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…)
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…)
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…)
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…)
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.”
11th Circuit Holds Eighth Amendment Applies to FCA Monetary Awards in Non-Intervened Cases
The Eleventh Circuit recently held that the Eighth Amendment’s prohibition on excessive fines applies to monetary awards in non-intervened FCA actions—the first federal court of appeals directly to address the application of this constitutional protection in non-intervened cases. See Yates v. Pinellas, No. 20-10276 (11th Cir.). However, the panel concluded that while the amount of the fine in this case was “very harsh,” it was not unconstitutionally excessive.
In Yates v. Pinellas, following the government’s declination, the district court imposed a total monetary award of $1,179,266.62 under the FCA based on the defendant’s submission of laboratory test claims to Medicare without a proper CLIA certificate. Specifically, the jury found that the defendant violated the FCA on 214 occasions and that the United States had incurred $755.54 in damages. The court then imposed treble damages of $2,266.62 and statutory minimum penalties of $5,500 for each of the 214 violations, or $1,177,000, for a grand total of $1,179,266.62. The defendant moved for remittitur, arguing that this amount constituted an excessive fine in violation of the Eighth Amendment. The district court rejected the argument. (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).
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.