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Third Circuit Deepens Divide on What Courts Require of Qui Tam Complaints

Posted  June 12, 2014

By Jason Enzler

Last Friday, the Court of Appeals for the Third Circuit held that it would join three other circuit courts in rejecting a more restrictive view of what qui tam relators must allege in order to survive challenges to their False Claims Act complaints. In doing so, the Third Circuit’s decision in Foglia, ex rel. U.S. v. Renal Ventures Management, LLC has deepened the split forming among the circuit courts, with four circuit courts taking a more restrictive view on the minimum facts whistleblowers must state in their complaints.

The case involved a whistleblower suit brought by a Thomas Foglia, a registered nurse, against his former employer, dialysis care company Renal Ventures. Mr. Foglia alleged among other things that Renal Ventures had engaged in a scheme to defraud the government by overcharging it for purchases of the drug Zemplar. The trial court dismissed the complaint, finding Mr. Foglia had failed to plead fraud with particularity as required. As the Third Circuit noted in its opinion, the trial court “focused on Foglia’s failure to provide a ‘representative sample’ or to ‘identify representative examples of specific false claims made to the Government.’” In other words, the complaint was rejected because the whistleblower failed to describe an example of an invoice Renal Ventures submitted to the government and details regarding the submission of that invoice.

In rejecting this reasoning, the Third Circuit began its analysis by noting a split among the circuit courts, with the Fourth, Sixth, Eighth, and Eleventh Circuits all requiring such “representative samples.” The First, Fifth, and Ninth Circuits, on the other hand, hold that a “more nuanced” standard applies that does not require complaints to describe specific false claims. Instead, qui tam complaints can survive if they allege sufficient details of a fraudulent scheme “that lead to a strong inference that claims were actually submitted.” In electing to follow the nuanced approach, the Third Circuit specifically pointed out that a primary purpose of the requirement of pleading fraud with particularity – fair notice so the defendant can investigate the allegations and prepare a defense – would still be satisfied.

With this decision, the Third Circuit has evened the score among the circuit courts. And there is no reason to believe that either side is going to change its position. Just yesterday, the Eleventh Circuit issued an unpublished opinion in Keeler, ex rel. U.S. v. Eisai, Inc. in what some view as a reaffirmation of that Court’s requirement that complaints include specific allegations of at least one representative sample of a false claim. Perhaps it is time for the Supreme Court to step in and settle the dispute?

Tagged in: FCA Materiality,