The ability to invoke the FCA’s statute of limitations defense often hinges on the timing of when “the official of the United States” knew or should have known of the alleged fraud. Most courts have sided with the government’s interpretation of “the official of the United States” as meaning only the Attorney General or his or her designees. A district court recently sided with the majority interpretation, but in so doing, affirmed avenues of discovery outside of DOJ Civil that should have put the government on notice of a potential FCA claim. See United States v. Kellogg Brown & Root Services, Inc., No. 12-cv-04110 (C.D. Ill. Sept. 16, 2016).
DOJ recently filed an amicus brief urging the First Circuit to revive a suit premised on the contention that an agency would have acted differently had it known of defendant’s fraud. See Brief for the United States as Amicus Curiae Supporting Neither Party, United States ex rel. D’Agostino v. ev3, Inc., No. 16-1126 (1st Cir. 2016). The government warns the First Circuit that adopting the district court’s reasoning in dismissing a “fraud-on-the-FDA” theory of liability would have wide-ranging consequences and “categorically foreclose claims that involve federal agency oversight of a defendant’s conduct.” Although courts generally agree that mere regulatory violations, standing alone, cannot serve as the predicate for FCA liability, relators often try to leverage so-called “fraud-in-the-inducement” theories (discussed further here) to repackage regulatory violations into ostensibly valid FCA claims. DOJ has so far suffered losses when advocating for a similar theory of liability in the context of FCA claims based on violations of current Good Manufacturing Practices (“cGMP”) (as discussed here and here), and DOJ’s latest effort to protect FCA liability where it touches on FDA’s discretionary decisions could have broad impact on cases alleging fraud within the context of agency enforcement. In addition, the effort by DOJ here to recast off-label promotion as a “fraud-on-the-FDA” also appears part of an evolving effort to maintain the viability of off-label claims in the face of growing judicial refusal to sanction off-label promotion as the predicate for FCA liability.
In the wake of Warner Chilcott’s civil settlement and guilty plea last fall, DOJ made headlines with the indictment of former Warner Chilcott executive Carl Reichel for his alleged role in the company’s violations of the Anti-Kickback Statute (“AKS”) (as discussed here). The indictment closely followed the announcement by Deputy Attorney General Sally Yates that the government was implementing a new commitment to prosecute individuals where appropriate (as discussed here). Today the government’s highest-profile test case fell short, with a jury acquitting Reichel after less than one day of deliberations.
This morning Justice Thomas announced a unanimous opinion in Universal Health Services, Inc. v. United States ex rel. Escobar. The Supreme Court held that implied certifications can violate the False Claims Acts in limited circumstances—when the “rigorous” and “demanding” materiality standard is met.
The principles in the Yates Memo expressly extend to both criminal and civil enforcement matters (as discussed further here), but when it comes to cooperation credit, the application of these principles in the civil and criminal contexts is not on equal footing. Criminal matters are resolved in the context of the federal sentencing guidelines, which incorporate a clear framework for applying credit for cooperation. Credit for cooperation in the civil context is far more nebulous, which can create the perception that the benefits will not outweigh the costs. Last week, DOJ’s newly appointed acting Associate Attorney General, Bill Baer, addressed these concerns and offered insight into DOJ’s application of the Yates Memo principles to civil enforcement matters.
In April 2015, we wrote about the Sixth Circuit’s decision to reverse and remand a $664 million judgment in favor of the government against United Technologies Corp., relating in part to claims that United Technologies’ predecessor, Pratt & Whitney (“P&W”), violated the False Claims Act by falsely certifying that it had corrected misstated projected costs in a 1983 bid to supply engines for the Air Force’s F-15 and F-16 fighter jets. See United States v. United Techs. Corp., No. 13-4057 (6th Cir. Apr. 6, 2015). The $664 million award included $7 million in statutory penalties related to the False Claims Act violation, and $657 million in damages for common law claims of payment by mistake and unjust enrichment.
As we have discussed here and here, yesterday the Supreme Court heard oral arguments in Universal Health Services v. United States ex rel. Escobar, which presents questions over the viability and scope of the implied certification theory. The justices actively questioned the advocates, raising concerns over whether the position of the government and the respondents (“Escobar”) contains logical limitations, and pressing the petitioner (defendant Universal Health Services (“UHS”)) over whether the limitations it proposes truly are consistent with common understandings of fraud.
The Sixth Circuit recently issued a strongly worded rebuke to the government in response to its proposition that “actual damages” in a FCA suit premised on wage underpayment equals the full amount of the government’s payment for the contractor’s services. See United States ex rel. Wall v. Circle C Constr., No. 14-6150 (6th Cir. Feb. 4, 2016). The defendant contractor—hired to build warehouses for the Army—had certified to compliance with certain laws and regulations, including one requiring payment of above-market wages. The contractor underpaid several employees by a total of $9,900, and the government argued that the contractor’s noncompliance “tainted” all of its claims, resulting in damages equal to the full amount the government paid for the services. Trebling these so-called damages yielded a total FCA damages award in excess of $750,000.
After nearly four years, CMS has revised and finalized its proposed rule offering guidance to Medicare Part A and B providers and suppliers as to how they can fulfill their statutory obligations to report and return “identified” overpayments. CMS altered a number of its proposals, including adopting a six-year lookback period, rather than ten. Perhaps most critically for providers, the Agency departed from its earlier interpretation of “identified” to allow for some length of time—generally six months, except in extraordinary circumstances—to quantify overpayments before the sixty-day repayment clock begins to run.
Although the Seventh Circuit last year became the first circuit court clearly to reject the “implied certification” doctrine of FCA liability, a district court in that circuit recently sought to cabin the impact of the ruling. See United States ex rel. Kroening v. Forest Pharm., No. 12-cv-00366 (E.D. Wisc. Jan. 6, 2016). As reported here, the Supreme Court will review the viability of the implied certification theory later this year. While the Kroening court ultimately dismissed the relator’s claims under Rule 9(b), the opinion highlights the divergence of the viewpoints around the implied certification theory that the Supreme Court has been asked to help resolve.