Supreme Court Mulls Scope of DOJ Dismissal Authority
On December 6, 2022, the Supreme Court heard oral argument in United States ex rel. Polansky v. Executive Health Resources, which presents the question of whether the government has the authority to dismiss a qui tam suit after initially declining to intervene, and if so, what standard of review applies to the government’s motion to dismiss. Overall, the lines of questioning suggest that the Court will conclude that the government may dismiss qui tam suits after initially declining to intervene. However, there was no clear consensus around how to define a judicially enforceable standard for evaluating the government’s dismissal authority.
Supreme Court Declines to Address Application of 9(b) to the FCA
Yesterday the Supreme Court denied cert in a trio of cases seeking clarification as to the pleading standard required in FCA cases under Rule 9(b). The petitioners urged the Court to remedy what they characterized as a circuit split over how much detail whistleblowers and the government must supply about alleged false claims in order to survive a motion to dismiss. As discussed further here, the Solicitor General opposed these cert petitions and argued that the circuits have “largely converged” in their application of Rule 9(b) to FCA complaints.
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.
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.
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.
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).
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.
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…)
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.