United States Ex Rel. Hanna v. City of Chicago
2016 U.S. App. LEXIS 15400
| 7th Cir. | 2016Background
- Plaintiff Albert C. Hanna, a long-time Chicago resident and real-estate professional, filed a qui tam False Claims Act (FCA) suit alleging Chicago falsely certified compliance with federal fair-housing and civil-rights obligations to obtain HUD funds.
- Hanna alleges City policies—chiefly “aldermanic privilege” (local aldermen control siting of affordable multifamily housing) and downzoning/landmarking in affluent wards—directed affordable-housing funds into poorer, predominantly minority neighborhoods, increasing segregation.
- Hanna claims the City’s annual certifications to HUD (as part of Consolidated Plans and grant applications) represented compliance with Title VI, the Fair Housing Act, and related HUD regulations while the City’s policies produced the opposite effect.
- The United States declined to intervene; Hanna amended his complaint after an initial dismissal, but the district court dismissed the amended complaint with prejudice for failing to meet Rule 9(b).
- The Seventh Circuit assumed Hanna’s factual allegations true for pleading purposes but held his amended complaint failed to plead the particulars of fraud required by Rule 9(b): it did not identify the specific statutory/regulatory provisions allegedly violated, the precise documents/representations, timing/place, or how the misrepresentations were communicated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chicago’s certifications to HUD were false under the FCA because City policies increased segregation | Hanna: City knowingly certified compliance with fair-housing obligations while pursuing policies (aldermanic privilege, downzoning) that perpetuated segregation, making certifications false | City: Complaint fails to identify which certifications or which statutory/regulatory provisions were violated; lacks specificity for an FCA claim | Court: Dismissed—plaintiff failed to plead falsity with the particularity required by Rule 9(b) |
| Whether plaintiff pleaded the requisite who/what/when/where/how of alleged fraud under Rule 9(b) | Hanna: Allegations about policy, funds distribution, and timing (generally annual) suffice to put City on notice | City: Pleadings lack identity of specific misrepresentations, specific documents, dates/places, and method of communication; public documents accessible to Hanna undermine reliance on information-and-belief pleading | Court: Held pleadings insufficient; Rule 9(b) requires particularity and insider-like factual detail when available |
| Whether plaintiff may cure specificity deficiencies by attaching statutes/regulations via appellate brief | Hanna: Court may consider statutes and regs cited in his appellate brief along with complaint | City: Rule 9(b) does not permit supplementation by brief for fraud pleadings; complaint must itself plead particulars | Court: Rejected supplementation approach for Rule 9(b); evaluated only the complaint’s contents |
| Whether FCA’s purpose (encouraging whistleblowers) supports lenient pleading here | Hanna: implied need to allow public-knowledge suits | City: FCA targets insiders with concrete information; opportunistic public suits should be discouraged | Court: Noted FCA’s whistleblower purpose; concluded Hanna appears non-insider and lacked specific, accessible facts, supporting dismissal |
Key Cases Cited
- Tricontinental Indus., Ltd. v. Pricewaterhouse-Coopers, LLP, 475 F.3d 824 (7th Cir.) (assume truth of factual allegations on motion to dismiss)
- DiLeo v. Ernst & Young, 901 F.2d 624 (7th Cir.) (Rule 9(b) requires who, what, when, where, and how)
- U.S. ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601 (7th Cir.) (FCA claims are subject to Rule 9(b) heightened pleading)
- U.S. ex rel. Grenadyor v. Ukrainian Village Pharmacy, Inc., 772 F.3d 1102 (7th Cir.) (identity, time, place, content, and method of misrepresentation required)
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436 (7th Cir.) (permitting information-and-belief pleading only when facts are not accessible and grounds for belief are stated)
- Ackerman v. Northwestern Mutual Life Ins. Co., 172 F.3d 467 (7th Cir.) (Rule 9(b) aims to force investigation before filing)