Northern District of Illinois Dismisses FCA Case for Failure to Meet Heightened Requirements for Pleading Fraud

On March 14, 2019, the U.S. District Court for the Northern District of Illinois dismissed the False Claims Act complaint of a qui tam relator who failed to allege that the defendants—a health care product distributor and its parent company—made any specific representation to the government that was false.

The relator alleged that the distributor sold products to entities enrolled in Medicare and/or Medicaid, and received funds from the United States and the state of Illinois either directly or through various healthcare providers.  The relator filed suit under an implied false certification theory, and argued that the bills submitted for payment were false because the distributor failed to disclose its noncompliance with FDA regulations regarding the reporting of certain product recalls and other adverse events. 

The district court followed the U.S. Supreme Court’s 2016 decision in United Health Services, Inc. v. U.S. ex rel. Escobar.  There, the Supreme Court held that in order to state a claim for relief under an implied false certification theory, a claim for payment must make specific representations about the goods or services provided, and the failure to disclose an alleged noncompliance makes those representations misleading half-truths. 

The district court found that, in accordance with Escobar, the relator’s complaint did not allege sufficient facts under Federal Rule of Civil Procedure 9(b) to show a misrepresentation by omission, because a simple demand for payment cannot constitute a specific representation about the goods or services provided.  The court had no basis to determine what information or representation any specific claim for payment contained, so it could not determine whether any representation or omission was misleading.  The relator’s express false certification and fraudulent inducement theories failed for the same reason:  the relator did not allege an affirmative certification that the distributor had complied with the regulations at issue.

In addition, the relator failed to plead that the defendant’s omissions were material to the government’s decision to pay claims.  The allegation that the government made payments for claims that would not otherwise be allowed because the products were defective was too conclusory.  The relator did not allege that the government’s actual decision to pay claims changed in response to the relator’s lawsuit.  And the relator did not allege that compliance with the regulations at issue was a condition of payment, or that the government consistently refused to pay claims based on noncompliance.

The court also dismissed the relator’s FCA retaliation claims, and his claims based on similar theories arising under the Illinois False Claims Act.

The case is United States ex rel. Thonton v. Pfizer, Inc., No. 16-cv-7142 (N. D. Ill. Mar. 14, 2019).