Briefs Filed Opposing Fourth Circuit Review of Statistical Sampling on Interlocutory Appeal

A district court in South Carolina recently certified to the Fourth Circuit two questions for interlocutory appeal: 1) whether courts can review and reconsider the government’s rejection of a settlement in a non-intervened qui tam suit, and 2) whether and when statistical sampling can be used to prove liability and damages in FCA actions.  Both the government (which did not intervene in this case, but which has opposed settlement) and the defendant hospice chain, Agape, recently filed briefs urging the Fourth Circuit to pass on the statistical sampling question.  The government also argued that the Fourth Circuit should adopt the majority rule recognizing the government as having unfettered veto authority.

In addition to arguing that the vast majority of courts to have considered the question of judicial review of settlement vetoes are aligned with the district court’s plain meaning reading of the FCA, the government emphasized that the district court’s ruling had too narrowly characterized the government’s objection as relating solely to the size of the settlement.  Instead, the government explained, it also opposed the “extraordinary scope of the proposed release,” which would have included a “full release as to all potential government claims, administrative, civil and criminal against the defendants.”  Two other factors compounded these terms, culminating in a settlement that ostensibly failed to vindicate the government’s interests: the parties had proposed to enter into a confidentiality order relating to the settlement, and the defendants would have been permitted to make repayments spread across 72 months, without paying any interest.  Once the district court took these factors into account, the government argued that the court might ultimately side with the government in opposing the settlement.  As such, even if the Fourth Circuit permitted the district court to second-guess the government’s initial rejection of the settlement, the ruling was unlikely to materially advance termination of the litigation.

The government also argued that the sampling question was ill-suited for interlocutory appeal because the ruling was “at bottom, a determination as to the admissibility of one piece of evidence at trial,” and such pre-trial evidentiary rulings are not appropriate for interlocutory appeal.  Furthermore, the government noted that if the Fourth Circuit affirmed the district court’s ruling as to the government’s ability to veto settlements, the parties, forced to go back to the bargaining table, may reach a settlement palatable to the government, thereby obviating the need for a sampling proposal.

Agape, too, opposed Fourth Circuit review of the application of statistical sampling, reiterating that the issue failed to offer the requisite “pure question of law.”  As Agape pointed out, the district court had characterized statistical sampling as appropriate, in certain circumstances, for establishing FCA liability and damages, an acknowledgement in tension with purely legal questions.  Second, Agape reiterated that a decision on statistical sampling would not diminish the expense or length of litigation because it planned “to defend each and every claim alleged as false by the Relators by calling witnesses and presenting evidence.”  Agape only addressed in a footnote the third element necessary to satisfy the criteria for interlocutory appeal, namely, that the question implicate “substantial ground for differences of opinion.”  Agape took the position that “there is no substantial disagreement among courts as to whether statistical sampling can be used to prove liability in an FCA case” because only four district courts have yet permitted it.

A copy of the government’s briefing can be found here, and a copy of Agape’s briefing can be found here.