The Eleventh Circuit Reminds Us Again That It Meant What It Said in Clausen: Margaret Jallali v. Sun Healthcare Group.

Dear Readers:

Defense practitioners in the Eleventh Circuit should take a look at the Circuit's recent unpublished opinion which reaffirmed the Circuit's "binding precedent" that "each element of an False Claims Act (FCA) claim must meet the pleading standard of Rule 9(b)"; Margaret Jallali v. Sun Healthcare Group, et al., 2016 WL 3564248 (11th Cir. July 1, 2016). Only three pages long, Jallali affirmed the lengthy decision by Southern District of Florida Judge Kathleen Williams --the author of U.S. ex rel Keeler v. Eisai-- who dismissed the Relator's FCA claims due to her failure to satisfy Rule 9(b): U.S. ex rel Jallali v. Sun Healthcare Group, et al., 2015 WL 10687577 (S.D. Fla. 9/17/2015). Judge Williams' opinion is definitely worth the read as well. 

To fully appreciate Jallali's holding that a relator must satisfy Rule 9(b)'s requirement to plead with particularity as to each element of his or her FCA claim, the reader should review Judge Williams' dismissal. As described in District Court's opinion, the Relator focused primarily on the defendants' "allegedly deceptive record keeping, alteration of charts, and falsified physician approvals." Apparently, the Relator provided a lot of detail about the defendants' allegedly fraudulent scheme both in her complaint and at a hearing the District Court held on the motion to dismiss. 

Notwithstanding detailed allegations of the defendants' fraud, Judge Williams observed that "Relator appears to conflate the internal processes of maintaining patient records with the separate act of billing the government." It is not enough, the Court explained, for Relator to describe a false scheme allegedly committed by the defendants. As "recognized" by the Eleventh Circuit in Corsello v. Lincare, Inc. 428 F.3d 1008, 1014 (11th Cir. 2005), Judge Williams pointed out that "a relator's pleading is insufficient if he 'provided the who, what, where, when, and how of improper practices, but he failed to allege the who, what, where, when, and how of fraudulent submissions to the government.'" In short, Rule 9(b) required the Relator to "link" the fraudulent activities she alleged "to claims submitted" by the defendants or to "specific facts of who, what, where, when, and how the claims were submitted."

Consequently, reaffirming Clausen v. Lab Corp. of Am. Inc., 290 F.3d 1301 (11th Cir. 2002) and Jallali held:

• Each element of an FCA clam must meet Rule 9(b);

• The Court "disregard[s] conclusory statements regarding a defendant's allegedly fraudulent submissions to the Government and require[d] a factual basis for the conclusory statement";

• The Court would not accept Relator's claim of personal knowledge of billing fraud when Relator only alleged she had "a reliable indication that claims were fraudulently submitted to Medicare for payment";

• The Relator failed to allege the "who, what, where, when, and how" of any specific false claim for payment; and

• That although the Relator provided "voluminous documents and allegations regarding improper internal practices," . . . "nowhere in the blur of facts and documents . . . can one find any allegation, stated with particularity, of a false claim actually being submitted to the government."

In sum, Jallali reminds defense counsel and, most importantly, district courts in the Eleventh Circuit that Rule 9(b) applies to every element of an FCA claim; it is simply not enough for a relator to provide "indications" or make "assumptions" that the defendant submitted false claims to the government.

A. Brian Albritton

August 22, 2016