Supreme Court Asked To Clarify Application of Rule 9(b) in FCA Cases
On September 21, 2015, counsel for AT&T, Inc., and other telecommunications providers asked the U.S. Supreme Court to resolve a circuit split over what relators asserting FCA claims must do to meet Federal Rule of Civil Procedure 9(b)’s requirement of particularity. Pet. for a Writ of Cert., AT&T, Inc. v. United States of America ex rel. Heath, No. 15-363 (Sept. 21, 2015).
Under the Universal Service Schools and Libraries Program, telecommunications providers provide discounted services to eligible schools and libraries. The services are subsidized by a Universal Service Fund paid through assessments on telecommunications providers. The program’s regulations bar service providers from charging schools and libraries prices more than the “lowest corresponding price” for the services. They also require service providers to file forms asserting compliance with the lowest-corresponding-price requirement, and require every service recipient to file associated forms to get reimbursements. The plaintiff here alleged that every form filed by certain telecommunications providers between 1997 and 2009 was false—and thus violated the FCA—because the providers violated the lowest-corresponding-price requirement.
According to the petition, the relator alleged the defendants’ failures to comply with the lowest-corresponding-price requirement only in general terms—for example, with statements that “AT&T never once calculated and offered [‘lowest corresponding price’] to a school or library.” The complaint did not plead with particularity any specific instances of individual false claims. As one argument supporting dismissal of the FCA claims, the defendants argued that this failed to satisfy Rule 9(b)—that is, that correctly pleading FCA claims requires specific details of individual claims. The D.C. Circuit Court of Appeals disagreed, finding that the relator’s complaint had sufficient specificity regarding the sort of fraud at issue even if the complaint did not detail specific instances of fraud.
The defendants’ petition highlights that this falls squarely into a “deep and significant conflict” among the courts with respect to how to apply Rule 9(b) to complaints with FCA claims. Because the FCA attacks fraud, all circuits agree that relators with FCA claims must comply with Rule 9(b). But circuits differ over what this compliance consists of. On the one hand, four circuits—the Fourth, Sixth, Eighth, Eleventh—hold that Rule 9(b) requires complaints with FCA claims to allege particular facts regarding at least one specific false claim presented to the federal government. On the other hand, numerous other circuits—the First, Third, Fifth, Seventh, Ninth, Tenth—have held that Rule 9(b) does not require FCA plaintiffs to allege specific examples of false claims. Defendants’ petition contends that under the first approach, the plantiff’s complaint missed the mark, since it had only general allegations of a purportedly fraudulent scheme and no particularly pled examples of specific instances of fraud.
Defendants’ petition notes that this pleading issue is of “tremendous practical importance” because it often determines whether complaints survive motions to dismiss, and that the general rise of FCA actions makes the issue one that occurs frequently. Counsel for Plaintiffs are due to respond to AT&T’s petition for certiorari in early November.