Third Circuit sets Standard for Pleading Fraud under the False Claims Act

June 17th, 2014 by Qui Tam

Under the Federal Rules of Civil Procedure, a plaintiff who claims that a defendant engaged in fraudulent conduct must allege facts in his or her complaint demonstrating that a fraud took place. A split has developed among the circuits regarding how this requirement applies to one who is bringing a claim under the False Claims Act. The Fourth, Sixth, Eighth and Eleventh Circuits have held that the plaintiff must provide “representative samples” of the supposedly fraudulent conduct, specifying the time, place and content of the acts and the identity of the actors. The First, Fifth and Ninth Circuits, on the other hand, have stated that a plaintiff only has to set out particular details of a scheme to submit false claims along with reliable indicia that leads to a strong inference that the claims were actually submitted.

In Foglia v. Renal Ventures Management, LLC, No. 12-4050 (3d Cir. June 6, 2014), the Third Circuit joined the second group, stating that the “representative samples” standard favored by the other courts conflicts with the fact that the FCA does not require one to show the exact content of a false claim. The Third Circuit also noted that the Solicitor General of the United States had recently stated in a brief which was filed with the United States Supreme Court that the approach taken by the other circuits undermined the effectiveness of the FCA as a tool to combat fraud against the United States. According to the Third Circuit, the rule of civil procedure governing fraud claims was intended to provide the defendant with fair notice of the plaintiff’s claims and that the more “nuanced” approach taken by the First, Fifth and Ninth Circuits served this purpose. The Court then concluded that the plaintiff in Foglia had satisfied this standard, particularly in light of the fact that the defendant was the only one who had access to the documents which could easily prove or disprove the plaintiff’s allegations. As a result, the district court’s order dismissing the complaint was reversed and the case was sent back to the trial court to allow the parties to engage in discovery.

 

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