The U.S. Supreme Court’s latest refusal to tackle the enduring and highly consequential circuit split over how precisely False Claims Act suits must be pled has left lawyers wondering whether justices will wade into the legal morass anytime soon.
The refusal happened on April 16 when justices shot down a petition from Johnson & Johnson, which is accused of defrauding Medicare by selling defective hip implants. J&J wanted the high court to resolve the split over Federal Rule of Civil Procedure 9(b), which requires that FCA suits be pled with “particularity.”
It marked at least the second time this term that justices swatted away an FCA petition involving 9(b). In October, the Supreme Court batted down a petition from Pennsylvania-based Victaulic Co., which allegedly violated the FCA by importing unmarked pipe fittings and falsifying import documents.
The high court’s repeated refusals have occurred despite its clear interest in the topic; twice since 2010, justices have asked the U.S. solicitor general whether to address the split, but they still haven’t pulled the trigger on a 9(b) case.
“Given recent history, it is difficult to envision a scenario in which the Supreme Court would be eager to weigh in as to how the requirements of Rule 9(b) should be applied to FCA claims in the near term,” Bass Berry & Sims PLC member Matthew Curley told Law360.
Notably, the petitions that the Supreme Court have rejected have often involved some of the country’s biggest businesses and most elite lawyers. J&J, of course, is a corporate powerhouse, and its lead counsel was appellate superstar Paul Clement of Kirkland & Ellis LLP.
If that sort of petition isn’t enough for the Supreme Court right now, then it’s hard to see any petition satisfying the court in the next few years, some observers say.
“It appears to me that there were very competent lawyers laying out the argument that the Supreme Court should address this issue, and it’s clear to me that it’s not something that’s going to be addressed in the near future,” said Reuben A. Guttman of Guttman Buschner & Brooks PLLC. “But obviously that can change.”
The central dispute over 9(b) is whether it requires whistleblowers to identify specific billing claims that were allegedly fraudulent. The Fourth, Sixth, Eighth and Eleventh Circuits usually require such specificity, while the other circuits are more tolerant of allegations that strongly suggest fraudulent billing claims must have been filed.
Attorneys differ over the scope of the split, but most agree it’s real enough to make or break cases depending solely on where they’re filed. For the plaintiffs bar, heavy-handed applications of 9(b) are unwise because they shield fraudsters simply because whistleblowers don’t have easy access to billing records.
“The lack of information on particular details when the whistleblower has plausibly alleged a scheme involving fraud on the government should not derail a case at an early stage,” Phillips & Cohen LLP partner Claire Sylvia said.
It’s also not always clear that a specific billing claim is essential to 9(b)’s main purpose, which is to provide adequate notice of fraud allegations and thereby allow a robust defense.
“The reality is that 9(b) is just a defense red herring. … It’s not a reality that they don’t know what the case is about — they’re just raising a technical argument,” Guttman said.
Defense lawyers see things much differently, arguing that whistleblowers can embark on unwarranted fishing expeditions if allowed to proceed to discovery without first identifying a single bogus billing claim.
“A relaxed or watered-down version of Rule 9(b) often allows complaints to proceed where there is no real connection between the alleged fraud scheme and any actual false claims,” Curley said.
There are different theories about why the Supreme Court hasn’t waded into the 9(b) fight. It’s possible that it has hoped the circuit split would resolve itself — something the solicitor general in 2014 said looked increasingly likely, but which has not yet happened.
It’s also possible that the Supreme Court is wary of mandating a one-size-fits-all approach that ends up torpedoing relatively strong FCA cases or unleashing relatively weak FCA cases.
“Pleading is kind of the bailiwick of the lower courts in some ways,” Morgan Verkamp LLC founding partner Rick Morgan said. “I think that the Supreme Court is concerned about appearing to cabin the discretion of the front-line judges.”
Alternatively, the right case may simply not have presented itself yet.
“I think the court looks at each petition presented by litigants and determines whether the particular case meets the criteria for meriting Supreme Court review,” Sylvia said. “I don’t think the court is looking for an FCA 9(b) case or avoiding an FCA 9(b) case.”
Whatever the reason, it won’t be long before the Supreme Court will once again have to consider delving into the circuit split. Whistleblowers earlier this month filed a petition asking the Supreme Court to resolve the 9(b) split as part of an FCA case they filed against Bristol-Myers Squibb Co. and Otsuka America Pharmaceutical Inc.
The whistleblowers — former sales representatives at Bristol-Myers — are represented by Morgan. He called the case a solid vehicle for addressing 9(b), while also acknowledging that it could join the long line of 9(b) cases that the Supreme Court has swept aside.
“We certainly think that it’s very well-founded, and that the court should be looking for a way to rationalize the 9(b) jurisprudence across the circuits,” Morgan said. “At the same time, there’s now a many-year history of the court not taking cases like this. So we put it up and see what happens.”
By Jeff Overley www.law360.com
–Additional reporting by Braden Campbell. Editing by Pamela Wilkinson and Breda Lund.
Reprinted with permission.
