by Ben Vernia | August 10th, 2010
In U.S. ex rel. Ebeid v. Lungwitz, issued on August 9, the Ninth Circuit finally addressed the viability of an implied certification theory of liability under the False Claims Act, which it had reserved in the 2006 case, United States ex rel. Hendow v. University of Phoenix.
In the case, an Arizona physician alleged that a California doctor and her associated medical businesses engaged in self-referrals which tainted all of the defendants’ medical claims.
After surveying other Circuits’ implied certification decisions, the Court found the Second Circuit’s reasoning in U.S. ex rel. Mikes v. Straus persuasive:
The Second Circuit’s analysis in Mikes of the implied false certification theory is persuasive and consistent with our precedent. The implied false certification theory shares common limitations with the express false certification theory as
delineated in Hopper and Hendow. Express certification simply means that the entity seeking payment certifies compliance with a law, rule or regulation as part of the process through which the claim for payment is submitted. Implied false certification occurs when an entity has previously undertaken to expressly comply with a law, rule, or regulation, and that obligation is implicated by submitting a claim for payment even though a certification of compliance is not required in the process of submitting the claim. Under both theories, “[i]t is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit.” Hopper, 91 F.3d at 1266. Likewise, materiality is satisfied under both theories only where compliance is “a sine qua non of receipt of state funding.” Id. at 1267.
The Court nevertheless affirmed the dismissal of the relator’s suit on particularity grounds after adopting a somewhat relaxed standard of particularity under Fed. R. Civ. P. 9(b).
To survive a Rule 9(b) motion to dismiss, a complaint alleging implied false certification must plead with particularity allegations that provide a reasonable basis to infer that (1) the defendant explicitly undertook to comply with a law, rule or regulation that is implicated in submitting a claim for payment and that (2) claims were submitted (3) even though the defendant was not in compliance with that law, rule or regulation. We do not embrace the district court’s categorical approach that would, as a matter of course, require a relator to identify representative examples of false claims to support every allegation, although we recognize that this requirement has been adopted by some of our sister circuits. In our view, use of representative examples is simply one means of meeting the pleading obligation. We join the Fifth Circuit in concluding, in accord with general pleading requirements under Rule 9(b), that it is sufficient to allege “particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.”
(Citations omitted.) The Ninth Circuit refused to relax these standards further for the relator, reasoning that he was not an insider of the sort the FCA seeks to encourage: “To jettison the particularity requirement simply because it would facilitate a claim by an outsider is hardly grounds for overriding the general rule, especially because the FCA is geared primarily to encourage insiders to disclose information necessary to prevent fraud on the government.”
Even under the flexible 9(b) standard, however, the Court found that the allegations of the relator’s complaint were too conclusory and failed to provide sufficient particularity.
