Posted on June 22, 2012 in Case Analysis
Written by: David B. Honig
Pleading a False Claims Act case can be a tricky exercise, and in defending an FCA case, it is important to know just what the rules are for a whistleblower, and how they can fail to meet them.
One of the most common mistakes made by whistleblowers is failing to “plead fraud with particularity,” a requirement that flows from Federal Rule of Civil Procedure, Rule 9(b):
FRAUD OR MISTAKE; CONDITIONS OF THE MIND. 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.
Courts have clearly stated that Rule 9(b) applies to FCA cases.1 They have interpreted it to mean the complaint must allege “the who, what, where, and when of the alleged fraud.”2 One question arises, though, when a whistleblower alleges several different FCA violations. Is the whistleblower required to plead every type of fraud with particularity, or merely enough to show the he is such an “insider” that the court should be satisfied that the pleading is brought in good faith?
The question is answered in two different ways. First, there is a small body of caselaw that addresses the issue itself. Second, there is a slightly larger body of caselaw that can be reviewed for examples of situations where part of the whistleblower’s complaint met Rule 9(b)’s requirements, while other claims were offered with less detail.
The first case to be considered is Fowler,3 a case out of the Seventh Circuit Court of Appeals. In Fowler the court ruled that a whistelblower, to meet Rule 9(b)’s requirements, must identify at least one actual claim that was false, rather than simply describing a scheme to defraud. The Fowler court went on to say, in language on point to the question at hand, that Rule 9(b) had to be “at an individualized transaction level.”4 In practice, other courts have applied Fowler to strike inadequately plead claims, while allowing other claims that met the “who, what, where, and when” rule. In two different cases out of the Southern District of Illinois56 trial courts dismissed claims that were inadequately plead, while allowing other claims to survive. Neither court accepted the whistleblowers’ arguments that, having plead something sufficiently, they showed enough insider knowledge that they should be permitted to proceed on all their allegations. These findings are not limited to the Seventh Circuit, either.7
Even without the reasoning in Fowler, relying on on Gross, it is clear that individual claims which fail to meet Rule 9(b)’s specificity requirements may be dismissed, even if other claims survive. In another Seventh Circuit Case8 the Court considered two different claims, finding that while one met the requirements of Rule 9(b), the other did not satisfy Rule 9(b) and therefore the Trial Court properly dismissed said claim. The Seventh Circuit allowed the dismissal of the individual claim inadequately plead to stand, rather than finding that the other allegations, which were adequately plead, saved the complaint in its entirety.
Based upon Fed.R.Civ.P. 9(b), Fowler’s requirement that FCA complaints be plead with specificity “at an individualized transaction level, and consistent caselaw striking the parts of complaints that fail to meet the requirements, it appears clear that a whistleblower must plead every alleged scheme that violates the False Claims Act with particularity. The whistleblower may not allege just part of the complaint, then argue that, having shown enough to be considered an “insider,” the complaint should survive in its entirety.
For more information, please contact David B. Honig at email@example.com or (317) 977-1447.