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No. 2015-01
IN THE
Supreme Court of the United States __________
UNITED STATES EX REL. KLEIN,
Petitioner,
V.
OSBORN LABORATORIES, INC.
Respondent.
__________
On Petition for Writ of Certiorari
to the United States Court of Appeals
for the Thirteenth Circuit
__________
BRIEF FOR THE PETITIONER
__________
TEAM THIRTEEN
2015 Julius H. Miner Moot Court Competition
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QUESTIONS PRESENTED
1. Whether a dismissed, insufficiently pled, first-filed False Claims Act (FCA) claim may
continue to block later claims presenting new and novel information even after the first-filed
claim is dismissed for insufficient pleading.
2. Whether a relator presenting specific, original details regarding a fraudulent billing scheme
by named actors, leading to a strong inference that false claims were submitted within the
definition of the FCA, satisfies Rule 9(b)’s particularity requirement without specific
invoices.
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TABLE OF CONTENTS
QUESTIONS PRESENTED ........................................................................................................... ii
TABLE OF CONTENTS ............................................................................................................... iii
TABLE OF AUTHORITIES ......................................................................................................... iv
OPINIONS BELOW ....................................................................................................................... 1
STATEMENT OF THE CASE ....................................................................................................... 2
SUMMARY OF THE ARGUMENT ............................................................................................. 5
ARGUMENT .................................................................................................................................. 7
I. RAV KLEIN’S QUI TAM CLAIM PROPERLY INVOKES THE JURISDICTION OF
FEDERAL COURTS, AS EARLIER CLAIMS CANNOT TRIGGER THE FIRST-TO-
FILE BAR IF THEY ARE INSUFFICIENTLY PLED UNDER RULE 9(B), AND
BECAUSE THE BAR LAPSES AFTER EARLIER CLAIMS ARE DISMISSED. ......... 7
A. An FCA complaint that is legally infirm under Rule 9(b) fails to fulfill
Congress’s goal of securing new information for the government, and cannot
trigger the first-to-file bar. ...................................................................................... 7
B. In order to encourage further private enforcement actions, a dismissed claim is
no longer “pending” for the purposes of section 3730(b)(5), even if it initially
triggered the first-to-file bar.................................................................................. 10
II. THE THIRTEENTH CIRCUIT’S DECISION MUST BE OVERTURNED
BECAUSE A COMPLAINT FILED PURSUANT TO THE FCA DOES NOT NEED TO
ALLEGE SPECIFIC INVOICES IN ORDER TO SATISFY RULE 9(B). ..................... 13
A. Finding Rule 9(b) satisfied where an FCA relator alleges details of a fraudulent
scheme but not of specific invoices serves the Rule’s essential purposes of
providing notice and limiting frivolous suits. ....................................................... 14
B. Applying Rule 9(b) to require FCA relators to allege specific invoices
improperly imposes a burden of proof at the pleading stage. ............................... 16
C. Requiring specific invoices to satisfy Rule 9(b) in every FCA case would
largely defeat the FCA’s remedial purpose. ......................................................... 19
CONCLUSION ............................................................................................................................. 21
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TABLE OF AUTHORITIES
CASES
Bly-Magee v. California, 236 F.3d 1014 (9th Cir. 2001) ............................................................. 13
Coffey v. Foamex L.P., 2 F.3d 157 (6th Cir. 1993) ......................................................................... 9
Conn. Nat. Bank v. Germain, 503 U.S. 249 (1992) ...................................................................... 11
Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (10th Cir. 2004) ................................... 8
In re Natural Gas Royalties Qui Tam Litig., 566 F.3d 956 (10th Cir. 2009) ................... 11, 12, 13
Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 134 S. Ct. 2899 (Jul. 1, 2014)
........................................................................................................................................... 11
Melder v. Morris, 27 F.3d 1097 (5th Cir. 1994) ........................................................................... 14
NLRB v. Wheeling Elec. Co., 444 F.2d 783 (4th Cir. 1971) ......................................................... 10
United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011) ............................. 8, 9
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634 (6th Cir. 2003) ............... 13
United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013) ............................ 11
United States ex rel. Chovanec v. Apria Healthcare Grp. Inc., 606 F.3d 361 (7th Cir. 2010) 8, 11,
12, 13
United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) .................. 13
United States ex rel. Duxbury v. Ortho Biotech Products, L.P., 579 F.3d 13 (5th Cir. 2009) ..... 17
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009)........................... passim
United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214 (D.C. Cir.
2003) ................................................................................................................................... 7
United States ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28 (1st Cir. 2013) ................ 8, 9
United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552 (8th Cir. 2006) ..................... 19
United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1,
2014). ......................................................................................................................... passim
United States ex rel. Klein v. Osborne Laboratories, Inc., No. 14-0840 (13th Cir. 2014) .... passim
United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849 (7th Cir. 2009) ......... 6, 15, 17, 18
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United States ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217 (11th Cir. 2012) 19
United States ex rel. Nathan v. Takeda Pharmaceuticals North Am., Inc., 707 F.3d 451 (4th Cir.
2013) ........................................................................................................................... 14, 20
United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503 (6th Cir. 2009) ............................... 8
United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304 (5th Cir. 1999) .... 13
United States ex rel. Shea v. Cellco P'ship, 748 F.3d 338 (D.C. Cir. 2014) ........................... 11, 12
United States ex rel. Springfield Terminal Ry. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) ................ 7
United States ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914 (8th Cir.
2014) ........................................................................................................................... 17, 18
United States ex. rel. Costner v. United States, 317 F.3d 883 (8th Cir. 2003) ............................. 10
Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005) ........................................ 5, 8, 9
STATUTES
31 U.S.C. § 3730 (1982) ................................................................................................................. 7
31 U.S.C. § 3730 (2012) ........................................................................................................ passim
31 U.S.C. §§ 3729–33 (2012) ......................................................................................................... 7
RULES
Fed. R. Civ. P. 9 .................................................................................................................. 8, 13, 14
OTHER AUTHORITIES
Black's Law Dictionary (10th ed. 2014) ....................................................................................... 11
Karin Lee, Linking Rule 9(B) Pleading and the First-to-File Rule to Advance The Goals of the
False Claims Act, 108 NW. U. L. REV. 1423 (2014) ......................................................... 14
S. Rep. No. 99-345 (1986), reprinted in 1986 U.S.C.C.A.N. 5266 ........................................ 10, 11
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OPINIONS BELOW
The opinion of the United States District Court for the Southern District of Wigmore is
reported at United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D.
Wig. May 1, 2014).
The opinion of the United States Court of Appeals for the Thirteenth Circuit is reported at
United States ex rel. Klein v. Osborn Laboratories, Inc., No. 14-0840 (13th Cir. 2014).
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STATEMENT OF THE CASE
Rapidly changing influenza viruses have devastated the United States and the world in
the last fifteen years, and pharmaceutical companies have been unable to keep up with the highly
mutative virus. United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839, at
*2–3 (S.D. Wig. May 1, 2014). Despite the significant public health risk, companies like Osborn
Pharmaceuticals gave up attempts to find a vaccine; instead, they switched to more profitable
drugs. Id. at *3–4.
With a worsening crisis, Congress created a financial incentive to perform vital influenza
research. Id. at *4. The Lonky–McCall Ensuring Pharmaceutical Industry Development of
Effective Medicines and Iterative Cures (EPIDEMIC) Act of 2010 reimbursed pharmaceutical
companies for up to fifty percent of their influenza research. Id. Itemized invoices were not
required; instead, companies only supply “a certification that all costs are associated with
research on iterative flu viruses.” Id. at *4, n. 4. Osborn and other companies rapidly reopened
influenza projects in response to this dedicated funding. Id. at *4. EPIDEMIC funding eventually
paid off, contributing to the research on Osborn’s Roundi-HAUSI-Kick (RHK) vaccine, mutated
with the virus, ending the HAUSI epidemic. Id. at *5.
Dr. Rav Klein, M.D., Ph.D., is an expert on influenza and epidemiology. Id. at *5–6.
Hired to research influenza for Osborn, he was reassigned at the height of the HAUSI epidemic.
Id. at *6–7. He could not figure out the connection of his new projects to influenza research;
even more concerning, he was instructed to continue using EPIDEMIC budget codes for this new
work. Id. at *6. With minimal research, Klein discovered that dozens of other researchers were
similarly reassigned. Id. at *7. Within several days, Klein overheard conversations between
senior research directors about departmental objectives unrelated to influenza and how “‘to make
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[department invoices] appear eligible’ for EPIDEMIC reimbursement.” Id. Shortly after these
conversations, Klein and hundreds of other researchers received an email detailing how they
should describe the work they were doing; the instructions matched the conversations he
overheard. Id.
Klein filed a detailed complaint on November 17, 2013, citing “ reason and belief” that
instructions were contributing to fraudulent billing under the EPIDEMIC Act, outlining Osborn’s
financial problems in their nonflu research, and describing the roles in the scheme of numerous
Osborn executives, research directors, and employees. Id. at *6–8.
One week prior to Klein’s filing, Dr. French Stewart filed a complaint in the District of
Rodriguez. Id. at *8. This complaint alleged a similar scheme, but Stewart failed to include
particularized pleadings. Id. When the Stewart and Klein complaints were unsealed on January
10, 2014, Osborn filed motions to dismiss in both cases. Id. The first Klein complaint was
dismissed due to the first-to-file bar restrictions imposed by 31 U.S.C. § 3730; the Stewart
complaint was dismissed for failure to state a claim, since it did not meet Rule 9(b) fraud
pleading standards. Id. at *8–9.
When the Stewart complaint was dismissed, Klein filed an amended complaint on March
29, 2014. Id. at *9. The government declined to intervene; Osborn once again filed a motion for
dismissal, alleging a lack of jurisdiction due to the first-to file bar in the FCA, and that Klein’s
complaint failed to meet the requirements of Rule 9(b). Id.
The district court denied both motions. Id. at *12, 15. Recognizing the policy concerns
behind the first-to-file bar, Judge Guster followed the Sixth Circuit and found an insufficiently
pled case under Rule 9(b) could not activate the first-to-file bar and preempt a subsequent claim.
Id. at *11. Additionally, Judge Guster reasoned that public policy dictated that an FCA complaint
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met the requirements of Rule 9(b) pleading standards so long as it “present[ed] a highly plausible
fraudulent billing scheme and where targeted discovery [could] convert a strong inference into
an explicit fact,” and did not require specific invoices. Id. at *14. Judge Guster authorized
interlocutory appeal in the matter. Id. at *15.
On interlocutory appeal, the majority rejected Judge Guster’s rationale. United States ex
rel. Klein v. Osborne Laboratories, Inc., No. 14-0840, at *4 (13th Cir. 2014). However, the
Thirteenth Circuit only overturned the result with regard to the motion to dismiss for failure to
state a claim. Id. at *11. The court of appeals adopted a stricter rule regarding the Rule 9(b)
pleading requirement in FCA cases, requiring production of a “specific fraudulent invoice.” Id. at
*10. Regarding the first-to-file bar, the court of appeals stated that an insufficiently pled claim
could trigger the bar, but once a case was dismissed the bar lapsed. Id. at *4, 5–7. For that reason,
Dr. Klein’s amended complaint was not prevented by the first-to-file bar.
Judge Divolivia largely agreed with the court of appeals ruling, but disagreed that the
first-to-file bar lapsed upon dismissal of the first-filed case. Id. at *11 (Divolivia, J., concurring
in part and dissenting in part). Adopting a view held by a minority of circuits, Judge Divolivia
declared that the first-to-file bar ran in perpetuity, forever protecting Osborn from matters related
to the Stewart complaint. Id.
On January 14, 2015, this Court granted a writ of certiorari and stayed the Thirteenth
Circuit Court of Appeals’ ruling pending the outcome of this appeal.
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SUMMARY OF THE ARGUMENT
The Thirteenth Circuit Court of Appeals erred in reversing the district court’s denial of
Osborn Pharmaceutical’s motion to dismiss. The Court of Appeals’ conclusion that the first-to-
file bar did not block Klein’s complaint was correct, but that Court incorrectly found that Klein
was required to allege specific fraudulent invoices in order to satisfy Rule 9(b)’s heightened
pleading requirement for fraud. A more flexible application of Rule 9(b) best serves the purposes
of that Rule, while the rigid application that the Thirteenth Circuit employed improperly imposes
a burden of proof at the pleading stage and significantly restricts the FCA’s effectiveness as tool
for exposing fraud on the government. Klein respectfully requests that this Court affirm the
Thirteenth Circuit’s decision as to the first-to-file bar, overturn its decision regarding Rule 9(b),
and remand to allow Klein’s case to move forward.
The first-to-file bar should not be triggered if a complaint fails to meet Rule 9(b)’s
pleading standards, as such a complaint cannot provide notice to the government. The district
court reached this conclusion, but the Thirteenth Circuit incorrectly failed to adopt this reasoning.
“A complaint that fails to provide adequate notice to a defendant can hardly be said to have
given the government notice of the essential facts of a fraudulent scheme, and therefore would
not enable the government to uncover related frauds.” Walburn v. Lockheed Martin Corp., 431
F.3d 966, 973 (6th Cir. 2005). The Thirteenth Circuit held that the Rule 9(b) standard did not
apply, but it failed to outline any alternate rule that should be used to judge notice.
Despite incorrectly rejecting the 9(b) standard, the Thirteenth Circuit accurately
concluded that a dismissed, insufficiently pled claim cannot bar a subsequently filed claim.
Congress intended to encourage private enforcement actions of the FCA, and a perpetual block
on future claims would be antithetical to that goal. The text of the first-to-file bar supports this
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purpose, which clearly states that the bar exists only while the first filed action is pending. In
addition, there are significant FCA protections against the filing of baseless nuisance claims,
preventing opportunistic claimants from acting upon publicly available information.
The Thirteenth Circuit erred, however, when it found Klein’s complaint failed to meet
Rule 9(b)’s particularity requirement for pleading fraud. Klein agrees with the Court’s holding
that Rule 9(b) applies to FCA actions, but he contests its erroneous finding that Rule 9(b)
requires relators to allege specific invoices in their FCA complaints. Rule 9(b) is satisfied where
an FCA relator alleges details of a fraudulent scheme but not necessarily of specific invoices, as
this application serves the Rule’s purposes of providing notice and limiting frivolous suits. In
evaluating FCA complaints, courts should consider the level of detail a plaintiff alleges about a
scheme, as those details more particularly assert a fraud scheme than any raw bill or invoice.
In addition, requiring FCA relators to allege specific fraudulent invoices would impose a
burden of proof at the pleading stage, far too early in the litigation process. “To say that fraud
has been pleaded with particularity is not to say that it has been proved (nor is proof part of the
pleading requirement).” United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 855 (7th
Cir. 2009). Finally, requiring specific invoices to satisfy Rule 9(b) in every FCA case would
largely defeat the FCA’s remedial purpose. A key aim of that statute is to reveal fraud against the
government; strictly requiring allegations of specific invoices in every FCA complaint would
prevent relators with detailed and well-supported allegations from challenging fraud where they
do not also have access to company billing records.
For these reasons, Klein respectfully requests that this Court affirm the Thirteenth
Circuit’s decision as to the first-to-file bar, overturn its decision regarding Rule 9(b), and remand
this case for further proceedings.
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ARGUMENT
I. RAV KLEIN’S QUI TAM CLAIM PROPERLY INVOKES THE JURISDICTION OF
FEDERAL COURTS, AS EARLIER CLAIMS CANNOT TRIGGER THE FIRST-TO-FILE
BAR IF THEY ARE INSUFFICIENTLY PLED UNDER RULE 9(B), AND BECAUSE THE
BAR LAPSES AFTER EARLIER CLAIMS ARE DISMISSED.
The District Court for the Southern District of Wigmore properly has jurisdiction over
Rav Klein’s qui tam complaint, as the insufficiently pled Stewart complaint did not trigger the
FCA’s first-to-file bar. The purpose of the first-to-file bar is to put the government on notice and
permit investigation. By failing to provide sufficient details of the alleged fraud to fulfill the
requirements of Rule 9(b), the Stewart complaint failed to effectuate such notice and thus cannot
fulfill the purpose behind the first-to-file bar. Jurisdiction is proper since (a) an insufficiently
pled case cannot trigger the first to file bar, and (b) the 3730(b)(5) first-to-file bar only applies
when another case is pending, and lapses once an earlier case is dismissed.
A. An FCA complaint that is legally infirm under Rule 9(b) fails to fulfill Congress’s
goal of securing new information for the government, and cannot trigger the first-to-file
bar.
The qui tam provisions in the FCA, 31 U.S.C. §§ 3729–33, represent Congress’s attempts
to “walk a fine line between encouraging whistle-blowing and discouraging opportunistic
behavior.” United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214,
217 (D.C. Cir. 2003) (quoting United States ex rel. Springfield Terminal Ry. v. Quinn, 14 F.3d
645, 651 (D.C. Cir. 1994)). As part of those attempts, the first-to-file bar was added to the FCA
in 1986. Compare 31 U.S.C. § 3730 (1982) with 31 U.S.C. § 3730 (2012). Section 3730(b)(5)
was added in order to state, “When a person brings an action under this subsection, no person
other than the government may intervene or bring a related action based on the facts underlying
the pending action.” 31 U.S.C. § 3730(b)(5) (2012). Circuit courts have uniformly interpreted
Congress’s purpose in adding section 3730(b)(5) as requiring a complaint to notify the
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government of fraud in order to be a relevant claim under the first-to-file rule; complaints relying
solely on previously known information are barred. United States ex rel. Heineman-Guta v.
Guidant Corp., 718 F.3d 28, 38 (1st Cir. 2013). See also United States ex rel. Chovanec v. Apria
Healthcare Grp. Inc., 606 F.3d 361, 364 (7th Cir. 2010) (highlighting that cases that do nothing
to notify the government will be dismissed); United States ex rel. Poteet v. Medtronic, Inc., 552
F.3d 503, 516 (6th Cir. 2009) (stating that the first-to-file bar seeks to notify the government
while barring “parasitic lawsuits”); Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276,
1279 (10th Cir. 2004) (“Once the government is put on notice of its potential fraud claim, the
purpose behind allowing qui tam litigation is satisfied.”). Once notice has occurred, future claims
are barred.
Providing proper notice to the government is essential in these cases. Without true notice,
the government will not be able to fulfill the statutory requirement that it “diligently shall
investigate a violation” of the FCA as alleged in a qui tam complaint. 31 U.S.C. § 3730(a). The
government has three options at its disposal after investigation: intervene in the case, decline to
intervene, or intervene and move for dismissal. 31 U.S.C. § 3730(b)(4), (c)(2)(A). This does not
provide a mechanism for alerting the court that a complaint fails to give them proper notice.
Instead, courts have attempted to develop their own rules for government notice.
The clearest approach, that adopted by the Sixth Circuit and the district court in this case,
is to apply Rule 9(b) pleading standards to determine whether the government has been put on
notice. Walburn, 431 F.3d at 973. See also Klein, No. 2014-CM-0839, at *11. Rule 9(b) is
designed to ensure that defendants accused of fraud are sufficiently able to respond to
accusations. Fed. R. Civ. P. 9(b); see also Heineman-Guta, 718 F.3d at 36 (quoting United States
ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011)). “A complaint that fails to
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provide adequate notice to a defendant can hardly be said to have given the government notice of
the essential facts of a fraudulent scheme, and therefore would not enable the government to
uncover related frauds.” Walburn, 431 F.3d at 973. As Judge Guster stated below, in order to be
put on notice, the government must have particular enough information “to devise a plan of
action to uncover an alleged fraudulent scheme.” Klein, No. 2014-CM-0839, at *11. “[T]ime,
place, and content of the alleged misrepresentation” in the fraudulent scheme must be produced.
Coffey v. Foamex L.P., 2 F.3d 157, 161–62 (6th Cir. 1993).
Regarding the specifics of this case, the district court in Rodriguez ruled that the Stewart
complaint, “[d]espite its fairly specific claims as to the content of Osborn’s alleged fraudulent
activity,” failed to indicate necessary time, place, and manner details for Osborn to properly
mount a defense. Klein, No. 2014-CM-0839, at *11 (emphasis added). If Osborn could not
mount a defense, it is illogical to believe that the government could launch an adequate
investigation without necessary details of who was involved, when misrepresentations occurred,
and where alleged actions took place. Without particularized pleadings, the government would
be as blind as the defendant.
Circuit courts that fail to accept 9(b) as a requirement to trigger the first-to-file bar have
failed to articulate any specific standard to apply in its place. See Heineman-Guta, 718 F.3d at
35; Batiste, 659 F.3d at 1210. Focused solely on the fact that section 3730(b)(5) lacks an explicit
reference to Rule 9(b), courts have only stated that government notice is required by 3730(b)(5).
Heineman-Guta, 718 F.3d at 35; Batiste, 659 F.3d at 1210. No specifics are given in such cases,
and the Thirteenth Circuit similarly omitted any cognizable standard from their opinion below.
Klein, No. 14-0840, at *4. Instead, the majority made a brief statement that, “The amount of
information required to put a defendant on notice and render her capable of defending against a
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suit is quite a bit more than that is required to allow the government to begin an investigation
into an alleged fraud.” Id. The court declined to state where that line was, or how to know what
is enough to notify the government, although Justice Divolivia’s concurrence admitted that there
will be cases where the allegations will be “too ‘blunt, overbroad, or vague’ to put the
government on notice.” Id. at *14, n. 2 (Divolivia, J., concurring in part and dissenting in part)
(quoting Id. at *6 (majority opinion)).
In comparison, Rule 9(b) provides complainants and courts with a detailed body of law
regarding what is sufficient to provide notice of fraud. See, e.g., United States ex. rel. Costner v.
United States, 317 F.3d 883, 888 (8th Cir. 2003), cert. denied 540 U.S. 875 (2003). Lower courts
would not be left adrift when determining whether first-to-file is triggered, relying on an unclear
“government notice” standard that has not been fleshed out. Additionally, outlining a clear
standard for complaints to meet would aid Congress’s goal of encouraging more private
enforcement. S. Rep. No. 99-345, at 23–24 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5288–
89. Relators would be encouraged to share new information with government in cases where
earlier relators have failed. Specifically with reference to the present case, Rav Klein should
become a qui tam relator, providing essential evidence and possible prosecution of Osborn’s
false claims.
B. In order to encourage further private enforcement actions, a dismissed claim is no
longer “pending” for the purposes of section 3730(b)(5), even if it initially triggered the
first-to-file bar.
Statutes are meant to be interpreted with regard to the legislative intent. In most cases,
courts need not probe far, as the “intent may be found in the statute itself.” NLRB v. Wheeling
Elec. Co., 444 F.2d 783, 787 (4th Cir. 1971). As this court has recognized, “in interpreting a
statute a court . . . must presume that a legislature says in a statute what it means and means in a
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statute what it says there.” Conn. Nat. Bank v. Germain, 503 U.S. 249, 253–54 (1992). Section
3730(b)(5) offers a rather clear explanation of he first-to-file bar, and yet certain circuits have
chosen to complicate the interpretive process, misconstruing the interpretive instruction offered
in Germain. See United States ex rel. Shea v. Cellco P'ship, 748 F.3d 338, 344 (D.C. Cir. 2014);
see also Klein, No. 14-0840, at *11 (Divolivia, J., concurring in part and dissenting in part). The
proper interpretation of the first-to-file ban is that it expires when a complaint is dismissed.
Section 3730(b)(5) states that after a complaint is filed under the FCA, “no person other
than the government may intervene or bring a related action based on the facts underlying the
pending action.” 31 U.S.C. § 3730(b)(5) (emphasis added). As the Fourth, Seventh, and Tenth
Circuits recognized prior to this case, the requirement that no party intervene or bring a related
action only creates a bar while a case is in front of a court. United States ex rel. Carter v.
Halliburton Co., 710 F.3d 171, 183 (4th Cir. 2013), cert. granted sub nom. Kellogg Brown &
Root Servs., Inc. v. United States ex rel. Carter, 134 S. Ct. 2899 (Jul. 1, 2014); Chovanec, 606
F.3d at 365; In re Natural Gas Royalties Qui Tam Litig., 566 F.3d 956, 964 (10th Cir. 2009).
This aligns with the literal definition of pending: “[r]emaining undecided; awaiting decision.”
Black's Law Dictionary 1314 (10th ed. 2014). Additionally, this temporal understanding of the
term matches the construction of the paragraph. No one may intervene in or bring an action;
while it may be possible to bring a related action after the case is dismissed, it is impossible to
intervene in a dismissed action. This understanding of section 3730(b)(5) has the added benefit
of matching Congress’s goal of encouraging private enforcement actions. S. Rep. No. 99-345, at
23–24. By allowing the bar to expire when a case is dismissed, “it protects the potential award of
a relator while his claim remains viable, but, when he drops his action another relator who
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qualifies as an original source may pursue his own.” In re Natural Gas Royalties, 566 F.3d at
964.
By permitting Klein’s qui tam claim to continue, the Thirteenth Circuit helped to realize
the goal of allowing private enforcement actions. Klein’s amended complaint brought significant
new information to the government, information missing from the Stewart complaint. As the
Thirteenth Circuit recognized, blocking this complaint would ignore the fact that the government
“may lack the resources, political will, or sufficient evidence to convince it to pursue a claim . . .
[subsequent cases] will fill any deterrence gap created by governmental reluctance to pursue
claims, and it may . . . entire the government to intervene.” Klein, No. 14-0840, at *6. This
would prevent Osborn from being “immunized” by the insufficient Stewart complaint. Id.
Adopting any other interpretation of “pending,” such as dubbing it only referential to the
first-filed action, adds nothing to the meaning of section 3730(b)(5). Shea, 748 F.3d at 347
(Srinivasan, J., concurring in part and dissenting in part). The statute already makes clear that all
actions are barred other than the first-filed. Id. This alternate definition, adopted by the D.C.
Circuit and advocated by Judge Divolivia below, also rejects Congress’s goal of encouraging
whistleblowers by barring all additional actions in perpetuity. Id. at 349–50.
Courts have attempted to justify such a perpetual ban by arguing it will reduce nuisance
suits, or those that fail to provide any nonpublic or new information to the government. Shea,
748 F.3d at 344 (majority opinion). This ignores the fact that the FCA already contains
provisions that provide for such protections. The FCA states that a court “shall dismiss” actions
based on publicly disclosed information or information the government already has in its
possession. 31 U.S.C. § 3730(e)(4)(A). Such publicly disclosed information includes earlier-filed
claims. See Chovanec, 606 F.3d at 362; In re Natural Gas Royalties, 566 F.3d at 963. The only
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exception to this bar is if the subsequent complainant is the original source of the information.
See Chovanec, 606 F.3d at 362–63; United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342
F.3d 634, 646 (6th Cir. 2003). Klein is an original source of information, and his complaint
provided new information to the government; as the Thirteenth Circuit ruled, the Stewart
complaint should not act as a jurisdictional bar to the Klein complaint. Klein, No. 14-0840, at *7.
II. THE THIRTEENTH CIRCUIT’S DECISION MUST BE OVERTURNED BECAUSE A
COMPLAINT FILED PURSUANT TO THE FCA DOES NOT NEED TO ALLEGE SPECIFIC
INVOICES IN ORDER TO SATISFY RULE 9(B).
The Thirteenth Circuit joined other circuits in holding that Rule 9(b) applies to actions
filed pursuant to the FCA, and petitioner does not challenge that application here. Klein, No. 14-
0840, at *8; see also United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1308–09
(11th Cir. 2002); Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001); United States ex
rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir. 1999). Rule 9(b)
requires that, “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, [and] knowledge . . . may be alleged
generally.” See Fed. R. Civ. P. 9(b).
Circuits have split over whether a complaint bringing an FCA cause of action must allege
specific false or fraudulent invoices submitted to the government in order to satisfy Rule 9(b).
The Thirteenth Circuit erred when it found that Rule 9(b) strictly requires relators to allege
specific invoices in their FCA complaints. Courts should instead find Rule 9(b)’s particularity
requirement satisfied where a relator describes in detail a defendant’s fraudulent scheme, even if
she is unable to identify specific false invoices from the defendant.
This Court should adopt a more “context specific and flexible” application of Rule 9(b),
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009), because (a) this
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formulation best serves the purposes of that Rule, (b) requiring specific invoices improperly
imposes a burden of proof at the pleading stage, and (c) the more flexible formulation furthers
the remedial goal of the FCA to encourage the exposure of fraud. Accordingly, the Thirteenth
Circuit’s holding should be reversed and Klein’s complaint should be revived.
A. Finding Rule 9(b) satisfied where an FCA relator alleges details of a fraudulent
scheme but not of specific invoices serves the Rule’s essential purposes of providing
notice and limiting frivolous suits.
A flexible, context-specific application of Rule 9(b) that does not strictly require
allegations of specific invoices meets the Rule’s goals of putting defendants on notice and
decreasing the risk of meritless, abusive litigation. Rule 9(b) imposes a heightened pleading
standard for fraud claims, requiring that they be pled with particularity. Fed. R. Civ. P. 9(b). Rule
9(b) ensures that a complaint “provides defendants with fair notice of the plaintiffs’ claims,”
shielding defendants from the damage to their reputation and goodwill that can stem from
frivolous lawsuits, decreases the chance that plaintiffs will sue only in search of a quick
settlement, and prevents plaintiffs from “filing baseless claims and then attempting to discover
unknown wrongs.” Grubbs, 565 F.3d at 190 (quoting Melder v. Morris, 27 F.3d 1097, 1100 (5th
Cir. 1994)); see also United States ex rel. Nathan v. Takeda Pharmaceuticals North Am., Inc.,
707 F.3d 451, 456 (4th Cir. 2013); Karin Lee, Linking Rule 9(B) Pleading and the First-to-File
Rule to Advance The Goals of the False Claims Act, 108 NW. U. L. REV. 1423, 1441 (2014).
When an FCA relator alleges details of a fraudulent scheme but does not identify specific
invoices, it still serves Rule 9(b)’s main aims of providing defendants with notice and
minimizing meritless lawsuits.
The Seventh Circuit took this position in Lusby, where a former Rolls-Royce engineer
filed a complaint including details about contracts, allegations that parts failed to meet
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government specifications, descriptions of quality-control tests, and allegations that Rolls-Royce
knew its parts failed to conform to specifications but told the government otherwise. 570 F.3d at
853. The complaint also identified shipment dates and payment details. Id. at 854. The court
stated it was sufficient in an FCA complaint for a relator “to show, in detail, the nature of the
charge, so that vague and unsubstantiated accusations of fraud do not lead to costly discovery
and public obloquy,” even absent specific invoices. Id. at 854–55. Finding that Rolls-Royce had
been told “exactly what the fraud entail[ed],” the court reversed the complaint’s dismissal. Id. at
855.
The Fifth Circuit took a similar approach in Grubbs, an FCA suit where a psychiatrist
accused other doctors and his former employer of fraudulently billing Medicare and Medicaid.
565 F.3d at 180. The psychiatrist alleged a detailed scheme that the defendant doctors
communicated to him; the date, location, and individuals present for a meeting where doctors
tried to include him in the fraud; and particular dates on which each doctor lied about providing
services. Id. at 191–92. The Fifth Circuit found that FCA complaints provide defendants with
sufficient notice where they allege a scheme to submit false claims as well as “details leading to
a strong inference that those claims were submitted—such as dates and descriptions of recorded,
but unprovided, services and a description of the billing system that the records were likely
entered into.” Id. at 190–91. Such complaints also satisfy Rule 9(b)’s objective of preventing the
filing of baseless claims that lead to unfocused discovery processes, the court said. The Fifth
Circuit reasoned that because the defendants either had or did not have evidence that the
allegedly fraudulent services were actually provided, discovery could be “pointed and efficient,
with a summary judgment following on the heels of the complaint if billing records discredit the
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complaint’s particularized allegations.” Id. at 191. The Fifth Circuit reversed and remanded the
dismissal of certain of the FCA claims, finding they satisfied Rule 9(b). Id. at 195.
These courts’ flexible, context-specific applications of Rule 9(b) properly focus on the
details of fraud schemes alleged in FCA complaints, and not on specific invoices. Klein’s
complaint alleges Osborn’s scheme in a similar level of detail, identifying specific Osborn
executives, research directors, and other employees and the particular roles each person played in
the fraud. He includes numerous documents demonstrating that he was reassigned to conduct
research unrelated to flu vaccines, and that he was directly told by Osborn employees to label his
billing sheets as if he was researching flu vaccines. Klein further alleges specific dates on which
he overheard conversations about the fraud between various other Osborn employees, and the
time frame during which five of his coworkers confirmed that they had also been reassigned to
apparently non-flu-related projects but were told to bill their work using flu vaccine codes. He
also points to Osborn’s specific financial position as the motivation for the scheme. Klein has
alleged a scheme to submit false claims and details supporting a strong inference that Osborn
actually submitted those claims.
Klein’s complaint thus satisfies Rule 9(b)’s key aims: it puts Osborn on notice because
that company has been told precisely what the fraud entailed, and it serves to prevent baseless
lawsuits by asserting his claims in detail and not relying on vague accusations that lead, as the
Seventh Circuit said in Lusby, to “costly discovery and public obloquy.”
B. Applying Rule 9(b) to require FCA relators to allege specific invoices improperly
imposes a burden of proof at the pleading stage.
Requiring FCA relators to allege specific fraudulent invoices would force these plaintiffs
to meet a burden of proof far too early in the litigation process. Rule 9(b)’s particularity
requirement does not demand that a plaintiff prove the complaint’s allegations at the pleading
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stage. Lusby, 570 F.3d at 855 (“To say that fraud has been pleaded with particularity is not to say
that it has been proved (nor is proof part of the pleading requirement).”). As the Fifth Circuit
noted in Grubbs, to require plaintiffs to put forth billing numbers, precise dollar amounts, or
dates at the pleading stage is “one small step shy of requiring production of actual documentation
with the complaint, a level of proof not demanded to win at trial and significantly more than any
federal pleading rule contemplates.” 565 F.3d at 190. Rather than requiring a relator to prove at
the pleading stage that false claims were actually submitted, a correct application of Rule 9(b)
requires sufficient details that support a strong inference that they were submitted. United States
ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914, 918 (8th Cir. 2014) (citing
Grubbs, 565 F.3d at 190); see also United States ex rel. Duxbury v. Ortho Biotech Products, L.P.,
579 F.3d 13, 30 (5th Cir. 2009) (finding Rule 9(b) satisfied where a relator did not identify
specific false claims but did identify details including the scheme’s actors, time periods, and
locations.)
The Seventh Circuit discussed the danger of overextending Rule 9(b) in Lusby, stressing
that “[n]o complaint needs to rule out all possible defenses.” 570 F.3d at 855. That the relator’s
allegations in that case may have later turned out to be incorrect was not reason to dismiss the
complaint based on Rule 9(b), the Seventh Circuit found. Id. The court held that a relator was not
required to produce invoices at the start of an FCA suit because, while a relator must show a
false statement to succeed, “much knowledge is inferential.” Id. at 854. Lusby’s proposed
inference was plausible, the court said, because Rolls-Royce’s contracts required the company to
submit the allegedly fraudulent forms to receive payment. Id. A complaint does not need to
dismantle all possibilities that the defendant was honest in order to satisfy Rule 9(b), the court
found. Id.
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The Eighth Circuit adhered to similar reasoning in Thayer, where a former Planned
Parenthood clinic manager accused the organization of filing false claims but did not include any
submitted claims in her complaint. Thayer, 765 F.3d at 915–16. The Eighth Circuit followed
Grubbs to conclude that pleading such examples is unnecessary where the relator can plead
specific details of a scheme along with “reliable indicia” supporting a “strong inference” that
false claims were submitted to the government. Id. at 918 (quoting Grubbs, 565 F.3d at 190).
The court found that the complaint satisfied Rule 9(b). Id. at 919. The complaint’s details of the
scheme included the names of people and clinics involved, the two-year time span in which the
events took place, and the methods by which the schemes were carried out. Id. The court also
focused on the manager’s allegations that she had access to the organization’s billing system and
“personal knowledge of Planned Parenthood’s submission of false claims.” Id. The Eighth
Circuit reversed dismissal of the claims. Id. at 921.
In the present case, Rule 9(b) should not require Klein to allege specific fraudulent
invoices because to do so would improperly force him to prove his claims at the pleading stage.
Similar to the relators in Thayer and Lusby, Klein has plead details of Osborn’s fraud scheme by
identifying scheme participants and their roles, specifying dates during which the fraud was
underway and on which important conversations took place, and including documents showing
he was reassigned to certain projects and then instructed to bill for others. Klein also alleges
Osborn told him to label his billing sheets himself, showing he some level of personal knowledge
about Osborn’s billing system and codes.
These allegations, taken together, support a strong inference that Osborn submitted false
claims in violation of the FCA. Requiring Klein to reach the significantly higher and unnecessary
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bar of alleging specific fraudulent invoices in his complaint would improperly impose a burden
of proof at the pleading stage.
In a pre-Thayer FCA case, the Eighth Circuit suggested that relaxing Rule 9(b)’s pleading
requirements to allow relators to use discovery to plead with particularity only later would open
the floodgate to baseless claims. United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d
552, 559 (8th Cir. 2006). The Rule 9(b) application urged by petitioner, however, is not a
“relaxed” version of that rule, but rather an enforcement of the particularity requirement that
stops short of becoming a proof requirement. Requiring specific details of a scheme, together
with indicia that support a strong inference that claims were submitted, avoids the undue risk the
Joshi court identified.
C. Requiring specific invoices to satisfy Rule 9(b) in every FCA case would largely
defeat the FCA’s remedial purpose.
As the district court stated below, the purpose of the FCA is to “encourage private
citizens who are aware of fraud against the government to expose the fraud, while preventing
opportunistic suits by individuals who hear of fraud publicly but play no part in exposing it.”
Klein, No. 2014-CM-0839, at *12 (quoting United States ex rel. Matheny v. Medco Health
Solutions, Inc., 671 F.3d 1217, 1222 (11th Cir. 2012)). Strictly requiring all FCA plaintiffs to
allege specific fraudulent invoices would effectively strip the statute of its intended function as a
tool for revealing fraud. An application of Rule 9(b) that does not require such invoice
allegations where sufficient details of the fraud scheme itself are alleged would preserve the
FCA’s vital purpose and still keep opportunistic litigation at bay.
The Fifth Circuit’s application of 9(b) in Grubbs struck the correct balance between the
FCA’s competing concerns. Rule 9(b) “is context specific and flexible and must remain so to
achieve the remedial purpose of the False Claim Act.” Grubbs, 565 F.3d at 190. Various courts
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have acknowledged the immense hurdle to satisfying Rule 9(b) that would exist where relators
simply cannot access an FCA defendant's billing and invoice records. See, e.g., Nathan, 707 F.3d
at 458. In fact, it would be logical for defendants that actually are engaged in a fraud on the
government to be especially vigilant in restricting as many potential whistleblowers as
possible—including those with the most access to other information about the scheme—from
accessing their claims documents.
If Rule 9(b) is applied to require allegations of specific invoices in all FCA cases, even a
plaintiff who pleads every other detail about an enormous, complex, multi-million-dollar scheme
will be unable to successfully challenge that fraud if the defendant secured its claims documents.
Finding that Rule 9(b) required Klein to allege specific false invoices, even in such a scenario,
would fully defeat the FCA’s fraud-revealing purpose.
For the foregoing reasons, an application of Rule 9(b) that does not require specific
invoices in all FCA complaints best serves the purposes of that Rule, avoids improperly
imposing a burden of proof at the pleading stage, and furthers the remedial goal of the FCA.
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CONCLUSION
For the foregoing reasons, Dr. Rav I. Klein respectfully requests that the Supreme Court
reverse the Thirteenth Circuit’s decision on Osborn Laboratories’ 12(b)(6) motion to dismiss for
failure to state a claim, uphold the decision on the 12(b)(1) motion to dismiss for lack of
jurisdiction, and remand this case for further proceedings.
Respectfully submitted,
Dr. Rav I. Klein, Petitioner
By: Team Thirteen
Counsel for Dr. Rav I. Klein, Petitioner
