United States Ex Rel. Raynor v. National Rural Utilities Cooperative Finance, Corp.
690 F.3d 951
8th Cir.2012Background
- Raynor filed a qui tam FCA action against National Rural Utilities Cooperative Finance Corp. (and others) alleging false claims to obtain federal funds and approvals.
- National Rural is a non-profit, member-owned cooperative that finances rural electric and telephone entities; Rural Telephone Finance Corp. is controlled by National Rural and provides financing to rural telephone companies.
- National Rural receives federal funds through Farmer Mac and USDA programs, including the Rural Economic Development Loan and Grant Program.
- Raynor alleges pre-2008 Farmer Mac investments exceeded entity caps and marketability requirements; post-2008 loans and lines of credit allegedly exceeded statutory authority and National Rural’s charter.
- Raynor also alleges three purported fraud schemes (Embezzlement Scheme, CoServ Loan Fraud, ICC Loan Fraud) and accounting misstatements violating GAAP to obtain investments, loans, or guarantees; he claims GAAP deficiencies imply false statements to obtain government funds.
- The district court dismissed Raynor’s third amended complaint with prejudice under Rule 9(b) and Rule 12(b)(6), and Raynor appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FCA false-claim pleading is subject to Rule 9(b)’s heightened standard. | Raynor argues the FCA claims about investments/loans are not fraud-based, so Rule 9(b) should not apply. | National Rural contends FCA claims are fraud-based anti-fraud statute, requiring Rule 9(b). | Rule 9(b) applies to FCA allegations. |
| Whether Raynor alleged sufficiently the falsity of claims under FCA. | Raynor contends GAAP deviations render claims false. | GAAP variations are not inherently false; claims require specific falsity beyond management’s accounting choices. | Complaint fails to plead false claims with sufficient specificity or definitive falsity. |
| Whether Raynor stated a plausible FCA claim even if GAAP could be disputed. | Raynor asserts accounting fraud makes claims false and actionable. | GAAP disputes alone do not establish knowing fraud; no factual allegations of knowing deception. | Plaintiff failed to show knowing fraud or a plausible false-claim theory. |
| Whether denial of leave to amend and Rule 59(e) reconsideration was an abuse of discretion. | Raynor sought leave to amend for greater particularity. | District court properly denied leave due to local-rule noncompliance and futility; no proposed amended pleading. | No abuse of discretion; leave to amend denied. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleading fraud claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (requires plausible claims, not mere allegations of elements)
- United States ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791 (8th Cir. 2011) (FCA false-claim allegations must meet Rule 9(b) when fraud-based)
- United States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818 (8th Cir. 2009) (fraud-based FCA claims must satisfy Rule 9(b))
- United States v. Basin Elec. Power Coop., 248 F.3d 781 (8th Cir. 2001) (GAAP interpretations and accounting practices viewed as reasonable; pleading must show no reasonable interpretation that would make statements true)