Relators Pleading Presentment Under FCA Face Circuit Roadblocks

The Bottom Line

• False Claims Act suits are increasing, but plaintiffs’ chances of success against a motion to dismiss on presentment grounds can vary depending on the venue where claims are brought.
• The Sixth and Eleventh Circuits have established the strictest requirements for relators pleading presentment of a false claim, while the Fourth and Seventh Circuits apply an “intermediate” standard that is more favorable to relators.
• Whistleblowers have a particularly difficult time pleading presentment if they can’t provide concrete examples of fraudulent claims that go beyond suspicions or inferences.

The number of False Claims Act relator suits continue to rise year after year. Last fiscal year, whistleblowers filed 979 qui tam lawsuits, the highest number in a single year. Recent events, including the announcement of the new DOJ-HHS False Claims Act Working Group and the launch of the Justice Department’s Civil Rights Fraud Initiative suggest those numbers are likely to increase, putting increased pressure on companies that interact with the government.

Against that backdrop, companies facing FCA cases would be wise to consider their circuit’s standards for pleading presentment of a false claim. The FCA’s presentment requirement can pose particular challenges for relators without direct knowledge of billing practices and frequently provides a strong basis for companies to move to dismiss claims brought by such relators.

The Presentment Requirement

The federal FCA imposes civil liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” Accordingly, plaintiffs (or “relators”) who bring claims under the FCA must plead, and ultimately prove, that the defendant actually caused a false claim to be submitted the government.

When bringing a case, mere generalized pleadings aren’t enough. Under the heightened pleading standard of Federal Rule of Civil Procedure 9(b), allegations of fraud must be stated with particularity, meaning the plaintiff must “at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentations and what he obtained thereby.”

FCA plaintiffs can plead presentment by identifying specific claims submitted to the government, such as invoices, billing records, or reimbursement forms. In suits brought by the government (or where it intervenes), the DOJ can usually plead presentment with ease, using original documentation or statements from government witnesses. But relators have no such advantage. Even insiders who blow the whistle often lack access to original transaction records or may be unaware of specific representations that were made to the government when claims were submitted.

Subcontractors, third-party competitors, and other whistleblowers who weren’t in the room when representations were made must often rely on hearsay, supposition, or investigations conducted by counsel to make up for their lack of relevant insider knowledge.

And even relators working for the prime contractor frequently lack sufficient insight into presentment, as is often the case when claims are brought by line level employees who weren’t involved in accounting or billing.

As such, even a relator who has pled many details supporting an inference of fraud may face dismissal under Rule 9(b) for failure to satisfy the presentment element.

The challenge faced by relators attempting to plead presentment can also increase depending on where the case is brought.

Presentment is subject to varying pleading standards across the circuits. The US Court of Appeals for the Eleventh Circuit and the US Court of Appeals for the Sixth Circuit have adopted a rigorous standard, requiring the identification of specific false claims or first-hand knowledge of fraudulent billing practices.

The US Court of Appeals for the Fourth Circuit and the US Court of Appeals for the Seventh Circuit require allegations of a pattern of conduct or set of circumstances which necessarily lead to the inference that false claims were submitted to the government.

The remaining circuits mostly adhere to the Grubbs standard discussed below—close to but slightly more relaxed than the standard found in the Fourth and Seventh Circuits—requiring allegations that lead to a strong or plausible inference that false claims were submitted.

Sixth, Eleventh Circuits

Qui tam relators in the Eleventh and Sixth Circuits face the greatest challenge when pleading presentment. Both circuits apply stringent standards that consider whether the plaintiff provided sufficient indicia of the reliability of presentment, either through specific examples of false claims or first-hand knowledge of fraudulent billing practices. In practice, these related standards frequently result in the dismissal of underpled claims.

In the Eleventh Circuit, courts are skeptical of claims that don’t show “personal knowledge or participation in the fraudulent conduct.” If specific claims submitted to the government can’t be identified, the relator must plead the submission of a claim with “sufficient indicia of reliability” by demonstrating “first-hand knowledge of the defendants’ billing practices.”

Similarly, the Sixth Circuit allows plaintiffs to proceed without pleading a “representative claim that was actually submitted to the government for payment” only if the relator alleges “‘specific personal knowledge that relates directly to billing practices,’ supporting a ‘strong inference that a [false] claim was submitted.’” Even personal knowledge of billing practices may not be sufficient if the relator doesn’t sufficiently identify particular claims submitted for payment.

The burden to meet this standard is high, and the Sixth and Eleventh Circuits have repeatedly upheld dismissal of claims by relators who had personal knowledge of billing practices but didn’t plead facts sufficient to support a strong inference that particular claims were submitted for payment.

For example, in United States ex rel. Atkins v. McInteer, the court upheld dismissal of claims brought by a relator who had no role in billing and no personal knowledge of what claims were actually submitted, but alleged that his employer was submitting false claims based on “rumors from staff” and his own opinions. As the Eleventh Circuit emphasized, the relator’s claims couldn’t proceed because the relator didn’t “profess to have firsthand knowledge of the defendants’ submission of false claims.”

Similarly, the Sixth Circuit held in Simi United States ex rel. Owsley v. Fazzi Assocs., Inc., that a relator failed to plead presentment with the required particularity when they alleged only a general scheme to upcode bills, without identifying specific claims submitted to the government.

Fourth, Seventh Circuits

The Fourth and Seventh Circuits apply an “intermediate” approach in which plaintiffs who can’t identify specific false claims don’t necessarily need to demonstrate personal knowledge of the billing practices but must allege a pattern of conduct or set of circumstances which necessarily would have led to the submission of false claims to the government.

The relator in these circuits is required to “connect the dots” even without specific documentation, “between the alleged false claims and government payment.” However, “[a]n FCA plaintiff may not merely describe a private scheme and then ‘allege simply and without any stated reason for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government.’”

This standard doesn’t require plaintiffs to provide “transaction level detail.” In Leveski v. ITT Educ. Servs., Inc., for example, the Seventh Circuit held that an employee of an educational training institution adequately pleaded fraud by alleging the institution failed to comply with federal law, received funding, and “could only have received federal funding by certifying compliance.” Rather, the relator must plead facts showing that the defendant’s actions “necessarily” led to the submission of false claims, not merely that the conduct “could have led” to the submission of false claims.

Under this standard, “information and belief allegations can meet Rule 9(b) [only] where these allegations serve the role of connecting the dots between the many facts based on Relators’ personal experience and the facts where they understandably lack access to necessary information.”

Grubbs Everywhere Else

The remaining circuits have adopted more flexible tests consistent with the standard established by the US Court of Appeals for the Fifth Circuit in United States ex rel. Grubbs v. Kanneganti. There, the court held that “a relator’s complaint, if it cannot allege the details of an actually submitted false claim, may nevertheless survive by alleging particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.”

The Fifth Circuit stated that requiring specific details identifying individual claims submitted to the government would be “one small step shy of requiring production of actual documentation with the complaint, a level of proof not demanded to win at trial, and significantly more than any federal pleading rule contemplates.”

Because actual documentation wouldn’t be required for a reasonable jury to “infer that more likely than not the defendant presented a false bill to the government,” most circuits don’t require it in the initial complaint.

However, the Grubbs standard isn’t a free pass for relators. It still requires specific factual allegations pled with the degree of particularity required under Rule 9(b). Those allegations must lead to the “logical conclusion” that fraudulent bills were presented to the government.

Courts have characterized this as requiring basic factual background of the fraudulent scheme, as “would accompany the first paragraph of any newspaper story—that is, the who, what, when, where and how of the events at issue.”

The test for pleading presentment under Grubbs is illustrated by United States ex rel. Benaissa v. Trinity Health. There, the relator, a surgeon, alleged a scheme by which every Medicare claim submitted by certain doctors was false and that the defendant received reimbursement from Medicare. Although the relator didn’t have firsthand knowledge of the defendant’s billing practices, he argued that presentment was satisfied based on pleadings that the defendant received a large Medicare reimbursement, and that every claim submitted by certain physicians was false or fraudulent. The US Court of Appeals for the Eighth Circuit found this insufficient, as the relator failed to allege basic factual information such as dates and descriptions of the services that were being claimed or any description of the billing system.

Practical considerations are often the most important when addressing pleadings under the Grubbs standard. In adopting the Fifth Circuit’s more “nuanced” approach to pleading, the US Court of Appeals for the Third Circuit noted the solicitor general’s brief as amicus curiae in United States ex rel. Noah Nathan v. Takeda Pharm. N. Am., Inc, which argued that “even the Circuits which purport to follow the ‘rigid understanding of Rule 9(b) [in the context of False Claims Act pleading] have ‘not consistently adhered’ to it, providing a further ground for doubting whether the ‘rigid’ understanding of Rule 9(b) could be the correct one.”

Conclusion

Both relators and defense counsel should keep in mind the challenge of sufficiently pleading presentment with particularity for claims brought under 31 U.S.C. § 3729(a)(1).

To be sure, whistleblowers will often be unable to plead presentment by identifying specific false claims that were submitted to the government for payment. And while most courts have backed off that stringent requirement, allowing relators to avoid dismissal under Rule 9(b) through other means—those too can present an avenue to dismiss for failure to plead with particularity.

At the very least, the relator must allege enough information to allow for the inference that false claims were actually submitted to the government, and they often must show more, providing detailed information about the fraudulent scheme or the relevant billing practices, and, in some instances, personal knowledge of the facts alleged.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Ian Herbert, Bradley Markano, and Connor Farrell are attorneys at Miller & Chevalier Chartered in Washington, DC, and are members of the firm’s False Claims Act practice group.

Eva Kahan, a summer associate, contributed to this article.

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