Clarifying Rule 9(b) in FCA Actions: Specificity Requirements for Pleading False Claims

Introduction

Jaime Vargas and Francis R. Alvarez (“relators”) brought a qui tam action under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., against Lincare, Inc. and its subsidiary Optigen, Inc. (“defendants”). The relators alleged four distinct schemes—up-coding of CPAP accessories as ventilator equipment, routine waiver of patient co-pays, automatic shipments of supplies, and kickback payments to referring technicians—and claimed each gave rise to false claims submitted to Tricare. The United States District Court for the Middle District of Florida dismissed the relators’ fourth amended complaint for failure to meet Rule 9(b)’s heightened pleading standard. On appeal, the Eleventh Circuit affirmed in part and reversed in part, holding that only the up-coding allegations were pleaded with sufficient particularity.

Summary of the Judgment

The Eleventh Circuit examined each of the four theories alleged under a single FCA count:

Battery Up-Coding Scheme: Optigen allegedly billed CPAP batteries, chargers, and cables under ventilator accessory codes (A4611–A4613). The relators identified dozens of actual claims by invoice number, patient identifier, billing code, date, and amount. The court held these allegations satisfied Rule 9(b) as they contained “sufficient indicia of reliability” and alleged actual claim submissions.
Co-Pay Waiver Scheme: Relators alleged that Optigen automatically included a generic co-pay waiver form in every setup package without financial‐hardship review. They did not identify a single submitted claim reflecting an improper waiver. The court affirmed dismissal, finding no particularized allegations tying the waiver practice to false claims.
Automatic Supply Shipments: Relators claimed Optigen shipped replacement masks and filters on a regular schedule, whether requested or not, to meet company metrics. Without identifying specific claims or having personal billing knowledge, these allegations failed Rule 9(b) and were dismissed.
Kickback Scheme: Relators alleged Optigen paid setup fees and perks to Contract Field Technicians (CFTs) to secure patient referrals. They offered no specific instances of referral inducements or any patient–provider linkage. The court held those allegations too general to withstand dismissal.

The appellate court affirmed the district court’s dismissal of the co-pay, auto-ship, and kickback theories, but reversed as to the up-coding theory and remanded for further proceedings on that claim alone.

Analysis

Precedents Cited

Clausen v. Laboratory Corp. of America, 290 F.3d 1301 (11th Cir. 2002): Held that FCA claims must allege with particularity both the fraudulent scheme and the actual submission of false claims.
Hopper v. Solvay Pharmaceuticals, Inc., 588 F.3d 1318 (11th Cir. 2009): Emphasized that relators must provide specifics—who, what, when, where, how—about false claims to survive a motion to dismiss.
United States ex rel. Atkins v. McInteer, 470 F.3d 1350 (11th Cir. 2006): Clarified that “indicia of reliability” can, in context, satisfy Rule 9(b) even absent documentary proof if the relator had first-hand billing knowledge.
United States ex rel. Walker v. R&F Properties of Lake County, Inc., 433 F.3d 1349 (11th Cir. 2005): Found specific observations and conversations about billing sufficient under Rule 9(b).

These decisions collectively shape the “two-pronged” pleading requirement in Eleventh Circuit FCA cases: 1) particularize the fraudulent scheme and 2) allege facts showing actual false claims submitted to the government.

Legal Reasoning

The court applied Federal Rule of Civil Procedure 9(b) to each theory:

Sufficiency of Allegations: A relator must plead “the who, what, when, where, and how of the alleged fraud.” General or conclusory assertions are insufficient.
Submission of a Claim: FCA liability arises only from the presentation of a false claim. Alleging a fraudulent practice (e.g., co-pay waivers) without tying it to an actual submitted claim fails the FCA’s “sine qua non” requirement.
Indicia of Reliability: When a relator has first-hand, inside knowledge—such as auditing patient files and billing records—detailed allegations of specific invoice numbers and paid codes can satisfy Rule 9(b).
Drawing Inferences: On a motion to dismiss, the court must accept well-pleaded factual allegations as true and draw all reasonable inferences in the relator’s favor.

Impact

This decision reinforces and refines Eleventh Circuit FCA pleading standards:

Relator Access to Billing Data: First-hand access to invoices and claim records empowers stronger pleadings. Relators without such access must allege additional indicia of reliability or documentary support.
Limiting Fishing Expeditions: Qui tam complaints must now more precisely link internal misconduct or policy violations to specific false claims—deterring broad, unsupported allegations.
Strategic Pleading Advice: FCA plaintiffs should segregate distinct theories into separate counts and include sample claim identifiers, dates, billing codes, and reimbursement amounts whenever possible.
Lower Courts’ Gatekeeping Role: District courts should continue rigorously enforcing Rule 9(b) in FCA cases to weed out speculative or incomplete allegations and allow meritorious claims to proceed.

Complex Concepts Simplified

Qui Tam Relator: A private individual who brings suit on behalf of the United States under the FCA and shares in any recovery.
Rule 9(b) Heightened Pleading: Federal Rule of Civil Procedure 9(b) requires fraud allegations to include details on who committed the fraud, what was done, when and where it occurred, and how it defrauded the government.
HCPCS Coding: A standardized system for billing Medicare and Tricare; each code describes a category of medical equipment or service. Mis-use of codes can lead to overpayment or false claims.
False Claim: Any claim submitted to the government for payment or approval that a person knows is false or fraudulent.
Indicia of Reliability: Contextual evidence—such as first-hand billing data or internal documents—that supports the plausibility of allegations without formal proof at the pleading stage.

Conclusion

Jaime Vargas v. Lincare, Inc. reaffirms the Eleventh Circuit’s rigorous application of Rule 9(b) in False Claims Act litigation. Relators must do more than describe internal misconduct or policy violations; they must tie those schemes to concrete, actual claims submitted to the government with enough specificity to survive a motion to dismiss. This decision preserves the FCA’s power to root out government fraud while preventing overbroad, speculative lawsuits. Going forward, qui tam plaintiffs will need to marshal detailed billing data or first-hand accounts of claim submissions and to structure their complaints count by count to reflect each distinct theory of liability.