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Supreme Court Declines to Settle False Claims Circuit Split

Written by:  Ellyn L. Sternfield

With its March 31, 2014 denial of certiorari in U.S. ex rel. Nathan v. Takeda, the U.S. Supreme Court declined to wade into the ongoing debate over the degree of particularity with which a false claims relator must plead a violation of the federal Civil False Claims Act.

The District Court in Takeda dismissed the relator’s Complaint for failing to meet Rule 9(b) pleading standards.  The Fourth Circuit sustained the dismissal, finding that the Complaint failed to allege with sufficient particularity that Takeda’s alleged off-label marketing scheme had actually resulted in false claims being submitted to a federally-funded health care program.  In fact, the Complaint did not establish that any false claims were submitted to the government.  In his Petition to the Supreme Court, the relator argued that the Fourth Circuit’s decision was at odds with the false claims pleading requirements in other circuits.  As described in our November Qui Tam Update, the issue is:

Whether Rule 9(b) of the Federal Rules of Civil Procedure requires that a complaint under the False Claims Act “allege with particularity that specific false claims actually were presented to the government for payment” as required by the Fourth, Sixth, Eighth and Eleventh Circuits, or whether it is instead sufficient to allege the “particular details of” a “scheme to submit false claims” together with sufficient indicia that false claims were submitted, as held by the First, Fifth, Seventh and Ninth Circuits.

Significantly, the federal government not only declined to intervene in the underlying false claims case in the lower court, it urged the Supreme Court to deny relator’s Petition for Certiorari.   While acknowledging “inconsistent” rulings among the circuits on the necessary specificity to plead a false claims case, the Solicitor General’s Brief to the Supreme Court argued that the inconsistencies were capable of being sorted out by the circuits without the Supreme Court’s intervention and, if not, the Supreme Court could address the issue in the future.

It may be that the federal government was less concerned about the existing “inconsistencies” between the circuits and more concerned that about the lack of specifics in this case as plead by the relator.  The government may have feared the potential for a Supreme Court ruling that would go even farther than the Fourth Circuit in defining necessary pleading specificity in false claims cases.

What is certain is that in the short term the Supreme Court will not be addressing this issue.  For now, relators, defendants and the government will need to keep in mind the significance of the location of filing and litigating a false claims case in determining pleading specificity and success on Rule 9(b) motions.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.