United States Ex Rel. Hirt v. Walgreen Co.
846 F.3d 879, 96 Fed. R. Serv. 3d 1024, 2017 FED App. 0019P (2017)
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Rule of Law:
A complaint alleging a violation of the False Claims Act must satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b) by stating with particularity the circumstances constituting fraud, which generally requires identifying at least one specific false claim that was submitted to the government for payment.
Facts:
- Andrew Hirt owned Andy's Pharmacies, including one in Cookeville, Tennessee.
- Hirt's Cookeville pharmacy competed with a local Walgreens pharmacy.
- Between November 2012 and August 2014, Hirt alleged that the Walgreens pharmacy offered $25 gift cards to customers to induce them to transfer their prescriptions.
- Hirt claimed that some of his customers, who were Medicare and Medicaid recipients, accepted these gift cards and moved their pharmacy business to Walgreens.
- Hirt further alleged that Walgreens submitted claims to the government for prescriptions filled by these specific customers, which he contended were fraudulent due to the illegal kickbacks.
Procedural Posture:
- Andrew Hirt filed a qui tam action against Walgreen Company in federal district court.
- The United States government declined to intervene in the case.
- Walgreens moved to dismiss the complaint for failure to state a claim with particularity under Federal Rule of Civil Procedure 9(b).
- The district court (the trial court) granted Walgreens' motion to dismiss.
- Hirt, as the appellant, appealed the dismissal to the U.S. Court of Appeals for the Sixth Circuit, with Walgreens as the appellee.
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Issue:
Does a False Claims Act complaint satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b) by alleging a fraudulent kickback scheme without identifying with particularity at least one specific false claim that was submitted to the government as a result of that scheme?
Opinions:
Majority - Sutton, Circuit Judge
No, a complaint does not satisfy Rule 9(b) by merely alleging a fraudulent scheme; it must state with particularity the circumstances of the fraud, which includes identifying a specific false claim. The court reasoned that Rule 9(b)'s requirement for particularity in fraud allegations is not met by general assertions and inferences. Citing its precedent in U.S. ex rel. Bledsoe, the court affirmed that the identification of at least one false claim is an 'indispensable element' of a False Claims Act complaint. Hirt's complaint failed because it did not identify any specific customers, prescription dates, or claim submission dates, leaving the court to merely infer that false claims were actually submitted. The court also clarified that prior references to a 'relaxed' standard do not grant courts authority to ignore the Federal Rules, but rather reflect that the particularity requirement can be met in different ways, such as through a plaintiff's personal knowledge of the defendant's billing practices, which Hirt lacked.
Analysis:
This decision reinforces a strict application of Federal Rule of Civil Procedure 9(b) for False Claims Act cases within the Sixth Circuit. It significantly clarifies that the previously mentioned 'relaxed' standard is not a true exception but a context-specific application of particularity, primarily available to plaintiffs with detailed, personal knowledge of a defendant's internal claims process. The ruling makes it more difficult for 'outsider' relators, like business competitors, to successfully initiate a qui tam lawsuit without first obtaining specific evidence of an actual false claim submitted to the government. This protects potential defendants from defending against speculative allegations of fraud based solely on the existence of a suspicious scheme.
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