A qui tam FCA case against Ford Motor Company came to a definitive close last week when the Sixth Circuit affirmed, for a second time, the dismissal of the relator’s first amended complaint and agreed with the lower court that the relator should not be allowed to file a second amended complaint. See United States ex rel. SNAPP, Inc. v. Ford Motor Co., 2010 WL 3419433 (6th Cir. Sept. 1, 2010). The first amended complaint alleged that Ford had misrepresented the extent of its dealings with small, minority-owned business to obtain government contracts, but contained no allegations concerning specific claims for payment submitted to the government. The Sixth Circuit held that its recent decisions requiring that an FCA complaint must allege the details of at least some representative claims submitted to the government was not so novel as to warrant giving the relator another opportunity to amend its complaint.
The relator, a subcontractor on certain contracts Ford had with the federal government, alleged that Ford falsely represented to the government that the relator was a minority-owned small business when it was allegedly “entirely controlled” by Ford and operated as a de facto subdivision of Ford. The relator contended that Ford made this misrepresentation so it could comply with government requirements that it hire as subcontractors small, minority-owned businesses. The government declined to intervene in the case.
On a prior appeal, the Sixth Circuit held that the first amended complaint failed to satisfy Rule 9(b) of the Federal Rules of Civil Procedure because it failed to allege a single specific claim for payment submitted to the federal government. However, the Sixth Circuit remanded the case to the district court so that it could reconsider its denial the relator’s motion to file a second amended complaint (which contained substantially more detail than prior complaints concerning specific contracts between Ford and the government) in light of the Sixth Circuit’s holding in the case United States ex rel. Bledsoe v. Community Health Systems, 501 F.3d 493 (6th Cir. 2007). In Bledsoe, which was decided after the district court denied the relator leave to file the second amended complaint, the Sixth Circuit held that an FCA complaint arising from a complex and far-reaching scheme need not plead every claim for payment at issue to satisfy Rule 9(b), but must still provide specific details concerning at least some actual claims for payment that are representative of all the claims at issue.
On remand, the district court refused to grant the relator leave to file the second amended complaint. The Sixth Circuit affirmed. Since the relator had moved for leave to file its second amended complaint after the district court dismissed the first amended complaint, the Sixth Circuit held that leave could be granted only if an intervening change in controlling law occurred after dismissal of the prior complaint. The Sixth Circuit found that Bledsoe was not an intervening change in the law, but was rather entirely consistent with prior decisions holding that a claim for payment is an essential element of a FCA violation and that a FCA complaint cannot simply describe a fraudulent scheme and surmise that false claims must have been submitted as a result of the scheme.
The Sixth Circuit’s continued adherence to its holding in Bledsoe, and its insistence that Bledsoe was not a change in the law, may mark the emergence of a significant circuit split. A growing number of circuits have held that FCA complaints need not identify specific claims for payment, provided there is some indicia of reliability in the pleading to support a conclusion that claims for payment were in fact made. The Sixth Circuit is joined by the Eighth Circuit and certain District Courts like the District of Maryland in still insisting that the complaint must allege at least some claims for payment with particularity. See, e.g., Maryland Court Dismisses Complaint Alleging Medicaid Rebate Fraud.