Feb 32017

What Might A Justice Gorsuch Portend For False Claims Act Enforcement?

Scott D. Stein and Meredith Toole Reiter

On January 31, 2017, President Donald Trump nominated Judge Neil Gorsuch to the Supreme Court.  Currently a judge on the United States Court of Appeals for the Tenth Circuit, Judge Gorsuch has been described as an originalist with a judicial philosophy similar to that of Justice Antonin Scalia, whose vacancy in the Court he has been nominated to fill.  While Judge Gorsuch has participated in only a few appeals of False Claims Act cases, his views regarding the appropriateness (or lack thereof) of deference to agency interpretations suggests that companies and individuals who find themselves the subject of FCA suits based on allegations that they violated overbroad, confusing, or ambiguous agency regulations may find a sympathetic ear.

Judge Gorsuch sat on a panel in appeals of four False Claims Act cases, authoring an opinion in one of them.  In U.S. ex rel. Boothe v. Sun Healthcare Group, Inc., 496 F.3d 1169 (10th Cir. 2007), Judge Gorsuch (writing for the unanimous panel) affirmed the district court’s dismissal of certain of the relator’s claims under the public disclosure bar on the ground that a relator’s claim is deemed to be “based upon” a public disclosure if it is “supported by” and “even partly based” on prior disclosures.  Judge Gorsuch noted that this standard was based on “an analysis of the statute’s plain language and with our obligation to construe narrowly statutes conferring our jurisdiction firmly in mind.”

In Brown v. Sherrod, 284 Fed.Appx. 542 (10th Cir. 2008), Judge Gorsuch joined the panel opinion holding that the consent of the Attorney General to dismiss a False Claims Act case is required only where the relator seeks voluntary dismissal of an FCA case, and not when a complaint is dismissed involuntarily due to a motion to dismiss.  In U.S. ex rel. Wickliffe v. EMC Corp., 473 Fed.Appx. 849 (10th Cir. 2012), he joined the panel opinion affirming the dismissal of a qui tam complaint based on the government’s motion to dismiss the complaint over the relator’s objection.  As previously reported here, the Court upheld the government’s dismissal under 31 U.S.C. 3730(c)(2)(A), declining to opine on the relator’s alternative argument that the first to file bar did not apply because the prior qui tam complaint did not meet the particularity requirements of Rule 9(b).

Last year, Judge Gorsuch was on the panel that issued the decision in U.S. ex rel. Smith v. The Boeing Company, 825 F.3d 1138 (10th Cir. 2016), a case we reported here.  In Smith, the panel upheld the district court’s grant of summary judgment in favor of the defendants because the relators failed to establish that the defendants knowingly submitted false claims to the government in connection with airplanes that they had certified met FAA regulations.  Specifically, the Court held that “at best, the evidence shows conflicting opinions” regarding the meaning of the provision under which the defendants allegedly submitted a false certification, and, without more, this was not enough to establish the requisite scienter under the False Claims Act.

Though Judge Gorsuch did not author the panel’s opinion in Smith, the opinion has echoes of his now widely-reported skepticism of voluminous agency regulations and his suggestion that the Supreme Court’s Chevron doctrine, under which courts defer to agency interpretations of statutes so long as they are “reasonable,” be revisited.  For example, in Caring Hearts Personal Home Services, Inc. v. Burwell, 824 F.3d 968 (10th Cir. 2016), Judge Gorsuch, writing for the panel, criticized a CMS enforcement action against a provider.  In so doing, he voiced concerns that echo those of healthcare providers subjected to “implied certification” FCA claims based on violation of any myriad of healthcare regulations: “Medicare is, to say the least, a complicated program. The Centers for Medicare & Medicaid Services (CMS) estimates that it issues literally thousands of new or revised guidance documents (not pages) every single year, guidance providers must follow exactingly if they wish to provide healthcare services to the elderly and disabled under Medicare’s umbrella. Currently, about 37,000 separate guidance documents can be found on CMS’s website — and even that doesn’t purport to be a complete inventory.”

In another recent case, Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016), Judge Gorsuch wrote a lengthy concurring opinion arguing for reconsideration of the Chevron doctrine altogether, arguing that “[t]ransferring the job of saying what the law is from the judiciary to the executive unsurprisingly invites the very sort of due process (fair notice) and equal protection concerns the framers knew would arise if the political branches intruded on judicial functions.”  Among his stated examples of the potentially harmful impacts of Chevron are the significant penalties that agencies can invoke even for civil violations, which are sometimes difficult to distinguish from criminal penalties to which Chevron does not apply.  While these latter opinions do not address the False Claims Act specifically, Judge Gorsuch’s concerns about the appropriateness of agency (rather than judicial) interpretations of the law, and their impact on regulated entities, may foreshadow a disinclination to extend False Claims Act liability to violations of certain agency regulations.

Scott D. Stein

Chicago

sstein@sidley.com

Meredith Toole Reiter

mtoole@sidley.com

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