Fourth Circuit’s partial reversal highlights the role of pleading standards

Today the Fourth Circuit U.S. Court of Appeals partially reversed the dismissal of a whistleblower’s lawsuit under the False Claims Act. In U.S. ex rel. Elms v. Accenture, LLP, No. 07-1361 (July 22, 2009), the court let stand the dismissal of the qui tam fraud claim, but reversed the dismissal of Elm’s retaliation claim. The key difference was in the pleading standards.

The Fourth Circuit correctly noted that the pleading standards are heightened for fraud claims. Rule 9(b) of the Federal Rules of Civil Procedure (FRCP) requires that a plaintiff “state with particularity the circumstances constituting fraud or mistake.” The court held that Elms failed to allege with specificity the “who, what, when, where and how” of Accenture’s rebate scheme. So, the Court held that Accenture was off the hook for any fraud it committed against the federal government. This is a common problem for whistleblowers who discover their employer’s fraud, but who don’t have access to the documentation showing each step of the false claim made to the government. If the government chooses not to intervene, then the whistleblower will not have all the information needed to plead the claim with specificity.

FRCP 9(b) does not apply to Elm’s retaliation claim, however. Like ordinary civil claims, a retaliation claim only needs to be pled with enough details to give the other side “notice” of the claim. FRCP 8. Under this standard, the Court held that Elms provided enough details in his complaint. The Court sent the case back to the U.S. District Court for Maryland to proceed further.

Notably, the Court reached its decision relying on long-standing precedent. The Fourth Circuit did not rely on the Supreme Court’s recent decision in Ashcroft v. Iqbal (2009). To let John Ashcroft and Robert Mueller off the hook for detaining Arab Americans after the 9/11 terrorist attacks, the Supreme Court, by a 5-4 vote, held that even under Rule 8, the pleading not only has to give the other side notice of the claim, but must plead sufficient facts to allow a plausible inference that the claim has merit. Peter Elms’ attorney is Stephen Z. Chertkof of the Washington, DC, law firm Heller, Huron, Chertkof, Lerner, Simon & Salzman.


Exit mobile version