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8th Circuit Ruling Shows More Agreement on False Claims Issue

The United States Court of Appeals for the Eighth Circuit has ruled that whistleblowers bringing a case under the False Claims Act ("FCA") do not necessarily have to present specific examples of the fraud in order to successfully plead a complaint. The Court decided that a whistleblower can successfully plead a false claims complaint if the whistleblower has "first-hand knowledge" of the alleged fraud. This decision is positive for whistleblowers because they may have witnessed fraud within a company but usually do not have access to company documents that would allow them to specifically show the alleged fraud.1

Rule 9(b) of the Federal Rules of Civil Procedure requires that a "complaint must plead such facts as the time, place, and content of the defendant's false representations."2 The vague language of the rule has caused some of the Circuit Courts to address it. The Eighth Circuit, like the Sixth Circuit has adopted a flexible understanding of Rule 9(b), holding that a whistleblower complaint can survive if it has an "indicia of reliability" and a "strong inference that claims were actually submitted" without necessarily having to provide specific evidence of fraudulent submissions.3

The Supreme Court considered weighing in on the False Claims/Rule 9(b) issue, but the Solicitor General and Department of Justice argued that the Circuit Courts are coming to agreement that false claims complaints do not need specific evidence in the pleading stage. Although the Fourth, Sixth, and Eleventh Circuits are holding onto the stricter approach, the First, Third, Fifth, Eighth, and Ninth Circuit all have embraced the more flexible approach.4

In the case, United States ex rel. Thayer v. Planned Parenthood (765 F.3d 914), the Eight Circuit differentiated between a whistleblower that could only speculate about false claims submitted and one that directly witnessed the submission of such fraudulent claims. The Court ruled, "[a] relator who provides sufficient indicia of reliability to support her allegations that false claims were submitted, such as by pleading details about the defendant's billing practices and pleading personal knowledge of the defendant's submission of false claims, fulfills Rule 9(b)'s objective of protecting the defendant from baseless claims." The Court further said that in order to achieve the full purpose of the FCA, a flexible interpretation of Rule 9(b) is necessary.5

A flexible interpretation of Rule 9(b) will be very beneficial for future whistleblowers that hope to expose wrongdoings. This interpretation will also give them a much better chance in fighting defendants' motions to dismiss.

If you have any questions regarding this subject or this posting, please contact James E. Miller (jmiller@sfmslaw.com) or Michael Ols (mols@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

Sources:

1. http://www.law360.com/corporate/articles/572823?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

2. http://caselaw.findlaw.com/us-8th-circuit/1676895.html

3. http://caselaw.findlaw.com/us-8th-circuit/1676895.html

4. http://www.law360.com/corporate/articles/572823?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

5. http://caselaw.findlaw.com/us-8th-circuit/1676895.html

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