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.

Before addressing the substance of the jury’s verdict, the Eleventh Circuit had to consider whether Ruckh’s litigation funding agreement—in which she sold less than 4% of her share of the judgment to a litigation funder—eliminated her standing to pursue the appeal.  The Court held that Ruckh had “sufficient interest” in the litigation to maintain standing for two reasons.  First, Ruckh had surrendered only a small interest in the case, which did not rise to the level of an “unequivocal and complete assignment.”  Second, the litigation funding agreement expressly provided that the litigation funder had “no power to influence or control th[e] litigation,” making it clear that Ruckh had “retain[ed] sole authority over the litigation.”

Having found that Ruckh had standing to pursue the appeal, the Eleventh Circuit affirmed the district court’s decision to set aside the jury’s verdict as to claims based on the Defendants’ alleged violation of a Florida Medicaid requirement that SNFs develop a “comprehensive plan of care for each resident.”  The Court held that, even accepting Ruckh’s allegations as true, the failure to develop comprehensive care plans was not material to Florida Medicaid’s decision to pay claims.  Critical to this conclusion was that, despite the Defendants’ self-reporting of the violations, there was no evidence that the “state refused reimbursement or sought recoupment.”  Additionally, the Eleventh Circuit found that Ruckh “failed to connect the absence of care plans to specific representations regarding the services provided,” an essential requirement of the falsity element for implied false certification claims.

The Eleventh Circuit reversed, however, the district court’s decision to set aside the jury’s award on Ruckh’s Medicare claims, which accounted for $255 million of the original $350 million award.  The Medicare award was based on the Defendants’ alleged upcoding (submitting bills to Medicare with elevated codes) and ramping (providing more extensive services during Medicare’s reimbursement look-back period than medically necessary).  The Eleventh Circuit held that, unlike with Ruckh’s alleged Medicaid violations, a jury reasonably could have found that the Medicare violations were material because Medicare SNF reimbursement is based on both the level and amount of services provided.  As the Court found, had the Defendants not committed these violations, “Medicare would have reimbursed the [D]efendants at a lower level.”

Finally, the Eleventh Circuit reversed the district court’s decision to set aside the jury’s finding of liability with respect to one of the Defendant management services companies.  The district court found that there was “insufficient evidence to establish the type of ‘massive, authorized, cohesive, concerted, enduring, top-down’ corporate scheme” needed to show that the company “caused the submission of false Medicare claims.”  Noting that the Eleventh Circuit had not previously addressed the FCA’s causation standard, the Court joined the Tenth Circuit and held that proximate cause is the “appropriate standard by which to determine whether there is a sufficient nexus between [a] defendant’s conduct and the submission of a false claim.”  Based on that standard, the Court determined that Ruckh’s evidence that the management services company pressured its employees to maximize reimbursement “irrespective of the services provided” was sufficient to establish that the company had caused false claims to be presented.

A copy of the Eleventh Circuit’s decision can be found here.

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