The U.S. Court of Appeals for the Eleventh Circuit held in United States ex rel. Sedona Partners LLC v. Able Moving and Storage Inc., No. 22-13340 (11th Cir. Jul. 25, 2025), that while a district court has the discretion to dismiss a relator’s complaint before or once discovery has begun, it may not disregard the allegations of qui tam relators at the motion to dismiss stage solely because those allegations reflect information obtained in discovery.
As our colleagues wrote in Summer 2025, the Eleventh Circuit in Sedona reversed a contrary decision of the U.S. District Court for the Southern District of Florida, which had relied on an unpublished 2019 case, Bingham v. HCA Inc., 783 F. App’x 868 (11th Cir. 2019), when it considered the matter in 2022.
According to the Eleventh Circuit, the district court had erred in both ignoring the allegations in question—relating to the defendant shipping companies’ requests to waive a requirement to use U.S. carriers in favor of foreign ones—and in striking those allegations from the relator’s second amended complaint.
Sedona is one in a string of False Claims Act (FCA) cases, including in the Eleventh Circuit, interpreting Federal Rule of Civil Procedure (FRCP) 9(b)’s heightened pleading standard. The rule requires that in alleging fraud or mistake, a party must state with particularity the circumstances of the alleged fraud or mistake. We take a closer look at the Sedona case here.
The Facts: Foreign Flag Waivers
The district court dismissed the second amended complaint of qui tam relator Sedona Partners after striking its discovery-based allegations. The FCA suit alleged that defendants, a specific group of transportation service providers (TSPs), had engaged in a scheme to defraud a federal program assisting federal employees in shipping their belongings when accepting new posts overseas.
Sedona, also a TSP, alleged that defendants fraudulently used less expensive foreign vessels instead of American shipping carriers in violation of a policy requiring the use of American carriers. Defendants would allegedly submit fraudulently low bids to win competitive contracts and routinely apply for a “foreign flag waiver” by certifying that no U.S. vessels were available to carry out the contracts. Other TSPs submitted higher bids, reflecting the higher cost of U.S. carriers. Since the amount paid by the government did not vary based upon whether U.S. or foreign vessels were used, Defendants allegedly profited from the scheme.
Defendants moved to dismiss, contending that Sedona failed to state a claim under FRCP 12(b)(6) and failed to plead fraud with particularity under Rule 9(b)—arguments that were repeated after the relator filed a second amended complaint identifying at least 96 shipments for which defendants allegedly submitted false certifications. Sedona had obtained additional information to include in the second amended complaint from the defendants and from a third-party shipping line in discovery.
Defendants also moved to strike allegations derived from materials obtained in discovery under Rule 12(f), asserting that in the Eleventh Circuit, “permitting a [r]elator to use the discovery process to cure a defective pleading constitutes an impermissible end-run around the gatekeeping functions of Rule 9(b).”
A magistrate judge and subsequently the district court judge agreed, concluding that under the unpublished Bingham case, courts may strike “allegations based on materials obtained during discovery if it prevents relators from circumventing the particularity requirement of Rule 9(b).” The district court found that Sedona’s allegations identifying the 96 shipments involving false waiver requests were derived from discovery materials, and consequently struck those allegations, and dismissed the second amended complaint with prejudice. Sedona appealed.
Eleventh Circuit: Rule 9(b)
The Eleventh Circuit reiterated that to satisfy Rule 9(b), a relator’s FCA complaint must “‘set… forth facts as to time, place, and substance of the alleged fraud, specifically the defendants’ allegedly fraudulent acts, when they occurred, and who engaged in them.’”
The court rejected the defendants’ arguments that Rule 9(b) would be nullified if relators were allowed to rehabilitate deficient FCA claims with information learned from discovery; and that binding precedent requires relators to satisfy the Rule’s particularity requirement before the start of discovery.
“Bingham is not binding on us, and we do not find it persuasive because…Rule 9(b) does not prohibit pleaders from using, or courts from considering, allegations based on information obtained during discovery,” Circuit Judge Jill Pryor wrote for the panel, reminding readers in a footnote that unpublished cases are not precedential.
The court reasoned that the text of Rule 9(b) places no restrictions on the source of the information that may be used to satisfy the rule; and the FRCP in general allow a party to amend the pleadings to reflect information gained from any source, as long as the amendment is otherwise proper under Rule 15 (“Amended and Supplemental Pleadings”). She noted that the Supreme Court has warned federal courts to abstain from supplementing the FRCP and to avoid adding pleading requirements on a case-by-case basis, since amending Rule 9(b) is the job of Congress. “[U]ntil that happens, relators face the same pleading standard as all other plaintiffs alleging fraud under Rule 9(b),” the court concluded.
The Eleventh Circuit also held that the district court abused its discretion when it struck Sedona’s discovery-based allegations under Rule 12(f), under which a “court may strike from a pleading any redundant, immaterial, impertinent, or scandalous matter.” A Rule 12(f) motion, the court said, is a drastic remedy to be used “only when required for the purposes of justice” and “should be granted only when the pleading to be stricken has no possible relation to the controversy.”
Finally, the court declined to affirm the district court on the basis that (1) the allegations in Plaintiff’s second amended complaint still failed to plead fraud with sufficient particularity, even with the information obtained in discovery, or that (2) the allegations failed to allege that the defendants knew the claims were false. Since the district court never reached those issues, the Eleventh Circuit chose to return them to the lower court.
The district court, and the Bingham panel, did not consider Rule 12(f) but merely struck the allegations without further analysis after concluding that Rule 9(b) barred the relators’ discovery-based allegations, the Eleventh Circuit said. “Thus, the district court abused its discretion by incorrectly applying Rule 12(f) when it struck allegations from Sedona’s second amended complaint without a basis under the Rule to do so.”
Public Disclosure Bar
We note here that the Eleventh Circuit did not address the potential applicability of the public disclosure bar. The district court in Sedona concluded that it did not apply, stating that “it is not clear from the record that all of the shipping information relied upon by Relator, including historical data, is accessible from internet websites.” U.S. ex rel. Sedona Partners LLC v. Able Moving & Storage, Inc. (S.D. Fla. 2022).
As our colleagues have written, this rule prevents whistleblower FCA qui tam actions if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed—
- in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
- in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
- from the news media,
unless the action is brought by the Attorney General or the person bringing the action (the relator) is an original source of the information. 31 U.S.C. § 3730(e)(4)(A).
For example, a case in the Second Circuit, U.S. ex rel. Smith v. Yale University, 415 F.Supp.2d. 58 (D. Conn. 2006), stated that the first prong “should be interpreted broadly, so as to include ‘allegations and information disclosed in connection with civil, criminal, or administrative litigation,’ including information disclosed during discovery” (quoting U.S. ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prud. Ins. Co., 944 F.2d 1149 (3d Cir. 1991)). However, when the district court in Smith examined whether the information produced—on which the relator relied—was “core” information or merely additional evidence to support the relator’s allegation, the court concluded that the relator did not have direct knowledge of the information forming the “core” of the allegation and could not be an “original source.”
Public disclosure bar cases typically involve discovery that has been obtained from other related matters, as opposed to the same case. The Third Circuit has noted that “[e]ven though the law usually does not allow a qui tam relator to save an inadequately pled complaint by adding amendments based on discovery obtained from the defendant, there is no authority barring such amendments based on discovery obtained from the Government,” U.S. ex rel. Underwood v. Genetech, Inc., 720 F. Supp.2d 671 (E.D. Pa. 2010). The First Circuit, meanwhile, has held that a qui tam relator may not present general allegations in lieu of details of actual false claims in the hope that such details will emerge through subsequent discovery. U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d. 220 (1st Cir. 2004) (abrogated on other grounds).
No Conflict
The Sedona defendants pointed to U.S. ex rel. Clausen v. Laboratory Corp. of America, 290 F.3d. 1301 (11th Cir. 2002), where the Eleventh Circuit noted in footnote 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, baseless, . . . allegations used to extract settlements.
The Sedona defendants also pointed to U.S. ex rel. Atkins v. McInteer, 470 F.3d. 1350 (11th Cir. 2006), where the Eleventh Circuit observed that “[t]he particularity requirement of Rule 9 is a nullity if Plaintiff gets a ticket to the discovery process without identifying a single claim” (quoting U.S. v. Lab. Corp. of Am., 2001 WL 1867721 (N.D. Ga. 2001)). Both Clausen and Atkins affirmed the pre-discovery dismissal of relators’ complaints for failure to satisfy Rule 9(b).
“We…had no occasion to address a district court’s dismissal of a relator’s amended complaint that included allegations informed by discovery,” Judge Pryor wrote in Sedona. “These cases do not conflict with our decision today.”
Takeaways
Though the underlying facts of the Sedona case concern the shipping industry, its principles apply, with equal force and effect, to all FCA cases, including those in health care and life sciences realms. While the Rule 9(b) heightened pleading standard requires particularity in cases alleging fraud or mistake, the Eleventh Circuit seemed to take no issue with a plaintiff’s use of material obtained in discovery to revive a faulty complaint. Indeed, in arriving at that outcome, the court distinguished two cases in which it had determined lower courts had not abused their discretion in dismissing complaints for failing to lodge allegations with sufficient particularity under Rule 9(b) before the start of discovery. In any event, Rule 9(b) particularity will continue to be an effective defense in FCA cases, but relators may look to initiate earlier discovery as a means to support—and possibly amend—their claims during the motion to dismiss phase.
Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.
Blog Editors
Authors
Member of the Firm
Board of Directors / Member of the Firm
Member of the Firm
Member of the Firm
Member of the Firm
