On Monday, May 22, 2022, a Georgia federal judge dismissed most of the False Claims Act (“FCA”) claims against medical equipment manufacturer Ermi LLC in a lawsuit filed by the company’s ex-chief compliance officer. The same judge also dismissed the entirety of the claims against Ermi’s chief executive officer, finding that the allegations against him weren’t pled with the necessary specificity.
The case in question is United States of America ex rel. et al. v. Ermi LLC et al., and was initiated by Ermi’s ex-CCO, Elizabeth Cooley, in 2020. In her complaint, Cooley alleged that Ermi had concocted an illegal scheme where it would bill the federal government for 16 weeks of durable medical equipment usage when it knew that it wouldn’t be medically necessary after ten weeks of use. Cooley also alleged that the company failed to disclose its equipment’s “best prices” to the U.S. Department of Veterans Affairs and the U.S. Department of Labor’s Office of Workers’ Compensation Programs. U.S. District Court Judge Thomas W. Thrash dismissed both claims finding that Cooley failed to plead allegations with the level of particularity required under Federal Rule of Civil Procedure 9(b).
Judge Thrash also dismissed all claims against Ermi CEO Dr. Thomas P. Branch, again stating that Cooley failed to plead her claims against him with the required specificity. Specifically, Cooley failed to provide specific examples of Branch’s illegal conduct or identify his knowledge about the purported schemes, instead referring to those responsible only as “Ermi leadership.”
Cooley attempted to address these specificity concerns in her latest amended complaint by relying on her “personal knowledge” of the alleged fraud. Nevertheless, Judge Thrash found that her purported knowledge of the claim wasn’t enough to meet the specificity requirements since she failed to identify specific false claims by date, amount, claim number, patient, or otherwise.
In addition to her other claims, Cooley also alleged that Ermi knowingly provided medical equipment to patients in Florida without the required Florida license or under a fraudulently obtained license., Judge Thrash left those claims alive, arguing that these claims do not rely on specific billing or medical information and that Cooley only had to demonstrate that Ermi had submitted claims while unlicensed in the state. He found that Cooley had satisfied this requirement by providing financial records showing that Ermi submitted almost 3,0000 claims to the Florida VA and OWCP while unlicensed.
The Rule 9(b) particularity requirement has been a central point of contention in the FCA bar. Federal courts have broadly been split as to what exactly is required to meet the rule’s specificity requirements, namely whether specific examples of fraudulent billing statements or records are required. The issue has resulted in an ongoing circuit split with the First, Fifth, and Seventh finding that FCA complaints do not need to be accompanied by specific false claims, while the Eleventh, Sixth, Eight, and Tenth Circuits require that they do. The Supreme Court is yet to resolve the split, refusing to hear cases litigating the issue.
Cooley’s case serves as an important reminder to relators that the Rule 9(b) specificity requirement can prove to be a barrier to any FCA case, having the ability to dismiss otherwise substantive claims due to a lack of specific examples. It also highlights the need for relators to gather specific examples when possible and carefully consider how courts interpret Rule (9)b requirements.
