Federal Rule of Civil Procedure 9(b)

On November 8, 2017, the US District Court for the Middle District of Florida dismissed a relator’s non-intervened claims in United States ex rel. Stepe v. RS Compounding LLC for failure to satisfy the particularity requirement of Federal Rule of Civil Procedure 9(b). Relator originally filed her complaint under seal on December 16, 2013, under the federal False Claims Act (FCA) and Florida’s analogous statute. Over three years after the complaint was filed, the government elected to partially intervene as to fraudulent pricing allegations relating to TRICARE. Relator amended her complaint in July 2017 and added state false claims counts under the laws of 16 additional states. All 17 states declined to intervene in the case in September 2017.

The complaint alleges that Relator, through her work as a sales representative for defendant RS Compounding, became aware of Defendants’ purported schemes to defraud the government on prescription compound and gel products. The relator alleged that prescription pads were prepopulated for physicians, with RS Compounding’s most expensive compounds pre-checked on the pads and six refills listed by default. Relator further alleged that this scheme involved sales representatives “coaching” physicians to number three different products on the pads, with priority given to products containing ketamine because those products had a higher reimbursement rate from the government. Continue Reading Dismissed in Florida: Former Compounding Pharmacy Sales Representative’s FCA Whistleblower Suit

On April 28, 2017, the United States District Court for the District of Massachusetts dismissed a relator’s qui tam complaint in United States ex rel. Leysock v. Forest Laboratories, Inc. after concluding that the complaint relied on information obtained resulting from deceptive conduct by the relator’s counsel.

In Leysock, the relator alleged that the defendant caused the submission of false claims to Medicare by promoting Forest’s dementia drug, Namenda, for off-label label use. After the United States declined to intervene, Forest filed a motion to dismiss, which the Court denied, largely based upon detailed allegations about eight prescribing physicians who prescribed Namenda for off-label use by Medicare beneficiaries. These allegations, the Court reasoned, were sufficient to satisfy Federal Rule of Civil Procedure 9(b), which in False Claims Act cases typically requires plaintiffs to plead specific allegations regarding the alleged fraud, tying alleged misconduct to the submission of false claims to a government payor.

Through discovery, Forest subsequently learned that relators’ counsel had obtained the information underlying these detailed allegations from a survey conducted by an individual whom relators’ counsel had contracted. This contractor misled the physicians about why he was conducting the survey (not disclosing that he had been retained by the relators in a False Claims Act action) and coaxed the physicians into turning over detailed patient information to the contractor.

In response, the Court concluded that this deception violated Massachusetts Rules of Professional Conduct Rule 4.1(a), which prohibits a lawyer or his agent from knowingly making a false statement of material fact or law to a third person. Consequently, the court concluded, this conduct violated Local Rule 83.6.1 of the United States District Court. As a remedy, the Court struck these allegations, noting that “[the contractor’s] study was conducted solely for the purpose of ensuring that the complaint survived a motion to dismiss,” i.e., to ensure that the complaint satisfied Rule 9(b)’s particularity requirement.

Although the relators’ conduct in this case is unlikely to be repeated in future cases, this case underscores the challenges relators can face in meeting Rule 9(b)’s particularity requirement. These challenges are particularly acute in non-intervened qui tam cases, where the government fails to provide the relator with information about specific false claims that the defendant allegedly submitted or caused to be submitted. Imposing these challenges will continue to chill would-be relators, without firsthand knowledge of wrongdoing, from bringing meritless qui tam cases.

On December 16, 2016, the US Court of Appeals for the First Circuit issued an opinion in United States ex rel. Hagerty v. Cyberonics, Inc. (Case No. 16-1304) affirming the US District Court for the District of Massachusetts’ dismissal of a relator’s False Claims Act (FCA) claims for failure to plead the alleged fraudulent scheme with the level of particularity required by Federal Rule of Civil Procedure 9(b).

The relator, a former sales representative of medical device manufacturer Cyberonics, Inc., alleged that his former employer had engaged in a scheme to overbill the government by encouraging unnecessary, untimely surgical procedures to prematurely replace batteries in patients’ Vagus Nerve Stimulator (VNS) devices. The relator alleged that while VNS devices, implanted to treat patients with refractory epilepsy, have battery lives of eight to nine years, Cyberonics adopted a sales strategy designed to result in battery replacements after four to five years.

Continue Reading First Circuit Affirms Dismissal of Former Sales Representative’s False Claims Act Claims Against Medical Device Manufacturer

A district court in the Middle District of Florida issued a new decision that will continue to make it challenging for corporate outsiders to successfully pursue a declined qui tam complaint – at least in the Eleventh Circuit. In U.S. ex rel. Chase v. Lifepath Hospice, Inc., et al., No. 10-cv-1061, 2016 WL 5239863 (M.D. Fla. Sept. 22, 2016), the court dismissed a False Claims Act (FCA) complaint based on the heightened pleading requirement of Federal Rule of Civil Procedure 9(b). The complaint, which alleged that defendants billed Medicare for hospice care that was either never provided or provided to ineligible patients, was dismissed primarily because the plaintiff did not adequately allege that false claims were actually submitted to the government. While the court held that the plaintiff had described a “private scheme in detail, to include facts as to some disturbing medical practices, she has not alleged ‘facts as to time, place, and substance of the defendant’s alleged fraud’ —that is, a fraudulent claim.” Id. at *7.

Continue Reading Corporate Outsiders – on the Wrong Side of the Circuit Split on Rule 9(b)