Category

Materiality

13 July 2020

Eleventh Circuit Reinstates Bulk of $350 Million FCA Jury Verdict, Adds Further Gloss to the FCA’s Materiality and Causation Standards and Role of Litigation Funding

On June 25, 2020, the Eleventh Circuit affirmed in part and reversed in part a district court’s decision to set aside a jury’s $350 million verdict in favor of the relator.  In Ruckh v. Salus Rehabilitation, LLC, Angela Ruckh, a registered nurse, alleged that two skilled nursing facilities (“SNFs”) and two related management services companies violated various Medicare and Florida Medicaid SNF regulations.  The Eleventh Circuit’s decision adds further gloss to the FCA’s materiality and causation standards.

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16 May 2019

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.

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25 September 2018

Ninth Circuit Addresses Impact of Escobar’s Falsity and Materiality Requirements On Existing Circuit Precedent

In Escobar, the Supreme Court held that the implied false certification theory of liability is viable under the False Claims Act when “at least two conditions” are satisfied: “[F]irst, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” As we have previously discussed here, courts are split as to whether Escobar’s two-part test is a mandatory baseline to demonstrate an implied false certification or merely one way to plead such a claim, leaving open the door for other variants of implied certification claims not explicitly identified by the Supreme Court.  Recently, in United States ex rel. Scott Rose, et al. v. Stephens Institute, No. 17-15111 (9th Cir. Aug. 24, 2018), the Ninth Circuit held that Escobar’s two-part test was mandatory—effectively overruling its pre-Escobar test for establishing implied certification claims outlined in Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993 (9th Cir. 2010). (more…)

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20 June 2018

Sixth Circuit’s Split Decision In Prather Highlights Persistent Questions About the Pleading Standard for Materiality After Escobar

Last week, the Sixth Circuit again resurrected the relator’s case in United States ex rel. Marjorie Prather v. Brookdale Senior Living Communities, Inc. (a discussion of the Sixth Circuit’s previous opinion is available here.  In a 2-1 decision, the majority held that the relator’s materiality and scienter allegations sufficed under Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  The majority issued the decision over a vigorous dissent by Judge McKeague.  The gulf between the majority and the dissent reflects persistent questions about how Escobar applies at the pleading stage (see discussion here). (more…)

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14 June 2018

Sen. Grassley Fires Warning Shot Over Evolving Interpretations of FCA Materiality Requirement

In a recent floor statement, Senator Chuck Grassley, considered by many to be the chief defender of the FCA in Congress, voiced concerns about how some lower courts are interpreting the FCA’s materiality requirement following the Supreme Court’s Escobar decision.   Senator Grassley’s speech is worth noting because he has led successful efforts to legislatively overrule FCA decisions with which he has disagreed in the past. (more…)

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06 July 2017

Applying Escobar, Court Rejects Comparative Effectiveness and “Fraud on the Formulary” Claims

The heightened materiality standard imposed by the Supreme Court last year in Escobar continues to pose a formidable bar to relators pursuing expansive theories of FCA liability.  As we explain below, one court recently rejected a claim against pharmaceutical manufacturers alleging that the defendants had fraudulently induced state formulary committees to cover the defendants’ drug, refusing to take a “step toward bringing all misrepresentations to government bodies within the purview of the FCA.”  See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-cv-01039 (D.N.J. June 27, 2017).  (more…)

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25 May 2017

Implications of Escobar Addressed in New Article by Sidley Lawyers

The latest edition of the Food and Drug Law Institute’s Top Food and Drug Cases 2016 & Cases to Watch 2017 contains an article by Sidley lawyers Mark E. Haddad and Naomi A. Igra about the Supreme Court’s decision in Universal Health Services, Inc. v. Escobar.  The article explains the underlying facts of the case, explains the importance of the Supreme Court’s decision, and discusses the evolution of the case law on implied certification in the lower courts seeking to apply Escobar.  The article is available here.

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15 May 2017

DOJ Weighs in on Materiality Standard Post-Escobar

In a May 8, 2017 statement of interest, DOJ made a bold attempt to strip the heightened materiality standard articulated in Escobar (previously reported here) of all of its meaning.  DOJ’s statement was filed in support of relator’s Rule 59(e) motion to alter or amend the judgment dismissing the underlying declined qui tam case, which took exception to the court’s determination that the government’s continued payment of defendant’s claims “despite its actual knowledge that certain requirements were violated” was “very strong evidence that those requirements are not material.” United States ex rel. Kolchinksy v. Moody’s Corp., – F.Supp.3d –, 2017 WL 825478, at *6 (S.D.N.Y. March 2, 2017) (citing Escobar).  DOJ took aim at the court’s conclusion, arguing that “an agency’s continued payment of claims to a potential FCA defendant who faces public allegations of fraud is insufficient – by itself – to establish that the alleged fraud is immaterial.” (more…)

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15 March 2017

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 EscobarId. 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.

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22 February 2017

DC Circuit Affirms Dismissal of FCA Claim Based On Insufficient Evidence of Materiality

In United States ex rel. McBride et al. v. Halliburton Co. et al., No. 15-7144, 2017 WL 655439 (D.C. Cir. Feb. 17, 2017), the D.C. Circuit affirmed a district court’s summary judgment in favor of several FCA defendants because the Relator failed to show their alleged misrepresentation was “material to the Government’s decision to pay,” as required by the Supreme Court’s decision in Escobar.

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