Ninth Circuit Court Overturns District Court on Sufficiency of Pleading under Rule 9(b), Remands for Amendment
The US Court of Appeals for the Ninth Circuit issued an opinion overturning a district court’s grant of summary judgment against a False Claims Act (FCA) relator in United States ex rel. Driscoll v. Todd Spencer M.D. Medical Group, Inc. on August 9, 2016. The case involved allegations by Scott Driscoll, M.D., a radiologist who had worked for the defendant medical group, that the medical group and its principal, Dr. Todd Spencer, performed unnecessary procedures and unbundled certain procedures in order to bill for multiple procedures rather than just one at a higher reimbursement rate.
The district court had granted the defendants’ motion for summary judgment on the grounds that the amended complaint failed to satisfy the particularity standard of Fed. R. Civ. P. 9(b). Specifically, the district court held that although the relator alleged the performance of certain unnecessary procedures and improper unbundling of procedures, the claims failed to sufficiently describe the details of the alleged scheme by failing to allege the “who, what, when, where, and how of the scheme.” For example, the district court found that the complaint lacked particularity in identifying the persons who performed the unnecessary services and submitted inflated bills. Moreover, the district court found that the relator failed to flesh out how the scheme worked and to provide facts regarding a protocol that was allegedly developed by Spencer and appeared to be the basis for the relator’s claims related to the performance of unnecessary procedures. The district court held that any subsequent amendment to the compliant would be futile and dismissed it with prejudice, noting that in a prior order related to the initial complaint, it had given the relator “one and only one” opportunity to amend the complaint and specific instructions on how to cure the complaint’s factual deficiencies.
The Ninth Circuit disagreed with the district court, holding that certain of the allegations in the complaint were sufficiently specific that the defendants could answer the complaint and defend against the charges. Citing its holding in Ebeid ex rel. United States v. Lungwitz (616 F. 3d 993 (2010)) the Ninth Circuit noted that, under Rule 9(b), it is sufficient 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. Moreover, a plaintiff need only provide enough detail to give the defendant notice of the particular misconduct which is alleged to constitute the fraud charged so that he or she can defend against the charge and not just deny that he or she has done anything wrong. The Ninth Circuit contrasted the facts in Driscoll with those in Ebeid (in which the court ultimately found that the claims failed to satisfy the heightened pleading standards of Rule 9(b)) in that in Driscoll, the relator had personal knowledge of the defendants’ practices whereas, in Ebeid, the relator was not an insider, “so his claim depended on speculation.” However, the opinion does not elaborate on how such a difference contributed to the court’s determination that the Rule 9(b) pleading standard had been met in Driscoll.
Finding that only a portion of the compliant was sufficiently specific, the Ninth Circuit remanded the case to the district court with instructions to allow the relator to amend the complaint to address the deficiencies and narrow the scope of the complaint so that the litigation would be manageable.
Although Ninth Circuit’s opinion in Driscoll was not published and does not have precedential value, it illustrates that some courts may give certain relators with personal knowledge of an alleged fraudulent scheme more leeway in meeting their Rule 9(b) burdens. However, Rule 9(b) continues to set a demanding standard that should be enforced by courts to guard against frivolous claims.