On September 30, 2019, a judge in the United States District Court for the Northern District of Illinois granted a motion to dismiss in an intervened FCA qui tam suit, finding that the relators, the United States, and the state of Illinois failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims. The suit targeted an entity referred to as C&M Specialty Pharmacy (“C&M”), which provides specialized medication for complex medical conditions.
On October 8, 2019, a judge in the United States District Court for the Central District of California granted a stay and certified two questions for interlocutory appeal in relator Integra Med Analytics’ FCA suit against Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The case, on which we have previously reported here, involves allegations that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.
The District Court has ruled on motions filed by DOJ to dismiss FCA cases against certain drug manufacturers in declined qui tam suits, consistent with the principles articulated in the Granston Memo. We previously described DOJ’s motions here. On Friday, the District Court for the Eastern District of Texas adopted in part the recommendation of a Magistrate Judge that DOJ’s motion be granted. Specifically, the Court agreed that the government had satisfied the heightened standard for dismissal adopted by the Ninth and Tenth Circuits, as articulated by the former in Sequoia Orange; namely, that the government has a legitimate interest in preserving its resources, that dismissal was rationally related to that interest, and that there is no evidence that the government’s decision was “fraudulent, arbitrary and capricious, or illegal.” In particular, the Court found the government’s interest in controlling litigation costs to be legitimate and held that avoiding the need to make employees available for deposition is rationally related to that interest. As such, the Court found it unnecessary to address the Magistrate’s recommendation that it instead adopt the view, embraced by the D.C. Circuit in Swift and other courts (as reported here and here), that DOJ has “unfettered discretion” to dismiss FCA claims. The court’s opinion is here.
Friday’s ruling bolsters DOJ’s efforts to dismiss meritless qui tam suits but fails to sharpen the split of authority on the breadth of its right to do so. We will continue to monitor and report on updates on this important issue.