As we previously reported here, DOJ is appealing its defeat in AseraCare, in which the district court concluded that “expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds may differ cannot be false,” and that the government had marshaled nothing more than a difference of opinion between its own expert and the defense’s. On appeal to the Eleventh Circuit, DOJ is arguing forcefully for rejection of the view that disputes about medical necessity cannot serve as the basis for an FCA claim.
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)?”
A qui tam relator’s disclosure statement may be discoverable if it is used to refresh the relator’s recollection for a deposition or other testimony. In United States ex rel. Bingham v. HCA, Inc., a False Claims Act case before the U.S. District Court for the Southern District of Florida, the defendant moved to compel production of the relator’s written disclosure statement to DOJ. The parties disputed whether the relator’s statement constitutes work product and, if so, whether the work product protection was waived. In an order issued earlier this week, the district court bypassed the first question and ruled that any work product protection was waived when the disclosure statement was used to refresh the relator’s recollection prior to his deposition. The court relied on “long-established principles” that privilege in these circumstances must give way to Federal Rule of Evidence 612, which entitles an adverse party “to have the writing [used to refresh the witness’s recollection] produced at the hearing, to inspect it, to cross-examine the witness about it, and to introduce in evidence any portion that relates to the witness’s testimony.” The court reasoned that fairness to the defendant requires that the disclosure statement be turned over for effective cross-examination.
On December 18, 2015, the Ninth Circuit affirmed the dismissal of a False Claims Act (“FCA”) case against Raytheon Company based on the perceived risk by the Department of Justice (“DOJ”) that litigation would risk disclosure of classified information. In United States ex rel. Mateski v. Raytheon Co, the DOJ moved to dismiss an FCA action challenging Raytheon’s conduct in its performance under a classified government contract, over the objections of the relator, because continued litigation of the case would substantially burden government resources and risk disclosure of classified information. Under section 3730(c)(2)(A) of the FCA, the Government may move to dismiss a FCA action notwithstanding the relator’s objections where it demonstrates that there is a rational relationship between dismissal and a valid government purpose.
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.
In a stunning reversal, a federal district court overseeing the AseraCare trial has not only vacated a verdict in favor of DOJ on the issue of whether claims submitted by the defendant were false, but has strongly indicated that the court is likely to grant summary judgment for the defendants. As we have previously reported here and here, in May 2015, the district court elected to bifurcate the trial into two phases, one focused on the falsity of a sample of claims and the second phase focused on the remaining elements of FCA liability. If the government could establish FCA liability through the two phases of the trial as to at least a fraction of the sample, the court planned to permit extrapolation of this liability to the broader universe of claims submitted by AseraCare. A critical issue in the falsity phase has been whether patients met CMS’ medical criteria for hospice eligibility, i.e., they have “a life expectancy of 6 months or less if the terminal illness runs its normal course.” Prior to the court’s decision to bifurcate, the government represented in interrogatories that it would only use the testimony of its expert witness and the sampled medical records to demonstrate that patients did not meet CMS’ criteria, and therefore AseraCare falsely certified to their eligibility for hospice care.
As we previously reported here, a district court in South Carolina recently certified to the Fourth Circuit two questions for interlocutory appeal: 1) whether courts can review and reconsider the government’s rejection of a settlement in a non-intervened qui tam suit, and 2) whether and when statistical sampling can be used to prove liability and damages in FCA actions. Both the government (which did not intervene in this case, but which has opposed settlement) and the defendant hospice chain, Agape, recently filed briefs urging the Fourth Circuit to pass on the statistical sampling question. The government also argued that the Fourth Circuit should adopt the majority rule recognizing the government as having unfettered veto authority.
On July 16, 2015, the Ninth Circuit held that a relator convicted criminally for his role in a fraud against the government must be dismissed from a qui tam action related to the fraud, even if he played only a minor role in the underlying misconduct.
In U.S. ex rel. Schroeder v. CH2M Hill, relator Carl Schroeder, who worked for a U.S. Department of Energy (“DOE”) contractor, submitted false time cards to his employer and was paid over $50,000 in unearned overtime. Many of Schroeder’s colleagues had engaged in similar conduct. DOE’s Office of Inspector General (“OIG”) launched an investigation in 2008. In an OIG interview conducted in December 2008, Schroeder admitted to over-billing for his time.
Posted by Kristin Graham Koehler, Monica Groat, and Marina Romani (Summer Associate)
As we have previously discussed on this blog, a court in the Northern District of Alabama last month granted AseraCare’s motion to bifurcate its trial. On June 25, 2015, the court refused the Government’s request to reconsider that decision.
A judge in the District of South Carolina has invited the Fourth Circuit to become the first appellate court to rule on when statistical sampling can appropriately be used to establish FCA liability. The district court also certified for interlocutory appeal the question of whether the Attorney General’s decision in a non-intervened qui tam suit to reject a proposed settlement is subject to judicial review, an issue on which the circuit courts are split. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 12-3466 (D.S.C. June 25, 2015). Both issues became intertwined in this case when the government rejected a $2.5 million settlement agreed to by the defendants and the relator, citing its own extrapolated calculations (based on an undisclosed statistical sampling) as the basis for concluding that damages to the government were $25 million, and that the settlement was therefore inadequate. The resolution of these questions has the potential to significantly impact bargaining dynamics when investigating and negotiating resolutions to qui tam suits.