Sixth Circuit Affirms Dismissal for Failure to Meet Demanding FCA Pleading Requirements

December 7, 2017Analysis
Dinsmore on FCA

Find more FCA content here

The Sixth Circuit Court of Appeals recently affirmed dismissal of an FCA complaint that failed to meet the FCA’s stringent pleading requirements. See United States ex rel. Ibanez v. Bristol-Myers Squibb Co., No. 16-3154, 2017 U.S. App. LEXIS 21328 (6th Cir. Oct. 27, 2017).

Ibanez is helpful to FCA defendants because it confirmed the general rule that FCA relators must plead with particularity the existence of at least a representative false claim, and cabined the exception to that rule by clarifying the limited circumstances in which a billing clerk with firsthand knowledge of the alleged false claims can potentially proceed to discovery by alleging other indicia that false claims were submitted.

The relators in Ibanez were former Bristol-Myers Squibb sales representatives who alleged the company engaged in a complex, nationwide scheme to improperly promote the antipsychotic drug Abilify, resulting in the submission of false claims to the government seeking reimbursement for the drug. The government declined to intervene in their qui tam suit, and the district court dismissed their claims (including relators’ original and amended complaints).

The Sixth Circuit affirmed the district court’s decision, concluding that relators’ (a)(1)(A) claims, for allegedly presenting or causing false claims to be presented, were inadequately pled. First, the Court re-affirmed the basic principle that “complaints alleging FCA violations must comply with Rule 9(b)’s requirement that fraud be pled with particularity because defendants accused of defrauding the federal government have the same protections as defendants sued for fraud in other contexts.” Based on this principle, “where a relator pleads a complex and far-reaching fraudulent scheme, she also must provide examples of specific false claims submitted to the government pursuant to that scheme in order to proceed on discovery on the scheme.” In other words, to plead an FCA case under (a)(1)(A), a relator must plead the existence of a false claim.

The Ibanez plaintiffs did not meet this bar because they generally alleged knowledge of a complex scheme related to promotion of certain drugs, but failed to identify a representative false claim. In fact, they conceded this shortcoming, but  argued that the Sixth Circuit should apply the relaxed pleading standard set forth in United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750 (6th Cir. 2016), which made an exception to the general rule when “a relator alleges specific personal knowledge that relates directly to billing practices, supporting a strong inference that a false claim was submitted.”

The Ibanez Court did not accept relators’ invitation to expand the “exception to [the Sixth Circuit’s] usual rule” which “applies only if a relator alleges specific personal knowledge that relates directly to billing practices.” Noting that Prather’s personal knowledge exception applies only in extremely limited circumstances, the Court observed, “In fact, the only time this court has ever applied a personal knowledge exception to FCA pleading requirements was in Prather itself.”  There, the exception applied where the relator was specifically employed to review medical treatment documentation allegedly submitted to Medicare, and actually reviewed the purportedly false claims firsthand. It was only this “detailed knowledge of the billing and treatment documentation related to the submission of requests for final payment, combined with her specific allegations regarding requests for anticipated payments” that qualified the Prather relator for the limited exception. Ibanez lacked this peculiar set of facts. The Ibanez relators were sales representatives, not personnel directly engaged in billing or claim submissions to the government. The Sixth Circuit clarified that “in order for the Prather exception to apply, it is not enough to allege personal knowledge of an allegedly fraudulent scheme; a relator must allege adequate personal knowledge of billing practices themselves.” Since the plaintiffs did not do that, the Court affirmed dismissal. (The court likewise concluded that relators’ allegations of making false statements under (a)(1)(B), and their conspiracy and reverse false claims causes of action were inadequately pled.)