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.
Fifth Circuit Affirms Dismissal of FCA Case Based on Inadequate Pleading of Upcoded Claims
On May 28, 2020, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal with prejudice of a False Claims Act suit brought against Baylor Scott & White Health (“Baylor”), a network of acute care hospitals. The suit, brought by Integra Med Analytics, alleged that Baylor submitted $61.8 million in fraudulent claims to Medicare by using unsupported “higher-value” diagnosis codes to inflate Medicare reimbursements. The U.S. government previously declined to intervene in the suit.
Recent Decisions Provide Further Guidance on Application of Escobar’s Materiality Standard
Two recent court decisions ruled in favor of relators on the issue of materiality under the standard set forth in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2001 (2016). On May 7, 2019, the Fifth Circuit reversed a decision by the Southern District of Texas, which had held that relators had failed to sufficiently plead materiality. And on May 8, 2019, the Eastern District of California denied a motion to dismiss premised on failure to adequately plead materiality.
Fifth Circuit Reverses $663M Jury Verdict Based on Government’s Insistence That It Was Not Defrauded
If the government “repeatedly concludes that it has not been defrauded,” could fraud have nonetheless occurred? The Fifth Circuit grappled with this question when reviewing an appeal from a $663 million jury verdict against Trinity Industries, a manufacturer of highway guardrails. See United States ex rel. Harman v. Trinity Indus., No. 15-41172 (5th Cir. Sept. 29, 2017). In finding the relator’s allegations of materiality wanting, the Fifth Circuit’s grant of judgment as a matter of law for Trinity Industries reiterated that the Supreme Court’s Escobar decision “heightened” the materiality standard to “adjust tensions between singular private interests and those of government and cabin the greed that fuels” False Claims Act litigation.
Fifth Circuit Rules In Favor Of Pharmaceutical Manufacturer Based on Relators’ Failure to Establish Causation
Last week, the Fifth Circuit affirmed summary judgment for Solvay Pharmaceuticals Inc. on allegations that the company violated the False Claims Act as a result of off-label marketing efforts and kickbacks to physicians, emphasizing the relator’s failure to demonstrate a causal link between the alleged improper conduct and any false claims. (more…)
Fifth Circuit Affirms Defense Verdict and Dismissals of Off-Label FCA Claims
Last week, the Fifth Circuit affirmed a defense verdict and the earlier dismissal of several False Claims Act claims related to the alleged off-label use and Medicare reimbursement of medical stents. The decision includes several significant rulings for FCA defendants, particularly in the Fifth Circuit. First, the court affirmed the dismissal of an anti-kickback claim because the relator had “[n]o particulars [to] show that the unidentified doctors who received the ill-defined benefits caused the hospital to use Abbott stents” and thus “never link[ed] the alleged carrots to the purchase and use of the stents at either of the hospitals.” Slip op. 6. The need to plead details showing such a “link[]” – or causation – is important. (more…)
Fifth Circuit Holds Public Disclosure Bar Is No Longer Jurisdictional, Affirms Summary Judgment on Materiality Grounds
On March 14, the Fifth Circuit affirmed summary judgment for the defendants in a former employee’s False Claims Act suit against BP related to an oil rig in the Gulf of Mexico. The opinion is notable in at least two respects. First, the Fifth Circuit affirmatively “agree[d] with [its] sister circuits that the public disclosure bar is no longer jurisdictional” after the 2010 amendments to the FCA. Slip op. 4 n.2. That had previously been an open question in the Fifth Circuit. Second, the Court reinforced the “demanding” materiality standard that the Supreme Court articulated in Escobar. Id. at 4-6. The relator’s FCA claims had led Congress to request an investigation by the Department of Interior. After that investigation, however, DOI “decided to allow the [rig] to continue drilling,” and that decisions was, in Escobar’s words, “‘strong evidence’” that regulatory compliance requirements related to the rig were “not material.” Id. at 5-6. Summary judgment for defendants was therefore warranted.
A copy of the opinion is here.
Supreme Court Rules That Violation of the FCA’s Seal Provision Does Not Mandate Dismissal
On December 6, 2016 the Supreme Court ruled that violation of the FCA’s seal provisions does not mandate dismissal of a relators’ complaint. Rather, while Section 3730(b)(2) requires relators to file under seal, the text of the statute is silent as to the remedy for violating this requirement. The Court left to the District Court’s discretion to determine the appropriate remedy for violations of the seal provision. Slip Op. at 10.
Fifth Circuit Rejects FCA Claims Challenging Prompt Pay Discounts
The Fifth Circuit recently affirmed summary judgment in favor of Omnicare—the nation’s largest provider of pharmacy services to skilling nursing facilities (“SNFs”) and other long-term care institutions—alleging that Omnicare made, or caused SNFs to make, false certifications of compliance with the Anti-Kickback Statute based on Omnicare’s debt collection activities and practice of offering prompt payment discounts (“PPDs”) to SNFs. United States ex rel. Ruscher v. Omnicare, Inc., No. 15-20629 (5th Cir. Oct. 28, 2016).
Supreme Court To Decide When Violations of Seal Warrant Dismissal
On May 31, 2016, the Supreme Court granted certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Cori Rigsby and Kerri Rigsby, making it the third False Claims Act (FCA) case the Supreme Court has taken up in the last two terms. The issue to be decided by the Court is “[w]hat standard governs the decision whether to dismiss a relator’s claim for violation of the FCA’s seal requirement, 31 U.S.C. § 3730(b)(2)?”