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Third Circuit Adopts Liberal Notice Pleading Standard for False Claims Act Cases

Refusing to adopt the heightened pleading standard under Rule 9(b), the US Court of Appeals for the Third Circuit reversed the U.S. District Court for New Jersey’s order, which held that Plaintiff Foglia failed to meet the pleading requirements under Rule 9(b) for pleading a false claims act case. U.S. ex rel. Foglia v. Renal Ventures Mgmt., LLC, 2014 WL 2535339 (3d Cir. June 6, 2014).  In contrast to the District Court, the Third Circuit agreed to a more liberal standard for pleading cases under the federal False Claims Act and concluded that Foglia’s factually false claim against Renal proved sufficient to satisfy Rule 9(b).  The circuits are split over whether a whistleblower must allege specific examples of false claims to survive a Rule 12(b)(6) motion, and the Third Circuit held that the whistleblower need not provide such specific examples.

The District Court had dismissed the claim brought by Thomas Foglia, a registered nurse who began working at Renal Ventures Management, LLC, a dialysis care services company, under Federal Rule of Civil Procedure 12(b)(6). The court determined that Foglia’s complaint failed to follow the heightened, fact-style pleadings standard required by Federal Rule of Civil Procedure 9(b) for fraud claims.

As a dialysis care company, Renal used a variety of medication in its day to day operations, such as Zemplar, a single-use injection drug that promotes the active form of vitamin D during kidney dialysis. Zemplar, the drug at issue in this case, is provided in three vial sizes, and Renal chose to import 5-microgram sized vials although patients typically use less than the 5-mcg amount. Abbott Laboratories, its producer, recommends opening the vial once and discarding it upon first use, even if there are dosages leftover.

Foglia claimed that Renal would re-use the vials, his “overfill” claim, by harvesting leftover dosages in the vials and administering it to patients. Although the Department of Health and Human Services in September 2002 declared it acceptable to administer injectable medicines in multiple usages, six conditions had to be followed. Foglia argues that Renal did not follow the six conditions and continued the administering of Zemplar in a precarious manner. Also, through this overfill scheme, Renal would charge the US Government for one 5-mcg vial administered to one patient, although in reality, maybe two patients would receive a dose from a single vial of Zemplar. Foglia contends that Renal, in October 2008 alone, actually used only 29 to 35 vials of Zemplar each day even though, if it used Zemplar in a single-dose fashion, it would have needed around 50 vials a day. Foglia further contends Renal still billed the US Government for the full 50 vials while using only 29 to 35 vials.

Based on the facts of the case, the Third Circuit found for a more liberal pleadings standard.  It held that, although Foglia did not identify specific examples of fraud, Foglia’s allegations established fraud claims that can be understood as a factually false claim.  Specifically, in concurrence with the First, Fifth, and Ninth Circuits, the Third Circuit also agreed that plaintiff must only 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.”

Due to the inability for Foglia to have had access to Renal records, as he was only a nurse and not under administration, he would have had a difficult time to prove specific facts establishing the alleged fraudulent conduct. Thus, Foglia’s factually false claim, or when a claimant falsifies goods or services provided to the Government, even without specific examples of fraudulent conduct, sufficiently fell under Rule 9(b).

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