Fourth Circuit Affirms Dismissal of FCA Complaint Alleging Contracting Fraud

Dorsey & Whitney LLP

In an unpublished decision issued on Thursday, August 13, 2015, the Fourth Circuit Court of Appeals reemphasized Federal Rule of Civil Procedure 9(b)’s “stringent particularity requirement” when it affirmed a lower court’s dismissal of plaintiff’s FCA claim, finding “that the district court did not err in concluding that the amended complaint failed to plead fraud with the requisite specificity.” McLain v. KBR, Inc., No. 14-1816 (4th Cir. Aug. 13, 2015).

In that case, plaintiff John McLain alleged “that KBR submitted false claims for payment in connection with electrical work it did in Iraq pursuant to a government contract.” Id. Although McLain pointed to seven purportedly fraudulent invoices submitted by KBR, the complaint only alleged that one of those invoices was for the electrical services forming the basis for the suit. In determining whether McLain’s pleadings conformed with Rule 9(b), the lower court noted that:

McLain fails to plead what specific services were billed in the invoice. As KBR’s duties involved ‘design, furnishing, installation and maintenance of electrical facilities,’ the services covered by the invoice could be for any of a variety of services. Moreover, McLain has failed to allege that the invoice was, in fact, false. Without an allegation as to what was specifically billed, the Court cannot discern what made the invoice false—for example, that the invoice was for a test never conducted or a test conducted in violation of LOGCAP III.

McLain v. KBR, Inc., No. 1:08-CV-499 (GBL/TCB) (E.D. Va. July 7, 2014) (internal quotations omitted). For this reason, the lower court found that under Rule 9(b)’s heightened pleading requirements, although McLain “identifies specific invoices submitted to the Government, McLain fails to allege the falsity of those invoices beyond alleging a set of conclusory statements. Moreover, McLain fails to allege the ‘who, what, when, where and how’ of the invoices . . . .”  In that vein, the lower court confirmed that “[t]here is no allegation as to who submitted the invoice to the Government, what specific services were billed in the invoice, or when and where the services were performed.” As such, the lower court concluded that the complaint failed to meet the particularity requirements of Rule 9(b). McLain appealed.

In reviewing the district court’s decision last week, the Fourth Circuit reiterated Twombly’s familiar teaching that, “to survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient ‘facts to state a claim to relief that is plausible on its face.’” McLain, No. 14-1816 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The court then confirmed that, “[i]n this context, ‘Rule 9(b) requires that an FCA plaintiff must, at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.’” Id. (quoting United States v. Triple Canopy, 775 F.3d 628, 634 (4th Cir. 2015), pet. for cert. filed, No. 14-1440 (June 8, 2015)). The court agreed that McLain’s failure to meet this standard rendered dismissal of his FCA claim appropriate.

McLain serves as an important reminder of the stringent evidentiary burden FCA plaintiffs must meet at the pleading stages of a dispute venued in the Fourth Circuit. It also provides FCA defendants with a model checklist to consider when submitting a motion to dismiss a complaint alleging false or fraudulent claims. To survive a motion to dismiss an FCA claim, it may not be enough that a plaintiff merely produce documentary evidence—such as the invoice produced by McLain—and broadly allege its falsity. Without specifying who submitted the invoice, what specific services the invoice is tethered to, when and where those services were rendered, and—perhaps most critically—how those services were fraudulent, the evidence contained on the face of that invoice will not be enough to meet the Fourth Circuit’s current iteration of Rule 9(b)’s heightened pleading requirements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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