Third Circuit Rules that Plaintiffs Don’t Need to Provide a Representative Sample of Actual False Claims

 

In United States ex rel. Foglia v. Renal Ventures Management, Inc., 2014 U.S. Dist. LEXIS 10549 (3d Cir. June 6, 2014), the United States Court of Appeals for the Third Circuit joined the First, Fifth and Ninth Circuits and ruled that a “nuanced” reading of the Federal Rule of Civil Procedure 9(b) applies to False Claims Act cases, requiring only that the plaintiff provide details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted, without necessarily providing a representative sample of the actual false claims.

Relator Foglia was a registered nurse employed by Renal Ventures Management, LLC (“Renal”), a dialysis care services company that uses the injectable drug Zemplar—a drug issued in small, single-use vials, with each vial containing slightly more of the drug than is needed for a single dose. Id. at *3–4. Based on Renal’s inventory logs of Zemplar usage, Foglia alleged that Renal falsely billed Medicare as if it were using a full vial of Zemplar for each patient when, in fact, it was using only a portion of each vial and then “reharvesting” the remaining amounts for use by other patients. The United States District Court for the District of New Jersey dismissed the action with prejudice on the grounds that the FCA violations were not pled with the particularity required by Fed. R. Civ. P. 9(b) because Foglia failed to plead a representative sample of false claims.

On appeal by Foglia, the Third Circuit reversed, holding that Rule 9(b) does not require a plaintiff to plead specific examples of false claims, but rather, as held by the First, Fifth, and Ninth Circuits, it is enough for the plaintiff “‘to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.’” Id. at 7–8 (quoting U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)); see also Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998–99 (9th Cir. 2010). The court noted that a complaint’s allegations must still be specific enough to give the defendant “notice of the charges against it.” Id. at *8. But according to the court, the more stringent standard adopted by the Fourth, Sixth, Eighth, and Eleventh Circuits, which requires that the plaintiff provide “representative samples” identifying the “time, place, and content of the acts and the identity of the actors,” was too demanding at the pleading stage and was not supported by the FCA, which “does not require that the exact content of the false claims in question be shown.” Id. at *6.

Under this “nuanced” standard, the court held that the relator’s claims satisfied Rule 9(b) because, if Renal was actually billing Medicare as though it used a full vial for each patient, Foglia’s allegation that the inventory logs showed that Renal used less than one vial per patient raised the strong inference of fraud and provided Renal with sufficient notice to identify the potential false claims.  Id. at *12, 14. The court noted that its conclusion was “further supported by the fact that Renal, and only Renal, ha[d] access to the documents that could easily prove the claim one way or another—the full billing records from the time under consideration.” Id.