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).

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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.

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Court Rejects “Tenuous” Connection Between FDCA Regulatory Violations and Claims for Payment

Recently, a district court in the Southern District of Florida dismissed with prejudice a qui tam complaint premised on the alleged sale of products adulterated and misbranded under the Food Drug and Cosmetic Act (“FDCA”). United States ex rel. Crocano v. Trividia Health Inc., No. 22-CV-60160-RAR (S.D. Fla. July 18, 2022).  In so doing, the court declined to embrace the arguments asserted in a Statement of Interest filed by DOJ and reiterated that “the False Claims Act is not the proper avenue for holding [companies] accountable” for violations of the FDCA, because “the FDA’s use of its regulatory enforcement  powers may be exercised fully to ensure further compliance.”

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CBO Reports on Grassley Bill That Would Modify Escobar Materiality and Impose Rational Relation Test on Granston Dismissals

On July 15, 2022, the Congressional Budget Office (CBO) issued a cost estimate concerning the False Claims Amendments Act of 2021, a bill sponsored by Senator Grassley.  The bill would alter the False Claims Act in three important ways. (more…)

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…)

National Nursing Home Initiative Picks Up Steam Under the FCA

In March 2020, DOJ implemented the National Nursing Home Initiative (“the Initiative”) to coordinate and enhance civil and criminal efforts to pursue nursing homes that allegedly provide substandard care to their residents. DOJ noted in its announcement of the Initiative that it had already begun investigating approximately 30 nursing facilities in nine states. However, since that announcement, DOJ’s FCA activity as part of this project has been limited. But earlier this week, DOJ announced the filing of one of its first FCA complaints resulting from an investigation launched as part of the Initiative. This case also comes in the wake of the White House’s announcement earlier this year of new initiatives by CMS to enhance the quality of care at nursing homes. In light of both DOJ and White House priorities in this space, this complaint could reflect DOJ’s intention to step up its use of the FCA to police quality of care at nursing homes. (more…)

DOJ Defends Viability of Fraud-on-the-FDA Theory in Statement of Interest

Over the past decade, relators have attempted to expand the long-established “fraudulent inducement” theory of liability into a novel “fraud-on-the-FDA” theory. The fraudulent inducement theory posits that when a defendant’s fraudulent conduct induces a government entity to enter into a contract with the defendant, the claims for payment submitted under that contract are false. However, the fraud-on-the-FDA theory stretches this causal chain by contending that fraudulent conduct directed at FDA can render false the claims for payment submitted to an entirely different government entity, such as CMS.  Courts have been divided as to the viability of this theory (as we have discussed here and here). (more…)

DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

There has been growing variation among courts of appeal over the appropriate pleading standard to apply under Rule 9(b) to the element of presentment, i.e., the requirement that plaintiffs plead with particularity the submission of a false claim to the government for payment. This topic has been the subject of repeated Supreme Court cert petitions (as discussed further here), and the topic has been raised yet again in a cert petition filed late last year in Johnson v. Bethany Hospice and Palliative Care, LLC (No. 21-462) (lower court opinion discussed here). The relator in Bethany Hospice, whose case was dismissed by the Eleventh Circuit for “rely[ing] on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point”, seeks Supreme Court review of this “longstanding circuit split.” (more…)

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