What is required in order for a plaintiff, or “relator”, to properly plead a cause of action under the False Claims Act? The Eleventh Circuit addressed this issue in detail in Urquilla-Diaz v. Kaplan University, 780 F.3d 1039 (11th Cir. 2015). Federal Rule of Civil Procedure 8(a)(2) requires a relator’s complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 8’s pleading requirement does not require detailed factual allegations, “but it demands more than unadorned, the-defendant-unlawfully-harmed-me-accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949 (2009).
Under the False Claims Act, Rule 8’s pleading requirements are supplemented by Federal Rule of Civil Procedure 9(b). Kaplan University, 780 F.3d at 1051. Rule 9(b) provides that a party alleging fraud must allege with particularity the facts constituting the fraud. Rule 9(b) sets a heightened pleading standard in a False Claims Act action. To satisfy this higher standard, the relator must allege “facts as to time, place and substance of the defendant’s alleged fraud,” including “the details of the defendant’s allegedly fraudulent acts, when they occurred, and who engaged them.” Id. at 1051, quoting Cooper v. Blue Cross and Blue Shield, 19 F.3d 562, 567 – 68 (11th Cir. 1994).
Under 31 U.S.C. § 3729(a)(1) – (2), the False Claims Act enables private citizens to recover damages on behalf of the United States by filing a qui tam action. See United States ex rel. Clausen v. Lab Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002)(recognizing the “sine qua non of a False Claims Act arises from the submission of a fraudulent claim to the government, not the disregard of government regulations or failure to maintain proper internal procedures.”)
In order for a relator to state a claim under the False Claims Act, the relator must allege:
(1.) the defendant made a false record or statement for the purpose of getting
a false claim paid or approved by the government; and,
(2.) the defendant’s false record or statement caused the government to
actually pay a false claim, either to the defendant itself or to a third party.
Kaplan University, 780 F.3d at 1052, citing Hopper v. Solvay Pharm. Inc., 588 F.3d 1318, 1324 (11th Cir. 2009).
In Kaplan, the plaintiff-relator brought claims under the False Claims Act against Kaplan University for falsely certifying to the government that it was in compliance with various federal statutes and regulations in order to receive financial aid from the federal government. Kaplan 780 F.3d at 1043. The district court dismissed the relator’s claims and the relator appealed.
In order for the relator to allege a claim under the False Claims Act, he had to allege:
(1.) a false statement or fraudulent course of conduct;
(2.) made with scienter;
(3.) that was material; and,
(4.) causing the government to pay out money or forfeit money due.
Kaplan, 780 F.3d at 1052, citing United States ex rel., Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1174 (9th Cir. 2006)(recognizing that “it is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit.”) In Kaplan, the relator alleged that Kaplan certified its compliance with the Higher Education Act which bans recruitment based incentive compensation. Id. at 1053. The relator further alleged that Kaplan violated the Act’s ban by paying its recruiters retention bonuses, cash bonuses and trips or salaries based on the number of students they enrolled. Id. at 1053.
The Kaplan court found that the relator pleaded a plausible claim under the False Claims Act. The relator’s claims were not defeated simply because Kaplan’s compensation policy included nonrecruitment factors. The relator alleged that recruiters who worked for Kaplan received compensation, in part, based on their ability to enroll students. Based on these allegations, the court found that the relator in Kaplan “plausibly stated a claim under the False Claims Act based on Kaplan’s alleged violations of the incentive-compensation ban that relates to these recruiters.” Id. at 1054 – 1055.
Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at firstname.lastname@example.org.