At the recent Compliance Week Annual Conference, Principal Deputy Associate Attorney General Claire McCusker Murray delivered extensive remarks on DOJ’s corporate enforcement priorities. Of particular note, Murray discussed a number of policy reforms focused on promoting and incentivizing corporate compliance and cooperation.
The U.S. District Court for the Northern District of Florida recently held that a False Claims Act suit can proceed against a Florida pharmacy and its owner, rejecting in particular the owner’s arguments that the complaint did not sufficiently allege that he acted with improper intent or caused the submission of false claims.
When a relator brings a civil action for a violation of the FCA, the Government “may elect to intervene and proceed with the action,” and, thereafter, the Government “shall have the primary responsibility for prosecuting the action.” 31 U.S.C. 3730(b)(2), (c)(1). In United States ex rel. Brooks, et al. v. Stevens-Henager College, Inc., et al., No. 2:15-cv-00199, 2019 WL 186663 (D. Utah Jan. 14, 2019), a judge in the District of Utah addressed the issue of “whether a relator retains an independent right to maintain the non-intervened portion of an action” in which the Government only partially intervened. The district court held that, under the plain language and legislative history of the statute, the relator has no right to litigate the non-intervened portions of the case. (more…)
On September 7, 2018, the United States District Court for the District of Columbia vacated CMS’s 2014 Final Overpayment Rule, applicable to the Medicare Advantage program, granting summary judgment to UnitedHealthcare that the Final Rule violated the Medicare statute, was inconsistent with the Affordable Care Act (ACA) and the False Claims Act (FCA), and violated the Administrative Procedures Act (APA). In broad strokes, the District Court confronted two statutory issues. The first centered on the undisputed fact that the Final Rule did not account for known errors in the data (from traditional Medicare) used to calculate payments to Medicare Advantage plans. The court found that this failure violates the statutory mandate of “actuarial equivalence” because, although “payments for care under traditional Medicare and Medicare Advantage are both set annually based on costs from unaudited traditional Medicare records,” the Final Rule “systematically devalues payments to Medicare Advantage insurers by measuring ‘overpayments’ based on audited patient records.” As a result, the court concluded that the Final Rule “establishes a system where ‘actuarial equivalence’ cannot be achieved.” On the same basis, the court found that the Final Rule violates the statutory requirement to use the “same methodology” in calculating expenditures in traditional Medicare and determining payments to Medicare Advantage plans. The Final Rule “fails to recognize a crucial data mismatch and, without correction, it fails to satisfy [the Medicare statute].” (more…)
Noncompliance with ambiguous regulations often presents a weak case for an FCA suit. A growing number of courts (as discussed here and here) have held that reasonable interpretations of regulations, absent contrary guidance from the government, reflect a mens rea inconsistent with the requisite “knowing” misconduct under the FCA. However, the Eleventh Circuit recently reached a contrary conclusion, holding that defendants who articulate reasonable interpretations of ambiguous regulations can nonetheless be liable under the FCA. See United States ex rel. Phalp v. Lincare Holdings, Inc., No. 16-10532 (May 26, 2017). (more…)
The Eighth Circuit recently affirmed a district court’s grant of summary judgment because the “defendant’s reasonable interpretation of an ambiguous regulation ‘belies the scienter necessary to establish a claim of fraud under the FCA.’” The opinion further reinforces a similar ruling the Eighth Circuit released last week (as reported here) and rejects objections from DOJ that such a holding “absolves defendants of liability whenever they can justify their conduct with a plausible post-hoc interpretation of an ambiguous law.” United States ex rel. Donegan v. Anesthesia Assoc. of Kansas City, No. 15-2420 (8th Cir. Aug. 12, 2016).
On August 8, 2016, the Eighth Circuit affirmed the dismissal of a FCA complaint against the University of Minnesota Medical Center (“UMMC”) alleging that UMMC improperly characterized the children’s unit of its hospital as a “children’s hospital”– a term not defined in the relevant statute – in order to avoid a decrease in Medicaid reimbursements under a recent statutory amendment. The Court held that UMMC’s lobbying efforts with the Minnesota Department of Human Services (“MDHS”) to classify itself as a “children’s hospital” under that amendment, and corresponding claims for Medicaid reimbursement, could not be characterized as “false” under the FCA.
In its first post-Escobar FCA opinion, the Seventh Circuit affirmed summary judgment in favor of defendants in United States ex rel. Sheet Metal Workers Int’l Assoc. v. Horning Investments, LLC, No. 15-1004 (7th Cir. July 7, 2016), and in doing so suggested that there is a high bar for establishing that defendants acted with the requisite knowledge when the claim is that they falsely certified compliance with an ambiguous underlying law.
In a victory for government contractors, the U.S. Court of Appeals for the Tenth Circuit held that vendors and their suppliers cannot knowingly submit false claims under the False Claims Act where the knowing falsity is premised on lack of compliance with government regulations that are subject to differing, good-faith interpretations. The case, U.S. ex rel. Smith v. Boeing, No. 14-3247, 2016 WL3244862 (10th Cir. 2016), involved an appeal by relators, three former Boeing employees, of summary judgment for Boeing and Ducommun, Inc.
Continuing a trend of recent attention to significant False Claims Act issues that have divided the courts of appeals, the Supreme Court this morning invited the views of the Solicitor General in a case that implicates two such issues—(1) dismissal for violation of the seal requirement and (2) the so-called collective knowledge theory of scienter. The specific Questions Presented in the cert petition are:
I. What 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)?
II. Whether and under what standard a corporation or other organization may be deemed to have “knowingly” presented a false claim, or used or made a false record, in violation of section 3729(a) of the FCA based on the purported collective knowledge or imputed ill intent of employees other than the employee who made the decision to present the claim or record found to be false, where (i) the employee submitting the claim or record independently made the decision to present the claim or record in good faith after reviewing the available information and (ii) there was no causal nexus between the submission of the false claim or record and the purported collective knowledge or imputed ill intent of those other employees?
The Solicitor General will likely file a brief in time for the Court to reconsider the petition before the summer recess at the end of June, and the invitation itself means that the Court is already taking a hard look at the petition. This is another case to watch closely.