCA

cases. See United States ex rel. Duxbury v. Ortho Biotech

Prods., No. 08-1409, 2009 WL 2450716 (1st Cir. Aug.

12, 2009); United States ex rel. Grubbs v. Kanneganti, 565

F.3d 180 (5th Cir. 2009). These recent decisions are important

because they provide concrete examples of circumstances in which a

flexible approach to FCA complaints has been applied under Rule

9(b). They are also important now as Congress decides whether to

take up a pending proposal that would change the pleading

requirements in FCA cases. The Duxbury and Grubbs

decisions demonstrate that legislative change is unnecessary

because courts already do apply Rule 9(b) flexibly when the

relator's allegations provide a strong inference that false

claims were submitted to the government.

The First Circuit Decision in Duxbury.

In Duxbury, the First Circuit held that the district court

erred by interpreting Rule 9(b) too strictly by mandating that

relators provide "details that identify particular false

claims for payment that were submitted to the

government." 2009 WL 2450716, at *14 (emphasis in original).

The First Circuit acknowledged that the complaint did not allege

that the defendant drug company itself submitted false

claims to the government. Rather, it alleged...