Fourth Circuit Appears Inclined to Avoid Sampling Question

As we reported here and here, the question of whether statistical sampling can be used to establish FCA liability became intertwined in a Fourth Circuit interlocutory appeal challenging the government’s assertion that it has unfettered authority to veto FCA settlements.  United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.).  During oral arguments last week, the Fourth Circuit panel demonstrated a clear preference for avoiding the sampling component of the appeal, likely leaving the lower courts to continue to develop a piecemeal approach.

The panel immediately began pressing relators’ counsel as to whether the Fourth Circuit had improvidently agreed to hear an interlocutory challenge to the statistical sampling question.  Under 28 U.S.C. § 1292(b), appellate courts can review district court orders that are not otherwise appealable as final orders if the district court is “of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”  The panel asked whether the court’s order denying the use of statistical sampling to establish liability was truly a question of law, as opposed to a fact-driven evidentiary ruling committed to the discretion of the district court.  Without a controlling question of law, the Fourth Circuit would lack jurisdiction over the interlocutory challenge to sampling.  The government further urged the panel to sidestep the issue, explaining that “if the court agrees with the proposition that the government has unreviewable veto authority, then it need not reach the sampling question.”

In support of its challenge to statistical sampling, counsel for the defendant in the FCA case, Agape, filed a notice of supplemental authority shortly before oral arguments.  First, Agape argued that the Supreme Court’s decision in Escobar, which emphasized the “demanding” nature of the materiality requirement, undercuts the viability of sampling to establish FCA liability. According to Agape, statistical sampling is inconsistent with this standard because “sampling shortcuts the plaintiff’s burden of proof by assuming (1) that each claim involves the same misrepresentation, and (2) that each misrepresentation is equally material to the Government’s willingness to pay the claim.”  Agape also cited to a district court’s rejection of statistical sampling in United States ex rel. Wall v. Vista Hospice Care, Inc. (discussed here).  That court relied on another Supreme Court case from last term, Tyson Foods v. Bouphakeo (discussed here), to conclude that the relator could not rely on statistical sampling to establish liability because the claims were simply too diverse.

A copy of Agape’s Notice of Supplemental Authority can be found here.