I commend to readers the recent blog posts at Sidley's Original Source blog and Ben Vernia's False Claims Counsel blog that discuss U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., (4th Cir. Jan. 11, 2013). In that case, the 4th Circuit recently upheld the District Court's dismissal of a qui tam alleging that a pharmaceutical company engaged in the "off-label" promotion of two different drugs that, in turn, allegedly resulted in prescriptions for medical uses that were not reimbursable under federal health insurance programs. The relator's complaint and amended complaints did not identify any specific false claims that were presented to the government. Rather, the relator argued that the defendant's scheme to promote off-label uses of its pharmaceuticals must inevitably have resulted in false claims for payment being presented to the government. The Court based its ruling affirming the dismissal of the relator's amended complaint on the combination of the "plausibility" standard for initial pleading found in Ashcroft v. Iqbal, 556 U.S.662, 678 (2009) and of Rule 9(b), Fed. R. Civ. P., which requires that a party plead fraud in the complaint with particularity.
The Court rejected the relator's argument that Rule 9(b) only required the relator to allege in his complaint "the existence of a fraudulent scheme that supports the inference that false claims were presented to the government for payment." Instead, the Court emphasized that the "critical question is whether the defendant caused a false claim to be presented to the government" since liability under the False Claims Act "attaches only to a claim actually presented to the government for payment, not to the underlying fraudulent scheme." Though it acknowledged cases where Rule 9's requirement to plead fraud with particularity was satisfied "in the absence of particularized allegations of specific false claims," the Court noted that in those cases, the "nature of the schemes alleged" and "specific allegations of fraudulent conduct necessarily led to the plausible inference that false claims were presented to the government." (emphasis added). Such cases are the exception, however. Rejecting a "relaxed construction" of Rule 9(b), the Court held "that when a defendant’s actions, as alleged and as reasonably inferred from the allegations, could have led, but need not necessarily have led, to the submission of false claims," then "a relator must allege with particularity that specific false claims actually were presented to the government for payment." (emphasis added).
Thus, the 4th Circuit joins the 11th Circuit in finding that to survive a motion to dismiss, a relator must do far more than simply plead in his or her complaint that a scheme to defraud might have or could have resulted in false claims being presented to the government. The relator must allege that "specific identifiable claims" were presented to the government for payment or plead the scheme with sufficient particularity that it necessarily follows that false claims were presented to the government for payment.
A. Brian Albritton
January 30, 2013