Case Information
*1 Before W OOD , Chief Judge , and P OSNER and R OVNER , Circuit Judges .
W OOD , Chief Judge . In order to receive federal housing funds, the City of Chicago must certify that it is in compliance with a number of federal requirements related to reducing the city’s racial segregation. Albert C. Hanna’s suit against the City alleges that it violated the False Claims Act because its policies—in particular, “aldermanic privilege” and strategic zoning of relatively wealthy neighborhoods—have actually *2 increased segregation, making its certifications false. But, as the district court properly recognized, Hanna has not alleged the circumstances of the purported fraud with sufficient par- ticularity to satisfy Federal Rule of Procedure 9(b). We there- fore affirm its judgment.
I
Chicago is, by its own admission, a “highly segregated city” and has been for more than 50 years. C ITY OF C HICAGO , 2010–2014 C ONSOLIDATED P LAN 19 (2010). Whites predomi- nately live on the North, Northwest, Southwest and far South Sides, while African-Americans live mostly on the West and South Sides. Id. at 20. (We omit details about other racial or ethnic groups, of which there are many, because they are not central to this case.) This geographic distribution “has re- mained fundamentally constant” since the 1980 census. Id.
Hanna is a long-time resident of Chicago’s Lincoln Park
neighborhood. For more than half a century, his professional
and personal activities have included real estate develop-
ment, real estate financing, civic affairs, and philanthropy in
Chicago. He has “a particular concern for providing afforda-
ble housing in quality neighborhoods,” and so filed his origi-
nal
qui tam
complaint in 2011. The United States declined to
intervene in 2013. We evaluate the allegations in his amended
complaint; we assume the truth of these allegations for pre-
sent purposes.
Tricontinental Indus., Ltd. v. Pricewaterhouse-
Coopers, LLP
,
Hanna alleges that during the six years before he filed this suit, the City knowingly made false claims and certifications to the U.S. government. One such representation was that it had complied—and would comply—with certain civil rights *3 requirements. It did this in order to receive more than $1 bil- lion in funds from federal programs administered by the U.S. Department of Housing and Urban Development (HUD). Those requirements arise under several laws. Hanna alleges that the City “was required … to certify that it [would] admin- ister each grant in compliance with Title VI, 42 U.S.C. § 2000d, et seq . and implementing regulations at 24 C.F.R. Part 1,” “the Fair Housing Act, 42 U.S.C. § 3601, et seq. , and its implement- ing regulations at 24 C.F.R. Part 100,” and “42 U.S.C. §§ 608(e)(5), 5304(b)(2), and 12705(b)(15) and applicable HUD regulations.” Finally, he asserts that “[a]s defined by HUD and by caselaw, the … obligation [affirmatively to pursue fair housing] requires the City to conduct ‘[a] comprehensive re- view of [its] laws, regulations, and administrative policies, procedures and practices[, and a]n assessment of conditions, both public and private, affecting fair housing choice for all protected classes.” He has not, however, given any further de- tails about which specific statutory and regulatory provisions the City violated, what those provisions said, or how exactly the City’s conduct violated them.
Hanna separates Chicago’s neighborhoods into two cate- gories: those with “lower poverty rates, good community ser- vices and commercial amenities, job opportunities, safe neighborhoods and good schools” he calls “areas of oppor- tunity”; those lacking those attributes he labels “low-oppor- tunity areas.” The City knew, Hanna says, which neighbor- hoods were typified by segregated living patterns (more than 75% minority population) and which were typified by high poverty rates (more than 40% of population with incomes be- low the federal poverty line). The City also knew that there *4 was predictable overlap between these categories: the desira- ble areas had larger White populations and smaller African- American and Latino populations than Chicago in general.
Hanna asserts that despite its knowledge of these facts and its obligation to take affirmative steps to secure fair housing, the City knowingly administered its affordable housing and funding programs, along with its zoning and land use laws, with the purpose and effect of locating affordable, multifam- ily rental housing units in the less desirable areas and discour- aging their location in the better neighborhoods. Doing so perpetuated and intensified the already-existing racial and ethnic segregation of Chicago’s neighborhoods.
The City allegedly enacted these goals through two poli- cies: “aldermanic privilege” and disproportionately down- zoning advantaged neighborhoods—that is, rezoning areas suitable for multifamily development so as to prevent or limit new construction of such projects. Chicago is divided into 50 wards, each of which elects an alderman to sit on the city council. Under “aldermanic privilege,” the City grants each alderman the “full authority to determine whether and where affordable, multifamily rental housing will be built and reno- vated in the ward.” According to Hanna, aldermen in the de- sirable, largely White areas used their authority to prevent such housing from being built in their wards.
Through these devices, the City directed hundreds of mil- lions of dollars in federal funds for affordable housing pri- marily into racially or ethnically segregated, low-income ar- eas. In the 1960s, 1970s, and 1980s, when a majority of the pro- jects built with these funds were not controlled by the City, roughly half of the affordable, multifamily rental housing was *5 located in areas that were already well-to-do. In the 1990s, af- ter the Chicago City Council began administering the funds, that percentage declined to only ten percent. During the six years covered by Hanna’s complaint, the City approved fund- ing of more than 2,600 housing units in 35 developments for low- and moderate-income families and children. Seven per- cent of those units were located in wealthier areas; 93% were located in low-income areas.
The complaint also contends that the City grants aldermen control over zoning, land use, building codes, and decisions about affordable housing funding and location within their wards. Aldermen in primarily White, higher-income neigh- borhoods use this authority to “downzone” areas suitable for multifamily development so that this use would be prohibited or limited. The City’s 2004 Zoning Ordinance also downzoned many advantaged areas, thus preventing the building of af- fordable, multifamily housing unless the alderman person- ally intervenes to rezone parcels for such use.
According to the Mayor’s Zoning Reform Commission, the 2004 Zoning Ordinance’s stated purpose was to “reinforce … established patterns” and to “preserve neighborhood char- acter.” But Hanna contends that this rationale was a smokescreen: the true purpose and effect was to limit devel- opment of affordable, multifamily housing units—and there- fore opportunities for African-American and Latino fami- lies—in predominantly White neighborhoods. The City also downzoned or applied landmark status to more than 5,200 acres of private, residentially zoned land. (The City’s Historic Preservation Ordinance severely limits redevelopment of lo- cations designated as “landmarks.”) Nearly two-thirds of that territory was within desirable areas. Meanwhile, the City did *6 not analyze or disclose in its five-year “Consolidated Plans” (submitted to HUD in 2004 and 2010) how its zoning and land use practices affect fair housing options for African-American and Latino families.
Hanna sued the City under the False Claims Act (FCA), 31 U.S.C. § 3729(a)(1)(A) and (B), alleging that the City had falsely certified compliance with its civil rights obligations while perpetuating policies and practices that increased resi- dential segregation. Based on these certifications, it submitted claims that yielded millions of dollars in funds from federal programs, and thus defrauded the U.S. government. The City moved under Federal Rule of Civil Procedure 12(b)(6) to dis- miss the complaint for failure to state a claim. The district court initially dismissed the complaint without prejudice, finding that Hanna had not pleaded the alleged fraud with sufficient specificity, and granted Hanna leave to amend. Hanna filed an amended complaint, which the City once again moved to dismiss. The district court granted the City’s motion, this time with prejudice, and Hanna appealed.
II
We review the district court’s decision to grant the City’s
motion to dismiss
de novo
.
Tricontinental
, 475 F.3d at 833. In
relevant part, the FCA imposes liability on any person who
“knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval” or “knowingly
makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.” 31 U.S.C.
§ 3729(1)(A), (B). To prove an FCA claim, Hanna must show
(1) that the defendant made a statement in order to receive
money from the government; (2) that the statement was false;
and (3) that the defendant knew the statement was false.
U.S.
*7
ex rel. Yannacopoulos v. Gen. Dynamics
,
Because it is an anti-fraud statute, claims under the FCA
are “subject to the heightened pleading requirements of Rule
9(b) of the Federal Rules of Civil Procedure.”
U.S. ex rel. Gross
v. AIDS Research Alliance-Chicago
, 415 F.3d 601, 604 (7th Cir.
2005) (internal citation omitted). This means that the plaintiff
must “state with particularity the circumstances constituting
fraud or mistake.” F ED . R. C IV . P. 9(b). To meet this standard,
the plaintiff must allege “the who, what, when, where, and
how: the first paragraph of any newspaper story.”
DiLeo v.
Ernst & Young
,
Before addressing the merits, we need to say a word about
what exactly is before us for review. Hanna’s briefs on appeal
set out a number of the statutes and regulations with which
the City allegedly falsely certified compliance—his pleadings,
however, did not. Hanna argues that the statutes and regula-
tions provided in his briefs to this court may be considered
along with his pleadings because a “plaintiff need not put all
of the essential facts in the complaint” but instead “may add
them by affidavit or brief—even a brief on appeal.”
Hrubec v.
Nat’l R.R. Passenger Corp.
,
This is true for pleading under Rule 8, which applies to
most pleadings and requires only a “short and plain state-
ment of the claim showing that pleader is entitled to relief.”
*8
F ED . R. C IV . P. 8. Rule 8 requires notice pleading, not fact plead-
ing.
Swanson v. Citibank, N.A.
,
Rule 9(b), however, is an exception to the notice pleading
regime. Fraud and mistake must be pleaded with particular-
ity; the pleader is not free to hold back and add facts via affi-
davit or brief. Indeed, the purpose of Rule 9(b) is to “force the
plaintiff to do more than the usual investigation before filing
his complaint.”
Ackerman v. Nw. Mut. Life Ins. Co.
,
On to the merits. The City argues that Hanna’s complaint does not satisfy Rule 9(b) because it gives no information about which regulatory provisions Hanna thinks the City vi- olated; it does not even draw a link between the statutes Hanna is now citing and any particular alleged false certifica- tion. The City has a point. Where the allegedly false certifica- tion relates to a failure to comply with certain statutory and regulatory provisions, the plaintiff should be able to tell the City which ones it flouted, and how and when. If the particu- larity requirement is meant to ensure more thorough investi- gation before filing, it is not too much to ask that one aspect of that investigation include the specific provisions of law *9 whose violation made the certification of compliance false. Moreover, if, as in this case, a defendant is presented only with an undifferentiated raft of statutory and regulatory pro- visions, it will be nearly impossible for the defendant to pre- pare a defense. And the district court will find it quite diffi- cult, on a motion to dismiss, to determine whether the defend- ant actually falsely certified compliance with any specific pro- vision.
Note that we are not saying that plaintiffs in Hanna’s po-
sition must list the City’s promises with any more particular-
ity than that with which the City made them. Unlike the
Ninth, Sixth, and Second Circuits, we have never demanded
that a plaintiff explain in her complaint
why
the claim was
false. See
Cooper v. Pickett
, 137 F.3d 616, 625 (9th Cir. 1997);
Frank v. Dana Corp.
,
Hanna’s particularity problems do not end with his failure
to be specific about which statutes or regulations that the City
violated. He also does not allege the “time, place, … and the
method by which the misrepresentation was communicated
*10
to the plaintiff.”
Grenadyor
,
Finally, he does not indicate how the allegedly false certi-
fication was communicated to him. Although Hanna may
have been able to plead facts about the relevant documents on
information and belief if he had shown they were “not acces-
sible” to him and provided “the grounds for his suspicions,”
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v.
Walgreen Co.
,
III
We A FFIRM the judgment of the district court.