It has long been the law of the Eleventh Circuit that, under the False Claims Act (FCA) and Federal Rule of Civil Procedure 9(b), a relator must provide sufficient “indicia of reliability … to support the allegation of an actual false claim for payment being made to the government.” U.S. ex rel. Clausen v. Laboratory Corp., 290 F.3d 1301, 1311 (11th Cir. 2002). To do so, a relator may either allege details of specific false claims, see U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350, 1358 (11th Cir. 2006), or direct knowledge based on the relator’s own experiences and on information gathered in the course of their employment, see United States v. HPC Healthcare, 723 F. App’x 783, 789 (11th Cir. 2018).
But what if a relator alleges the details of a scheme to submit false claims rather than the details of any individual claim? Is that enough to satisfy the Eleventh Circuit’s “reliable indicia” standard? The Eleventh Circuit says no. In United States ex rel. Vargas v. Lincare, Inc. et al., — F.4th —-, No. 24-11080 (11th Cir. Apr. 16, 2025), the court reversed in part and affirmed in part a dismissal for failure to plead a false claim with particularity as required under the FCA and Federal Rule of Civil Procedure 9(b).
Vargas began several years ago in the Middle District of Florida. Two relators sued under the FCA based on the following purported schemes: (1) delivering CPAP supplies coded as more expensive ventilator supplies or upcoding of billing of CPAP batteries and battery accessories; (2) allowing patient financial hardship co-pay waivers without assessing patients’ true financial situations; (3) delivering and billing for unnecessary durable medical equipment, and (4) paying kickbacks in the form of setup fees.
The crux of the relators’ FCA claim was the allegedly “routine” practice of submitting waivers of copayments for alleged financial hardships. They contended that the defendants “never” required patients to actually establish their financial hardship and, consequently, that the Government paid more than it should have for the claims submitted. The defendants moved for dismissal, and the court dismissed the entire complaint—the fourth amended—with prejudice. The court concluded, in a somewhat cursory fashion, that the complaint “d[id] not comply” with Rule 9(b)’s requirement to “state with particularity the circumstances constituting fraud or mistake.”
The Eleventh Circuit reversed as to the battery upcoding scheme but affirmed as to the rest. With respect to the “upcoding” scheme, relators provided detailed accounts of upcoding, complete with identifying information as to individual patients, specific claim numbers, and examples. As to the alleged “co-pay” scheme, by contrast, relators identified neither specific claims submitted “in connection with a co-pay waiver” nor any “patient whose co-pay was improperly waived.” So too with the remaining alleged schemes; the relators identified no specific false claims. And the relators could not rely on allegations of direct knowledge to avoid the requirement to allege specific claims because, put simply, they did not “allege any direct knowledge of billing activity or access to claims data.” Ultimately, the court held that the relators were not excused from “pleading claims that were actually submitted to the government” merely by pleading a “reliable indicia that there was a scheme to submit false claims.”
In Vargas, the Eleventh Circuit provides much-needed clarity as to the “reliable indicia” standard under the FCA and Rule 9(b). That standard is not a crutch that a relator may use to prop up an otherwise deficient pleading. To the contrary, the Eleventh Circuit strictly demands that a relator allege either details of specific false claims or a basis for direct personal knowledge of the submission of individual false claims with particularity. If, as in Vargas, the relator does not meet this strict standard, their claims should be dismissed.
Bradley’s Government Enforcement & Investigations Practice Group will continue monitoring the latest developments in False Claims Act litigation throughout the federal courts.
