IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-20743
THE UNITED STATES OF AMERICA,
ex rel SANDRA RUSSELL, in her own right;
SANDRA RUSSELL,
Plaintiffs-Appellants
versus
EPIC HEALTHCARE MANAGEMENT GROUP;
HEARTHSTONE HOME HEALTH INC., doing business as
Continucare Health Services
Defendants-Appellees
Appeal from the United States District Court
for the Southern District of Texas
October 14, 1999
Before REYNALDO G. GARZA, HIGGINBOTHAM, and DAVIS, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This False Claims Act suit raises the question of time to
appeal under Rule 4(a)(1) of the Federal Rules of Appellate
Procedure in qui tam cases in which the United States has not
intervened. Qui tam plaintiff Sandra Russell filed a notice of
appeal of the dismissal of her action forty-eight days after the
entry of judgment. We must decide if the parties have sixty days
in which to file a notice of appeal when the United States has not
intervened in a False Claims Act suit. We find that Russell's
notice of appeal was timely filed within sixty days but we AFFIRM
the district court's dismissal of the suit because Russell failed
to plead fraud with particularity as required by Rule 9(b) of the
Federal Rules of Civil Procedure.
I
Sandra Russell sued her employers, Epic Healthcare Management
Group and Hearthstone Home Health, Inc., d/b/a ContinuCare Health
Services, under the False Claims Act, 31 U.S.C. § 3729 et seq.
(1994). The United States declined to intervene in the action.
Epic and Hearthstone sought dismissal of her suit on the ground
that she failed to plead fraud with particularity as required by
Rule 9(b). The district court gave Russell the opportunity to
amend her complaint to rectify the deficiency, and the court
dismissed Russell’s action because her amended complaint failed to
comply with Rule 9(b).
II
Russell’s case presents an issue of first impression in this
court: whether the government is a party for purposes of Rule
4(a) of the Federal Rules of Appellate Procedure when a qui tam
plaintiff has brought suit on behalf of the government, but the
United States has declined to intervene in the action. Rule
4(a)(1) of the Federal Rules of Appellate Procedure provides:
In a civil case in which an appeal is permitted by law as
of right from a district court to a court of appeals, the
notice of appeal required by Rule 3 must be filed with
the clerk of the district court within 30 days after the
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entry of judgment or order appealed from; but if the
United States or officer or agency thereof is a party,
the notice of appeal may be filed by any party within 60
days after such entry.
The sixty-day period is supported by the exigencies of government.
The Advisory Committee’s Notes of 1946 to Rule 73(a) of the Federal
Rules of Civil Procedure, the predecessor of Rule 4(a), explain
that the government's institutional decisionmaking practices
require more time to decide whether to appeal and that in fairness,
the same time should be extended to other parties in a case in
which the government is a party. See MOORE’S FEDERAL PRACTICE §
304.11[2], at 304-24 (3d ed. 1997).
In a qui tam case in which the United States intervenes, the
government is clearly a party and the sixty-day rule applies. The
difficulty arises when the government chooses not to intervene.
When a False Claims Act suit is initiated by a private person--a
qui tam plaintiff or relator--the action is brought "for the person
and for the Government" and is "brought in the name of the
Government." 31 U.S.C. § 3730(b)(1). The government has sixty
days after receiving a complaint and evidentiary information from
the relator to decide whether to intervene in the suit. See id. §
3730(b)(2)-(4).
If the government decides not to intervene, the citizen may
conduct the action. See id. § 3730(b)(4)(B). However, the
government's involvement may continue. If the government decides
not to intervene initially, it may request that it be served with
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copies of pleadings and be sent deposition transcripts; may
intervene later for good cause shown; may pursue alternative
remedies, such as administrative proceedings; and must give its
written consent to dismissal of the suit. Id. § 3730(b)(1) and
(c). Even when it does not intervene, the government receives the
larger share of any recovery. See id. § 3730(d).
The peculiar nature of the government’s relation to a qui tam
suit has in other contexts presented us the question whether the
non-intervening United States is a party to the suit for specified
purposes. In Searcy v. Philips Electronics North America Corp.,
we held that the United States could not appeal of right when it
had not intervened before the district court, but that it could
appeal the settlement of the case as a non-party. See 117 F.3d
154, 155 (5th Cir. 1997). We were persuaded that the government
had no appeal of right because it was not a party to the suit,
reasoning that as the False Claims Act distinguishes cases in which
the government is and is not an active litigant, we should not
treat the government as a party for purposes of standing to appeal
when it had chosen not to intervene. Id. at 156.
In United States ex rel. Foulds v. Texas Tech University, we
held that the 11th Amendment barred a relator’s suit against a
state when the United States had not intervened because the United
States was not an active litigant and hence had not "commenced or
prosecuted" the action for purposes of the 11th Amendment. See 171
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F.3d 279, 290 (5th Cir. 1999). The Foulds court recognized,
however, that the United States is a real party in interest to a
qui tam suit and may be a relevant party in the suit for some
purposes of the litigation. See Foulds, 171 F.3d at 289, 291.
Two circuits have examined the time-to-appeal issue and have
reached conflicting conclusions. The Ninth Circuit recently
applied the sixty-day period, emphasizing the need for simplicity
and clarity in applying the rule. See United States ex rel.
Haycock v. Hughes Aircraft Co., 98 F.3d 1100 (9th Cir. 1996). The
court pointed out that, even though the government declined to
intervene, the government’s name was still on all of the papers as
the plaintiff and the government would receive most of the money
from an award. See id. at 1102. Haycock applied the sixty-day
rule to ensure that the parties could determine the time for filing
"easily, without extensive research, and without uncertainty."1
Id.
In contrast, the Tenth Circuit has applied the thirty-day
period, reasoning that the government’s name on the pleadings was
merely a statutory formality and that the relator did not merit the
longer period afforded the government. United States ex rel.
1
In Searcy, we referred to the Ninth Circuit's Haycock
decision concerning the applicability of Fed. R. App. P. 4(a)(1):
"viewing the government as a party for the purposes of Rule 4(a)(1)
does not compel us to treat it as a party for all appellate
purposes." Searcy, 117 F.3d at 156. Searcy did not decide whether
the sixty-day rule applies when the government does not intervene
in a False Claims Act suit.
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Petrofsky v. Van Cott, Bagley, Cornwall, McCarthy, 588 F.2d 1327,
1329 (10th Cir. 1978). The majority rejected the dissent’s
argument that the language of the False Claims Act could mislead
the parties; the majority held there was no prejudice because the
parties were aware that the government disclaimed participation.
See id. at 1329.
The Tenth Circuit does not address the contention that the
government is a party albeit represented by the relator. Whether
in any sense a relator in a qui tam suit under the False Claims Act
is the government or is an agent or independent actor does not
control our reading of Rule 4. We need not here join the debate
over a relator's standing under Article III. Rule 1 of the Federal
Rules of Civil Procedure provides that the Rules "shall be
construed and administered to secure the just, speedy, and
inexpensive determination of every action." This is a charge to
resist reading the Rules in a manner that lays traps for the
unwary. Doing so, we are persuaded by the Haycock court's view
that the language of the False Claims Act is apt to mislead qui tam
plaintiffs into believing that the United States is a party, and we
agree that Rule 4(a)(1) should be construed to reduce uncertainty
in the already difficult conceptual terrain of qui tam suits.
However the relationship between a relator and the government may
be shaded in different contexts, the government is ever present in
qui tam suits in ways that promote confusion. We hold that when
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the United States has declined to intervene in a False Claims Act
suit filed by a qui tam plaintiff, Rule 4(a)(1) provides the
remaining parties sixty days from the entry of the judgment or
order appealed from to file notices of appeal.
III
A dismissal for failure to comply with Rule 9(b) is a
dismissal on the pleadings for failure to state a claim. See
Shushany v. Allwaste, Inc., 992 F.2d 517, 520 (5th Cir. 1993). We
review dismissal on these grounds de novo. See id.
The complaint in a False Claims Act suit must fulfill the
requirements of Rule 9(b). See United States ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997).
While the Federal Rules of Civil Procedure generally require in a
complaint only a short and plain statement of the cause of action,
Rule 9(b) states that "[i]n all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with
particularity. Malice, intent, knowledge, and other condition of
a mind of a person may be averred generally." To plead fraud with
particularity a plaintiff must include the "'time, place and
contents of the false representations, as well as the identity of
the person making the misrepresentation and what [that person]
obtained thereby.'" Williams v. WMX Tech., Inc., 112 F.3d 175, 177
(5th Cir. 1997)(quoting Tuchman v. DSC Communications Corp., 14
7
F.3d 1061, 1068 (5th Cir. 1994)), cert. denied, 118 S. Ct. 412
(1997).
The conduct to which liability attaches in a False Claims Act
suit consists in part of false statements or claims for payment
presented to the government. See United States ex rel. Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999).
Because such statements or claims are among the circumstances
constituting fraud in a False Claims Act suit, these must be pled
with particularity under Rule 9(b).
Russell maintains that the Rule 9(b) requirements should be
relaxed in her case because the information necessary to provide
her claim with sufficient particularity is within the exclusive
control of Epic and Hearthstone. We have held that when the facts
relating to the alleged fraud are peculiarly within the
perpetrator’s knowledge, the Rule 9(b) standard is relaxed, and
fraud may be pled on information and belief, provided the plaintiff
sets forth the factual basis for his belief. See Thompson, 125
F.3d at 903 (warning that the exception "must not be mistaken for
license to base claims of fraud on speculation and conclusory
allegations" (citations omitted)). Russell asserts that she was
unable to obtain the necessary information because a
confidentiality agreement prohibited her from copying relevant
documents while she worked for Epic and Hearthstone. The district
court found that Russell was not entitled to the relaxed standard
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because documents containing the requisite information were
possessed by other entities, such as the Healthcare Financing
Administration. We agree.
We decline to further relax Rule 9(b) in the context of qui
tam suits. The text of the rule provides no justification for
doing so. As we observed in reading Rule 4 of the Federal Rules of
Appellate Procedure, we are to be practical and strive for simple,
direct and clear meanings. We have no license to craft judicial
exceptions, and we see no reason to do so here. Furthermore, the
False Claims Act grants a right of action to private citizens only
if they have independently obtained knowledge of fraud. See 31
U.S.C. § 3730(e)(4). With this requirement the government seeks to
purchase information it might not otherwise acquire. It must
decide on review of the sealed complaint whether to take the case
over. A special relaxing of Rule 9(b) is a qui tam plaintiff's
ticket to the discovery process that the statute itself does not
contemplate.
IV
Russell's appeal was timely filed, but as her complaint fails
to allege a violation of the False Claims Act with particularity,
we AFFIRM the district court's dismissal of her suit.
AFFIRMED.
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