In an effort to avoid transforming the FCA into “an all-purpose antifraud statute,” the Sixth Circuit recently reaffirmed that relators must plead a connection between the alleged fraud and an actual claim made to the government. The Sixth Circuit’s decision in United States ex rel. Ibanez v. Bristol-Myers Squibb confirms the long-held rule that absent very limited circumstances, FCA claims must be pled with particularity.
In Ibanez, former sales representatives for the defendant brought a qui tam FCA action alleging that the defendant engaged in a “complex, nationwide wide scheme” to improperly promote the antipsychotic drug, Abilify. The relators’ claims involved a long chain of causal links, which led to the eventual submission of false claims to the government. However, the relators failed to identify a representative claim, which ultimately led to the district court granting the defendant’s motion to dismiss and denying the relators’ motion to amend. In reaching this holding, the district court reasoned that the relators failed to satisfy Rule 9(b)’s pleading requirements—specifically, identifying a representative false claim that was actually submitted to the government and pleading the existence of such a false claim.
On appeal, relators encouraged the Sixth Circuit to apply the more “relaxed” exception to Rule 9(b)’s pleading requirements, which was the approach taken in United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc. In Prather, the Sixth Circuit made an exception to the usual, stringent pleading standard when “a relator alleges specific personal knowledge that relates to billing practices” and supports a “strong inference that a [false] claim was submitted.”
Even when construing the complaint in the light most favorable to the plaintiff, the Sixth Circuit affirmed the district court’s dismissal and declined to extend the more relaxed standard to the facts at hand. The Sixth Circuit noted that the Prather personal knowledge exception applies in extremely limited circumstances; in fact, the only time the Sixth Circuit ever applied the personal knowledge exception to FCA pleading requirements was in Prather itself. The Sixth Circuit reasoned that although the relators alleged knowledge of a complex scheme related to the promotion of Abilify, they lacked the “specific personal knowledge” required to apply the more relaxed, Prather exception. Accordingly, because the relators failed to identify a representative claim with specificity as to each necessary component of the alleged scheme, they failed to satisfy Rule 9(b)’s pleading requirements. The Sixth Circuit ultimately concluded that allowing the relators’ claims to succeed would, in essence, allow them to ‘“avoid the specificity requirements of Rule 9(b) by relying upon the complexity of the edifice which [they] created.”’
Ibanez reaffirms that even if it is foreseeable that an action resulted in FCA liability, it is not enough for relators to show that a violation was likely—relators must instead plead the existence of such a false claim. Courts will likely apply the reasoning set forth in Ibanez in future FCA claims that involve complex fraudulent schemes, providing defendants accused of FCA fraud violations with the same protections as in other fraudulent circumstances and, potentially, making it more difficult for whistle blowers to succeed in certain FCA claims.