Circuit Defines FRCP 9(b) Pleading Standard for Fraud under the False Claims Act: Third Circuit | Practical Law

Circuit Defines FRCP 9(b) Pleading Standard for Fraud under the False Claims Act: Third Circuit | Practical Law

In Foglia v. Renal Ventures Management, LLC, a case of first impression for the court, the US Court of Appeals for the Third Circuit clarified what a plaintiff must show at the pleading stage to satisfy the "particularity" requirement of Federal Rule of Civil Procedure (FRCP) 9(b) for a claim under the False Claims Act (FCA).

Circuit Defines FRCP 9(b) Pleading Standard for Fraud under the False Claims Act: Third Circuit

by Practical Law Litigation
Published on 13 Jun 2014 • USA (National/Federal)
In Foglia v. Renal Ventures Management, LLC, a case of first impression for the court, the US Court of Appeals for the Third Circuit clarified what a plaintiff must show at the pleading stage to satisfy the "particularity" requirement of Federal Rule of Civil Procedure (FRCP) 9(b) for a claim under the False Claims Act (FCA).
On June 6, 2014, in Foglia v. Renal Ventures Management, LLC, a case of first impression for the court, the US Court of Appeals for the Third Circuit clarified what a plaintiff must show at the pleading stage to satisfy the "particularity" requirement of FRCP 9(b) for a claim under the False Claims Act (FCA) (No. 12-4050, (3d Cir. June 6, 2014).
The plaintiff, Thomas Foglia, filed a qui tam complaint against his former employer, Renal Ventures Management, LLC (a dialysis care services company), on behalf of himself as a relator and on behalf of the United States under the FCA. The United States chose not to intervene. Foglia's complaint arises out of claims submitted or presented to Medicare by Renal that the plaintiff alleges are fraudulent. Renal moved to dismiss Foglia's second amended complaint.
The US District Court for the District of New Jersey granted Renal's motion to dismiss the complaint, finding that Foglia had failed to state a claim with the heightened level of particularity required by FRCP 9(b) for fraud claims. The district court also dismissed the second amended complaint with prejudice since Foglia had twice amended his complaint and engaged in initial discovery. Foglia appealed.
The Third Circuit reversed the dismissal of Foglia's second amended complaint and clarified the standard of what Rule 9(b) requires of an FCA claimant at the pleading stage. The court first noted the circuit split on the issue:
  • The Fourth, Sixth, Eighth and Eleventh Circuits require a plaintiff to show "representative samples" of the alleged fraudulent conduct, specifying the time, place and content of the acts and identity of the actors.
  • The First, Fifth and Ninth Circuits take a more nuanced reading of the heightened requirements of Rule 9(b), holding that it is sufficient for a plaintiff to allege:
    • particular details of a scheme to submit false claims; and
    • reliable indicia that lead to a strong inference that claims were actually submitted.
The Third Circuit adopted the approach taken by the First, Fifth and Ninth Circuits, reasoning that:
  • It is difficult to reconcile the text of the FCA, which does not require that the exact content of the false claims be shown, with the "representative samples" standard favored by the Fourth, Sixth, Eighth and Eleventh Circuits.
  • The Solicitor General indicated in a recent brief for a factually similar case that the pleading standard required by the Fourth, Sixth, Eighth and Eleventh Circuits is unsupported by Rule 9(b). The Solicitor General also noted, among other things, that these circuits have not consistently adhered to this more rigid standard.
Counsel litigating in the Third Circuit should be aware of the pleading standard required by the court for a FCA claim.