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.
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.
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…)
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…)
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.
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.
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).
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)?”
Last year, we wrote about a district court decision disqualifying an attorney from serving as relator in a False Claims Act (“FCA”) action that he initiated against his client’s adversary in pending litigation (see here and here). The attorney and would-be-relator, Donald Holmes, was retained by an insurance company, Munich Re, in connection with arbitration against Northrop Grumman, who had submitted claims for damage to its shipyards allegedly resulting from Hurricane Katrina. Holmes, on behalf of the insurance company, filed a complaint in federal court to obtain certain documents from the Navy allegedly relevant to the arbitration. He eventually obtained the documents subject to a protective order that forbade their disclosure outside of the arbitration. However, Holmes promptly filed an FCA complaint against Northrop, alleging Northrop improperly used government funds allocated to compensate for Hurricane Katrina damage to instead cover cost overruns that occurred before the storm, based on the documents obtained from the Navy —in clear violation of the protective order.
Earlier this year, we wrote about a case in which a district court disqualified an attorney, Donald Holmes, from serving as a relator based, in part, on his use of information in violation of a protective order in a related case in another district court. See “Court Disqualifies Attorney Relator for Ethical Violations” (June 15, 2015). With Holmes’s appeal of that decision pending in the Fifth Circuit, he filed a motion in the District Court for the District of Columbia—the court that originally issued the protective order that Holmes violated—requesting that the court sanction him $1,000 and modify the protective order to permit disclosure of the confidential information to the DOJ and the qui tam court. The court characterized Holmes’s motion as “a likely attempt to show the Fifth Circuit that he has already been sanctioned by this Tribunal in the hopes of having the dismissal there overturned” but explained that it had no power to alter sanctions levied by another court.