Judge Dismisses FCA Claim Against City of Chicago; Concludes that “Subsequent Nonperformance of a Future Commitment” Was Not a Falsehood Under FCA
On September 16, 2015, the U.S. District Court for the Northern District of Chicago dismissed a False Claims Act (FCA) case against the City of Chicago, because the qui tam complaint did not satisfy the relevant pleading standard. In an opinion issued by District Judge Andrea Wood, the court found that the complaint failed to allege facts with particularity as required under Federal Rule of Civil Procedure 9(b). United States ex rel. Hanna v. City of Chi., No. 11-CV-04885, 2015 WL 5461664 (N.D. Ill. Sept. 16, 2015).
In the complaint, the relator alleged that Chicago violated the FCA by falsely certifying its compliance with relevant federal housing laws when it received funds disbursed by the U.S. Department of Housing and Urban Development. According to the relator, the City violated the FCA by falsely certifying that it was taking affirmative steps to further fair housing as required by law when, in fact, it “was using its housing programs and ordinances to preserve and exacerbate housing segregation.”
The court deemed the complaint to be insufficient under Rule 9(b), observing that the standard “requires a complaint to state the identity of the person making the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated, or, in other words, the plaintiff must plead the ‘who, what , when, and where,’ of the alleged fraud.” The court explained that the defendant “must have actual knowledge of the falsity of the information presented or deliberately ignore or act in reckless disregard of its truth or falsity.”
The court found the complaint wanting in these respects. First, the alleged misrepresentations consisted of forward-looking statements that confirmed Chicago’s general intention to advance fair housing. The FCA focuses on the defendant’s intention at the time of making the statement, not a change of heart afterwards. According to the court, “subsequent nonperformance of a future commitment is not a falsehood for FCA purposes,” and the complaint failed to show “a link between the representation and the intention not to abide by it.”
Second, the complaint failed to specify the persons who were responsible for making the statements, or their intention to violate fair housing obligations. Although the complaint alleges that “the City’s Mayor (or his designee)” made the statements, the court found that this allegation was imprecise. Although the complaint mentions the influence of city aldermen over zoning, the complaint did not allege that the aldermen participated in any plan to avoid compliance. The court found that these indefinite allegations did not satisfy the requirement under Rule 9 to “plead facts that make the allegation of fraud plausible.”