Whistleblower News & Articles
May 12, 2016
Late last year, we wrote about the False Claims Act qui tam case of United States ex rel. Ge v. Takeda Pharmaceuticals Company pending in the First Circuit. Ge raised a rather routine issue under Fed. R. Civ. P. 9(b). Rule 9(b) governs pleading fraud with particularity. However, Ge also raised an important and novel issue regarding liability under the False Claims Act. The First Circuit has now affirmed the district court’s dismissal of the case. However, in doing so, the Court reached only the 9(b) issue. It did not weigh in on the more intriguing question of if and when a violation of FDA laws can serve as the underpinnings of an False Claims Act violation.
The Court’s opinion on the Rule 9(b) issue is hardly surprising given the meager details alleged in the complaint. This stands in contrast to what is required by well-established First Circuit precedent. When a qui tam action alleges a defendant induced third parties to file false claims with the government, a relator can satisfy the Rule 9(b) requirement by providing factual or statistical evidence to strengthen the inference of fraud beyond possibility without necessarily providing details as to each false claim. But, the complaint must establish that false claims were submitted to the government for payment as a result of the defendant’s alleged misconduct.
Dr. Ge has, however, alleged next to no facts in support of the proposition that Takeda’s alleged misconduct resulted in the submission of false claims or false statements material to false claims for government payment. Dr. Ge alleges a conclusion that numerous claims for the four subject drugs would not have been submitted for government payment but for Takeda’s misconduct, but alleges no more than that. What is missing are any supporting allegations upon which her conclusion rests and any particulars.
The relator attempted to salvage her case under Rule 9(b) by raising three new theories of False Claims Act liability, but the First Circuit found these claims were waived because they were not raised in the district court. While not reaching the Rule 9(b) issue on these waived theories, the Court did note that it was “doubtful” any of these theories under any subsection of the FCA would have added the needed specificity under Rule 9(b). Id. at 125.
In doing so, the Court cited the Eleventh Circuit’s Clausen case and the Fourth Circuit’s Nathan case (which is the subject of a pending petition for a writ of certiorari to the Supreme Court), leading some to wonder if the First Circuit is signaling that it is becoming more restrictive on Rule 9(b) issues in whistleblower cases. We don’t think so. Rather, relators and their counsel must continue to look at Duxbury I cited in the Ge opinion as the floor for what must be alleged in a complaint to survive a defense challenge under Rule 9(b).
The First Circuit passed on the most watched issue in the case. This was also, the issue the United States had filed an amicus brief. That was the question of whether False Claims Act liability can ever hinge on violation of FDA post-approval reporting requirements. And whether alternative administrative remedies, such as those available through the FDA, preclude FCA liability. But that will have to wait for another day.