On October 1, 2018, the U.S. Supreme Court denied a petition for a writ of certiorari asking the Court to weigh in on just how precisely a whistleblower must plead the submission of a false claim. Since the False Claims Act (FCA) prohibits the knowing submission of false claims to the government, the question courts have struggled with is whether the “who, what, when, where, and how” requirements of fraud pleading extend to facts alleged in support of the nexus between fraudulent schemes and presentment of claims. For the time being, lower courts are left to continue to grapple with this issue without Supreme Court input.
The Details of the Case
The petitioner, a social worker employed by a Florida-based hospice chain for about 20 years, alleged that the hospice, together with a network of doctors, referring nursing homes and assisted living facilities, engaged in a fraudulent scheme to submit false claims for hospice care rendered to Medicare and Medicaid beneficiaries. The defendants enrolled patients in hospice even though the patients did not meet Medicare and Medicaid requirements, enrolled patients in higher levels of care than warranted by their conditions, and maintained enrollment for patients who were no longer eligible for care. The defendants allegedly demanded that employees meet enrollment quotas, falsified records, and paid kickbacks to feeder nursing homes and assisted living facilities for patient referrals. According to the petitioner, 80% of the defendants’ hospice patients are Medicare or Medicaid beneficiaries.
The Eleventh Circuit, like the district court below, accepted that the petitioner “‘describe[d] a private scheme in detail’ regarding ‘disturbing medical practices[.]’” United States v. HPC Healthcare, Inc., 723 F. App’x 783, 789 (11th Cir. 2018). Nevertheless, the circuit court held that the petitioner’s allegations fell short of heightened pleading requirements of Federal Rule of Civil Procedure 9(b) for claims alleging fraud because the petitioner failed to adequately allege that any of the misconduct resulted in the submission of false claims. Since the “submission of a false claim is “the sine qua non of a False Claims Act violation,” the Eleventh Circuit held “that submission must be pleaded with particularity and not inferred from the circumstances.” Id.
The Eleventh Circuit determined that the petitioner failed either to (1) allege the details of false claims by providing specific billing information—such as dates, times and amounts of actual false claims or copies of bills; or (2) allege “direct knowledge of the defendants’ submission of false claims based on her own experiences and on information she learned in the course of her employment.” Id. Without such showing, the Eleventh Circuit stated that there can be no inference with any “indicia of reliability” that “false claims were actually submitted to the government[.]” Id.
In requesting cert, the petitioner argued that the Eleventh Circuit applied an overly rigid pleading requirement that prohibits inference of fraudulent claim submission to be made from the circumstances, including the details of the fraudulent scheme itself. This standard, which the petitioner claims also applies in the Fourth, Sixth and Eighth Circuits, diverges from a more liberal pleading requirement of the First, Third, Fifth, Seventh, Ninth, Tenth and District of Columbia Circuits. Under the flexible standard favored by the petitioner, a relator must plead the fraudulent scheme with particularity, but the remaining allegations need only provide an adequate basis for a reasonable inference that false claims ultimately were submitted as a result of the scheme. The latter standard, according to the petitioner, is in accord with the remedial purpose of the FCA, which would be seriously impeded if whistleblowers were required to be privy to both the fraudulent conduct and the corporate accounting practices. Such a requirement would shrink the pool of potential whistleblowers to a minuscule, potentially nonexistent, group of people. Accordingly, the petitioner implored the Supreme Court to resolve the circuit split.
The Supreme Court signaled initial interest in the petition and directed the defendants to respond even though they had waived their right to do so.
In opposing Supreme Court review, the defendants argued that there is no circuit split as the petitioner claims, and even if one existed, the petitioner’s pleading fell short of even a more liberal standard. First, the defendants argued that the circuit split has largely resolved, as no circuit currently applies a per se rule requiring relators to plead representative claims, whereas all circuits, including the Eleventh Circuit where the petitioner’s claim arose, require relators to plead “indicia of reliability” that a false claim had been submitted. The petitioner, as the Eleventh Circuit concluded, failed to do so as her complaint did not provide examples of specific patients who were ineligible for hospice care, details about why they were ineligible, information regarding which individuals made particular false certifications, when the falsifications occurred, or when the fraudulent claims were submitted to Medicare. In short, the defendants argued that the pleading did not lead to the conclusion that a false claim was necessarily submitted.
Next, the defendants claimed that even if the Eleventh Circuit is more demanding than others, the petitioner’s complaint would fail even under the petitioner’s desired standard, as she provided no facts from which a reasonable inference of false claim submission could be drawn. The defendants argued that a finding for the petitioner on the facts alleged would mean that a court could always assume that false claims were submitted whenever a fraudulent scheme is alleged.
The Decision Not to Review
The Supreme Court ultimately elected to deny review. The Court denied another cert petition on this issue earlier this spring in United States, ex rel. Ibanez v. Bristol-Myers Squibb Co. (No.16-3154), indicating that it may have no interest in wading into Rule 9(b) territory at this time.