Government Contracts Blog
Posted at 5:20 AM on September 13, 2010 by Sheppard Mullin
Ninth Circuit Weakens Rule 9(b) In False Claims Act Litigation
By Robert M.P. Hurwitz
The U.S. Court of Appeals for the Ninth Circuit recently weakened the impact of Federal Rule of
Civil Procedure 9(b) in False Claims Act (“FCA”) cases. The FCA allows whistleblowers (called
“relators”) to bring lawsuits against contractors on behalf of the federal government. Relators can
receive up to 30 percent of the government‟s ultimate recovery. This bounty incentivizes relators
to bring FCA lawsuits. It also causes some relators to see the FCA as a retirement-advancing
lottery, and their complaints often characterize innocent business challenges as fraudulent
schemes.
Contractors attempt to eliminate these meritless suits by arguing that the complaints lack
sufficient detail. Under Federal Rule of Civil Procedure 9(b), FCA complaints must “state with
particularity the circumstances constituting fraud.” In fraudulent scheme complaints, the relators
recite the proverbial “parade of horribles,” overemphasizing perceived inadequacies in billing
practices, quality control systems, manufacturing processes, or other system-wide business
practices. However, they fail to identify any false claims (such as invoices or certificates of
compliance). Instead, they hypothesize that because the contractor had systemic problems, it
must have submitted false claims to the government.
Courts of Appeals are split on the viability of fraudulent scheme complaints. The majority reject
them because the “submission of a claim is … the sine qua non of a False Claims Act violation,”
and thus the complaint must allege an actual false claim. United States ex rel. Clauson v. Lab.
Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002); see also United States ex rel. Bledsoe
v. Cmty. Health Sys., Inc., 501 F.3d 493, 509 (6th Cir. 2007); United States ex rel. Joshi v. St.
Luke’s Hosp., Inc., 441 F.3d 552, 557 (8th Cir. 2006); United States ex rel. Karvelas v. Melrose-
Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004). In cases where many claims are at issue,
such as an alleged long-running Medicare fraud, the complaint satisfies Rule 9(b) if it provides
actual, representative examples of false claims. Claims are only representative if they are
“illustrative of the class of all claims covered by the fraudulent scheme.” Bledsoe, 501 F.3d at
510-11 (internal quotation marks omitted).
Momentum is shifting, however, and more recent decisions have been willing to accept
fraudulent scheme complaints, even if they do not allege any specific false claims. Last month,
