‘

No. 2015-01

IN THE

Supreme Court of the United States

__________

UNITED STATES EX REL. KLEIN,

Petitioner,

v.

OSBORN LABORATORIES, INC.

Respondent. __________

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Thirteenth Circuit __________

BRIEF FOR THE RESPONDENT __________

TEAM 8

2015 Julius H. Miner Moot Court Competition

2

QUESTIONS PRESENTED

1. Whether the False Claims Act first-to-file bar precludes a follow-on suit when an

earlier-filed complaint provided sufficient notice of fraud to the government

without meeting Federal Rule of Civil Procedure 9(b)’s heightened pleading

standard and was dismissed prior to the filing of the follow-on suit.

2. Whether a complaint filed under the False Claims Act can overcome Federal Rule

of Civil Procedure 9(b)’s heightened pleading standard without alleging the

particularities of the fraudulent offense actually prohibited by the Act.

3

TABLE OF CONTENTS

QUESTIONS PRESENTED ........................................................................................................ 2

TABLE OF CONTENTS ............................................................................................................. 3

TABLE OF AUTHORITIES ....................................................................................................... 5

OPINIONS BELOW ..................................................................................................................... 8

STATEMENT OF THE CASE .................................................................................................... 9

SUMMARY OF THE ARGUMENT ........................................................................................ 13

ARGUMENT ............................................................................................................................... 15

I. OSBORN’S MOTION TO DISMISS PETITIONER’S COMPLAINT UNDER RULE

12(b)(1) MUST BE GRANTED BECAUSE THE CLAIM IS BARRED BY THE FCA’S

FIRST-TO-FILE PROVISION, WHICH IS TRIGGERED BY ANY PRIOR CLAIM

SUFFICIENT TO PROVIDE NOTICE OF FRAUD TO THE GOVERNMENT, AND

REMAINS IN EFFECT IN PERPETUITY. ............................................................................. 15

A. The first-to-file bar was activated by the Stewart action because its pleadings

provided sufficient notice of fraud to give the government an opportunity to investigate,

fulfilling the purpose of the bar. ........................................................................................... 16

1. The Rule 9(b) standard should not be read into the first-to-file clause because it is

not referenced anywhere in the False Claims Act. ........................................................... 16

2. The first-to-file bar must operate independently of the Rule 9(b) standard to

accomplish its goals of encouraging whistleblowers while rejecting suits of which the

government already has sufficient notice. ........................................................................ 17

3. Requiring complaints to satisfy Rule 9(b) to activate the first-to-file bar would lead

to undesirable policy outcomes by allowing a stream of follow-on cases and requiring

courts to review pleadings filed in other jurisdictions. ..................................................... 19

B. Once the first-to-file bar is activated, it must stay active in perpetuity to fulfill its

function of blocking follow-on suits of which the government already has notice. ............. 20

II. OSBORN’S MOTION TO DISMISS PETITIONER’S COMPLAINT UNDER RULE

12(b)(6) MUST BE GRANTED, BECAUSE PETITIONER FAILED TO PLEAD DETAILS

ABOUT A SPECIFIC FALSE CLAIM SUBMITTED TO THE GOVERNMENT, WHICH IS

NECESSARY TO OVERCOME RULE 9(b)’S PLEADING STANDARD. .......................... 22

A. The plain language of Rule 9(b) in conjunction with the plain language of the FCA

requires a plaintiff suing under the FCA to allege facts of at least one submitted false or

fraudulent invoice to overcome the pleading stage............................................................... 22

B. A bright line threshold at the pleading stage requiring allegation of the particularities

of at least one submitted false or fraudulent invoice would best fulfill Rule 9(b)’s purpose of

barring abusive litigation. ..................................................................................................... 25

4

C. If the 9(b) pleading bar is to be lowered for FCA claims, it must be done by

amending the Federal Rules of Civil Procedure, not by judicial fiat. ................................... 27

Conclusion ................................................................................................................................... 29

5

TABLE OF AUTHORITIES

CASES

Bates v. United States, 522 U.S. 23 (1997) ................................................................................... 16

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ......................................................................... 25

Campbell v. Redding Med. Ctr., 421 F.3d 817 (9th Cir. 2005) .................................................... 19

Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102 (1980) ......................... 16

Delta Air Lines, Inc. v. Aug., 450 U.S. 346 (1981) ....................................................................... 22

Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (10th Cir. 2004) ................................. 15

Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999) ............................ 25

In re Natural Gas Royalties Qui Tam Litig. (CO2 Appeals), 566 F.3d 956 (10th Cir. 2009) ...... 21

Keene Corp. v. United States, 508 U.S. 200 (1993) ..................................................................... 17

Ross v. Bolton, 904 F.2d 819 (2d Cir. 1990)................................................................................. 18

Schiavone v. Fortune, 477 U.S. 21 (1986) .................................................................................... 22

Simms v. D.C., 699 F. Supp. 2d 217 (D.D.C. 2010) ..................................................................... 25

Swierkiewicz v. Sorema N.A., 534 U.S. 506, (2002) ............................................................... 26, 27

U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350 (11th Cir. 2006) .................................................. 26

U.S. ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011). .......................... 16, 17, 18, 19

U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493 (6th Cir. 2007) ....................... 24, 26

U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) ................................. 24

U.S. ex rel. Costner v. United States, 317 F.3d 883 (8th Cir. 2003) ............................................. 25

U.S. ex rel. Ge v. Takeda Pharm. Co., 737 F.3d 116, 123 (1st Cir. 2013) ............................. 24, 25

U.S. ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28 (1st Cir. 2013) .............. 16, 17, 18, 19

U.S. ex rel. Hopper v. Anton, 91 F.3d 1261 (9th Cir. 1996) ......................................................... 24

6

U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001) ............................. 15, 21

U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451 (4th Cir. 2013) .......... 24, 25, 26

U.S. ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App'x 890 (5th Cir. 2013) .......... 23

U.S. ex rel. Totten v. Bombardier Corp., 286 F.3d 542 (D.C. Cir. 2002)..................................... 24

U.S. ex rel. Ven-A-Care of the Florida Keys, Inc. v. Baxter Healthcare Corp., 772 F.3d 932 (1st

Cir. 2014) .................................................................................................................................. 21

U.S. ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791 (8th Cir. 2011) .................................................... 24

U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111 (1st Cir. 2014) .................... 17, 20

U.S., ex rel. Shea v. Cellco P’ship, 748 F.3d 338 (D.C. Cir. 2014) .................................. 17, 18, 20

United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371 (5th Cir. 2009)....... 21

United States ex rel. Klein v. Osborn Laboratories, Inc., No. 14-0840 (13th Cir. 2014). 11, 12, 23

United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1,

2014) ............................................................................................................................... 9, 10, 11

United States v. McNinch, 356 U.S. 595 (U.S. 1958) ................................................................... 27

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) ................................................... 23

STATUTES

False Claims Act, 31 U.S.C. § 3730 (2012)........................................................................... passim

Judicial Improvements and Access to Justice Act, 28 U.S.C. § 2074 .......................................... 28

OTHER AUTHORITIES

Brian D. Howe, Conflicting Requirements of Notice: The Incorporation of Rule 9(b) into the

False Claims Act's First-to-File Bar, 113 Mich. L. Rev. 559 (2015) ....................................... 18

7

Department of Justice Office of Public Affairs, Justice Department Recovers $3.8 Billion from

False Claims Act Cases in Fiscal Year 2013, Justice News (Oct. 22, 2014),

http://www.justice.gov/opa/pr/justice-department-recovers-38-billion-false-claims-act-cases-

fiscal-year-2013 ........................................................................................................................ 27

Joel M. Androphy & Mark A. Correro, Whistleblower and Federal Qui Tam Litigation-Suing the

Corporation for Fraud, 45 S. Tex. L. Rev. 23 (2003). ............................................................. 27

Sean Elameto, Guarding the Guardians: Accountability in Qui Tam Litigation Under the Civil

False Claims Act, 41 Pub. Cont. L.J. 813 (2012) ............................................................... 25, 28

RULES

Federal Rule of Civil Procedure 8(a) ............................................................................................ 26

Federal Rule of Civil Procedure 9(b) ...................................................................................... 22, 23

TREATISES

Alan Wright et. al., § 1297 Pleading Fraud With Particularity—In General, 5A Fed. Prac. &

Proc. Civ. § 1297 (3d ed.) ......................................................................................................... 23

8

OPINIONS BELOW

The opinion of the District Court for the Southern District of Wigmore is reported at

United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1,

2014).

The opinion of the Thirteenth Circuit is reported at United States ex rel. Klein v. Osborn

Laboratories, Inc., No. 14-0840 (13th Cir. 2014).

9

STATEMENT OF THE CASE

Respondent Osborn Laboratories (Osborn) “has a sterling reputation as a leader in the

pharmaceutical industry . . . ” United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-

CM-0839 at *14 (S.D. Wig. May 1, 2014). In addition to developing the leading pharmaceutical

treatment for obesity, Osborn develops treatments for nonflu viruses such as HIV, ebola,

polyoma virus, and marburg virus, id., as well as for influenza, id. at *2.

Such developments became increasingly important over the past two decades, as the

country faced a growing frequency of influenza superbug epidemics. Id. at *2. With each new

outbreak, Osborn and other pharmaceutical companies incurred monumental expenses to develop

vaccines and rush them to market. Id. at *3. The companies suffered crippling financial losses

when vaccines were ineffective due to the evolving nature of new viruses. Id. Companies began

exiting the market, and in 2009, Osborn was the last to leave. Id.

After three flu outbreaks came and went without pharmaceutical company intervention,

Congress passed the Lonky-McCall Ensuring Pharmaceutical Industry Development of Effective

Medicines and Iterative Cures (EPIDEMIC) Act in order to spur vaccine research. Id. at *4. The

EPIDEMIC Act provided partial reimbursement for certain influenza research costs. Id.

Moreover, given security concerns about the viruses, EPIDEMIC allowed reimbursement

invoices to be filled out generally with only basic details included. Id. EPIDEMIC enticed four

out of the ‘big five’ pharmaceutical companies, including Osborn, to reenter the influenza

vaccine market. Id. While these companies still had to bear substantial investments themselves,

the reputational benefits of contributing to vaccines for crippling outbreaks helped keep

companies like Osborn solvent. See id. at *4, *5.

10

In the same year that EPIDEMIC was passed, Osborn hired Rav. I. Klein, (Petitioner) as

an influenza researcher. Id. at *6. Three years later, in September of 2013, the Hyper-Avian-

Ursa-Swiney iterative influenza virus (HAUSI) emerged, and infected half a million people in

just nine days. Id. at *5. Osborn expedited research for a cure, pouring huge amounts of time and

resources into its vaccine program. Id. On September 23, 2013, Osborn announced it had

developed a cure, which was rushed to market and saved an estimated twenty million lives. Id.

Petitioner claims his work in the summer of 2013 laid the groundwork for the expeditious

development of the vaccine. Id. at *6.

In the fall of 2013—the same time of the HAUSI outbreak—Petitioner began to have

misgivings about his job. He was assigned to a new project, and became unable to discern

exactly how his research was related to the influenza virus, even though he was instructed to bill

his time to an EPIDEMIC-related code. Id. Because of the high-security nature of influenza

research, id., and the ramifications of a security breach, id. at *4, assistants would occasionally

not be told the exact purpose of their assignments. Petitioner developed a belief that his work,

and that of co-workers, was not actually related to influenza research. Because of this, Petitioner

assumed that Osborn was violating the False Claims Act (FCA), 31 U.S.C. § 3730 (2012).

Petitioner resigned from Osborn on October 22, 2013. Id. at *7.

On November 17, 2013, Petitioner filed a qui tam action in the Southern District of

Wigmore alleging Osborn’s violation of the FCA. Id. at *6. Just one week earlier, on November

10, 2013, another relator and Osborn employee, Dr. French Stewart, filed a similar claim against

Osborn in District Court in Rodriguez. Id. at *8. After investigating the claims, the government

declined to intervene, and both cases were unsealed on January 10, 2014. Id.

11

Osborn filed a motion to dismiss Petitioner’s action for lack of subject matter jurisdiction

based on Federal Rule of Civil Procedure [hereinafter “Rule”] 12(b)(1) and the FCA’s first-to-

file bar, § 3730(b)(5). Section 3730(b)(5) states, “When a person brings an action under this

subsection, no person other than the Government may intervene or bring a related action based

on the facts underlying the pending action.” Based on Stewart’s first-in-time claim in Rodriguez,

the court granted Osborn’s motion to dismiss Petitioner’s complaint on March 7, 2013. Klein,

No. 2014-CM-0839 at *8.

On March 28, 2013, the Rodriguez court dismissed Stewart’s complaint under Rule

12(b)(6) because it did not satisfy Rule 9(b). Id. at *8, *9. Petitioner re-filed his complaint. Id. at

*9. This complaint, identical to his first, alleges a false billing scheme involving use of

EPIDEMIC billing codes for non-influenza related research. Id. at *6. It also lists executives and

other employees allegedly involved in fraud. Id. Notably, however, it does not allege any details

of a particular fraudulent invoice submitted to the government. Id.

Osborn again moved to dismiss the complaint, asserting it was barred by the first-to-file

clause and Rule 12(b)(1) and failed to state a claim under Rule 12(b)(6). Id. at *1. The court

denied the 12(b)(1) motion, holding that the first-to-file bar was not activated by Stewart’s

complaint, because Stewart’s complaint did not allege facts sufficient to state a claim. Id. at *12.

The court also denied the 12(b)(6) motion, holding that Rule 9(b) pleading is “satisfied where a

relator presents a highly plausible fraudulent billing scheme and where targeted discovery can

convert a strong inference into an explicit fact.” Id. at *14. The district court certified these two

issues to the circuit court on interlocutory appeal. Id. at *15.

The Thirteenth Circuit decided the appeal on December 18, 2014. United States ex rel.

12

Klein v. Osborn Laboratories, Inc., No. 14-0840 at *1 (13th Cir. 2014). Reaching a contrary

conclusion to the district court, the circuit court held that a prior complaint activates the first-to-

file bar when it provides the government with sufficient notice of the alleged fraud, regardless of

whether the complaint survived a Rule 12(b)(6) motion. Id. at *4. The circuit court, however,

affirmed the district court’s holding in part by ruling that a first-filed complaint precludes follow-

on actions only when the first-filed action is in fact before a court awaiting review, id. at *7,

despite Judge Divolivia’s vigorous dissent, id. at *15 (Divolivia, J, dissenting). Lastly, the circuit

court reversed the district court’s denial of the Rule 12(b)(6) motion, holding that Rule 9(b) must

be strictly adhered to so that defendants are only subject to the “time and financial costs of

litigation” when complaints contain “readily identifiable allegations of an actual false claim.” Id.

at *11.

On January 14, 2015, this Court granted a writ of certiorari and stayed the Thirteenth

Circuit’s mandate pending the outcome of this appeal. R. at 2.

13

SUMMARY OF THE ARGUMENT

The Thirteenth Circuit properly dismissed Petitioner’s FCA action under Rule 12(b)(6)

for failure to state a claim after applying the correct Rule 9(b) standard requiring allegations of

particularity about at least one false or fraudulent invoice actually submitted to the

government. The Thirteenth Circuit also correctly held that the Stewart complaint activated the

FCA’s first-to-file bar. The circuit court erred, however, in holding that the first-to-file bar is

temporally limited and was no longer active when Petitioner filed his complaint.

The Stewart complaint activated the first-to-file bar because it alleged sufficient essential

facts to put the government on notice of potential fraud. The circuit court correctly held that

Rule 9(b) has no bearing on whether a claim activates the first-to-file bar because the statutory

provision never references Rule 9(b). The purposes of Rule 9(b), driven by notice to the

defendant of an impending fraud suit, do not align with the purpose of the first-to-file bar, driven

by notice to the government. Moreover, applying a Rule 9(b) standard to activate the first-to-file

provision would allow too many follow-on qui tam suits, which tax judicial resources without

providing the government any more useful information. The circuit court correctly determined

that a first-to-file standard based on notice to the government would best fulfill the purposes of

the FCA.

The first-to-file bar remained active even after the Stewart complaint was dismissed. The

plain language of the bar does not provide for a time limit, nor is a time limit logical given that

the bar operates based on a standard of notice to the government. Once activated by sufficient

notice to the government, the bar is no longer dependant on the status of the original

complaint. The government, that is, cannot then be put “off notice.” The first-to-file bar best

14

fulfills the purposes of the FCA when it acts in perpetuity to block all follow-on complaints after

the government has received sufficient notice of fraud.

Furthermore, the circuit court correctly dismissed Petitioner’s complaint pursuant to

Osborn’s Rule 12(b)(6) motion for failure to state a claim. Because Petitioner sued under the

FCA, a fraud statute, the complaint was subject to Rule 9(b)’s heightened pleading standard.

Rule 9(b) requires that claims be pleaded with particularity—that is, the ‘who, what, when,

where, and how’ of the fraudulent offense. The fraudulent offense prohibited by the FCA is

actually submitting a fraudulent bill to the government. Thus, the particularities of at least one

submitted fraudulent invoice must be alleged.

Petitioner fell short. Indeed, Petitioner merely alleged facts that gave rise to a strong

inference that a fraudulent scheme exists. However, the plain language of Rule 9(b) in

conjunction with the plain language of the FCA, the purpose of Rule 9(b), and separation of

powers concerns, all require this Court to reject Petitioner’s argument for relaxation of the Rule

9(b) standard. This Court should accordingly affirm the Thirteenth Circuit’s granting of Osborn’s

Rule 12(b)(6) motion to dismiss.

15

ARGUMENT

I. OSBORN’S MOTION TO DISMISS PETITIONER’S COMPLAINT UNDER RULE

12(b)(1) MUST BE GRANTED BECAUSE THE CLAIM IS BARRED BY THE FCA’S

FIRST-TO-FILE PROVISION, WHICH IS TRIGGERED BY ANY PRIOR CLAIM

SUFFICIENT TO PROVIDE NOTICE OF FRAUD TO THE GOVERNMENT, AND

REMAINS IN EFFECT IN PERPETUITY.

The first-to-file bar balances two purposes: incentivizing whistleblowers and preventing

claims from opportunistic follow-on plaintiffs. U.S. ex rel. Lujan v. Hughes Aircraft Co., 243

F.3d 1181, 1187 (9th Cir. 2001). The overall goal of the FCA is to return fraudulently gotten

gains to the federal fisc. Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1279 (10th

Cir. 2004). The government can accomplish this once it is put on notice of a fraudulent claim,

which obviates the need for follow-on qui tam actions. Id.

Complaints need not meet the Rule 9(b) standard to provide notice to the government.

The text of the first-to-file rule demonstrates that Congress did not intend to use Rule 9(b) in that

context. Looking to the purpose of the FCA, a “notice to the government” standard better suits

the twin goals of incentivizing whistleblowers while preventing opportunistic claims. Finally, a

bar without the Rule 9(b) standard is more workable because it filters out more follow-on claims

and avoids courts ruling on sufficiency of claims in other jurisdictions.

Grounding the first-to-file bar in the purpose of providing government notice reveals that

the bar operates in perpetuity, regardless of the status of the first-filed action. First, the text of the

statute indicates perpetual operation. Second, the first-filed action provides notice to the

government. With the FCA’s notice purpose satisfied, there is no more reason to incentivize

whistleblowers. Instead, the sole remaining purpose is minimizing follow-on plaintiffs. This is

best accomplished by a perpetual bar.

16

The Stewart complaint provided the government with sufficient information to put it on

notice of alleged fraud. This activated the first-to-file bar, which remained active after the

Stewart complaint was dismissed. Petitioner’s complaint must accordingly be dismissed under

the FCA first-to-file bar.

A. The first-to-file bar was activated by the Stewart action because its pleadings

provided sufficient notice of fraud to give the government an opportunity to

investigate, fulfilling the purpose of the bar.

The Stewart complaint activated the first-to-file bar because 1) nothing in the FCA

indicates the Rule 9(b) standard should be applied to the bar, 2) the purposes of the FCA are

better met when the bar functions independently of Rule 9(b), and 3) applying a Rule 9(b)

standard to the bar would create undesirable policy outcomes.

1. The Rule 9(b) standard should not be read into the first-to-file clause

because it is not referenced anywhere in the False Claims Act.

The court must begin interpreting a statute with the language itself. Consumer Product

Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980). The first-to-file provision of the

False Claims Act, 31 U.S.C. § 3730(b)(5) (2012), states “when a person brings an action under

this subsection, no person other than the Government may intervene or bring a related action

based on the facts underlying the pending action.” The passage contains no reference linking the

first-to-file bar to the heightened pleading standard of Rule 9(b). This “militates against” reading

such a link into the bar. U.S. ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011).

The Court ordinarily does not read into a statute requirements which do not appear on the face of

it. See Bates v. United States, 522 U.S. 23, 29 (1997); U.S. ex rel. Heineman-Guta v. Guidant

Corp., 718 F.3d 28, 35 (1st Cir. 2013). Thus, contrary to Petitioner’s implicit request, a

requirement that a first-filed claim meet Rule 9(b) should not be read into the FCA.

17

Congress referenced other Federal Rules of Civil Procedure throughout the FCA, but did

not reference Rule 9(b). See, e.g., 31 U.S.C. §§ 3732(a), 3733(b)(1)(B), 3733(c)(2), 3733(h)(1),

3733(j)(6). In fact, there are two references to other Federal Rules in the same section as the

first-to-file bar. See id. §§ 3730(b)(2), 3730(b)(3). “When Congress includes language in one

section of a statute but omits it in another, it is generally presumed that Congress acts

intentionally and purposely . . . ” Heineman-Guta, 718 F.3d at 35 (quoting Keene Corp. v. United

States, 508 U.S. 200, 208 (1993) (internal quotation marks omitted)). Here, Congress’s refusal to

attach Rule 9(b) to the first-to-file bar should be understood as Congress intending that no such

link exist. While this statutorily based reasoning should be sufficient to conclude that the first-to-

file bar should not be linked with Rule 9(b)’s standard, the purpose of the first-to-file bar further

reinforces such an outcome.

2. The first-to-file bar must operate independently of the Rule 9(b) standard

to accomplish its goals of encouraging whistleblowers while rejecting

suits of which the government already has sufficient notice.

The first-to-file bar functions to reject suits “which the government is capable of pursuing

itself,” U.S., ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343 (D.C. Cir. 2014) (quoting Batiste,

659 F.3d at 1208) (internal quotation mark omitted), while providing whistleblowers an incentive

to alert the government of fraud, U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111,

117 (1st Cir. 2014). The government needs only certain essential facts before it is capable of

mounting its own investigation. Heineman-Guta, 718 F.3d at 35-36. The appropriate standard for

the first-to-file bar is thus ensuring the government has received notice of these essential facts.

Rule 9(b)’s requirement for particular pleading does not fit the functions of the first-to-file bar

because it would allow, rather than reject, many suits of which the government already has

sufficient notice of the fraud alleged.

18

Rule 9(b) provides notice to defendants and protects them from frivolous accusations by

allowing them to prepare an appropriate defense. Heineman-Guta, 718 F.3d at 36, Batiste, 659

F.3d at 1210. The first-to-file bar is concerned with notice to the government, not defendants. Id.

Accordingly, a complaint falling short of Rule 9(b)’s particularity requirements for notice to a

defendant may still “provide the government sufficient notice to begin an investigation.”

Heineman-Guta, 718 F.3d at 36.

There are several reasons the government requires less notice than the FCA defendant.

First, the pleading requirements of Rule 9(b) are designed to protect a defendant from the

reputational harm of a fraud suit. Ross v. Bolton, 904 F.2d 819, 823 (2d Cir. 1990). The

government, not being accused of anything, does not require this protection. See Brian D. Howe,

Conflicting Requirements of Notice: The Incorporation of Rule 9 (b) into the False Claims Act's

First-to-File Bar, 113 Mich. L. Rev. 559, 572 (2015). Second, the government works in

partnership with a qui tam relator, not as an adversary. Id. at 575. Finally, the government is

provided with a “written disclosure of substantially all material evidence and information the

person possesses.” Id. at 576 (quoting 31 U.S.C. § 3730(b)(2)). The government has sixty days

after a qui tam action is filed to review this evidence. See 31 U.S.C. § 3730(b)(2). This ensures

the government can adequately decide whether to intervene, regardless of whether Rule 9(b)’s

pleading standard is met.

In fact, Rule 9(b) as a standard for the first-to-file bar would conflict with one purpose of

the bar—to reject suits the government could pursue itself, Shea, 748 F.3d at 343. Hence, the

most appropriate standard for the first-to-file bar is simply that the complaint put the government

on notice of the alleged fraud.

19

3. Requiring complaints to satisfy Rule 9(b) to activate the first-to-file bar

would lead to undesirable policy outcomes by allowing a stream of

follow-on cases and requiring courts to review pleadings filed in other

jurisdictions.

Tying the first-to-file bar to Rule 9(b) would create a revolving door of cases alleging

incrementally more facts in an effort to meet Rule 9(b)’s standard. This is undesirable because it

would burden courts’ dockets with claims even after the government has received notice of the

essential facts needed to investigate fraud.

Petitioners will argue that adopting a lower “notice to the government” standard for the

first-to-file bar will create a perverse incentive for potential relators to be first at the expense of a

thorough and well-pleaded complaint. See, e.g., Campbell v. Redding Med. Ctr., 421 F.3d 817,

821 (9th Cir. 2005). However, a relator’s complaint must still meet the Rule 9(b) standard to

survive a Rule 12(b)(6) motion. Batiste, 659 F.3d at 1210-11. If insufficiently pleaded, the

relator’s claim would be dismissed and that relator would miss his or her opportunity at a reward.

Id. Thus, a potential relator would not be incentivized to file an overly broad complaint, Id.

Should a complaint be so broad as to not provide sufficient “notice to the government,” the first-

to-file bar would not be activated. Heineman-Guta, 718 F.3d at 38. A subsequent relator could

then assist the government via another complaint.

The greatest policy concern with tying the first-to-file bar to the Rule 9(b) standard is that

it would require a court where a second-in-time claim is filed to review the legal sufficiency of

the pleadings in the first-filed case. Batiste, 659 F.3d at 1210. This would be especially

problematic if courts in differing jurisdictions came to opposite conclusions on the sufficiency of

the first complaint due to differing precedent on the Rule 9(b) standard, for example. Batiste, 659

20

F.3d at 1210. Such a situation could lead to two parallel actions on the same underlying fraud, a

scenario the first-to-file bar was clearly designed to avoid.

The plain language of the first-to-file bar, the differing purposes of Rule 9(b) and the bar,

and avoidance of perverse policy outcomes all establish that Rule 9(b) would be a poor standard

for the first-to-file bar. The appropriate standard is one requiring government notice of essential

facts of the fraud. This accomplishes the purposes of the bar by rejecting suits the government is

capable of pursuing, Shea 748 F.3d at 343, while still providing an incentive to relators, Wilson,

750 F.3d at 117.

B. Once the first-to-file bar is activated, it must stay active in perpetuity to fulfill its

function of blocking follow-on suits of which the government already has notice.

Because the first-to-file bar is independent of the Rule 9(b) standard, the Court must also

address whether the bar remains in effect perpetually or is temporally limited. This determination

requires interpreting the meaning of “pending action” in § 3730(b)(5), which states “when a

person brings an action under this subsection, no person other than the Government may

intervene or bring a related action based on the facts underlying the pending action.” Based on

the statute’s plain language and purpose, the bar must be active in perpetuity.

The simplest reading of the first-to-file bar reveals that the word “pending” is referential,

serving simply to “identify which action bars the other.” Shea, 748 F.3d at 343. Indeed, Congress

has worded statutes differently when using "pending" in a temporal context. Id. at 344. See, e.g.,

28 U.S.C. § 1500 (any claim for . . . which the plaintiff . . . has pending in any other court any

suit or process against the United States.... (emphasis added)), (42 U.S.C. § 300aa–11(a)(5)(B)

(precluding a person from bringing a vaccine-related claim... if he or she “has pending a civil

action for damages for a vaccine-related injury or death” (emphasis added)). In § 3730(b)(5),

however, Congress did not use “pending” in such a context. Interpreting the bar as temporally

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limited requires adding words like “when a person has pending an action” at the beginning of the

clause or appending “while the first action remains pending” at the end of the clause, Shea, 748

F.3d at 343. Reading the statute as written, however, shows that “pending action” merely

distinguishes the earlier- from the later-filed action. 748 F.3d at 343.

Keeping in mind that the purpose of the FCA is to put the government on notice of fraud

so that it can be investigated, U.S. ex rel. Ven-A-Care of the Florida Keys, Inc. v. Baxter

Healthcare Corp., 772 F.3d 932, 937 (1st Cir. 2014), a perpetual first-to-file bar best

accomplishes the twin goals of promoting incentives for whistleblowers while preventing

opportunistic successive plaintiffs, Lujan, 243 F.3d at 1187. The first-to-file bar incentivizes

whistleblowers by protecting the relator who wins the “race to the courthouse” from having to

share the reward with follow-on filers. In re Natural Gas Royalties Qui Tam Litig. (CO2

Appeals), 566 F.3d 956, 961 (10th Cir. 2009). In this way, the first-to-file bar prioritizes

timeliness, over detail, in complaints. United States ex rel. Branch Consultants v. Allstate Ins.

Co., 560 F.3d 371, 377 (5th Cir. 2009). Importantly, the first-filing relator is protected either

way.

Additionally, a perpetual bar “weeds out” opportunistic claims without sacrificing notice

to the government. This is because a suit need not be “pending” for the government to be on

notice. Lujan, 243 F.3d at 1188. Once the first claim is filed, resolution of it (by dismissal or

otherwise) does not put the government “off notice” of the fraud. Shea, 748 F.3d at 344. A

promptly filed claim fulfills the goal of the first-to-file rule regardless of whether it is

subsequently dismissed. Lujan, 243 F.3d at 1188.

This analysis firmly demonstrates that the incentive for whistleblowers to file is

unaffected by whether the bar is perpetual. However, the bar functions much more effectively to

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prevent opportunistic successive plaintiffs if it is perpetual. Thus, a perpetual bar best endorses

the purposes of the first-to-file provision.

II. OSBORN’S MOTION TO DISMISS PETITIONER’S COMPLAINT UNDER RULE

12(b)(6) MUST BE GRANTED, BECAUSE PETITIONER FAILED TO PLEAD

DETAILS ABOUT A SPECIFIC FALSE CLAIM SUBMITTED TO THE

GOVERNMENT, WHICH IS NECESSARY TO OVERCOME RULE 9(b)’S

PLEADING STANDARD.

When fraud is alleged, a claimant “must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Because the FCA is a statute that makes one

liable for defrauding the government, 31 U.S.C. § 3729–3733 (2012), FCA claims fall under the

ambit of Rule 9(b). See Klein, No. 14-0840 at *8 (“The Supreme Court has repeatedly identified

the FCA as an anti-fraud statute.” (citations omitted)).

The plain language of Rule 9(b) in conjunction with the plain language of the FCA, the

purpose of Rule 9(b), and separation of powers concerns, all counsel in favor of this Court

holding that Rule 9(b)’s requirement of particularity requires pleading, at a minimum, the ‘who,

what, when, where and how’ of a false or fraudulent submitted bill. In so holding, Petitioner’s

complaint, which fails to “directly allege[] the existence of any specific fraudulent invoice,”

Klein, No. 14-0840 at *8, must be dismissed for failing to meet Rule 9(b)’s pleading standard.

A. The plain language of Rule 9(b) in conjunction with the plain language of the

FCA requires a plaintiff suing under the FCA to allege facts of at least one

submitted false or fraudulent invoice to overcome the pleading stage.

In construing a Federal Rule of Civil Procedure, the Court should first consider the plain

language of the rule. See Schiavone v. Fortune, 477 U.S. 21, 30 (1986); Delta Air Lines, Inc. v.

Aug., 450 U.S. 346, 350 (1981). Rule 9(b) states: “In alleging fraud or mistake, a party must state

with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).

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Because Rule 9(b) applies to all claims alleging fraud or mistake, of which FCA claims

are merely one species, Rule 9(b)’s language is not specific to the FCA. Rather, the court must

give meaning to the words “circumstances” and “particularity” depending on the type of claim.

Generally, “circumstances” refers to “matters such as the time, place, and contents of the false

representations or omissions,” as well as the person responsible. Alan Wright et. al., § 1297

Pleading Fraud With Particularity—In General, 5A Fed. Prac. & Proc. Civ. § 1297 (3d ed.).

“Particularity” means with specificity. See e.g., U.S. ex rel. Rost v. Pfizer, Inc., 507 F.3d 720,

731 (1st Cir. 2007).

In other words, to “state with particularity the circumstances constituting fraud or

mistake,” Fed. R. Civ. P. 9(b), one must allege the ‘who, what, when, where and how’ of the

fraud at issue. This understanding of Rule 9(b) has been firmly established among the circuit

courts. See, e.g., U.S. ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App'x 890, 892

(5th Cir. 2013); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

The information that satisfies the ‘who, what, when, where and how’ varies with the type

of fraud alleged. In FCA claims, plaintiffs must plead the ‘who, what, when, where and how’ of

an actually submitted false or fraudulent bill, because that is the offense prohibited by the FCA,

as evidenced by the plain language of the statute. 31 U.S.C. §§ 3729(a)(1)(A)-(B) states: “any

person who—(A) knowingly presents, or causes to be presented, a false or fraudulent claim for

payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false

record or statement material to a false or fraudulent claim” is civilly liable to the government. 31

U.S.C. § 3729(a)(1)(A)’s inclusion of the word “present” demonstrates that the actual

submission of a false claim is required. See also U.S. ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791,

797 (8th Cir. 2011). And where 31 U.S.C. § 3729(a)(1)(B) might leave room for doubt about the

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necessity of an actual submission, 31 U.S.C. § 3729(2)(A)(i) clarifies: a “claim” is defined as a

request or demand “presented to an officer, employee, or agent of the United States.” Thus, in

the context of FCA claims, the offense is the submitted false or fraudulent claim to the

government. See U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 454 (4th Cir.

2013), cert. denied, 134 S. Ct. 1759, 188 L. Ed. 2d 592 (2014) (“Importantly, to trigger liability

under the Act, a claim actually must have been submitted to the federal government for

reimbursement . . .” (internal quotation marks omitted)); Totten, 286 F.3d at 551; U.S. ex rel.

Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996)).

When the plain language of Rule 9(b) is read in conjunction with the plain language of

the FCA, it becomes clear that a plaintiff must allege, at minimum, the ‘who, what, when, where

and how’ of a specific fraudulent invoice submitted to the government in order to overcome

9(b)’s pleading standard. See e.g., U.S. ex rel. Ge v. Takeda Pharm. Co., 737 F.3d 116, 123 (1st

Cir. 2013), cert. denied, 135 S. Ct. 53, 190 L. Ed. 2d 30 (2014); U.S. ex rel. Bledsoe v. Cmty.

Health Sys., Inc., 501 F.3d 493, 504 (6th Cir. 2007). Contrary to the district court’s holding,

allegations that merely give rise to an inference of a fraudulent billing scheme, even an inference

that is “highly plausible,” Klein, No. 2014-CM-0839 at *14, simply do not satisfy the plain

language requirements of Rule 9(b), U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301,

1313 (11th Cir. 2002) (“[W]e cannot be left wondering whether a plaintiff has offered mere

conjecture or a specifically pleaded allegation on an essential element of the lawsuit.”).

Given the plain language of Rule 9(b) and the FCA, plaintiffs suing under the FCA must

allege details of at least one submitted false or fraudulent invoice to overcome the pleading stage.

Because Petitioner failed to allege the particularities of a submitted false invoice, Respondent’s

Rule 12(b)(6) motion to dismiss must be granted.

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B. A bright line threshold at the pleading stage requiring allegation of the

particularities of at least one submitted false or fraudulent invoice would best

fulfill Rule 9(b)’s purpose of barring abusive litigation.

Plaintiffs bringing FCA claims must allege the particularities of a submitted fraudulent

claim, as any relaxation of this standard would eviscerate Rule 9(b)’s purpose. As the Supreme

Court has directed, “[o]n certain subjects understood to raise a high risk of abusive litigation, a

plaintiff must state factual allegations with greater particularity than Rule 8 requires. Fed. Rules

Civ. Proc. 9(b)-(c).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569 (2007). Fraud claims under

the FCA are exactly the kinds of claims that create a risk of abusive litigation, because the

potential for high payouts for successful relators, see Sean Elameto, Guarding the Guardians:

Accountability in Qui Tam Litigation Under the Civil False Claims Act, 41 Pub. Cont. L.J. 813,

844 (2012) (noting that qui tam relators were awarded over $2.8 billion between 1986 and 2010),

and the high costs faced by defendants, see Simms v. D.C., 699 F. Supp. 2d 217, 226 (D.D.C.

2010) (acknowledging the potential for reputational harm and strike suits).

Indeed, preventing abusive litigation can be understood as Rule 9(b)’s umbrella purpose,

under which are several more discrete purposes: to give notice to defendants so they may

“respond specifically and quickly to the potentially damaging allegations,” U.S. ex rel. Costner v.

United States, 317 F.3d 883, 888 (8th Cir. 2003), to protect defendants from reputational harm,

Nathan, 707 F.3d at 456, to prevent frivolous suits, Harrison v. Westinghouse Savannah River

Co., 176 F.3d 776, 784 (4th Cir. 1999), and to “eliminate fraud actions in which all the facts are

learned after discovery, id. Thus, in the context of FCA claims, the very purpose of the

particularity requirement of Rule 9(b) is to serve as a “limitation[] on qui tam actions.” Ge, 737

F.3d at 123.

26

If the plaintiff does not allege particularities about a submitted fraudulent claim, the

defendant is not effectively put on notice and cannot specifically respond. Moreover, potential

plaintiffs will be further incentivized to file suits in order to go on fishing expeditions during

discovery. U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350, 1359-60 (11th Cir. 2006) (predicting

that plaintiffs who get into discovery this way “will request production of every . . . claim

submitted by the Defendant” during the time period alleged, and that the court will face

“difficulty in fashioning logical and principled limits on what has to be produced.” (internal

quotation marks omitted)).

Additionally, “Rule 9(b) is not to be read in isolation.” Bledsoe, 501 F.3d at 503. When

read in the context of the entire Federal Rules of Civil Procedure, and specifically alongside Rule

8(a), Rule 9(b)’s purpose of preventing abusive litigation is apparent. Rule 8(a), which governs

pleadings for all claims besides fraud or mistake, requires only “a short and plain statement of

the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This “liberal

notice pleading” standard was “adopted to focus litigation on the merits of a claim.”

Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). Unlike Rule 8(a), however, Rule 9(b)

pushes the focus forward to the pleading standard. Accordingly Rule 8(a) requires only

plausibility, whereas Rule 9(b) requires plausibility and particularity. See Nathan, 707 F.3d at

455.

Petitioner’s fear that requiring such particularities to overcome Rule 9(b) would bar

whistleblowers with meritorious claims is overblown. First, the Supreme Court has resolved that

“the False Claims Act was not designed to reach every kind of fraud practiced on the

Government.” United States v. McNinch, 356 U.S. 595, 599 (U.S. 1958). Furthermore, even if

flexibility in the Rule 9(b) standard was permissible, there is no empirical evidence as to how

27

many potential plaintiffs exist who have legitimate FCA claims, but lack the means of securing

billing information. On the other hand, it is well-documented that the number of filed qui tam

actions has ballooned since the 1986 Amendments to the Act. See Department of Justice Office

of Public Affairs, Justice Department Recovers $3.8 Billion from False Claims Act Cases in

Fiscal Year 2013, Justice News (Oct. 22, 2014), http://www.justice.gov/opa/pr/justice-

department-recovers-38-billion-false-claims-act-cases-fiscal-year-2013 (“The number of qui tam

suits filed in fiscal year 2013 soared to 752—100 more than the record set the previous fiscal

year.”); Joel M. Androphy & Mark A. Correro, Whistleblower and Federal Qui Tam Litigation-

Suing the Corporation for Fraud, 45 S. Tex. L. Rev. 23, 28 (2003). Thus, not only does the

theoretical purpose of Rule 9(b) support requiring allegations of particularities of a submitted

fraudulent bill, but current practical realties demand it.

C. If the 9(b) pleading bar is to be lowered for FCA claims, it must be done by

amending the Federal Rules of Civil Procedure, not by judicial fiat.

Because Rule 9(b) requires that the circumstances of fraud claims be pleaded with

particularity, the particulars of an actually-submitted false claim must be alleged. Petitioner’s

likely argument that circumstances giving rise to an inference of fraud are sufficient eviscerates

the distinction between claims pleaded under Rule 8(a) versus those pleaded under Rule 9(b). If

Congress and this Court decide to lower the Rule 9(b) bar for FCA claims, essentially creating a

carve-out from the rule, that change must take place through the Federal Rules of Civil

Procedure amendment process.

In Swierkiewicz v. Sorema N. A., this Court made clear that adjusting the scope of a

Federal Rule must be done in the amendment process. 534 U.S. 506, 515 (2002) (refusing to

expand the types of claims that must be pleaded under Rule 9(b), and noting the scope of Rule

9(b) could only be broadened “by the process of amending the Federal Rules, and not by judicial

28

interpretation.” (internal quotation marks omitted)). Similarly, if the scope of Rule 9(b) is to be

adjusted for FCA claims—by lowering what constitutes a sufficient pleading—it must be done

by amendment. See Judicial Improvements and Access to Justice Act, 28 U.S.C. § 2074

(governing the process by which Congress approves proposed Federal Rules).

Alternatively, Congress could simply amend the FCA itself to remove FCA claims from

Rule 9(b). Indeed, in 2007 and 2009, these types of laws were proposed. Elameto, Guarding the

Guardians: Accountability in Qui Tam Litigation Under the Civil False Claims, supra, at 823

(“Both H.R. 4854 and H.R. 1788, neither of which became law, proposed language that

explicitly made FRCP 9(b) inapplicable to qui tam filings.”). Thus, either via amendment of Rule

9(b) or via statute, avenues exist for Congress to relax the pleading standard of the FCA if it sees

fit. Until then, this Court must respect the plain language of Rule 9(b) in conjunction with the

plain language of the FCA, and the purpose of Rule 9(b), in holding that Rule 9(b)’s requirement

of particularity requires pleading, at a minimum, the ‘who, what, when, where and how’ of a

false or fraudulent submitted bill.

29

Conclusion

For the forgoing reasons, Respondent respectfully requests that the Court affirm the

Thirteenth Circuit’s decision dismissing Petitioner’s complaint pursuant to Rule 12(b)(6), and

reverse the Thirteenth Circuit’s decision which denied Respondent’s motion to dismiss pursuant

to Rule 12(b)(1).