NO.

2015-01

IN THE

SUPREME COURT OF THE UNITED STATES

SPRING TERM 2015

UNITED STATES EX REL.

KLEIN, Petitioner,

v.
OSBORN
LABORATORIES, INC.,
Respondent.

ON WRIT OF
CERTIORARI
TO THE SUPREME COURT OF
WIGMORE

BRIEF FOR THE RESPONDENT

NORTHWESTERN UNIVERSITY SCHOOL OF

LAW JULIUS H. MINER MOOT COURT
COMPETITION ATTORNEYS FOR THE
RESPONDENT:
TEAM 4
 QUESTIONS PRESENTED

I. Whether under the False Claims Act, a first-filed yet insufficiently pleaded qui

tam complaint precludes Klein’s subsequent related claim under the Act’s first-

to-file bar when the earlier-filed claim is dismissed.

II. Whether pleadings including causes of actions under the False Claims Act are

required by Federal Rule of Civil Procedure 9(b) to include in the complaint

allegations of specific fraudulent billing or if complainant can include

conclusory language regarding numerous required facts when the defendant’s

actions can be equally plausibly explained as legal behavior and make it

through pleading.

iii
 TABLE OF CONTENTS

QUESTIONS PRESENTED...............................................................................................ii
TABLE OF CONTENTS....................................................................................................iii
TABLE OF AUTHORITIES...............................................................................................v
OPINIONS BELOW............................................................................................................1
STATEMENT OF THE CASE...........................................................................................1
SUMMARY OF THE ARGUMENT..................................................................................4
ARGUMENT........................................................................................................................5
I. THE PLAIN LANGUAGE OF 31 U.S.C.S. § 3730(b)(5) DEMONSTRATES
THAT ITS BAR APPLIES TO ALL “RELATED ACTIONS.” KLEIN’S COMPLAINT
IS A RELATED ACTION TO THE STEWART COMPLAINT AND SHOULD BE
DISMISSED FOR LACK OF SUBJECT MATTER JURISDICTION. PENDING
OUGHT TO BE READ AS REFERING TO AN INITIAL COMPLAINT, NOT A
TEMPORAL PHRASE.......................................................................................................5
A. The “same material elements” test adopted by the Third, Fourth, Fifth, Sixth,
Ninth, Tenth, and D.C. Circuit Courts of Appeals establishes that Klein’s First
Amended Complaint should have been dismissed..........................................................6
1. The purpose of the first-to-file bar furthers the purpose of qui tam suits under the
False Claim Act...............................................................................................................6
B. Canons of statutory interpretation endorsed by this court leads to finding that
“pending” takes on a referential nature towards the first-filed complaint, not a temporal
one. 8
1. The court should interpret the word “pending” in reference to the words
surrounding it as well as in deference to unambiguous Congressional intent.................8
2. Reading “pending” as temporal ignores the policy considerations underlying qui
tam suits and leads to absurd results..............................................................................11
II. KLEIN’S COMPLAINT IS DEFECTIVE UNDER FEDERAL RULE OF CIVIL
PROCEDURE 9(B) REQUIRING COMPLAINTS TO PLEAD WITH
PARTICULARITY COMPLAINTS OF FRAUD. KLEIN RELIES ON CONCLUSORY
LANGUAGE AND LACKS THE REQUIRED FACTS TO SHOW THE ALLEGEDLY
FRAUDULENT BEHAVIOR TOOK PLACE. THEREFORE, KLEIN’S CASE WAS
PROPERLY DISMISSED................................................................................................11
A. The court should adopt the more stringent 9(b) standard for False Claims Act
claims. Under the more stringent standard, Klein’s claim was properly dismissed
because it fails to plead with particularity all of the necessary facts.............................13
B. Even if the court adopts the flexible 9(b) pleading standard, Klein’s complaint
should be dismissed because Osborn’s actions are explained by legal behavior and
Klein relies on conclusory statements to prove his case................................................16
C. State law cases regarding similarly worded state statutory schemes interpret state
False Claims Acts to require the more stringent pleading standard..............................20
iv
CONCLUSION...................................................................................................................21

v
 TABLE OF AUTHORITIES
Cases
Bell Atlantic Corp. v. Twombly, 550 U.S. 544.................................................................................23
Church of the Holy Trinity v. United States, 12 S.Ct. 511...............................................................16
City of Pomona v. Superior Court, 107 Cal.Rptr.2d 710.................................................................25
Com. Ex rel. Riedel v. Quest Diagnostics Inc., 30 Mass. L. Rptr. 327.............................................25
Corsello v. Lincare, Inc., 428 F.3d 1008...................................................................................19, 20
Freeman v. Quicken Loans, Inc., 132 S.Ct. 2034............................................................................14
Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276................................................................12
Hall v. United States, 132 S.Ct. 1882..............................................................................................15
INS v. Chadha, 103 S.Ct. 2764........................................................................................................15
Maracich v. Spears, 133 S.Ct. 2191................................................................................................14
Miles v. Apex Marine Corp., 498 U.S. 19........................................................................................15
Ridenour v. Kaiser-Hill Co., LLC, 397 F.3d 925.............................................................................13
Schindler Elevator Corp. v. U.S. ex rel. Kirk, 131 S. Ct. 1885........................................................17
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148..........................................17
United States ex rel. Ciaschini v. Ahold USA Inc., 282 F.R.D. 27...................................................20
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180..................................................21, 22, 23
United States ex rel. Kinney v. Stoltz, 327 F.3d 671........................................................................19
United States v. Bornstein, 423 U.S. 303.........................................................................................16
United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204............................................11, 12, 13, 16
United States ex rel. Carter v. Halliburton Co., 710 F.3d 171.........................................................14
United States ex rel. Clausen v. Lab. Corp of Am., 290 F.3d 1301..................................................18
United States ex rel. Gagne v. City of Worcester, 565 F.3d 40........................................................21
United States ex rel. Hampton v. Columbia/Hca Healthcare Corp., 318 F.3d 214..........................12
United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552............................................18, 19
United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360, F.3d 220.........................19, 21, 23
United States ex rel. Klein v. Osborn Laboratories, Inc., No. 14-0840 (13th Cir. 2014).............6, 10
United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1,
2014)....................................................................................................................................passim
United States ex rel. LaCorte v. Wagner, 185 F.3d 188...................................................................11
United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181.....................................10, 12, 14
United States ex rel. Shea v. Cellco P'ship, 748 F.3d 338....................................................14, 15, 16
Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765..................................17
Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097...............................................................................18
Statutes
28 U.S.C. § 1500..................................................................................................................16
31 U.S.C.A. § 3729(a)(1)(A)....................................................................................17, 18, 25
31 U.S.C.S. § 3730(b)(5)...............................................................................................passim
42 U.S.C. § 300aa-11(a)(5)(B).............................................................................................16
Other Authorities
Emily Hill, Understanding When to Use the New Patient E/M Codes, AMERICAN
ACADEMY OF FAMILY PHYSICIANS..................................................................................25

vi
James D. Cox, et. al., Do Differences in Pleading Standards Cause Forum Shopping in
Securities Class Actions?: Doctrinal Empirical Analyses, 2009 WIS. L. REV. 421.........18
Martin H. Redish, Electronic Discovery and the Litigation Matrix, Duke 51 L.J. 2...........19
Federal Rules of Civil Procedure
Federal Rule of Civil Procedure 12(b)(1).............................................................................10
Federal Rule of Civil Procedure 12(b)(6).......................................................................10, 26
Federal Rule of Civil Procedure 9(b)............................................................................passim
Senate Report
S. REP. 99-345, 1986 U.S.C.C.A.N. 5266...........................................................................14

vii
 OPINIONS BELOW

The opinion of the United States District Court for the Southern District of

Wigmore approving Respondent’s motion to dismiss is found at United States ex rel. Klein

v. Osborn Laboratories, Inc., No. 2014-CM-0839 (S.D. Wig. May 1, 2014). The opinion

of the Thirteenth Circuit Court of Appeals is found at United States ex rel. Klein v. Osborn

Laboratories, Inc., No. 14-0840 (13th Cir. 2014).

STATEMENT OF THE CASE

For the past fifteen years, increasingly complex forms of influenza (flu) have

infected and killed millions of Americans. United States ex rel. Klein v. Osborn

Laboratories, Inc., No. 2014-CM-0839, at 2, (S.D. Wig. May 1, 2014). Pharmaceutical

companies began developing vaccines to prevent the different strands of flu, and they

enjoyed monetary success. Id. But the quickly mutating flu strains rendered

pharmaceutical companies unable to respond quickly enough to some strains in delivering

a viable vaccine to the market. Id. at 3. By mid-2010, pharmaceutical companies began to

see costly flu vaccine research yield no profits in the market, and as a result, all of the

companies exited the market. Id. at 3-4. Congress quickly took action to ensure public

safety, passing the Lonky-McCall Ensuring Pharmaceutical Industry Development of

Effective Medicines and Iterative Cures (EPIDEMIC) Act in July 2010. Id. at 4. The Act

enabled Federal reimbursement to pharmaceutical companies for 50% of certain research

costs related to flu vaccines. Id. As a result, four of five companies previously in the

market restarted their flu vaccine research and development programs. Id. at 4. In 2013,

1
the Hyper-Avian-Ursa-Swiney iterative influence virus (HAUSI) appeared, killing

approximately 700,000 people before a vaccine was produced. Id. at 5. Osborn eventually

managed to develop a vaccine, spurred on by EPIDEMIC, saving an estimated twenty

million American lives. Id. at 5.

Dr. Klein and Dr. Stewart were both employed by Osborn post-EPIDEMIC as

research assistants, presumably to contribute to flu vaccines. Id at 8. Prior to Dr. Klein’s

complaint, Dr. Stewart, filed a False Claims Act suit alleging that Osborn directed him to

enter codes for reimbursable labor under the EPIDEMIC Act for non-EPIDEMIC research.

Id. The same broad, fraudulent act was alleged in Dr. Klein’s complaint. Id. The

government declined to intervene in either case. Id. at 9. Then, the Northern District of

Rodriguez dismissed Stewart’s complaint because “it failed to meet the heightened

pleading requirements of 9(b).” Id.

Dr. Klein was delegated assignments without being told precisely how they related

to flu vaccines. Id. at 6. Klein’s complaint did not contain any allegations of “particular

fraudulent invoice submission to the government.” Id. at 6. Klein’s complaint also

contains conclusory statements regarding his brilliance – claims that he could “almost

always ‘reverse engineer’ how his assignments related to given flu vaccines” and a claim

that his research “laid the foundation” of Osborn’s response to HAUSI flu outbreak in the

summer of 2013. Id. After the HAUSI outbreak, Klein admits his relationship with the

company “began to deteriorate.” Id. After this deterioration Klein could no longer

“reverse engineer” his work assignments. Id. at 7. On September 19, 2013, Klein heard

two of his Senior Research Directors (SRD’s) – a job title with responsibilities left

undefined by the complaint except insofar as they delegated research assignments – talking

2
about products unrelated to influenza treatment. Id. Klein knew of another product that

Osborn was developing, StaySlight, which promised to be economically beneficial for

Osborn, but Klein was told his projects were related to influenza prevention projects

reimbursable under the EPIDEMIC Act. Id. On September 22, Klein overheard an SRD

and an executive discussing how “department invoices should be written in order ‘to make

them appear eligible’ for EPIDEMIC reimbursement.” Id. On September 24, Klein and

200 other RAs received an email detailing how to describe the work they were doing. Id.

The email did not specifically mention the EPIDEMIC program or any other program. Id.

On September 26, Klein complained to a coworker about working on highly

secretive projects that he believed were not clearly linked to influenza research. Id. The

coworker shared that she and some others that she had known had been assigned to a

“seemingly” non-flu-related project and were told to bill their work using codes tied to the

EPIDEMIC program. Id. Klein then talked to four other RA’s whom he was friends with

who shared a “similar story.” Id. Klein relies on this information to establish that

“Osborn’s false claims for reimbursement spanned at least months and likely totaled

hundreds of millions of dollars.” Id. Klein also relies upon Osborn’s self-reporting of

losses related to non-flu research and development programs. Id. After the report

regarding losses at the start of 2013, “Osborn’s CEO announced a ‘surge strategy’ by

which the company would ‘do what it takes’ to get the projects back on track, ‘including

pushing our available lines of financing to the limit.’” Id. at 7-8. Osborn’s quarterly for

the first and second quarter of 2013 “reflected lower-than-normal cash reserves and greatly

increased debt obligations.” Klein’s complaint alleged no detail regarding specific false

invoices submitted to the government. Id. at 8. Klein’s final offering of evidence is that

3
Osborn’s quarterly report did not show a significant drop in EPIDEMIC funding despite

Osborn’s “surge strategy” in non-EPIDEMIC projects. Id.

SUMMARY OF THE ARGUMENT

This court should reverse in part the Thirteenth Circuit’s denial of Osborn’s motion

to dismiss and, in the alternative, affirm in part the decision of the Thirteenth Circuit to

dismiss Klein’s claim under Federal Rule of Civil Procedure 12(b)(6).

First, the False Claims Act precludes all subsequent, related claims following a

first-filed claim, requiring dismissal under Federal Rule of Civil Procedure 12(b)(1).

Second, Federal Rule of Civil Procedure 9(b) bars Klein’s claim because it was not plead

with sufficient particularity. The Thirteenth Circuit correctly dismissed Klein’s claim

under Federal Rule of Civil Procedure 12(b)(6).

A first-filed yet legally insufficient complaint may bar all subsequent complaints.

The plain language of 31 U.S.C.S. § 3730(b)(5) bars all related claims. The “same material

elements” test is the proper measure of relatedness under the False Claims Act. The first-

to-file bar furthers the Congressional purpose of qui tam suits under the False Claim Act.

“Pending” for purposes of the first-to-file bar should be understood as referential, not

temporal. Canons of statutory interpretation endorsed by this court lead to that conclusion.

Reading “pending” as temporal ignores the policy behind Congress’s decisions and would

yield absurd legal results.

Klein’s complaint is defective under Federal Rule of Civil Procedure 9(b), and

therefore was properly dismissed by the Thirteenth Circuit. The Court should adopt the

more stringent standard of pleading required by 9(b) that is adopted by some of the Circuit

4
Courts of Appeals because of the burden a looser standard places on socially valuable

companies like Osborn. Klein’s complaint is missing necessary information regarding the

allegedly fraudulent billing, so the complaint is defective and was correctly dismissed by

the Thirteenth Circuit. Alternatively, if the Court adopts the loose standard of pleading

employed by other Circuits, Klein’s complaint is still defective because Osborn’s actions

can be explained by legal behavior, the complaint employs conclusory language about

numerous parts of the allegedly fraudulent scheme, and the complaint fails to identify a

mechanism for fraudulent behavior.

ARGUMENT

I. THE PLAIN LANGUAGE OF 31 U.S.C.S. § 3730(b)(5) DEMONSTRATES

THAT ITS BAR APPLIES TO ALL “RELATED ACTIONS.” KLEIN’S
COMPLAINT IS A RELATED ACTION TO THE STEWART COMPLAINT
AND SHOULD BE DISMISSED FOR LACK OF SUBJECT MATTER
JURISDICTION. PENDING OUGHT TO BE READ AS REFERING TO AN
INITIAL COMPLAINT, NOT A TEMPORAL PHRASE

The Thirteenth Circuit incorrectly denied Osborn’s motion to dismiss for lack of

subject matter jurisdiction. United States ex rel. Klein v. Osborn Laboratories, Inc., at 11,

(13th Cir. 2014). The False Claims Act’s first-to-file bar applies to all “related actions.”

31 U.S.C.S § 3730(b)(5) (2014). Klein’s First Amended Complaint is related to the initial

Stewart complaint. Klein, No. 14-0840, 5. While the Thirteenth Circuit correctly reached

this intermediate conclusion, it incorrectly found that the Stewart complaint was not

“pending” for the purposes of the False Claim Act and failed to dismiss Klein’s First

Amended Complaint. Id at 7.

5
 The False Claims Act’s first-to-file rule is best read as unambiguous and without

exception. United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1183 (9th

Cir. 2001), cert. denied, 534 U.S. 1040 (2001); United States ex rel. LaCorte v. Wagner,

185 F.3d 188, 191 (4th Cir. 1999). The proper test for determining whether a subsequent

case is a “related action” and subject to the first-to-file bar is the “same material elements”

test postulated by the Third, Fourth, Fifth, Sixth, Ninth, Tenth, and D.C. Circuits Courts of

Appeals. Under this test, Klein’s First Amended Complaint ought to be found to be related

to the Stewart complaint and barred. Furthermore, the word “pending” in 31 U.S.C.S. §

3730(b)(5) is correctly read as referential, that is to say referring to the initial complaint. It

should not be read as temporal, referring to whether or not the initial complaint had been

decided upon.

A. The “same material elements” test adopted by the Third, Fourth, Fifth, Sixth,
Ninth, Tenth, and D.C. Circuit Courts of Appeals establishes that Klein’s First
Amended Complaint should have been dismissed.

1. The purpose of the first-to-file bar furthers the purpose of qui tam suits
under the False Claim Act.

The first-to-file bar serves a dual purpose which illustrates why an insufficiently

pleaded False Claims Act complaint may still preclude a subsequent related claim. The

first purpose is to reward whistleblowers who “provide the government sufficient

information to launch an investigation of a fraudulent scheme.” United States ex rel.

Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011). The second is to “bar copycat

actions that provide no additional material information.” Id. Both purposes are focused

upon the government’s notice for investigation. Whether or not a complaint is legally

infirm does not necessarily have a bearing upon this. What matters is that the complaint be
6
sufficient “to equip the government to investigate [the] allegedly fraudulent” practices. Id

at 1209.

Courts have interpreted the language “related action based on the facts underlying

the pending action” as barring “‘actions alleging the same material elements of fraud’ as an

earlier suit, even if the allegations ‘incorporate somewhat different details.’” United States

ex rel. Hampton v. Columbia/Hca Healthcare Corp., 318 F.3d 214, 217 (D.C. Cir. 2003)

(quoting United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th Cir.

2001)). Furthermore, “latter complaints” that “marshal additional factual support” are still

insufficient so long as the latter complaints “do no more than assert the same material

elements of fraud.” Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276, 1279 (10th

Cir. 2004).

In Batiste, Zahara filed a qui tam case against SLM Corp. alleging a fraudulent

scheme. Batiste, 659 F.3d at 1210. Zahara’s complaint predated Batiste’s by two years.

Id. The court considered whether Batiste’s complaint alleged the same material elements

of fraud as Zahara’s. In finding that it did, the court noted that it named the same

defendant, the same national scheme, and similar timelines. Id at 1209. Here, the Stewart

complaint alleged that Osborn directed Dr. Stewart to conduct research on matters outside

of flu medication. United States ex rel. Klein v. Osborn Laboratories, Inc., No. 2014-CM-

0839, at 8, (S.D. Wig. May 1, 2014). Klein alleges similar direction. Id at 6. Dr. Stewart

alleged that he was instructed to fraudulently bill the government under the EPIDEMIC

Act. Id at 8. Klein again alleges similar misconduct. Id. Under the “same material

elements” test adopted by a majority of the courts, the parallel allegations within Klein’s

First Amended Claim is related to the Stewart complaint and ought to be barred. The First

7
Amended Claim fails to allege a new scheme of fraud that would “provide the government

sufficient information to launch an investigation of a fraudulent scheme.” Batiste, 659

F.3d at 1204.

The lower courts correctly noted that the Stewart complaint and the Klein’s First

Amended Complaint were materially similar. But the Thirteenth Circuit erred in its

analysis surrounding whether a dismissed complaint was still a “pending action” for the

purposes of the first-to-file bar.

B. Canons of statutory interpretation endorsed by this court leads to finding that

“pending” takes on a referential nature towards the first-filed complaint, not a
temporal one.

1. The court should interpret the word “pending” in reference to the words
surrounding it as well as in deference to unambiguous Congressional
intent.

The plain purpose of the False Claims Act and the qui tam provision is to put the

government on notice of fraudulent schemes perpetuated against it. “Once the government

is put on notice of its potential fraud claim, the purpose behind allowing qui tam litigation

is satisfied.” Batiste, 659 F.3d at 1204. “The purpose of the FCA ‘is to enhance the

Government's ability to recover losses sustained as a result of fraud against the

Government.’” Ridenour v. Kaiser-Hill Co., LLC, 397 F.3d 925, 930 (10th Cir. 2005)

(citing S. REP. 99-345, 1986 U.S.C.C.A.N. 5266).

What is at issue, then, is the meaning behind the word “pending” in the statute and

how it applies to this purpose. Klein erroneously instructs the court to afford it a temporal

definition which requires that Osborn’s motion to dismiss be denied. More appropriate is a

referential definition, allowing the motion to dismiss to succeed. In judging the meaning of
8
a statute and the statute’s language, the court necessarily must “look first to the plain

language of the statute, construing the provisions of the entire law, including its object and

policy, to ascertain the intent of Congress.” United States ex rel. Lujan v. Hughes Aircraft

Co., 243 F.3d 1181, 1187 (9th Cir. 2001) (emphasis added). Within the context of the first-

to-file bar, the meaning of pending imparted by Klein runs contrary to the object and policy

of the statute. Beyond that, it runs afoul of the clear intent of Congress which

unequivocally stated that the False Claims Act is designed “to enhance the Government’s

ability to recover losses sustained as a result of fraud.” S. REP. 99-345, 1986

U.S.C.C.A.N. 5266. The government is able to recover losses once put on notice of

potential fraud.

That notwithstanding, in situations similar where a word or a phrase may be

ambiguous, this court instructs that one should adhere to the canon of noscitur a sociis

which “counsels that a word is given more precise content by the neighboring words with

which it is associated.” Maracich v. Spears, 133 S.Ct. 2191, 2201 (2013) (internal

quotations removed). See also Freeman v. Quicken Loans, Inc., 132 S.Ct. 2034, 2037

(2012). With this in mind, “pending” must be seen as referential. The courts have found

the first-to-file bar “exception-free.” See, e.g., Lujan, 243 F.3d at 1183, 1187 (9th Cir.

2001) ("We reject Lujan's contentions because they would require this court to read

exceptions into the statute's plain language."); United States ex rel. Carter v. Halliburton

Co., 710 F.3d 171, 181 (4th Cir. 2013) (“This Court has described the first-to-file bar as an

absolute, unambiguous exception-free rule.”). Pending, therefore, “serves to identify

which action bars the other.” United States ex rel. Shea v. Cellco P'ship, 748 F.3d 338,

343 (D.C. Cir. 2014).

9
 The Shea court rejected a temporal interpretation of “pending” much like the one

Klein mistakenly asks to be applied. It is unequivocally wrong to read the bar as

preventing “a related action while the first action remains pending” because “this is not

what the statute says.” Id. (emphasis in original). Instead, the “simplest reading of

‘pending’ is the referential one” which “makes clear that the bar commences ‘when a

person brings an action under [the Act]’ and thence forth bars any action ‘based on the

facts underlying the pending action.’” Id.

It would be remiss to read the verb phrasing and language in the statute as merely

an oversight by Congress or an accidental construction. In other statutes, Congress has

used the word “pending” in such a way that its temporal nature could not be mistaken. For

example, “Congress has barred ‘any claim [in the Court of Federal Claims] for . . . which

the plaintiff . . . has pending in any other court any suit or process against the United States

. . . .’” Id. (citing 28 U.S.C. § 1500) (emphasis added). Preclusion based on a temporal

reading of “pending” also applies when bringing a vaccine-related claim in the Court of

Federal Claims if the person "has pending a civil action for damages for a vaccine-related

injury or death." 42 U.S.C. § 300aa-11(a)(5)(B) (2000). But in those two statutes, the

language is markedly different than the language in the False Claims Act. The court

presumes “‘that Congress is aware of existing law when it passes legislation.’” Hall v.

United States, 132 S.Ct. 1882, 1889 (2012) (quoting Miles v. Apex Marine Corp., 498 U.S.

19, 32 (1990)). Because of this, the court should afford due deference to Congress and its

drafting. It is not within the purview of the courts to consider the wisdom behind a statute.

See INS v. Chadha, 103 S.Ct. 2764, 2808 (1983).

10
 2. Reading “pending” as temporal ignores the policy considerations
underlying qui tam suits and leads to absurd results.

Because one of the primary purposes of qui tam suits under the False Claims Act is

to put the government on notice of potential fraud, it is irrelevant if the first-filed suit is

resolved insofar as the government’s notice is concerned. “[D]uplicative suits would

contribute nothing to the government's knowledge of fraud.” Shea, 748 F.3d at 343.

There are strong policy considerations underlying this reading. The alternative

leads to absurd results that this court should seek to avoid. If this court was to impart a

temporal reading to “pending,” potential whistleblowers would be incentivized to file

infirm claims only to then amend them and maintain their status as pending. Allowing the

legal sufficiency of a claim to determine whether it had been “pending” may “create a

strange judicial dynamic, potentially requiring one district court to determine the

sufficiency of a complaint filed in another district court, and possibly creating a situation in

which the two district courts disagree on a complaint's sufficiency.” United States ex rel.

Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011).

If the construction of an ambiguous phrase or word in a statute leads to absurd

results, it should then “be so construed as to avoid the absurdity.” Church of the Holy

Trinity v. United States, 12 S.Ct. 511, 512 (1892).

II. KLEIN’S COMPLAINT IS DEFECTIVE UNDER FEDERAL RULE OF

CIVIL PROCEDURE 9(B) REQUIRING COMPLAINTS TO PLEAD WITH
PARTICULARITY COMPLAINTS OF FRAUD. KLEIN RELIES ON
CONCLUSORY LANGUAGE AND LACKS THE REQUIRED FACTS TO
SHOW THE ALLEGEDLY FRAUDULENT BEHAVIOR TOOK PLACE.
THEREFORE, KLEIN’S CASE WAS PROPERLY DISMISSED

11
 The False Claims Act (FCA) imposes civil penalties on persons “knowingly

present[ing] . . . a false or fraudulent claim for payment or approval.” 31 U.S.C.A. §

3729(a)(1)(A) (2009). The FCA was enacted and amended with the purpose of stopping

frauds perpetrated against the federal government. See United States v. Bornstein, 423

U.S. 303, 309 (1976) (“The Act was originally aimed principally at stopping the massive

frauds perpetrated by large contractors during the Civil War.”); Vermont Agency of Natural

Resources v. United States. ex rel. Stevens, 529 U.S. 765, n.4 (2000) (internal citations

omitted) (“When Congress amended the FCA in 1986, it noted that ‘[e]vidence of fraud in

Government programs and procurement is on a steady rise.’”) However pleading standards

under the FCA has only been mentioned once in the Supreme Court. When considering

whether Freedom of Information Act disclosures are considered public information under

the FCA, Justice Ginsburg’s dissent noted that whistleblowers are subject “to the

heightened pleading standards of Federal Rule of Civil Procedure 9(b). Schindler Elevator

Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885, 1898 (2011) (Ginsburg, J., dissenting).

The circuit courts have a split opinion regarding the specificity level required in

complaints.

When 9(b) is given teeth it accomplishes the worthy goal of protecting socially

valuable businesses against the threat of private suits. Fed. R. Civ. P. 9(b) (“In alleging

fraud or mistake, a party must state with particularity the circumstances constituting fraud

or mistake.”) In limiting the right to suit, the Court has previously given weight to the

harm that the threat of private suits poses in non-healthcare markets too. See Stoneridge

Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 165-67 (2008) (rejecting

scheme liability in securities class actions, governed by the Private Securities Litigation

Reform Act – an act requiring a 9(b) standard of pleading, due to the economic harm posed
12
by potential private suits). Academics have also recognized the value of a rigid, tough

interpretation of 9(b). See, e.g., James D. Cox, et. al., Do Differences in Pleading

Standards Cause Forum Shopping in Securities Class Actions?: Doctrinal Empirical

Analyses, 2009 WIS. L. REV. 421, 433-34, n.37 (2009) (internal citations omitted) (partially

attributing United States capital markets’ lack of competitiveness to the fear of private

suit). Similarly, there is great need to give 9(b) proper bite in this context meritless claims

threaten an already delicate industry that had to be supported by government subsidies.

The policy goals of the FCA can still be accomplished with a properly rigid 9(b) standards.

Relators with reliable information can still pass through the pleading standard, so the

FCA’s desired incentive structure is still in place.

A. The court should adopt the more stringent 9(b) standard for False Claims Act
claims. Under the more stringent standard, Klein’s claim was properly dismissed
because it fails to plead with particularity all of the necessary facts.

Truly applying the 9(b) standard requires rigidly requiring a list of facts generally

including the “who, what, when, where and how of the misconduct charged.” Vess v. Ciba-

Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The United States Circuit Courts

are split on exactly what facts need to be shown by a relator in a FCA action. Some

circuits suggest a looser standard than is generally applied under 9(b), see infra, Section II-

B, but “’neither the Federal Rules nor the [FCA] offer any special leniency [when a relator

is not in the billing department] to justify [the relator] failing to allege with the required

specificity the circumstances of the fraudulent conduct he asserts in his action.’" United

States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 560 (8th Cir. 2006) (citing

United States ex rel. Clausen v. Lab. Corp of Am., 290 F.3d 1301, 1314 (11th Cir. 2002).

As a result, the circuit courts would have to rely on policy reasons to justify relaxing the

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pleading standards, but there are compelling policy reasons against doing so. See, e.g.,

Clausen, 290 F.3d at n.24 (“When a plaintiff does not specifically plead the minimum

elements of their allegation, it enables them to learn the complaint's bare essentials through

discovery and may needlessly harm a defendants' goodwill and reputation by bringing a

suit that is, at best, missing some of its core underpinnings, and, at worst, are baseless

allegations used to extract settlements.”); United States ex rel. Karvelas v. Melrose-

Wakefield Hosp., 360, F.3d 220, 229 (1st Cir. 2004) (internal citations omitted) (“The

reluctance of courts to permit qui tam relators to use discovery to meet the requirements

of Rule 9(b) reflects, in part, a concern that a qui tam plaintiff, who has suffered no injury

in fact, may be particularly likely to file suit as "a pretext to uncover unknown wrongs.”);

United States ex rel. Kinney v. Stoltz, 327 F.3d 671, 674 (internal citations omitted) (“The

[FCA] . . . ‘is not intended to create windfalls for people with secondhand knowledge of

the wrongdoing.’”). See generally Martin H. Redish, Electronic Discovery and the

Litigation Matrix, Duke 51 L.J. 2 (2001) (detailing the burdensome cost of discovery in a

digital age). The monetary and reputational cost to socially valuable corporations is too

high to justify loosening pleading standards based only on policy reasoning. Therefore, the

more stringent standard should be applied.

Simple knowledge of improper practices in FCA cases is not enough to meet the

9(b) standard. Corsello v. Lincare, Inc., 428 F.3d 1008, 1013 (11th Cir. 2005) (per

curiam). Specific facts regarding the entirety of the scheme is what is needed. See, e.g.,

Corsello, 428 F.3d at 1013 (11th Cir. 2005) (per curiam) (requiring the relator to “allege

the ‘who,’ ‘what,’ ‘where,’ ‘when,’ and ‘how’ of fraudulent submissions.”); United States

ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006) (requiring that the

relator plead all of the following facts: “the time, place, and content of the defendant's false
14
representations, as well as the details of the defendant's fraudulent acts, including when the

acts occurred, who engaged in them, and what was obtained as a result.”)

In Corsello, the relator was a sales person with the Lincare, Inc. 428 F.3d at 1013.

The relator alleged various fraudulent schemes including kickback schemes, billing for

non-existent treatments to obtain Medicare payments unlawfully, and other fraudulent

behavior. Id. at 1011. The complaint was dismissed by the Eleventh Circuit because the

allegations were “often based ‘on information and belief,’” and the allegations “failed to

provide an underlying basis for Corsello’s assertions.” Id. at 1013. The court held that it

was required to know particularities regarding the billing scheme. Id.

In Ahold USA, the relator alleged that pharmacy staff shorted prescriptions, by only

dispensing some of a prescription, as a way to bill Medicare or Medicaid for the full

amount. United States ex rel. Ciaschini v. Ahold USA Inc., 282 F.R.D. 27, 31 (D. Mass.

2012). The allegation did not include allegations that the relator knew the pharmacy staff

actually submitted those claims to the government. Id. The court dismissed the claim

saying, “a relator must allege more than the possibility of fraud in order to satisfy rule

9(b).” Id. at 31.

The 9(b) standard requires is too stringent to allow Klein’s complaint to pass

through. His complaint only includes conclusory language about the submission of the

allegedly fraudulent invoices: “[Klein] provided no detail on specific false invoices

submitted to the government. Instead, he . . . cited ‘reason and belief’ to claim that Osborn

regularly submitted false invoices.” United States ex rel. Klein v. Osborn Laboratories,

Inc., No. 2014-CM-0839, at 8, (S.D. Wig. May 1, 2014). This is the same flaw that caused

the Ciaschini claim dismissed. 282 F.R.D. at 31. The circuit court opinions that institute a

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restrictive 9(b) standard all require a “who,” a “what,” a “where,” a “when,” and a “how”

of fraudulent submissions. See, e.g., Corsello, 428 F.3d at 1013 (emphasis added). The

usage of the word and in the opinions indicate the necessary of all of those facts to avoid

dismissal. Klein’s complaint is defective as to the billing, therefore it must be dismissed.

Also, much of Klein’s evidence – submission of bills, his assignments being unrelated to

EPIDEMIC, his coworkers’ assignments being unrelated to EPIDEMIC, Osborn’s

allegedly diverting resources from EPIDEMIC to non-EPIDEMIC projects – is based “‘on

information and belief.’” Id.; United States ex rel. Klein v. Osborn Laboratories, Inc., No.

2014-CM-0839, at 8, (S.D. Wig. May 1, 2014). Under Corsello’s stringent standard,

Klein’s complaint was properly dismissed.

B. Even if the court adopts the flexible 9(b) pleading standard, Klein’s complaint
should be dismissed because Osborn’s actions are explained by legal behavior and
Klein relies on conclusory statements to prove his case.

The Grubbs court argued for the need for flexibility in determining what facts are

required by the 9(b) pleading standard, distinguishing FCA claims from common law or

securities fraud based on the FCA’s lower bar for punishment – requiring only that false

claims were submitted, not that the government relied on or was harmed by the false

claims. United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 189 (5th Cir. 2009); But

see United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360, F.3d 220, 229 (1st Cir.

2004) (internal citations omitted) abrogated on other grounds by United States ex rel.

Gagne v. City of Worcester, 565 F.3d 40 (1st Cir. 2009) (“[Q]ui tam plaintiff[s], who has

suffered no injury in fact, may be particularly likely to file suit as ‘a pretext to uncover

unknown wrongs.’”). In holding that exact contents of the fraudulent bill were not required

to make it past pleading, the Grubbs court said that there need only be a “reliable indicia

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that false bills were actually submitted as a result of the scheme – such as dates that

services were fraudulently provided or recorded, by whom, and evidence of the

department’s standard billing procedures . . . .” Id. (emphasis added). See also Karvelas,

360 F.3d at n.17 (1st Cir. 2004) (internal citations omitted) (in allowing some flexibility in

the relator’s complaint, the court analogized FCA claims to a securities fraud case where

pleading defects were ignored when “’the fraud allegations advanced in [the] complaint,

with their consistent details provided from at least half a dozen different sources across

various alleged schemes, reinforce each other and suggest reliability of the information

reported.’”). The Grubbs court, in instituting the “reasonable indicia” standard, argued that

some relators cannot reasonably be expected to have all of the facts. Therefore, the court

relaxed the pleading standard, based on extra-legal, policy reasons, beyond what is

typically required by 9(b). Still, the Grubbs court requires significantly more evidence

than Klein alleges in his complaint. The relator in Grubbs, Dr. Grubbs, had significantly

more information than Klein had here, providing a sharp contrast which illustrates that

even the more lenient circuits would not allow Klein’s complaint past pleading. In his

complaint, Dr. Grubbs included information detailing his conversations with other doctors

where they “divulged to him their fraudulent billing scheme” and discussed how he could

specifically contribute to the scheme. Grubbs, 565 F.3d at 184. His complaint also cited

nurse attempts to involve him in the scheme. Id. When Dr. Grubbs reported the practice to

a hospital administrator, the administrator replied, “You certainly figured that out quickly.”

Id. Klein’s evidence of an allegedly fraudulent scheme pales in comparison.

One large piece of Klein’s evidence is based on a significant logical leap. Klein

relies on vague, public statements from the Osborn CEO – a CEO who was recently

coming off of a financially negative quarter – to establish that there allegedly fraudulent
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invoices were actually submitted. The public statement was that Osborn would “do what it

takes” to get non-EPIDEMIC projects back on track. United States ex rel. Klein v. Osborn

Laboratories, Inc., No. 2014-CM-0839, at 8, (S.D. Wig. May 1, 2014). At the same time,

Osborn did not see a drop in EPIDEMIC reimbursement. Klein infers that Osborn must

have been fraudulently representing non-EPIDEMIC projects as EPIDEMIC projects, but

the lack of an EPIDEMIC funding drop can just as easily be explained by Osborn

expanding the resources invested, as corroborated by the “greatly increased debt

obligations,” rather than diverting monetary resources into non-EPIDEMIC projects. Id.

A required piece of the puzzle, fraudulent submission, can just as easily be explained by

legal behavior as it can be by illegal behavior. Cf. Bell Atlantic Corp. v. Twombly, 550

U.S. 544 (2007) (dismissing a claim under 8(a)’s more lax pleading standards because

legal behavior was an adequate, equally plausible explanation for behavior that, while

consistent with illegal behavior, was also consistent with legal behavior). Osborn could

have taken on debt in order to be able to run their non-EPIDEMIC projects while

maintaining similar levels of investment in EPIDEMIC projects.

Klein’s only evidence that he and other doctors were working on non-EPIDEMIC

projects while allegedly fraudulently billing for EPIDEMIC related work is that he and his

fellow researchers could no longer “reverse engineer” how their small projects were related

to the larger EPIDEMIC research. There is a large gulf between Klein and his colleagues

not always being able to reverse engineer how his projects were related and the level of

particularity in Dr. Grubbs’ complaint. His complaint included information about how a

detailed, intricate fraudulent scheme’s mechanics while providing “at least one overt act”

for each named defendant. Grubbs, 565 F.3d at 184. Klein has nothing of the sort.

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 The Karvelas court also allowed for some flexibility when there are corroborating

sources that suggest the “reliability of information reported.” Karvelas, 360 F.3d 220, n.17

(1st Cir. 2004). However, the only corroboration Klein has of his report are four unnamed

colleagues – colleagues from which Klein has no supporting affidavits, relying on the exact

same flimsy logic as Klein – not being able to reverse engineer small slices of a project.

Klein alleges no evidence regarding the specific mechanics of any of the fraudulent

scheme.

Klein attempts to tie his lack of ability to reverse engineer a specific project with

the existence of non-EPIDEMIC projects in development at Osborn to come up with the

conclusion that he must have been put on one of the non-EPIDEMIC projects. But his

conclusion does not follow from the facts that he cites. Osborn’s likely purpose in splitting

up the projects into small slices and not telling the researchers the greater purposes was to

obfuscate how researcher’s individual project fit into the larger puzzle. Klein seemingly

relies on the goal of Osborn’s strategy being fulfilled as a piece in his puzzle to prove

fraud.

Another key piece of Klein’s complaint is him overhearing an SRD and an

executive discussing how “department invoices should be written in order ‘to make them

appear eligible’ for EPIDEMIC reimbursement.” United States ex rel. Klein v. Osborn

Laboratories, Inc., No. 2014-CM-0839, at 7, (S.D. Wig. May 1, 2014). Shortly after, Klein

and 200 other Osborn employees were directed how to explain their work. Id. Klein’s

complaint again employs conclusory language in an attempt to show that there Osborn

employees are fraudulently representing non-EPIDEMIC work as EPIDEMIC work, but

Klein does not know whether his work is EPIDEMIC or not. There is nothing in the

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complaint to indicate that Osborn employees were directed to fraudulently represent their

work as something that it was not. Osborn could have been attempting to streamline the

billing process by accurately describing the work in order to ensure receipt of EPIDEMIC

funds.

The exact same process exists in another context. Doctors are told how to describe

their work to make sure that they are adequately compensated by federal programs like

Medicare and Medicaid. Doctors are compensated by Medicaid based off of the different

patient visit levels. Patient visit levels are all dependent on what verbiage is used in the

doctor’s note and how intricate the visit is. It is commonplace for doctors to be instructed

on what verbiage to use. See, e.g., Emily Hill, Understanding When to Use the New

Patient E/M Codes, AMERICAN ACADEMY OF FAMILY PHYSICIANS ,

http://www.aafp.org/fpm/2003/0900/ p33.html (Sept. 10, 2003) (telling doctors how to bill

visits because not using the proper verbiage “amounts to shortchanging yourself.”).

Osborn’s instructions do not indicate fraudulent billing, rather they indicate a company

attempting to properly navigate strict government procedures regarding billing.

C. State law cases regarding similarly worded state statutory schemes interpret state
False Claims Acts to require the more stringent pleading standard.

The state pleading requirements mirror the level required by 9(b) and state law

precedents help show that Klein’s claim is defective. They are illustrative of how to

interpret exactly similarly worded state FCA provisions. Many states have state law

parallels to the federal False Claims Act, and numerous have adopted the same more

stringent standard as required by 9(b). See, e.g., City of Pomona v. Superior Court, 107

Cal.Rptr.2d 710, 717 (Cal. Ct. App. 2001) (internal citation omitted) (holding that

20
“particularity” was required in pleading and the “particularity” standard was met because

the complaint included “the time, place, and contents of the false representations, as well

as the identity of the person making the misrepresentation and what he obtained thereby.”)

(emphasis added); Com. Ex rel. Riedel v. Quest Diagnostics Inc., 30 Mass. L. Rptr. 327,

330 (Mass. Dist. Ct. 2012) (ruling, while having the exact same procedural requirements

for pleading, that “the Plaintiff has failed to meet Rule 9(b)'s particularity standard because

he vaguely referenced dates in his amended complaint and did not specify who within

Quest made the alleged false statements to MassHealth.”). Klein’s claim lacked specific

information required by the state courts – the same defects as discussed above. See supra,

section II-B.

CONCLUSION

For the foregoing reasons, the Respondent, Osborn, respectfully requests that this

court reverse the Thirteenth Circuit’s decision as to Osborn’s motion to dismiss. Should

this court not reverse that portion of the decision, Osborn respectfully requests that this

court affirm the Thirteenth Circuit’s dismissal of Klein’s First Amended Claim under Fed.

R. Civ. P. 9(b) and Fed. R. Civ. P. 12(b)(6).

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