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Fifth Circuit Weighs In On The Rule 9(b) “Particularity” Quandary

Date Published
Apr 17, 2009

Here is a common dilemma for qui tam relators and their counsel: a whistleblower inside a company knows that the company is involved in a fraud scheme, but does not know all of the details, including precisely how the fraudulent claims are transmitted to the government, because the whistleblower’s role in the company only provides access to information about one part of the scheme. For example, someone working in a hospital may know that the hospital encourages routine “upcoding” by its doctors, but may not know precisely how, when or in what amount that “upcoding” results in specific bills to Medicare or Medicaid. When the relator files the qui tam lawsuit, the defendant hospital seeks dismissal of the case under Rule 9(b) of the Federal Rules of Civil Procedure, which requires that claims of fraud be alleged with “particularity.” Some courts have granted such motions, reasoning that a qui tam relator who is not able to allege the details of when and in what amount fraudulent bills were actually sent to the government is not entitled to pursue the case, even if the relator otherwise has compelling evidence of an ongoing fraudulent scheme.

On April 8, 2009, the U.S. Court of Appeals for the Fifth Circuit weighed in on this issue in its decision in U.S. ex rel. Grubbs v. Kannegati, reversing the trial court’s dismissal of a False Claims Act qui tam lawsuit brought by psychiatrist Dr. Grubbs against his former employer, Memorial Hermann Baptist Hospital, and several doctors at the hospital. In ruling in favor of Dr. Grubbs, the Fifth Circuit held that, even under Rule 9(b), a qui tam relator can proceed even if he or she does not know the details of the fraudulent billing.

In his complaint, Dr. Grubbs alleged that doctors at the defendant hospital were billing all of the time worked on their on-call weekend shifts as “face-to-face” hospital visits with patients when, in fact, the doctors were only getting updates from nursing staff on patients and then, if necessary, visiting those patients with acute problems. Grubbs alleged that the workings of this scheme were explained to him by his fellow doctors during a dinner meeting prior to Grubbs’ first on-call weekend shift. In addition to describing this overall scheme, Grubbs’ complaint included additional details regarding at least one instance of false billing for each of the allegedly fraudfeasing doctors, including the date of the specific false billing. In the trial court, the defendants moved to dismiss Grubbs’ complaint, arguing that Grubbs failed to plead his claims with sufficient particularity under Rule 9(b). The trial court agreed and dismissed the case.

But the Fifth Circuit reversed that dismissal. The Court noted that “fraudulent presentment requires proof of only the claim’s falsity, not of its exact contents.” Thus, “a plaintiff does not necessarily need the exact dollar amounts, billing numbers, or dates to prove to a preponderance that fraudulent bills were actually submitted.” Indeed, the Fifth Circuit stated that “to require these details at pleading is one small step shy of requiring production of actual documentation with the complaint, a level of proof not demanded to win at trial and significantly more than any federal pleading rule contemplates.” In a key passage, the court held that “a relator’s complaint, if it cannot allege the details of an actually submitted false claim, may nevertheless survive by alleging particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” Because Grubbs’ complaint alleged in detail the fraudulent billing scheme (including the date, place, and participants) as well as the specific dates that each doctor falsely claimed to have provided services to patients, the “logical conclusion” of Grubbs’ allegations was that false claims were, in fact, submitted.

The Fifth Circuit’s decision in Grubbs is a refreshing, reasonable, and practical approach to the Rule 9(b) “particularity” quandary. Under the reasoning of Grubbs, a qui tam relator who knows of a scheme to defraud the government is not deterred from pursuing valid and valuable cases under the False Claims Act merely because he or she knows some – but not all – of the details of the fraud. Hopefully, other courts around the country will follow Grubbs in future similar cases.

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