In a recent case, affirming the dismissal of an FCA complaint against the City of Chicago, the Seventh Circuit provided guidance to those seeking to understand the pleading requirements for an implied certification claim after the Supreme Court’s recent decision in Escobar. In United States ex rel. Hanna v. City of Chicago, No. 15-3305 (7th Cir. Aug. 22, 2016), the Court held that the relator failed to provide sufficient detail on the alleged statutory and regulatory violations and the link between those violations and the alleged false certification to meet the heightened Rule 9(b) standard.
The case was brought by a long-time Chicago resident who was involved in the real estate industry and had an expressed interest in fair housing. He alleged that the City used its “aldermanic privilege” policy, which grants each alderman control over whether and where affordable housing projects are built in his or her ward, and other strategic zoning policies, to direct affordable housing projects to less desirable and racially segregated neighborhoods. As a result, he alleged, the City violated unspecified civil rights requirements. Though the relator identified specific statutes and regulations with which the City allegedly failed to comply in his briefs on appeal, the Court refused to consider those claims because the relator failed to provide those details in the pleadings, as required by Rule 9(b).
The Seventh Circuit explained that:
Where the allegedly false certification relates to a failure to comply with certain statutory and regulatory provisions, the plaintiff should be able to tell the [defendant] which ones it flouted, and how and when. If the particularity requirement is meant to ensure more thorough investigation before filing, it is not too much to ask that one aspect of that investigation include the specific provisions of law whose violation made the certification of compliance false. Moreover, if, as in this case, a defendant is presented only with an undifferentiated raft of statutory and regulatory provisions, it will be nearly impossible for the defendant to prepare a defense. And the district court will find it quite difficult, on a motion to dismiss, to determine whether the defendant actually falsely certified compliance with any specific provision.
The court added that, in addition to identifying specific violations, a relator must identify the time, place, and “method by which the misrepresentation was communicated” to the government and identify how he or she learned of those misrepresentations. Regarding the latter requirement, the Court noted that the relator in this case seemed to lack any inside knowledge that he could contribute in his role as whistleblower.
This opinion suggests that courts may use the heightened pleading standard for implied certification claims to discourage overreaching allegations that make vague accusations of a defendant’s failure to comply with statutory or regulatory obligations and fail to put defendants on notice of the specific claims at issue. A copy of the court’s opinion can be found here.