A recent decision of the United States Court of Appeals for the Seventh Circuit addressed the standard that courts should use to decide whether a whistleblower plaintiff has adequately pleaded that a defendant committed fraud in violation of the False Claims Act (“FCA”). In U.S. ex rel. Presser v. Acacia Mental Health Clinic, LLC, the Seventh Circuit held that under Federal Rule of Civil Procedure 9(b)’s “heightened” pleading standard for fraud claims, whistleblowers cannot base their allegations of FCA fraud solely on their own personal opinions or experiences—instead they must provide the relevant factual context that would enable a reader of their complaint to understand why the defendant’s alleged actions were forbidden by the FCA. This decision will help other defendants facing FCA lawsuits to convince courts to dismiss the lawsuits at the initial pleading stage.
In Presser, the whistleblower plaintiff was an independent contractor nurse practitioner who alleged two different types of fraud by the defendants, a health clinic and its owner. First, she claimed that the defendants misused a billing code for psychological and psychiatric assessments by charging patients under this code even when this type of evaluation was not performed. With respect to this claim, the Seventh Circuit held that the whistleblower adequately had alleged that the defendants had falsely presented claims for payment to the government.
Significantly, however, the Seventh Circuit found that the whistleblower’s second claim did not pass muster. The whistleblower alleged that the defendants conducted a number of medically unnecessary services for patients, such as treating patients with four different medical professionals, conducting regular urine drug screening, and requiring in person visits by patients to obtain a prescription refill or speak to a physician. A key factor for the Court was that the whistleblower relied on her own “personal estimation,” unsupported in any concrete manner, that certain treatments were medically unnecessary. The whistleblower failed to provide “medical, technical, or scientific context” that would allow others to understand why the treatments were not medically necessary, and her complaint also did not include any “references to policies or practices at other clinics, regulations or other publications” that would show that the defendants’ practices were “unusual.” The Court reasoned that a whistleblower “may not be in a position to see the entire picture” or “may be colored by considerable bias or self-interest,” and so his or her subjective evaluation, standing alone, will not be a sufficient basis for a fraud claim. Accordingly, the Court affirmed the lower court’s dismissal of this claim.
The Seventh Circuit’s decision helps to clarify the heightened pleading standard for fraud claims under the FCA. Whistleblowers cannot meet Rule 9(b)’s heightened pleading requirements by basing their allegations solely on their own subjective evaluations—instead, they must provide a “concrete basis,” independent from their own opinion, that puts a defendant’s alleged activity into its relevant context. Although this decision is only binding on courts within the Seventh Circuit, defendants can offer it to courts in other jurisdictions as persuasive authority in support of dismissal of FCA fraud claims.
The Seventh Circuit’s decision can be found here.
