Court Agrees With DOJ That FMV Payments Can Be Kickbacks
On February 23, 2022, a district court in the Central District of California denied a defendant’s motion to dismiss a qui tam suit premised on alleged Anti-Kickback Statute (“AKS”) violations, holding that “even some fair-market-value payments will qualify as illegal kickbacks.” See United States ex rel. Chao v. Medtronic PLC, No. 17-cv-1903 (C.D. Cal.).
The relator’s operative complaint argued that the defendant, a manufacturer of medical devices, violated the FCA by offering kickbacks in various forms to reward physicians for using the defendant’s devices. Among other arguments, the defendant urged the court to dismiss the complaint because the relator failed to allege that certain payments to physicians for proctoring other physicians on how to use the medical devices exceeded fair market value (“FMV”). As such, the defendant contended, the relator failed to address the potential applicability of the AKS’s personal services safe harbor. (more…)
Third Circuit Adopts the Seventh Circuit’s Voluntary Dismissal Standard for Evaluating Granston Motions to Dismiss
On October 28, 2021, the Third Circuit affirmed a district court’s grant of the United States’ motion to dismiss—over the relator’s objection—a qui tam alleging that the defendant had caused hospitals to submit false claims. Adopting the Seventh Circuit’s approach, the court determined that in evaluating the government’s motion to dismiss over a relator’s objection in a declined qui tam, courts should apply the standards for voluntary dismissals contained in Federal Rule of Civil Procedure 41(a).
Finding No Materiality, Court Grants Summary Judgment for Defense in Fraudulent Inducement Case
On August 12, 2021, the United States District Court for the District of Minnesota granted Boston Scientific Corporation’s (BSC) motion for summary judgment in relator Stephen Higgins’s declined qui tam, which alleged that BSC had fraudulently induced the Food and Drug Administration (FDA) to approve two types of defibrillators that the FDA later recalled. (more…)
Fifth Circuit Affirms DOJ’s Broad Authority to Dismiss Qui Tams Over Relators’ Objections, but Adds Teeth to “Hearing” Requirement
On July 7, 2021, the Fifth Circuit affirmed a district court’s grant of the United States’ motion to dismiss—over the relator’s objection—two qui tams that challenged pharmaceutical patient support programs. While the court’s decision is consistent with those of other courts of appeal that have confirmed DOJ’s broad authority to dismiss qui tams over relators’ objections, the Fifth Circuit appears to add some teeth to the requirement that the relator be provided with a “hearing” before such a dismissal may be granted.
D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory
On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139. The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract. In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms. IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement. The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided. According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.
DOJ Opposes Supreme Court Review of Granston Dismissal Standard
On May 21, 2021, the Department of Justice filed a brief in opposition to a petition for writ of certiorari filed by the relator in U.S. ex rel. Cimznhca, LLC v. UCB, Inc. The petition challenges the Seventh Circuit’s decision reversing the district court’s denial of the government’s motion to dismiss over the relator’s objection. In reversing, the Seventh Circuit determined that, so long as relators have an opportunity to be heard under 31 U.S.C. § 3730(c)(2)(A), the government may dismiss qui tams when it satisfies the standard contained in Federal Rule of Civil Procedure 41(a)(1)(A)(i). That rule provides that a plaintiff may dismiss an action by serving notice of dismissal any time before the opposing party serves either an answer or a motion for summary judgment.
Senator Grassley Pushes Back on DOJ’s View of Its Right to Seek to Dismiss FCA Actions over Relators’ Objections
In a May 4, 2020 letter to Attorney General William Barr, Senator Chuck Grassley “vehemently” disagreed with the Department of Justice’s (“DOJ”) view, expressed in a brief recently filed with the Supreme Court by the Solicitor General, that the DOJ’s authority to dismiss an FCA claim “is an unreviewable exercise of prosecutorial authority.” As a principal author of the 1986 FCA amendments that substantially expanded the whistleblower provisions, Senator Grassley argued that he could “confidently say” that the text of the FCA plainly states that the court—not DOJ—should decide whether the government’s motion to dismiss a qui tam claim succeeds.
DOJ Says Its Authority to Dismiss Qui Tam Suits Is Expansive Notwithstanding Circuit Split
In its May 4, 2020 Opposition to the Petition for Writ of Certiorari in United States ex rel. Schneider v. JPMorgan Chase NA, the Department of Justice (“DOJ”) advocated a reading of the FCA that preserves the Executive Branch’s unfettered discretion to dismiss a qui tam, absent “extraordinary circumstances.” DOJ’s power to dismiss derives from FCA Section 3730(c)(2)(A), which provides that the Government “may dismiss” a relator’s action if the relator “has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” Since the revealing of the Granston Memo, which we have addressed here and here, DOJ has more frequently sought to use this statutory power. In hopes of doing so in an unrestricted manner, DOJ presented the Supreme Court with the following question in its Opposition: “Whether the United States’ decision to dismiss a relator’s FCA claim under Section 3730(c)(2) is subject to judicial review where the relator does not allege that the government’s dismissal decision was a fraud on the court.”
Ninth Circuit Invited To Weigh In On Public Disclosure Bar, Falsity
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.
Court Establishes a Test to Determine the Scope of the FCA’s “News Media” Provision
On July 16, 2019, the United States District Court for the Central District of California granted in part and denied in part motions to dismiss a declined FCA suit against defendants Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The suit alleges 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.