Hospitals and health care systems that successfully defend against frivolous FCA actions may oftentimes recover fees and expenses incurred as part of their defense. Recently, however, the United States District Court for the District of Utah broadly connected this “frivolous” standard with Rule 9(b)’s pleading requirements—a decision that may stave off whistleblowers who have not put in the legwork before filing their complaint.

In U.S. ex rel. Sorenson v. Wadsworth Bros. Construction Comp., Inc.[1], the relator filed a qui tam action against a construction company asserting several causes of action under the FCA, including: 1) filing false claims; 2) false record; 3) conspiracy to defraud; and 4) false receipt—all claims of fraud that require the heightened pleading requirements of Rule 9(b).[2] After the government declined to intervene in the case, the defendant successfully moved to dismiss these claims, which the court found to be “conclusory, unsupported, and/or baseless.”[3] Similarly, the court found for the defendant on summary judgment on the relator’s claim of retaliation, holding that the claim was “meritless” because the relator failed to communicate to his employer that he was accusing it of violating the FCA. Shortly after the court awarded judgment in favor of the defendant, the defendant moved to collect its fees.[4]

In its decision, the court awarded the defendant reasonable fees and expenses under 31 U.S.C. §3730(d)(4) because it was “indisputably clear” that the relator’s claims were frivolous.[5] Just how frivolous was the relator’s action? The court eschewed the statute’s traditional interpretation and found that a failure to meet requisite pleadings standards rose to the level of frivolity.

In support of this holding, the court reasoned that the relator’s claims were frivolous because they were “conclusory, unsupported, and/or baseless,” failing to meet the requisite pleading standards under Rules 9(b) and 12(b)(6).[6] The court chose not to mirror the exact phrasing contained in the statutory language of §3730(d)(4), which allows for the recovery of fees when claims are “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” Rather, the court incorporated a phrase that is often connotated with the language used in Twombly[7] and Iqbal[8], where the Supreme Court held: “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[9]

The court’s deliberate logic connecting a failure to sufficiently plead fraud to frivolity suggests a level of mens rea for those who fail to meet the heightened pleading requirements of Rule 9(b). Under this rationale, those claims that fail because they do not state with particularity the who, what, when, where and how of the fraud may be considered frivolous. And though this decision may not be taken up by the Tenth Circuit or other district courts, it cements into caselaw an argument that defendants in FCA actions may incorporate into their own requests for fees under §3730(d)(4).

Posted on February 11, 2021 in FALSE CLAIMS ACT DEFENSE

Published by: HALL RENDER