Health Headlines – May 23, 2022

Supreme Court Seeks Solicitor General’s Opinion Regarding False Claims Act Circuit Split – Last week, the Supreme Court requested the Solicitor General’s views on United States ex rel. Owsley v. Fazzi Associates Inc. et al.,signaling the Court’s interest in potentially resolving a longstanding Circuit split. The circuit courts have been divided over the facts necessary to plead fraud with “particularity” under the False Claims Act (FCA), specifically whether Federal Rule of Civil Procedure 9(b)’s heightened pleading standard requires a party to plead details of specific false claims or whether the submission of a false claim can be inferred from details about a fraudulent scheme.  

Rule 9(b) requires plaintiffs who allege fraud to “state with particularity the circumstances constituting fraud.” The circuits have been divided over how this standard applies in FCA cases. The First, Second, Fourth, Sixth, Eighth, and Eleventh Circuits generally require plaintiffs to allege at least one example of a false claim in their complaint. The other circuits, the Third, Fifth, Seventh, Ninth, Tenth, and D.C. Circuits, do not require a plaintiff to plead the details of representative false claims.

The Supreme Court’s interest in resolving this division among the Circuits appears to be growing. There are currently three petitions pending before the Supreme Court raising this split, two brought by relators and one by a defendant. (Johnson et al. v. Bethany Hospice and Palliative Care LLC, No. 21-462; United States ex rel. Owsley v. Fazzi Associates Inc. et al., No. 21-936; and Molina Healthcare of Illinois, Inc., et al., v. Thomas Prose, No. 21-1145.) This is the second time the Supreme Court has asked the Solicitor General to weigh in on this question. In January, the Supreme Court first sought the Solicitor General’s input on the petition for certiorari in Johnson et al. v. Bethany Hospice and Palliative Care LLC, a case involving an alleged kickback scheme where the hospice allegedly paid doctors in exchange for Medicare referrals. The Eleventh Circuit held that the relators did not meet Rule 9(b)’s heightened pleading standard because they did not identify the false claims submitted or include any details about when the claims were submitted, how much the claims were worth, or the services provided. The Eleventh Circuit refused to infer from the circumstances that a false claim was submitted.

Similarly, in United States ex rel. Owsley v. Fazzi Associates Inc. et al., the relator pleaded some information about an alleged fraudulent scheme, but did not provide details about the submission of a false claim. The Sixth Circuit applied the more exacting standard and held that relators must plead a false claim with specificity and that details about a fraudulent scheme do not suffice.

The Supreme Court has not yet weighed in on the third petition, in Molina Healthcare of Illinois, Inc., et al., v. Thomas, which raises both this split as well as a second split over whether a request for payment that makes no specific representations about the goods or services provided can be actionable under an implied false certification theory. The Supreme Court’s requests for the Solicitor General’s input in the two earlier petitions suggest that the Court may want to resolve the circuit split over Rule 9(b) in the near future. If the Supreme Court grants either or both petitions for certiorari, the Court will most likely hear oral arguments in the winter and issue an opinion by the summer of 2023. The Supreme Court’s decision to either uphold the more rigorous interpretation of Rule 9(b) or permit plaintiffs to bring FCA claims without pleading details about false claims could significantly affect the landscape of FCA litigation.

Reporter, Taylor Whitten, Sacramento, +1 916 321 4815, twhitten@kslaw.com.