Fourth Circuit En Banc Vacates Application of Safeco to FCA Cases

The Fourth Circuit, evenly divided while sitting en banc, recently unwound a panel decision finding that Safeco’s “reckless disregard” standard applies to the False Claims Act (“FCA”).

In January 2022, a panel of the Fourth Circuit held, joining every other circuit to have considered the issue, that when allegations of false claims are premised on violations of ambiguous laws or regulations, the defendant’s scienter is properly assessed using the standard for “reckless disregard” established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007).  Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation.  As discussed here, applying Safeco, the panel affirmed the district court’s dismissal of the case.

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D.C. Circuit Holds Defendants Are Entitled To Offset Damages By Amounts Paid By Other Settling Defendants

The D.C. Circuit recently issued an important opinion on an issue of first impression: under what circumstances is an FCA defendant entitled to offset damages by amounts the government or relator has received in settlement from other defendants involving the same claims. The opinion is available here.

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Ninth Circuit Construes Post-2010 Public Disclosure Bar to Include Facts Disclosed During a Patent Office Patent Prosecution

In United States ex rel. Silbersher v. Allergan, Inc., 2022 WL 3652967 (9th Cir. Aug. 26, 2022), the Ninth Circuit ruled that the FCA public disclosure bar, as amended in 2010, encompasses information provided to the U.S. Patent & Trademark Office (“PTO”) during a patent prosecution.  Accordingly, a qui tam action premised entirely on materials obtained from PTO records is barred.

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Fourth Circuit Underscores the Risk of Commission-Based Compensation Agreements with Independent Contractors

In a recent decision, the Fourth Circuit Court of Appeals for the second time in two years held that commission-based compensation arrangements with independent contractors cannot be safe harbored and do violate the Anti-Kickback Statute and FCA.  See United States ex rel. Nicholson v. Medcom Carolinas, Inc., No. 21-1290 (4th Cir. July 21, 2022).

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Eighth Circuit Holds that AKS Violations Do Not “Taint” All Claims

The Eighth Circuit Court of Appeals recently issued a notable decision that offers defendants in FCA cases premised on violations of the Anti-Kickback Statute (“AKS”) significant new defenses relating to causation.  The panel soundly rejected the government’s position that as a result of the 2010 amendments to the AKS, any claim provided in violation of the AKS is tainted, and therefore “false,” under the FCA.  Instead, the Eighth Circuit held that for an AKS violation to render a claim false, the kickback must have been the but-for cause of the submission of the claim.  United States ex rel. Cairns v. D.S. Medical LLC, No. 20-3010, 2022 WL 2930946 (8th Cir. July 26, 2022).  The decision creates a circuit split with the Third Circuit and given the many courts of appeal that have not weighed in on this question, promises to generate renewed debate in district courts across the country as to the appropriate causation standard in FCA cases involving alleged violations of the AKS.

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Supreme Court Grants Certiorari to Resolve Circuit Split on the Government’s Authority to Dismiss FCA Cases Over Relators’ Objections

On June 21, 2022, the Supreme Court granted certiorari to resolve a Circuit split on the standard for evaluating the government’s authority to dismiss a qui tam over the relator’s objection.  As we have previously written (see here and here), various Circuits have adopted different standards.  The Supreme Court has agreed to review a decision of the Third Circuit affirming a district court’s grant of the United States’ motion to dismiss a qui tam. (more…)

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DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

There has been growing variation among courts of appeal over the appropriate pleading standard to apply under Rule 9(b) to the element of presentment, i.e., the requirement that plaintiffs plead with particularity the submission of a false claim to the government for payment. This topic has been the subject of repeated Supreme Court cert petitions (as discussed further here), and the topic has been raised yet again in a cert petition filed late last year in Johnson v. Bethany Hospice and Palliative Care, LLC (No. 21-462) (lower court opinion discussed here). The relator in Bethany Hospice, whose case was dismissed by the Eleventh Circuit for “rely[ing] on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point”, seeks Supreme Court review of this “longstanding circuit split.” (more…)

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New Pharmacy, Same Result: Seventh Circuit Holds That Objective Reasonableness Dooms “Usual and Customary” Pricing Case

On April 5, 2022, in a 2-1 decision, the Seventh Circuit applied the precedent it set in United States ex. rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) (discussed here) and found once again that a defendant retail pharmacy did not act with “reckless disregard” under the False Claims Act (“FCA”) by interpreting Medicare Part D and Medicaid “usual and customary” price requirements as allowing it to charge those programs its retail cash prices rather than prices offered through discount programs. United States ex rel. Proctor v. Safeway, Inc., No. 20-3425, 2022 WL 1012256 (7th Cir. Apr. 5, 2022). (more…)

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First Circuit Joins Circuit Split on FCA Dismissal Authority, Finds Government Has Broad Authority to Dismiss FCA Cases

On January 21, 2022, the First Circuit affirmed the government’s request for dismissal of a whistleblower complaint alleging that several pharmaceutical companies had colluded to defraud Medicare Part D. The government, after declining to intervene, requested dismissal based on its finding that: (1) the suit would require “substantial expenditure of government resources”; (2) “many key aspects of [the relator’s] allegations [we]re not supported”; and (3) “allegations that [the relator] used the qui tam process to leverage his financial interests through securities trading .  . . convince[d] the [g]overnment that [the relator was] not an appropriate advocate of the United States’ interests.” (more…)

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Fourth Circuit Applies Safeco to FCA Claims, Accuses CMS of “Maintaining Strategic Ambiguity” Around Medicaid Drug Rebate Program Requirements

In a recent 2-1 decision, the Fourth Circuit joined every other circuit to have considered the issue in applying Safeco’s “reckless disregard” standard to legally false FCA claims based on alleged violations of ambiguous laws and regulations.  Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation.  The Fourth Circuit found that the Safeco standard “duly ensures that defendants must be put on notice before facing liability for allegedly failing to comply with complex legal requirements.  Without such notice, defendants are not likely to receive due process.”

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