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Case Law Developments: Rule 9(b) as Applied to Qui Tam Complaints

Date Published
Sep 18, 2010

Under the Federal Rules of Civil Procedure, whistleblowers seeking to expose fraud against the government must satisfy the requirements of Rule 9(b). That rule requires that whistleblowers explain the factual details of the alleged fraud “with particularity” in their initial complaint. This requirement, which is more stringent than the requirement in cases not alleging fraud, has posed significant challenges for some whistleblowers–namely, those who possess significant information about some aspects of the fraud, but do not have detailed knowledge of every aspect. Some courts have dismissed these types of claims–even though the whistleblower presented allegations strongly suggesting the existence of a fraud on the government–by applying a strict interpretation of the Rule. In short, according to these courts, because the whistleblowers only knew some, but not all, of the details of the fraudulent scheme, the allegations of their complaints were not alleged with sufficient “particularity.”

Recently, many courts have adopted a more commonsense application of Rule 9(b), the federal rule governing the level of factual detail required of qui tam relators alleging fraud against the government. This more favorable reading of Rule 9(b) is highlighted in a recently-decided Ninth Circuit case, U.S. ex rel. Ebeid v. Lungwitz et al., 2010 WL 3092637 (9th Cir. 2010).

In Ebeid, an outsider private physician claimed that the defendants–two individuals and three health care businesses–submitted false certifications to the government in connection with Medicare payments. The crux of the relator’s claims was that the Defendant engaged in the “unlawful corporate practice of medicine” and that referrals among the health care businesses were unlawful, making every claim for Medicare reimbursement that they submitted fraudulent.

Relying on the Fifth Circuit’s decision in Grubbs v. Ravikumar Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009), the Ninth Circuit held that, under Rule 9(b), “it is sufficient to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” Ebeid, 2010 WL 3092637, at *4 (internal citations omitted). Importantly, the Court explicitly rejected an application of 9(b) that would require “a relator to identify representative examples of false claims to support every allegation [in the relator’s complaint].” Id. However, even applying this more relaxed standard, the Ninth Circuit found that Ebeid’s complaint did not survive Rule 9(b) because, rather than allege the “who, what, when, where and how” of the defendants’ misconduct, Ebeid simply made “general allegations–lacking any details or facts[.]” Id. at *5.

Although the result in Ebeid was unfavorable for the relator, the Ninth Circuit’s endorsement of Grubbs is encouraging. In Grubbs, the Fifth Circuit made it clear that Rule 9(b)’s time, place, content, and identity requirements are not “a straitjacket.” 565 F.3d at 190. Instead, Rule 9 (b) is “context specific and flexible.” Id. In short, under Grubbs, and now Ebeid, whistleblowers need not have specific knowledge–at the time they file their complaint–of every detail of the defendants’ specific false claims so long as they can properly allege the details of defendants’ scheme to submit such claims.

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