This article continues discussion of Rule 9(b) in False Claims
Act litigation from
Ninth Circuit Weakens Rule 9(b) in False Claims Act
Litigation, also published today.
While the Ninth Circuit has joined the minority position on
fraudulent scheme complaints, the Sixth Circuit has reiterated
the standard adopted in Bledsoe II, requiring False Claims Act
("FCA") relators to plead actual, representative examples
of false claims to meet the particularity requirements of Rule 9(b)
when alleging a fraudulent scheme. In a September 1, 2010
decision in U.S. ex rel. SNAPP v. Ford Motor Co., the
Sixth Circuit again considered and affirmed dismissal of a qui
tam suit on Rule 9(b) grounds. The Sixth Circuit had
previously considered the case in 2008, but had remanded to the
district court to decide whether the dismissal was warranted in
light of Bledsoe II.
The case was brought by an alleged minority-owned, small
business ("Relator") who claimed that Defendant was using
Relator as a shell corporation to funnel payments to large,
majority-owned businesses and, in the process, inflating the extent
of Defendant's dealings with small and minority-owned
businesses in official reports to the Government. Relator
alleged that the resulting exaggerations induced the Government to
contract with Defendant. In light of these alleged "sham
payments," Relator claimed that had the Government been aware
that Defendant was exaggerating its dealings with small and
minority-owned businesses, it would not have permitted Defendant to
act as prime contractor. Relator further claimed that, as a
result, none of the payments made on those contracts would have
been paid if not for Defendant's alleged deceit.
The Sixth Circuit held that nothing in Bledsoe II saved
the complaint from its failure to meet the particularity
requirements of Rule 9(b). Although Relator listed specific
examples of the contracts at issue, with identifying contract
numbers, and amounts of payments alleged to have been made by the
Government pursuant to those contracts, these did not constitute
claims to the Government for payment. In again
affirming dismissal, the court found that Relator still did not
plead at least one claim with specificity.
While the court would not go so far as to decide the issue of
whether a listing of contracts and payments could ever suffice to
meet the requirement that an FCA complaint plead a false claim with
particularity, its decision makes that possibility appear
remote. Given the Ninth Circuit's recent adoption of the
less stringent standard (requiring only "reliable indicia that
lead to a strong inference that claims were actually
submitted"), the differing standards applied by the Circuits
appear ripe for consideration by the Supreme Court.
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