In our 2016 Year-End Update, we noted that 2016 was a year full of change—including significant Supreme Court False Claims Act rulings and the election—and raised questions regarding the application and enforcement of the False Claims Act ("FCA") going forward. The first half of 2017 has answered some of those questions, but many remain.
First, some consensus has developed among the courts as to how to apply the Supreme Court's decision in
Universal Health Services v. United States ex rel. Escobar. Nevertheless, certain federal courts have adopted different approaches to key issues implicated by
Escobar. Next, Congress continues to consider legislation that would repeal and/or replace the Patient Protection and Affordable Care Act—and potentially reshape the FCA, at least on the margins. That said, the current versions of the repeal-and-replace legislation do not appear to directly impact the FCA itself. Also, senior Trump Administration officials have touted stringent enforcement of the FCA. But FCA enforcement policy remains largely inchoate. Finally, the Administration's overarching commitment to overhauling and reducing regulations may diminish the number of potential violations that could arguably serve as predicates for FCA actions.
Other FCA-related developments have been in line with our predictions. As we previewed in January, state legislative activity has increased in response to calls by the Centers for Medicare and Medicaid Services ("CMS") for states to increase civil penalties to match federal law. The Government has continued to recover substantial settlements based on alleged FCA violations. And several courts have interpreted
Escobar as a call to strengthen the materiality analysis under the FCA, reviving a defense that had been rendered effectively non-existent in many circuits.
We address these and other important developments in greater depth below. We focus first on legislative activity at the federal and state levels, then turn to important FCA settlements that have been announced thus far in 2017, and conclude with an analysis of significant jurisprudence from the past six months.
We note at the outset of this update that Gibson Dunn's recent publications on the FCA, including more in-depth discussions of the FCA's framework and operation, along with practical guidance to help companies avoid or limit FCA liability, may be found on our website. Additionally, this year we will host a series of webinars about the FCA and how it may impact certain industries. The upcoming schedule for these webinars is below:
- The False Claims Act and the Education Sector – July 26
- The False Claims Act and Drug and Device Manufacturers – August 2
- The False Claims Act and Government Contractors (defense, technology, and others) – August 9
- The False Claims Act and Financial Services – August 23
- The False Claims Act and Health Care Providers – August 30
I. LEGISLATIVE ACTIVITY
In our previous update, we raised the possibility that legislation repealing the Patient Protection and Affordable Care Act ("ACA") could implicate components of the FCA—notably the "public disclosure bar." Although the ACA has not been repealed to date, neither the bill passed by the House nor the draft currently under consideration by the Senate appears to impact the FCA. A number of states, however, have initiated amendments to state false claims acts.
A. The New Administration's Statements on the FCA
Although the Trump Administration has not issued any formal policy statements regarding the FCA. Nevertheless, the few public statements made by officials during their Senate confirmation hearings indicate that the administration intends to enforce the FCA vigorously.
During his Senate confirmation hearing in January, then-nominee for U.S. Attorney General, Senator Jeff Sessions (R-AL) stated, "this government must improve its ability to protect the United States Treasury from waste, fraud, and abuse. This is a federal responsibility. We cannot afford to lose a single dollar to corruption, and you can be sure that if I am confirmed, I will make it a high priority of the department to root out and prosecute fraud in federal programs and to recover any monies lost due to fraud or false claims." With regard to the
qui tam provisions of the FCA, Attorney General Sessions, who represented a
qui tam relator while in private practice, noted that he "think[s] that they are a valid and effective method of rooting out fraud and abuse. . . . It has saved this country lots of money. And probably has caused companies to be more cautious because they could have a whistleblower that would blow the whistle on them if they try to do something that's improper. So I think it's been a very healthy thing and . . . I do support the Act." Confirming that he would provide Congress with regular, timely updates on the status of FCA cases, including statistics as to how many are under seal and the average length of seal time, then-Senator Sessions added that, in his experience, the seal period stretches "an awfully long time."
Rod Rosenstein, the former U.S. Attorney for the District of Maryland, also testified before the Senate Judiciary Committee about the FCA in connection with his nomination for Deputy Attorney General. In response to a question regarding waste and fraud related to government grants, Mr. Rosenstein identified the FCA as one of the "tools" for policing compliance with grant rules. The Senate Judiciary Committee Chairman, Senator Grassley (R-IA), also asked Mr. Rosenstein directly if he would vigorously enforce the FCA to recover taxpayer dollars, and Mr. Rosenstein was unequivocal in his response. "Yes, senator," Rosenstein replied. "We have enforced that in my office in the District of Maryland . . . and we certainly will continue to enforce that." Senator Grassley followed up, asking if Mr. Rosenstein would commit to ensuring that DOJ attorneys would work collaboratively with whistleblowers in regard to the fraud under the FCA and whistleblowers generally. Mr. Rosenstein responded that he would ensure that "whistleblowers receive any protection they are entitled to by law or regulation."
Deputy Attorney General Rosenstein is no stranger to the FCA. His office resolved several FCA claims during his tenure as U.S. Attorney for the District of Maryland. For example, in February, before he was confirmed as Deputy Attorney General, Mr. Rosenstein announced a settlement that required a health services contractor to pay $3.81 million to settle FCA allegations related to double billing and mischarging for medical services in connection with work performed on an Internal Revenue Service contract. In announcing the settlement, Mr. Rosenstein stated that "[b]usinesses that knowingly overcharge the government should be held accountable and penalized," and that "[w]histleblower lawsuits are a valuable tool to deter fraud and punish perpetrators." In another example, in December 2016 Mr. Rosenstein announced a settlement that required a defense contractor to pay $4.43 million to settle alleged FCA violations related to the submission of false invoices that allegedly included inflated hours and exaggerated job classification rates. In the press release, Mr. Rosenstein stated that "[f]ederal authorities will vigorously investigate and prosecute defense contractors that cheat the government." In both of these instances, however, the settlement agreements contain no admission of liability, and the press release for one of the settlements notes that "[t]he claims resolved by this settlement are allegations; there has been no determination of liability and [the defendants] cooperated in the investigation."
The Attorney General and Deputy Attorney General were not the only Trump appointees to field questions on the FCA. During Tom Price's confirmation hearing, Senate Finance Committee Chairman Orrin Hatch (R-UT) asked President Trump's then-nominee for Secretary of the Department of Health and Human Services ("HHS") whether "as a former practicing physician who has experience with Medicare and Medicaid programs,  you have any insights into steps you think should be taken to address the multibillion dollar problem of waste, fraud and abuse in these programs?" Then-Representative Price responded that he supports aggressive enforcement against "bad actors" and "real time" monitoring of potential fraud and abuse:
Nobody supports care being billed for [w]hat isn't needed or . . . hasn't been provided. And this is one of those areas that I think we need to be very, very focused. I'm . . . certain that there are some bad actors out there. I think they're a minority, but there's some bad actors out there. And I'm certain that if we were to focus specifically on those bad actors in real time, which is what happens in every other industry in our country that real time information is . . . available and acted upon. Instead of . . . trying to determine whether every single incident of care is necessary. If we were to focus on those individuals that were the bad actors specifically, then I think we could do a much better job of not just identifying the fraud that exists out there, but ending that fraud.
B. Federal Activity
2016 Year-End Update, we reported that President Trump's promise to repeal and replace the ACA implicated various components of the FCA that were amended by the ACA, including the FCA's "public disclosure bar" and the standard for relators to qualify as an "original source." On May 4, 2017, the House of Representatives passed the American Health Care Act of 2017, and on June 22, 2017, the Senate unveiled its version of the bill, overhauling many of the ACA's prescriptions. Both versions, however, left the FCA unaltered. As such, the first half of 2017 has been surprisingly quiet on the federal legislative front. Although there was no new legislation on the federal level, there were a few regulations of note early in the year:
- On January 9, 2017, the FDA issued a final rule that partially amends the agency's definition of "intended use" for drugs and devices codified in 21 C.F.R. § 201.128 and 21 C.F.R. § 801.4, respectively. Under the current definitions, "intended use" encompasses whether a manufacturer knows or has "knowledge of facts that would give him notice" that a drug or device would be used for off-label purposes. Under the new rule, the "knowledge" clause in the two regulations is replaced with a "totality of the evidence" standard, providing that "where the totality of evidence is sufficient to establish a new intended use for a medical product, relevant provisions of the [Food, Drug, and Cosmetics] Act and its implementing regulations will be triggered."
Opponents of the rule argue that its definition of intended use is overbroad—allowing the FDA "to consider any evidence, including knowledge"—and would lead to a growth in FCA litigation. Indeed, following the transition of the new presidential administration and its regulatory freeze of finalized rules that had yet to take effect, various industry organizations submitted a petition requesting the FDA to reconsider and permanently stay the rule based on such an argument. On March 20, 2017, the FDA further delayed the rule's effective date until March 19, 2018 to allow for public comments on the issues raised in the petition.
- On January 12, 2017, the HHS Office of Inspector General ("HHS OIG") issued a final rule codifying the ACA's expansion of the agency's permissive authority to exclude parties from participating in federal health care programs. In relevant part, the rule grants HHS OIG the authority to exclude individuals or entities for "knowingly making or causing to be made any false statement, omission, or misrepresentation of material fact in any application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under a Federal health care program." In addition, the rule adopts a 10-year statute of limitations on permissive exclusions in line with the statute of limitations for FCA claims. The rule took effect on February 13, 2017.
- As we reported in our
2015 Year-End Update, Congress passed legislation in October 2015 requiring agencies to increase FCA penalties to account for inflation. In comparison to the one-time "catch up" adjustment in July 2016—which doubled the FCA penalty levels to account for inflation from 1999 through mid-2016—this year's inflation adjustment was more modest. On February 3, 2017, the DOJ issued a final rule increasing the per violation FCA penalty range of $10,781 to $21,563 to a range of $10,957 to $21,563. Notably, the penalty hike applies retroactively to violations occurring after November 2, 2015, the date the initial inflation adjustment took effect. We will continue to monitor future penalty adjustments, specifically with respect to challenges made to penalty awards pursuant to the Excessive Fines Clause and due process principles.
C. State Activity
The first half of 2017 brought some notable legislative activity at the state level. As predicted in our
previous update, part of this activity resulted from states introducing amendments in response to CMS's September 2016 announcement that states should amend their false claims acts to mirror the increased civil penalties available under federal law.
Since CMS's announcement, HHS OIG analyzed all previously reviewed state false claims acts, and determined that the following states' false claims acts complied, in their current form, with the increased civil penalties under the federal FCA: Colorado, Connecticut, Indiana, Iowa, Massachusetts, Montana, Nevada, Oklahoma, Tennessee, Texas, and Vermont.
HHS OIG determined that the following states' false claims acts needed to be amended to mirror the civil penalties allowed under federal law: California, Delaware, Florida, Georgia, Hawaii, Illinois, Michigan, Minnesota, New Hampshire, New York, North Carolina, Rhode Island, Virginia, Washington, and Wisconsin. HHS OIG provided most of these states until December 31, 2018 to amend and resubmit their false claims acts for approval.
Four of these states are currently considering legislation that conforms their false claims acts to the federal FCA:
- On May 30, 2017, a bill that would amend the Illinois False Claims Act to mirror penalties allowed under the federal FCA passed both state houses.
- On June 20, 2017, a bill that would similarly amend New York's False Claims Act passed the New York Assembly and was sent to the Senate for consideration.
- Bills amending California's and North Carolina's false claims acts have been referred to committees for consideration.
States that do not amend their false claims acts to comply may be deemed by the DOJ and HHS OIG to be less effective than the federal FCA in facilitating qui tam actions and thereby lose the ability to increase by 10% their share of recoveries in cases that prosecute Medicaid fraud.
One state also recently considered enacting a broader false claims act, and another is currently considering enacting a false claims act. Although Arkansas already has a Medicaid Fraud False Claims Act, on March 21, 2017, the Arkansas Senate introduced a bill that would create a broader Arkansas False Claims Act (S.B. 548). After being referred to the Senate Judiciary Committee, the bill died upon adjournment of the Committee. On January 26, 2017, S.B. 65, creating Michigan's False Claims Act, was introduced to the State Senate and referred on the same day to the Committee on Judiciary.
As for several items that we mentioned in previous updates:
- On February 11, 2016, Alabama legislators introduced a false claims act in the state's senate. Legislation is still pending in the state's Senate Judiciary Committee.
- In New Jersey, no further action has been taken on a bill that would authorize the retroactive application of New Jersey's False Claims Act under certain circumstances. The general assembly, the lower house of the state's legislature, previously passed this bill on May 14, 2015.
- In New York, no further action has been taken on a May 2015 bill that would provide for securities fraud whistleblower incentives and protections.
- South Carolina legislators have taken no further action on a bill to enact the "South Carolina False Claims Act" (S.B. 223), which was referred to the Committee on Judiciary in January 2015.
II. NOTEWORTHY SETTLEMENTS AND JUDGMENTS DURING THE FIRST HALF OF 2017
Federal and state governments amassed nearly $1.3 billion in FCA recoveries from settlements in the first half of this year and obtained another $370 million in judgments from FCA cases. Although these figures standing alone are staggering, they fall off the pace of the $1.86 billion recovered at the mid-year mark in 2016. Nevertheless, DOJ remains on pace for an incredible eighth consecutive year exceeding $3 billion in total FCA recoveries. Below, we summarize notable settlements in the health care and life sciences, financial services, government procurement, and defense industries, as well as two notable judgments in FCA cases.
These settlements and judgments provide some insight into both the type of industries as well as the theories of liability on which the government and relators have focused so far this year. As in years past, companies in the health care industry continued to dominate the investigations and resolutions in the first half of 2017, whereas the flow of alleged FCA violations stemming from the financial crisis continues to dwindle.
A. Federal Settlements
1. Health Care and Life Sciences Industries
- On January 9, 2017, a Texas dental management firm and 21 affiliated pediatric dental practices agreed to pay $8.45 million to resolve allegations that they knowingly submitted claims for dental services that were never performed, received improper kickbacks, and misidentified the dentists who actually performed the services. Five owners of the firm and the affiliated practices agreed to each pay $250,000 to resolve claims made against them individually, and the firm's head of marketing agreed to pay $100,000 to resolve alleged individual liability. The whistleblower, a former employee at the firm, will receive a $1.52 million share of the settlement.
- On January 11, 2017, a global pharmaceutical company agreed to pay $350 million to resolve claims that the company allegedly offered kickbacks to induce clinics and physicians to use one of its medical devices products, marketed the device for uses not approved by the FDA, made false statements to inflate the price of the device, and caused improper coding of claims for reimbursement. The settlement represents the largest ever FCA recovery in a kickback case involving a medical device. The allegations were brought in six separate lawsuits; the respective whistleblowers' shares of the settlement have not yet been determined.
- On January 12, 2017, a Connecticut-based home health care agency agreed to pay $5.25 million to settle allegations that it fraudulently billed the Medicaid program for home health services.
- On January 12, 2017, a global health care company agreed to pay $18.15 million to resolve allegations that the company submitted false claims to the Department of Veterans Affairs ("VA") as a result of failing to abide by current Good Manufacturing Practices in producing drug products it sold to the VA. The settlement includes a deferred prosecution agreement, penalties and forfeiture totaling $16 million, and a civil FCA settlement totaling approximately $2.15 million from which the relator is set to receive $431,535.99.
- On January 13, 2017, a Massachusetts-based ambulance company, four of its subsidiaries, and the company's two owners agreed to pay $12.7 million to settle allegations that the company knowingly submitted false claims to Medicare for ambulance transport services. The whistleblower, a former billing employee, will receive approximately $3.5 million.
- On January 19, 2017, a nationwide retail pharmacy chain agreed to pay almost $50 million to resolve claims that it allegedly provided kickbacks to induce government health care program beneficiaries to fill prescriptions at the pharmacy's locations. The company will pay $46.21 million to the United States and $3.79 million to resolve various state claims. The company also admitted and accepted responsibility for the conduct alleged.
- On February 1, 2017, a pain management physician agreed to the entry of a $20 million consent judgment to settle claims brought by three whistleblowers in two lawsuits that the physician billed for medically unnecessary diagnostic tests and surgical monitoring services that were never performed. On October 24, 2016, the physician was also sentenced to more than three years in prison and three years of supervised release in connection with some of the related conduct. The relators' share of the settlement has not yet been disclosed.
- On February 6, 2017, a health care service provider, acting as successor in interest, agreed to pay $60 million plus interest in order to settle allegations that the company in which it is acting as successor interest had over-billed Medicare, Medicaid, and other government agencies for unnecessary or unperformed medical services. The whistleblower, a physician employed by the provider, is set to receive approximately $11.4 million.
- On February 7, 2017, a Florida-based physician agreed to pay $18 million to settle allegations that the physician knowingly submitted claims to federal health care programs for medically unnecessary services, services performed in contravention of standard practice, and services conducted without supervision and by unlicensed or unqualified assistants. A co-defendant physician in the matter also agreed to pay $250,000 for allegedly submitting false claims tainted by kickbacks to, and improper financial relationships with, the other physician. The relator's portion of the settlement has not been disclosed.
- On April 18, 2017, a hospice company, having purchased and consolidated multiple hospice companies, agreed to pay $12.21 million to settle allegations that the companies engaged in kickback schemes in which the companied paid cash and in-kind payments (such as sham loans, equity in another entity, stock dividends, and free rental space) to a company, medical providers, and facilities in exchange for patient referrals. This settlement resolves allegations raised in two consolidated whistleblower suits, and the relators' shares of the settlement have not yet been disclosed.
- On April 20, 2017, a national retail pharmacy chain agreed to pay $9.86 million to resolve allegations that it knowingly submitted false claims for reimbursement to California's Medi-Cal program by billing the program for incorrectly documented or unconfirmed diagnoses. The whistleblowers, a pharmacist and pharmacy technician both formerly employed by the chain, will receive a $2.3 million share in the proceeds.
- On April 25, 2017, a California-based home oxygen and sleep therapy service provider agreed to pay $11.4 million to resolve claims that it allegedly submitted false claims for reimbursement to Medicare and other federal health care programs as a result of a cross-referral kickback scheme with various sleep clinics. The whistleblower who brought the claim will receive approximately $1.82 million.
- On April 27, 2017, Indiana University's health care system and a health insurance provider agreed to pay $18 million to settle allegations that they engaged in a kickback scheme to refer the provider's patients to the University's hospital. The University health care system and the provider will each pay approximately $5.1 million to the United States and $3.9 million to the State of Indiana. The relator, a former employee of both the insurance provider and the hospital, is set to receive approximately $2.8 million.
- On April 28, 2017, a national clinical laboratory services provider agreed to pay $6 million to settle allegations that a laboratory testing company that the provider acquired in 2011 had paid kickbacks to physicians and patients for testing services and charged for medically unnecessary tests prior to the acquisition. The whistleblower's share has not yet been determined.
- On May 11, 2017, a benefits management company agreed to pay $54 million to resolve allegations that it authorized unnecessary medical diagnostic procedures paid for with Medicare and Medicaid funds without assessing the necessity or reasonableness of the procedures. The company agreed to pay $45 million to the United States and $9 million to various states.
- On May 16, 2017, a national long-term care pharmacy services provider agreed to pay $8 million to resolve claims that it allegedly implemented a drug label verification system that caused the submission of claims for generic drugs that were different from the drugs actually dispensed to Medicare and Medicaid beneficiaries. It also allegedly led to drugs being dispensed with false manufacturer and National Drug Code information on labels. The whistleblowers who brought the claim will receive over $2 million.
- On May 18, 2017, two Missouri-based hospitals agreed to pay $34 million to settle allegations that they engaged in a kickback scheme with referring physicians for chemotherapy services wherein physician compensation improperly accounted for the value of patient referrals. The whistleblower, a physician formerly employed by one of the hospitals, will receive $5.44 million.
- On May 26, 2017, a national long term care pharmacy services provider agreed to pay $23 million to resolve allegations that it engaged in a kickback scheme in the form of receiving discounts in exchange for promoting certain drugs. The provider will pay more than $12.8 million to the federal government and nearly $10.2 million to several states. The whistleblowers, two former employees of the drug company, will receive up to $3.7 million.
- On May 30, 2017, a Florida-based managed care services provider agreed to pay more than $31.69 million to resolve claims that it allegedly engaged in illegal schemes to maximize payments from the government with respect to the provider's Medicare Advantage plans. In addition, the company's former COO agreed to pay $750,000 for his alleged individual role in one of the schemes. Specifically, the company allegedly submitted unsupported diagnosis codes, which resulted in inflated reimbursements with respect to two of the provider's Medicare Advantage plans. The share for the whistleblower, a former employee of the company, has not yet been determined.
- On May 31, 2017, an electronic health records software vendor based in Massachusetts agreed to pay $155 million to resolve allegations that it misrepresented the extent of the capabilities of its software and paid kickbacks to customers in exchange for promoting its software. This settlement is the largest FCA recovery in the District of Vermont and may represent the largest financial recovery in the history of the State of Vermont. The whistleblower will receive a $30 million share of the settlement.
- On June 16, 2017, a Pennsylvania-based health care company agreed to pay over $53.63 million to settle six lawsuits alleging that companies it acquired submitted false claims to government health care programs. The global settlement resolves allegations that, prior to the acquisitions, the acquired companies had: (1) billed for hospice services for patients who were not terminally ill and therefore were not eligible for Medicare's hospice benefit, (2) inappropriately billed for physician evaluation management services, (3) provided medically unnecessary treatment, and/or (4) provided sub-standard care at their nursing homes. The seven whistleblowers, all former employees, will receive a $9.67 million share of the settlement.
- On June 26, 2017, a medical equipment maker agreed to pay $20 million to resolve allegations that it paid kickbacks and billed government health programs for services that were not eligible for reimbursement, that were not medically necessary, or that were never provided or provided in violation of federal regulations. The whistleblowers who brought the suit, four former billing employees, will split a $6 million share.
- On June 28, 2017, two companies, which together own an acute care hospital in California agreed to pay $42 million to resolve claims that they allegedly engaged in improper financial relationships with referring physicians through marketing arrangements with the physicians' practices and under certain agreements to rent space in the physicians' offices. The lawsuit was brought by a manager of one of the defendants, who will receive a $9.2 million share.
2. Financial Services Industry
- On May 16, 2017, a Texas-based reverse mortgage originator and underwriter agreed to pay $89 million to resolve allegations that the company sought to obtain interest payments from the Federal Housing Administration, which the company was not entitled to receive because the company failed to adhere to deadlines to appraise properties, failed to submit claims, and failed to pursue foreclosure proceedings. The whistleblower will receive approximately $1.6 million from the settlement.
3. Government Contracting and Defense/Procurement
Resolutions with government contractors so far this year have reflected the broad array of alleged misconduct that may lead to FCA liability, including cost inflation and procurement of allegedly defective products.
- On January 23, 2017, a nuclear waste storage company agreed to pay more than $5.72 million to resolve claims that the company allegedly submitted false claims to the Department of Energy ("DOE") for overtime pay and did not comply with internal audit procedures required by its contract with the DOE.
- On February 15, 2017, a Nevada-based electronic systems provider and integrator agreed to pay $14.9 million to resolve allegations that it knowingly misstated its manufacturing and production engineering costs, which, in turn, resulted in the government paying inflated rates pursuant to its contracts with the provider.
- On March 10, 2017, a New York-based information technology management software and services company agreed to pay $45 million to resolve allegations that the company made false statements in the negotiation and subsequent administration of a General Services Administration ("GSA") contract for software licenses and maintenance services. The company allegedly did not adequately disclose its discounting practices to GSA and did not reduce prices when commercial discounts improved in violation of its contract. The whistleblower, a former employee of the company, will receive a share of over $10.19 million.
- On April 24, 2017, a Georgia-based nuclear power product supply company agreed to pay $4.6 million to resolve allegations that the facility failed to perform certain required quality assurance procedures and supplied defective steel reinforcing bars for a nuclear treatment facility that it contracted to build for the DOE. The share for the whistleblower, a former employee of a subcontractor on the project, has not yet been determined.
- On May 26, 2017, a Kuwaiti-based defense contractor agreed to pay $95 million to resolve allegations that it overcharged the Department of Defense with respect to its contracts to supply food to U.S. troops from 2003 through 2010. The whistleblower, a former vendor for the contractor, will receive $38.85 million.
- On April 10, 2017, the Virginia Department of Social Services agreed to pay more than $7.15 million to settle claims that it allegedly implemented a system that improperly determined eligibility for the state's food stamps program in an effort to secure performance bonuses from the U.S. Department of Agriculture.
- On April 12, 2017, the Wisconsin Department of Health Services agreed to pay more than $6.9 million to resolve allegations that it similarly violated the FCA in implementing its state food stamp program.
B. Notable Judgments
So far this year there have been two notable judgments, one of which involved the use of statistical sampling and is among the largest FCA judgments ever.
- On February 15, 2017, a federal judge in the Southern District of Florida entered a final judgment of more than $20 million against a Florida-based for-profit college chain that was found liable for defrauding the U.S. Department of Education by submitting falsified documents to secure federal financial aid funding for ineligible students. The for-profit college chain will pay $12 million to the federal government and an additional $10 million in civil penalties.
- On February 15, 2017, a jury in the Middle District of Florida returned a verdict finding that an operator of skilled nursing facilities was liable for over $115 million in damages for submitting false Medicare claims based on false records and misrepresentations. This judgment is one of the largest FCA jury verdicts ever. On March 1, 2017, the District Court assessed an additional statutory penalty and trebled the jury's damages figure, resulting in a total judgment of nearly $348 million. The share for the relator, a nurse formerly employed at two of the operator's facilities, has yet to be determined. The case was also noteworthy in that the court allowed the plaintiff to utilize statistical sampling to prove her case.
C. State Settlements
- On March 2, 2017, two pharmacy owners, a pharmacist, and ten related corporations agreed to pay $7.9 million to the State of New York to settle claims that they allegedly submitted false claims to Medicare, Medicaid, and other various Medicaid-managed care organizations for drugs that were not actually dispensed to patients.
III. NOTABLE CASE LAW DEVELOPMENTS
A. Developments in the Implied False Certification Theory Since
It has now been a year since the Supreme Court's landmark decision recognizing, and broadly defining the elements of, the implied certification theory of FCA liability in
Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). As we have detailed previously, in
Escobar, the Supreme Court held that there could be FCA liability under the so-called "implied certification" theory of liability "at least where two conditions are satisfied: first, 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." 136 S. Ct. at 2001. The
Escobar Court also went on to "clarify how [the] FCA materiality requirement should be enforced[,]" notably stating that materiality is a "rigorous" and "demanding" requirement that requires a showing, by factual proof, more than that the government merely had the "option" to refuse payment had it known of the alleged noncompliance, but instead something more akin to a showing that the government did or actually would have refused payment had it known of the alleged matter at issue.
Id. at 2002–03.
Two questions have stood at the forefront of discussion regarding
Escobar over the past year. First, must both of
Escobar's "two conditions" be satisfied to establish liability under an implied certification theory? Or, more specifically, is a "specific representation" about the goods or services a prerequisite to FCA liability, or does
Escobar leave the door open for liability where the allegation is that the claim itself merely somehow "implies" compliance with some legal requirement? And second, what exactly must an FCA plaintiff plead or prove to establish that noncompliance with a legal requirement is "material"? Over the past six months, a number of appellate courts have had their first foray into the post-Escobar world and have begun to wrestle with these questions. There are some common themes, but differences are emerging as well.
1. The Fourth Circuit Focuses on Materiality
The Fourth Circuit's first engagement with
Escobar this year came in the same case in which it first recognized the implied certification theory (albeit pre-Escobar)—United States ex rel. Badr v. Triple Canopy, Inc., 857 F.3d 174 (4th Cir. 2017). In
Badr, the DOJ intervened in an FCA case alleging that the defendant violated the FCA by falsifying marksmanship scores of guards providing security for Government facilities in Iraq, thereby allegedly making its claims for payment of those guards false because the personnel were unqualified. Id. at 175–76. Before the Supreme Court's decision in
Escobar, the district court had dismissed the case, declining to recognize the implied certification theory. United States ex rel. Badr v. Triple Canopy, Inc., 950 F. Supp. 2d 888, 899 (E.D. Va. 2013). The Fourth Circuit reversed on appeal, affirming the validity of implied certification when the Government "alleges that the contractor, with the requisite scienter, made a request for payment under a contract and withheld information about its noncompliance with material contractual requirements." United States ex rel. Badr v. Triple Canopy, 775 F.3d 628, 636 (4th Cir. 2015) (citation and internal quotation marks omitted). Following its decision in
Escobar, the Supreme Court vacated and remanded
Badr for reconsideration.
On remand, the
Badr court determined that
Escobar did not alter its earlier decision and again reversed the district court. Badr, 857 F.3d at 177–78. First, the Fourth Circuit held, in effect, that both of
Escobar's "two conditions" are
not required for a valid implied certification claim. Specifically, the
Badr panel rejected defendant's argument that the case should be dismissed because defendant was not required to certify that the guard services complied with contractual responsibilities regarding marksmanship qualifications (instead only showing the number of guards and hours worked). The court found that defendant's omissions regarding qualifications and marksmanship fell "'squarely within the rule that half-truths . . . can be actionable misrepresentations[,]'"
id. at 178 (quoting
Escobar, 136 S. Ct. at 2000), and it was not bothered that there was no "specific representation" of qualifications in the claims for payment,
Id. at 178.
Addressing materiality, the Fourth Circuit also found unchanged its previous ruling that the alleged noncompliance was material to government payment based on "common sense and [defendant's] own actions in covering up the noncompliance."
Id. The court noted that in
Escobar, the Supreme Court had explained materiality in part by stating that "'[i]f the Government failed to specify that guns it orders must actually shoot, but the defendant knows that the Government routinely rescinds contracts if the guns do not shoot, the defendant has actual knowledge'" that such a factor is material.
Id. at 179 (quoting
Escobar, 136 S. Ct. at 2001–02). The
Badr court found a direct analogy to that hypothetical, holding that "[g]uns that do not shoot are as material to the Government's decision to pay as guards that cannot shoot straight."
Id. Notably, the court went on to find that the Government's failure to renew its contract with the defendant and the DOJ's intervention in the
qui tam itself were evidence that defendant's "falsehood affected the Government's decision to pay." Id. Though the Fourth Circuit did not cite
Escobar on that point, it stands to reason that the court was considering
Escobar's admonition that "if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material."
Escobar, 136 S. Ct. at 2003.
2. The D.C. Circuit Bolsters the Importance of Proof of Materiality
In February, the D.C. Circuit applied
Escobar for the first time in
United States ex rel. McBride v. Halliburton Co., 848 F.3d 1027 (D.C. Cir. 2017). In
McBride, the relator had alleged that a contractor providing recreation services to the U.S. military in Iraq inflated headcounts detailing the amount of personnel it served. Id. at 1029. According to the relator, this made the costs the contractor submitted "unreasonable," in violation of the Federal Acquisition Regulations.
Id. at 1032.
In affirming the motion for summary judgment against the relator, the D.C. Circuit found that it did not need to address whether a "specific representation" was required for liability under the implied certification theory, because the lack of evidence of materiality alone was dispositive of the relator's claims.
Id. at 1031 n.4. The
McBride court noted
Escobar's statement that the materiality question was not too "fact intensive" to decide on a motion for summary judgment,
id. at 1032 (quoting
Escobar, 136 S. Ct. at 2004 n.6), and, in fact, the court repeatedly stressed that FCA materiality had to be supported by evidence, rather than the relator's speculation and say-so. For example, the
McBride court noted that there was no record evidence establishing that the allegedly inflated headcount made any of defendant's costs "unreasonable" and thus that the government would not have paid for them.
Id. at 1033. Because the relator's claim was insufficiently based on "the far-too-attenuated supposition that the Government
might have had the 'option to decline to pay[,]'" the D.C. Circuit held there was no dispute of material fact as to the materiality of the alleged conduct to Government payment, and affirmed summary judgment under
Escobar. Id. at 1033–34 (quoting
Escobar, 136 S. Ct. at 2003).
3. The Third and Fifth Circuits Focus on Government Knowledge and Investigatory Inaction
Two post-Escobar cases in recent months were particularly notable for bringing into relevance the knowledge and inaction not only of the government's payment officials, but also of the government agencies later investigating the alleged noncompliance at issue.
United States ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 485 (3d Cir. 2017), the Third Circuit affirmed the district court's decision to grant a motion to dismiss the relator's claims that the defendant pharmaceutical company "had suppressed data that caused doctors to certify incorrectly that [a drug] was 'reasonable and necessary' for certain at-risk Medicare patients." Specifically, according to the relator, the defendant was liable under the FCA because, if it had disclosed certain data showing more common and severe side effects of its cancer drug, that "would have required the company to file adverse-event reports with the FDA, and could have resulted in changes" to the drug's FDA label.
Id. Relator further alleged that had the side-effect information been disclosed, physicians would have prescribed different doses of the drug, or not prescribed it at all.
Id. at 486.
In affirming the district court's dismissal of the relator's allegations for failure to state a claim, the Third Circuit found that the alleged data suppression was not material to payment under
Escobar, the court noted that the relator's claims must fail, in large part, because he "not only fails to plead that CMS 'consistently refuses to pay' claims like those alleged . . . but essentially concedes that CMS would
consistently reimburse these claims with full knowledge of the purported noncompliance."
Id. at 490 (quoting
Escobar, 136 S. Ct. at 2003). On the relevance of the government's knowledge to materiality, the court went even further, observing that the relator had disclosed the allegations to the FDA and the DOJ, but that neither of those agencies took any adverse action.
Id. In fact, the court noted, the FDA
added more approved indications for the drug and the DOJ declined to intervene in the
qui tam suit.
Id. The court thereby concluded that since the relator "concedes that the expert agencies and government regulators have deemed these violations insubstantial (or at least would do so if made aware), we do not think it appropriate for a private citizen to enforce these regulations through the [FCA]."
The Fifth Circuit seemingly employed similar reasoning in
Abbott v. BP Exploration & Production, Inc., 851 F.3d 384 (5th Cir. 2017). There, the relator appealed a summary judgment in favor of defendant on his claims that the defendant had "falsely certified compliance with various regulatory requirements" for one of its oil production facilities. Id. at 386. The Fifth Circuit affirmed under
Escobar for a lack of evidence of materiality, concluding that the fact that there had been both a congressional and a Department of the Interior investigation into the allegations, and yet the government still had not taken any action against the defendant (such as a revocation of the company's drilling rights), represented "strong evidence" that the regulations the defendant had allegedly violated were "not material." Id. at 388.
Escobar clearly stated that the Government's continuing to pay despite knowledge of the alleged noncompliance is "strong evidence" of immateriality, it did not as clearly say that inaction by the agencies investigating the same alleged noncompliance would also potentially negate FCA materiality. That some courts seem to be extending
Escobar's comments on Government knowledge even to the DOJ's intervention decision is a notable development, though it seems only to underscore what the case data already show—that Government intervention is the most important inflection point in the life of an FCA case. Whether these cases are the start of a trend is worth watching.
4. The Ninth Circuit Takes a Strict View of
Escobar's Two Conditions But Comes to Diverging Conclusions in Two Implied Certification Cases
In January, the Ninth Circuit applied
Escobar for the first time in a published opinion in
United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325 (9th Cir. 2017). In
Kelly, the relator alleged that his former employer, a technology services provider, had failed to use a particular cost and progress tracking system, called the earned value management ("EVM") system, required by industry cost guidelines, and had failed to make required EVM reports to the prime contractor under a Government contract. According to relator, this failure made defendant's payment vouchers false under an implied certification theory.
Id. at 329. The district court granted summary judgment for the defendants, and in
Kelly, the Ninth Circuit affirmed.
Kelly court structured its analysis around
Escobar's "two conditions." Although it did not expressly rule on whether both of the conditions are required, the
Kelly court took the trouble to analyze whether the first condition was met, and found that it was not.
Id. at 332–33. The court explained that the defendant's claims included no representations about its "performance"; rather, they merely contained the time period of the work and total costs and fees incurred.
Id. Nor was there any evidence that the defendant's vouchers "contained any false or inaccurate statements."
Id. at 333. Noting that the relator's dispute was really about the "format that [defendant] used to report costs incurred," the Ninth Circuit went on to reason that "his FCA claim fails because the FCA attaches liability, not to the underlying fraudulent activity or to the government's wrongful payment, but to the claim for payment—here, [defendant's] public vouchers."
Id. (citation and internal quotation marks omitted).
Apparently on alternative grounds, and citing
Kelly court also affirmed on the basis that the relator had failed to plead materiality. The relator had argued that the alleged false statements were material because they were contained within reports that the government supposedly "relied on" to manage the project under contract. Id. at 333. The court rejected that argument and emphasized that the government
knew that some of the reports it received from the defendant were not compliant with industry standards, but accepted the reports and continued making payments to the defendant for its work anyway. Id. at 334. It did not help the relator's case that there was evidence cited by the court that the government did not even find the
compliant "reports helpful[,] and did not use them to manage the . . . [p]roject."
More recently, the Ninth Circuit applied
Escobar in the context of allegations involving a drug manufacturer and certain applicable FDA regulations, but to strikingly different results from the court's approach in
United States ex rel. Campie v. Gilead Sciences, Inc., No. 15-16380, 2017 WL 2884047, at *2–3 (9th Cir. July 7, 2017), the relators alleged that the defendant biotechnology company fraudulently obtained approval for certain of its drugs by making false statements to the FDA about the manufacturing source of the drugs' active ingredient and negative results of internal quality testing of the products. According to the relators, although the defendant later sought (and obtained) FDA approval of the manufacturing site, if the FDA had been aware of the alleged quality issues, it would not have granted that approval.
Id. The relators also alleged that the defendant took various steps to fraudulently conceal that, prior to approval, it was obtaining the active ingredient from unapproved manufacturing sites.
Id. at *3.
After the government declined to intervene, the district court granted the defendant's pre-Escobar motion to dismiss, finding primarily that the relators had not pled that the allegedly violated FDA regulations were a material condition of payment, and thus they had not stated a claim for relief under an implied certification theory.
See id. at *5. The Ninth Circuit reversed. As to the relators' implied certification theory, the court notably began its discussion by making explicit that "[t]o succeed on such a claim . . . [the defendant] must not merely request payment, but also make specific representations about the goods or services provided"—thus making explicit that
Escobar's "two conditions" must be satisfied for implied certification liability.
Id. at *7. But the court then indicated that the drug's proprietary names alone could constitute a false representation, because they "necessarily refer to specific drugs under the FDA's regulatory regime"—in other words, the drug names themselves represent FDA approval.
Id. Accordingly, the court reasoned, the defendant "requested payment for drugs that fell outside of that approval and omitted critical information regarding compliance with FDA standards."
The court also rejected the distinction, advanced by the defendant and adopted by the district court, that any misrepresentations were made to the FDA, not the government agency paying for the drugs.
Id. at *8. The court, rather incredibly, stated that the fraud was "committed against the Department of Health and Human Services," which oversees the FDA, and thus indicated that a fraud on one large component agency amounts to a fraud on a separate component agency, as long as they are "overseen" by the same cabinet secretary.
Id. In any event, the court went on to reason that "[i]t is not the distinction between the agencies that matters, but rather the connection between the regulatory omissions and the claim for payment."
Id. More specifically, according to the
Campie court, the crux of the inquiry is whether the false statement is "integral to [the] causal chain leading to payment[.]"
Id. (citation and internal quotation marks omitted).
Turning to the second condition of implied certification liability, materiality, the court found that condition was met because "FDA approval is the
sine qua non of federal funding here."
Id. at *9 (citation and internal quotation marks omitted). The court then rejected the defendant's argument—similar to the one employed by the court in
Kelly—that the FDA's choice not to withdraw approval, even after it became aware of the unsanctioned manufacturing site and the alleged quality issues, showed that the alleged conduct was not material.
Id. at *9–10. The court noted that "there are many reasons the FDA may choose not to withdraw a drug approval," and unlike the situation in
Kelly, in this case the FDA's continued approval of the drugs was unremarkable since the company had stopped using the manufacturing site in question.
Id. at *11.
Campie court's analysis of materiality was, at best, half-baked because although it recognized that FDA approval was material to payment, it never analyzed how the alleged statements or regulatory violations were material to the FDA approval, or whether the relators' pleading had established those seemingly required facts. Nevertheless, the court concluded—citing
Kelly—that the "issues raised by the parties here are matters of proof, not legal grounds to dismiss relators' complaint."
Id. The procedural posture of
Campie (a motion to dismiss) may distinguish it from
Kelly (summary judgment), but regardless the
Campie court did not give much regard to
Escobar's admonition that questions about materiality in the implied certification context are "[not] too fact intensive for courts to dismiss [FCA] cases on a motion to dismiss . . . ." 136 S. Ct. at 2004 n.6.
In sum, it remains to be seen whether the Ninth Circuit's different attitude toward implied certification claims in
Campie reflect mere factual differences. The commonality in the Ninth Circuit appears to be that both of
Escobar's "two conditions" are required for implied certification liability, though what exactly is a "specific representation" remains somewhat open to interpretation. Given how the Fourth Circuit seemingly took a different stance on the "two conditions" issue, there may be a circuit split brewing on
Escobar's "two conditions."
B. Updates on Rule 9(b) Pleading Standards
As we have logged extensively in these pages, circuit courts around the country have taken varying approaches to whether Federal Rule of Civil Procedure 9(b)—which requires fraud, and FCA, claims to be pled with particularity—requires FCA plaintiffs to plead specific, representative examples of false claims in their complaints. In recent years, some circuits that previously appeared to set such a requirement showed some flexibility, adding further variability to the circuit split that has developed around the contours of Rule 9(b). For example, last year, the Sixth Circuit held a relator need not identify the specifics of a false claim to survive a Rule 9(b) motion to dismiss, at least where he or she had personal knowledge "that support[s] a strong inference that specific false claims were submitted[.]" United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750, 773 (6th Cir 2016). But in its recent decision in
United States ex rel. Hirt v. Walgreen Co., 846 F.3d 879 (6th Cir. 2017), the Sixth Circuit refused to extend such a "relaxed" pleading standard to other contexts. In
Hirt, the relator, a pharmacy owner, alleged that a rival pharmacy chain offered gift cards to lure customers in violation of the Anti-Kickback Statute and FCA. Id. at 880. Yet the relator's complaint "d[id] not identify a single false claim[,]" and he described only "the unlawful distribution of gift cards in general but not the submission of any claims obtained with those gift cards."
Id. at 881. The Sixth Circuit distinguished the relator in
Hirt from the relator in
Prather because the latter "had sufficient personal knowledge of the defendant's claims submission and billing processes" and held a job whose "sole purpose [was] submitting the claims to Medicare" for government payment.
Id. at 881–82. It appears that the
Hirt court viewed that as the line in the sand, stressing that its decision in
Prather did not "relax" Rule 9(b)'s requirements and that the court had "no more authority to 'relax' the pleading standard . . . than we do to increase it."
Id. at 881.
C. Developments in the FCA's Public Disclosure Bar
Since it was amended in 2010, the FCA's public disclosure bar has mandated that a court "shall dismiss" a relator's FCA action if "substantially the same allegations or transactions" were publicly disclosed in certain enumerated sources, such as news media or government hearings or reports, unless the relator qualifies as an "original source" of the information. 31 U.S.C. § 3730(e)(4). A number of circuit courts weighed in on the contours of the public disclosure in the past six months, with some particularly notable decisions in the Eighth and Ninth Circuits interpreting the scope of information to which the bar applies and when relators can qualify for the "original source" exception to the bar.
1. The Eighth Circuit Examines What Must Be Disclosed to Trigger the Statutory Bar
First, the Eighth Circuit recently provided some useful fodder for determining how specific a public disclosure must be for the bar to be triggered, in United States ex rel. Lager v. CSL Behring, L.L.C., 855 F.3d 935 (8th Cir. 2017). In
CSL Behring, the relator alleged that the defendant, a maker of protein-based therapies and related equipment, reported an average wholesale price ("AWP")—the price at which Medicare would reimburse the products—far in excess of its actual costs.
Id. at 938–39. According to the relator, the defendant then marketed the "spread" by promoting that customers buy its products at close to actual cost and thereby make a profit when the products were reimbursed at the higher AWP amount.
Id. at 939. The district court found that the allegations of fraudulent marketing the spread, and the inference that they could apply to the defendant, were publicly disclosed in a wide variety of government reports, CMS data, and news media.
Id. Accordingly, the district court granted the defendant's motion to dismiss.
Id. at 940.
The Eighth Circuit affirmed. First, in response to the relator's argument that he added value by pointing to the specific defendant in question, the court held that to trigger the statutory bar, a public disclosure must
either "explicitly identify" the defendant or "provide enough information about the participants in the scheme such that the defendant is identifiable."
Id. at 944. The court then agreed with the district court that collectively, the various sources speaking to AWP issues, including CMS data showing the defendant's prices and a government report identifying the same class of products, "provide enough information" to "directly identify" the defendant and its products.
Id. at 945–46 (citation and internal quotation marks omitted). The court went on to find that the same sources disclosed the concept of marketing the spread and the potential for fraudulent AWP reporting, and thus the "elements critical to [relator's] complaint theory were already in the public domain before [he] brought suit" and the statutory bar applied.
Id. at 948–49.
2. The Ninth Circuit Rules on Disclosures in Prior Litigation and When a Relator Satisfies the "Voluntary Disclosure" Requirement
A number of courts have interpreted the scope of the FCA's enumerated sources of public disclosures to encompass pleadings and other public filings in civil litigation. In
Amphastar Pharmaceuticals Inc. v. Aventis Pharma SA, 856 F.3d 696 (9th Cir. 2017), the Ninth Circuit examined the application of the public disclosure bar in that context and concluded that it precludes allegations and transactions the bases for which were developed by the relator itself during discovery in a prior suit. In
Amphastar, the relator, a generic pharmaceutical manufacturer, alleged that the defendant innovator manufacturer violated the FCA by submitting false information to the U.S. Patent and Trademark Office in obtaining a patent for one of its drugs, which then allowed the defendant to maintain a monopoly in the market for this drug and thus allegedly overcharge the government.
Id. at 702. These claims echoed the relator's earlier assertion of inequitable conduct as an affirmative defense to a patent infringement suit brought by the defendant, which the relator eventually won after obtaining discovery.
Id. at 701. The government declined to intervene in the FCA case, and the district court dismissed, finding that the FCA claims were publicly disclosed in the earlier litigation and the relator was not an "original source" of the information.
Id. at 702.
The relator appealed, and the Ninth Circuit affirmed the dismissal. After observing that "pleadings or other public filings" can provide the basis for public disclosures that trigger the statutory bar,
id. at 703, the court held that the relator's amended answer and counterclaim for inequitable conduct in the prior suit "made nearly identical allegations to those made" in the FCA case,
id. at 704. The court rejected the relator's argument that it had not previously raised FCA claims, reasoning that an allegation "need not include an express reference to the [FCA,]" nor must it contain "every specific detail" for the bar to apply.
Id. at 704 (citation and internal quotation marks omitted). The court also noted that although the relator had not previously alleged that the government was buying the drug in question while the defendant asserted its patent, that was "an obvious inference based on the publicly disclosed allegations."
Moving to its analysis of the "original source" exception, the
Amphastar court found, applying the pre-2010 version of the rule, that the relator lacked the required "direct and independent knowledge" of the allegations because the underlying information was developed during the earlier litigation.
Id. at 706–-08. Specifically, the court refused to overturn the district court's factual findings on this issue, noting in particular that when the relator raised its affirmative defenses in the prior litigation, it did so "based on facts recently developed in th[e] litigation[.]"
Id. at 707. Notably, the court also recognized as evidence of the lack of direct and independent knowledge the relator's mandatory disclosure statement to the DOJ in the
qui tam case, in which it stated that it discovered the alleged fraud "during [its] litigation" with the defendant.
The Ninth Circuit had another recent opportunity to examine the contours of the public disclosure bar and, in particular, a unique question: can a relator satisfy the statute's requirement of voluntarily disclosing the allegations to the government prior to suit, if the pre-suit disclosure occurs as part of the relator's government employment? In
Prather v. AT&T, Inc., 847 F.3d 1097 (9th Cir. 2017), the relator, a former prosecutor in the organized crime section of the New York Office of Attorney General, alleged that the defendant telecommunications company overcharged the government for costs associated with law enforcement wiretapping activities. The relator conceded that the public disclosure bar applied to his claims, which were publicized before his suit. Applying the pre-amendment version of the statute, the court affirmed the district court's dismissal of the relator's claims because he did not qualify as an original source of the information about wiretapping charges in part because he did not "voluntarily provide the information to the Government before filing [his] action."
Id. at 1105. Noting that the relator had developed his knowledge of wiretapping from his work prosecuting organized crime, the court reasoned that although that work did not "include a duty to report fraud against the government," the relator's disclosures of fraud were made in response to a request from his employer; they were accomplished during the ordinary course of his work and in his official capacity; and he was compensated by a government salary.
Id. at 1107–08. The court held that under these circumstances, a relator cannot be said to have "voluntarily provided" the allegations of fraud prior to suit, as the public disclosure bar requires.
D. Developments in Application of the First-to-File Bar
In April, the Second Circuit joined the D.C. Circuit in finding that the FCA's first-to-file rule is not jurisdictional. In United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 84 (2d Cir. 2017), the relator alleged that defendant liability insurance companies engaged in a nationwide scheme to defraud Medicare. Finding that the relator had no personal knowledge of the alleged scheme, the district court had dismissed the action with prejudice. Id. On appeal, defendants contended the court correctly dismissed the complaint, and a small group of defendants advanced a separate basis for affirming the decision—"that the district court lacked subject matter jurisdiction over Hayes's action because Hayes did not satisfy the FCA's first-to-file rule," as he raised a similar action that was already pending in the same district. Id. at 84–85.
The Second Circuit affirmed the dismissal on the grounds addressed by the district court. But in addressing jurisdiction, the Second Circuit held that "a district court does not lack subject matter jurisdiction over an action that may be barred on the merits by the first-to-file rule." Id. at 86. The Second Circuit found persuasive the D.C. Circuit's observation that the language of 31 U.S.C. § 3730(b)(5) "'speaks only to who may bring a private action and when'" but "'does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts[.]'"
United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 120 (D.C. Cir. 2015)).
United States ex rel. Carson v. Manor Care, Inc., 851 F.3d 293 (4th Cir. 2017), the Fourth Circuit addressed a different issue under the first-to-file rule, and refused to take a strict approach to application of the bar, finding that it applies when allegations cover conduct occurring in different states and when the lower court consolidates competing claims. Carson involved two competing FCA actions against the defendant nursing facility operator alleging similar violations of Medicare regulations, including overbilling and providing unnecessary patient services. Id. at 300–01. The second relator, filing two years after the initial
qui tam action, attempted to distinguish the claims through factual additions, the occurrence of alleged violations in Pennsylvania rather than Virginia, and the novel defense that the district court's consolidation of the two claims prevented dismissal under the first-to-file bar. Id. at 300, 303–05.
To determine whether the later-filed complaint bore enough similarity to the earlier-filed complaint to trigger the first-to-file bar, the Fourth Circuit applied the "material elements test," which bars a later suit "if it is based upon the same material elements of fraud as the earlier suit, even though the subsequent suit may incorporate somewhat different details."
Id. at 302. The Fourth Circuit found the later complaint's claims "are essentially the same as those found in [the initial] complaint," and neither "factual additions nor the fact that [the second relator's] experience took place in Pennsylvania . . . saves him from the first-to-file bar." Id. at 303–04. Regarding the consolidation argument, the Fourth Circuit definitively held "[t]he FCA does not make an exception to the first-to-file rule for consolidated complaints," and, as such, the district court properly dismissed the case. Id. at 305.
E. The Eleventh Circuit Comments on Proving Scienter in the Context of Ambiguous Legal Requirements
United States ex rel. Phalp v. Lincare Holdings, Inc., 857 F.3d 1148 (11th Cir. 2017), the relators alleged that defendants, suppliers of oxygen and respiratory therapy services, submitted claims without authorization from the relevant Medicare beneficiaries and after making unsolicited telemarketing calls to Medicare beneficiaries, thereby allegedly violating Medicare regulations and the FCA. The district court granted summary judgment for defendants, finding that the relators had failed to present evidence of the defendants' scienter under the FCA because "a defendant's reasonable interpretation of any ambiguity inherent in the regulations belies the scienter necessary to establish a claim of fraud under the FCA."
Id. at 1155. The Eleventh Circuit affirmed, but rejected "that a finding of scienter can be precluded by a defendant's identification of a reasonable interpretation of an ambiguous regulation that would have permitted its conduct."
Id. The court clarified that instead, the relevant inquiry is whether the defendant "actually knew or should have known that its conduct violated a regulation in light of any ambiguity at the time of the alleged violation." Id. The
Phalp court explained that a contrary holding would allow defendants to escape FCA liability by manufacturing—post hoc—a supposedly reasonable interpretation "despite having actual knowledge of a
different authoritative interpretation." Id. (emphasis added). However, the court went on to find that the evidence adduced by the relators—two emails that dealt with different issues or time periods from the case in question—did not permit a reasonable jury to conclude that the defendants knowingly submitted false claims.
It is interesting, and perhaps surprising, that the Eleventh Circuit did not cite the Supreme Court's opinion in
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007), which clarified the application of a scienter requirement under the Fair Credit Reporting Act that is identical to the FCA's standard. The
Safeco court held that a defendant is not reckless if it adopts an interpretation of a regulation that is not objectively unreasonable, even if it turns out to be erroneous. The court explained that "where . . . the statutory text and relevant court and agency guidance allow for more than one reasonable interpretation, it would defy history and current thinking to treat a defendant who merely adopts one such interpretation as a knowing or reckless violator."
Id. at 70 n.20.
F. The Eleventh and Ninth Circuits Rule on Nonparty Intervention in FCA Suits
Two cases in the past six months—one from the Eleventh Circuit and one from the Ninth—addressed the relatively unusual questions of when nonparties—either a private party or the government after it initially declines—can intervene in an ongoing FCA case.
United States v. Everglades College, Inc., 855 F.3d 1279 (11th Cir. 2017), the Eleventh Circuit clarified the situations in which the FCA's good-cause intervention requirement applies. The case arrived at the Eleventh Circuit by a winding path. The relators had brought their FCA allegations to the government, but the government declined to intervene, and thus the relators litigated the case on their own. Though the relators won at trial, they were unsatisfied with the outcome, and they appealed. The United States then, apparently concerned that the Eleventh Circuit would affirm the district court (which had adopted a somewhat narrow view of FCA liability), stepped in and settled with the defendants. Id. at 1283–84.
The relators cried foul and appealed to the Eleventh Circuit for relief, arguing that the United States had no good reason to intervene, and had thus violated the FCA's provision at 31 U.S.C. § 3730(c)(3), which allows the government—once it has declined to pursue a case—to intervene only upon a showing of "good cause." Id. at 1285. By settling with the defendants, the relators alleged, the government had deprived the relators of their chance at a greater recovery upon reversal and remand. Id. The Eleventh Circuit disagreed. Joining with the D.C. and Fifth Circuits, the court held that the good-cause intervention provision does not apply when the government steps in to settle and
end litigation; the provision applies only when the government steps in to
proceed with the litigation. Id. at 1285–86. The Eleventh Circuit affirmed the lower court's dismissal of the case, as a result of the settlement between the United States and the defendants.
In a case involving the opposite situation (where the government, not a relator, has brought an FCA suit), the Ninth Circuit prohibited a private party from intervening. In
United States v. Sprint Communications, Inc., 855 F.3d 985, 987 (9th Cir. 2017), the private party had brought a similar
qui tam action against the same defendant several years earlier, and failed. When the government subsequently sued the same defendant, the party attempted to intervene. Id. at 988. The Ninth Circuit found that where an earlier
qui tam action has been unsuccessful, the relator has no "significantly protectable interest," as required by Federal Rule of Civil Procedure 24(a)(2), and thus the relator cannot intervene in, nor does he or she have a claim for monetary recovery from, the government's separate action. Id. at 990–91.
G. Update on the Fourth Circuit's Ruling in
As was widely expected, the Fourth Circuit refused to issue a decision on the merits regarding the validity of relator's use of statistical sampling to establish liability and damages in an FCA case when it ruled in
United States ex rel. Michaels v. Agape Senior Community, Inc., 848 F.3d 330 (4th Cir. 2017). Instead, the Fourth Circuit ruled on jurisdictional grounds, finding that the appeal before it was not jurisdictionally appropriate.
Id. at 341 (citing
McFarlin v. Conseco Servs., LLC, 381 F.3d 1251, 1259 (11th Cir. 2004)).
On a separate matter, the Fourth Circuit in
Michaels joined a growing number of circuits ruling on the authority of the United States Attorney General to veto voluntary settlements in
qui tam actions. In
Michaels, a proposed settlement between the relator and defendants emerged from mediation, but the DOJ, which had not intervened in the case, objected. Id. at 335. The Fourth Circuit, affirming the district court and agreeing with the Fifth and Sixth Circuits, found that "the Attorney General possesses an absolute veto power over voluntary settlements in FCA
qui tam actions," basing its judgment on a plain reading of 31 U.S.C. § 3730(b)(1), which directs that an action "may be dismissed only if the court and the Attorney General give written consent to the dismissal." Id. at 339.
In so ruling, the Fourth Circuit gives broad authority to the Attorney General to reject any
qui tam settlement under § 3730(b) whether or not the Government has intervened, finding the statute "is not temporally qualified or explicitly limited in any other manner" and "does not overtly require the Government to satisfy any standard or make any showing reviewable by the court." Id. The decision in
Michaels is yet another sign that even long after declination, parties likely have no choice but to engage with the Government as another negotiating party to ensure their settlements can be finalized.
The first half of 2017 ushered in the Trump Administration and saw notable developments in FCA jurisprudence on both the legislative and judicial fronts. As the new administration's enforcement policy coalesces and the courts continue to construe the FCA in a post-Escobar world, we will monitor FCA legislative activity, settlements, and jurisprudence throughout the year. You can look forward to a comprehensive summary in our 2017 False Claims Act Year-End Update, which we will publish early in January 2018.
 Senate Judiciary Committee Hearing on Nomination of Sen. Jeff Sessions to be U.S. Attorney General, 115th Cong. (Jan. 10, 2017),
 Senate Judiciary Committee Hearing on Nominations of Rod Rosenstein and Rachel Brand to be Deputy Attorney General and Associate Attorney General, 115th Cong. (Mar. 7, 2017),
See Press Release, U.S. Atty's Office for the Dist. of Md., U.S. Dep't of Justice, Health Services Contractor Agrees to Pay $3.818 Million to Settle False Claims Act Allegations for Double-Charging And Mischarging Medical Services on Internal Revenue Service Contract (Feb. 8, 2017),
See Press Release, U.S. Atty's Office for the Dist. of Md., U.S. Dep't of Justice, Defense Contractor Agrees to $4.535 Million Settlement for Alleged False Claim Act Violations (Dec. 28, 2016),
See Press Release, U.S. Atty's Office for the Dist. of Md., U.S. Dep't of Justice, Health Services Contractor Agrees to Pay $3.818 Million to Settle False Claims Act Allegations for Double-Charging And Mischarging Medical Services on Internal Revenue Service Contract (Feb. 8, 2017),
 Senate Finance Committee Hearing on Nomination of Rep. Price to be Health and Human Services Secretary, 115th Cong. (Jan. 24, 2017),
 H.R.1628 — 115th Congress (May 4, 2017).
 As of the date of this publication, Congress had not voted on the bill.
 82 Fed. Reg. 2194 (Jan. 9, 2017).
See Petition to Stay and for Reconsideration, Ropes & Gray and Sidley Austin LLP on behalf of the Medical Information Working Group, the Pharmaceutical Research and Manufacturers of America, and the Biotechnology Innovation Organization (Feb. 8, 2017), available in Docket Nos. FDA-2011-P-0512, FDA-2013-P-1079, FDA-2015-N-2002, and FDA-2016-N-1149 at
See U.S. Food & Drug Admin.,
Opportunities to Comment Closing – July 2017 (last updated May 8, 2017),
 82 Fed. Reg. 4100 (Jan. 12, 2017).
 82 Fed. Reg. 9131 (Feb. 3, 2017).
See U.S. Dep't of Health & Human Servs., Office of Inspector Gen., State False Claims Act Reviews, https://oig.hhs.gov/fraud/state-false-claims-act-reviews/index.asp.
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Cynthia H. Coffman (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. George C. Jepsen (Dec. 30, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Greg Zoeller (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Tom Miller (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Maura Healey (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Tim Fox (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Adam Paul Laxalt (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Mike Hunter (June 6, 2017),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Herbert H. Slatery III (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Ken Paxton (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. William H. Sorrell (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Kamala D. Harris (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Matt Denn (Dec. 28 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Pam Bondi (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Samuel S. Olens (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Douglas S. Chin (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Lisa Madigan (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Bill Schuette (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Lori Swanson (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Joseph Foster (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Eric T. Schneiderman (Dec. 28, 2016),
 See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Roy Cooper (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Peter Kilmartin (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Mark Herring (Dec. 28, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Bob Ferguson (Dec. 30, 2016),
See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Brad Schimel (Dec. 28, 2016),
See, e.g., Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep't of Health & Human Servs., to Att'y Gen. Kamala D. Harris (Dec. 28, 2016),
 S.B. 1577, 100th Gen. Assembly (Ill. 2017),
 B. A07989, 240th Leg. (N.Y. 2017),
 S.B. 387, 2017-2018 Reg. Sess. (Cal. 2017),
 S.B. 378, 2017-2018 Reg. Sess. (N.C. 2017),
 S.B. 548, 91st Gen. Assembly (Ark. 2017), http://www.arkleg.state.ar.us/assembly/2017/2017R/Pages/BillInformation.aspx?measureno=SB548.
 S.B. 0065, 2017 Reg. Sess. (Mich. 2017),
 S.B. 216, 2016 Reg. Sess. (Ala. 2016),
 S.B. 2645, 216th Leg. (N.J. 2015); S.B. 326, 217th Leg. (N.J. 2016),
 B. A07304, 238th Leg. (N.Y. 2015),
 2015 S.C. S.B. 223, S.C. Gen. Assembly 121st Session 2015-2016,
See Press Release, U.S. Atty's Office for the Northern Dist. of Tex., U.S. Dep't of Justice, Texas Dental Management Firm, 19 Affiliated Dental Practices, and Their Owners and Marketing Chief Agree to Pay $8.45 Million to Resolve Allegations of False Medicaid Claims for Pediatric Dental Services (Jan. 9, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Shire PLC Subsidiaries to Pay $350 Million to Settle False Claims Act Allegations (Jan. 11, 2017),
See Press Release, U.S. Atty's Office for the Dist. of Conn., U.S. Dep't of Justice, Connecticut Home Health Agency and its Owners Pay $5.25 Million to Settle False Claims Act Violations (Jan. 12, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Baxter Healthcare Corporation to Pay More Than $18 Million to Resolve Criminal and Civil Liability Relating to Sterile Products (Jan. 12, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Medstar Ambulance to Pay $12.7 Million to Resolve False Claims Act Allegations Involving Medically Unnecessary Transport Services and Inflated Claims to Medicare (Jan. 13, 2017),
See Press Release, U.S. Atty's Office for the Southern Dist. of N.Y., U.S. Dep't of Justice, Manhattan U.S. Attorney Announces $50 Million Settlement With Walgreens For Paying Kickbacks To Induce Beneficiaries Of Government Healthcare Programs To Fill Their Prescriptions At Walgreens' Pharmacies (Jan. 19, 2017),
See Press Release, U.S. Atty's Office for the Eastern Dist. of Ky., U.S. Dep't of Justice, Pain Management Physician Resolves False Claims Act Allegations (Feb. 1, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Healthcare Service Provider to Pay $60 Million to Settle Medicare and Medicaid False Claims Act Allegations (Feb. 6, 2017),
See Press Release, U.S. Atty's Office for the Southern Dist. of Fla., U.S. Dep't of Justice, Dr. Gary Marder and the United States Consent to a Final Judgment of Over $18 Million to Settle False Claims Act Allegations (Feb. 7, 2017),
See Press Release, U.S. Atty's Office for the Northern Dist. of Tex., U.S. Dep't of Justice, Hospice Companies To Pay $12.2 Million To Settle Kickback Claims (Apr. 18, 2017),
See Press Release, U.S. Atty's Office for the Eastern Dist. of Cal., U.S. Dep't of Justice, Walgreen Co. Pays $9.86M to Settle Allegations of Improper Medi Cal Billings (Apr. 20, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Oxygen Equipment Provider Pays $11.4 Million to Resolve False Claims Act Allegations (Apr. 25, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Indiana University Health and HealthNet to Pay $18 Million to Resolve Allegations of False Claims (Apr. 27, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Blood Testing Laboratory to Pay $6 Million to Settle Allegations of Kickbacks and Unnecessary Testing (Apr. 28, 2017),
See Press Release, U.S. Atty's Office for the Southern Dist. of N.Y., U.S. Dep't of Justice, Acting U.S. Attorney Announces $54 Million Settlement Of Civil Fraud Lawsuit Against Benefits Management Company For Improper Authorization Of Medical Procedures (May 11, 2017),
See Press Release, U.S. Atty's Office for the Dist. of N.J., U.S. Dep't of Justice, Omnicare Inc. Agrees To $8 Million Settlement In False Claims Act Case (May 16, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Missouri Hospitals Agree to Pay United States $34 Million to Settle Alleged False Claims Act Violations Arising from Improper Payments to Oncologists (May 18, 2017),
See Nate Raymond,
CVS's Omnicare to pay $23 million to resolve U.S. kickback case, Reuters (May 26, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Medicare Advantage Organization and Former Chief Operating Officer to Pay $32.5 Million to Settle False Claims Act Allegations (May 30, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Electronic Health Records Vendor to Pay $155 Million to Settle False Claims Act Allegations (May 31, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Genesis Healthcare Inc. Agrees to Pay Federal Government $53.6 Million to Resolve False Claims Act Allegations Relating to the Provision of Medically Unnecessary Rehabilitation Therapy and Hospice Services (June 16, 2017),
SeeUnited States ex rel. Robins v. Lincare, Inc., No. 1:10-cv-12256-DPW (D. Mass. June 27, 2017).
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Los Angeles Hospital Agrees to Pay $42 Million to Settle Alleged False Claims Act Violations Arising from Improper Payments to Physicians (June 28, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Financial Freedom Settles Alleged Liability for Servicing of Federally Insured Reverse Mortgage Loans for $89 Million (May 16, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Washington River Protection Solutions Agrees to Pay $5.275 Million to Settle False Overtime and Premium Pay Allegations (Jan. 23, 2017),
See Press Release, U.S. Atty's Office for the Eastern Dist. of Cal., U.S. Dep't of Justice, Sierra Nevada Corporation Pays $14.9m to Settle Allegations of Improper Contract Billings (Feb. 15, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, CA Inc. to Pay $45 Million for Alleged False Claims on Government-Wide Information Technology Contract (Mar. 10, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Energy & Process Corp. Agrees to Pay $4.6 Million for Alleged False Claims Regarding Defective Steel Rebar and Quality Control Failures in Nuclear Waste Treatment Facility (Apr. 24, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Defense Contractor Resolves Criminal, Civil and Administrative Liability Related to Food Contracts (May 26, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Virginia Department of Social Services Agrees to Pay $7.1 Million to Resolve Alleged False Claims for SNAP Funds (Apr. 10, 2017),
See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Wisconsin Department of Health Services Agrees to Pay Nearly $7 Million to Resolve Alleged False Claims for SNAP Funds (Apr. 12, 2017),
See Press Release, U.S. Atty's Office for the Southern Dist. of Fla., U.S. Dep't of Justice, United States Prevails in Civil Suit Against For-Profit College Chain and its President for False Claims Act Violations (Feb. 21, 2017),
United Statesv. FastTrain II Corp., No.: 1:12-cv-21431 (S.D. Fla. Feb. 15, 2017).
SeeUnited States ex rel. Ruckh v. CMC II, LLC, No. 8:11-cv-01303-SDM-TBM (M.D. Fla. Feb. 15, 2017).
See Press Release, N.Y. State Office of the Att'y. Gen, A.G. Schneiderman Announces $7.9 Million Settlement And State Prison Sentences In Major Illegal Prescription Buy-Back And Money Laundering Scheme (Mar. 2, 2017),
 Gibson, Dunn & Crutcher LLP represented the defendants-appellants in the district court and in their successful appeal of this matter in the Ninth Circuit.
The following Gibson Dunn lawyers assisted in preparing this client update: F. Joseph Warin, Robert Blume, Timothy Hatch, Stephen Payne, Alexander Southwell, Charles Stevens, Joseph West, John Partridge, James Zelenay, Ryan Bergsieker, Jonathan Phillips, Jeremy Ochsenbein, Sean Twomey, Reid Rector, Allison Chapin, Yamini Grema, Eva Michaels, Meghan Dunn, and Joshua Rosario.
Gibson Dunn's lawyers have handled hundreds of FCA investigations and have a long track record of litigation success. Among other significant victories, Gibson Dunn successfully argued the landmark
Allison Engine case in the Supreme Court, a unanimous decision that prompted Congressional action. See
Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008). Our win rate and immersion in FCA issues gives us the ability to frame strategies to quickly dispose of FCA cases. The firm has more than 30 attorneys with substantive FCA expertise and more than 30 former Assistant U.S. Attorneys and DOJ attorneys. For more information, please feel free to contact the Gibson Dunn attorney with whom you work or the following attorneys.
F. Joseph Warin (+1 202-887-3609,
Stuart F. Delery (+1 202-887-3650, firstname.lastname@example.org)
Joseph D. West (+1 202-955-8658,
Andrew S. Tulumello (+1 202-955-8657,
Karen L. Manos (+1 202-955-8536,
Stephen C. Payne (+1 202-887-3693,
Jonathan M. Phillips (+1 202-887-3546,
Alexander H. Southwell (+1 212-351-3981,
Robert C. Blume (+1 303-298-5758,
John D.W. Partridge (+1 303-298-5931,
Ryan T. Bergsieker (+1 303-298-5774,
James C. Ho (+1 214-698-3264,
Robert C. Walters (+1 214-698-3114,
Nicola T. Hanna (+1 949-451-4270,
Timothy J. Hatch (+1 213-229-7368,
James L. Zelenay Jr. (+1 213-229-7449,
Benjamin Wagner (+1 650-849-5395,
Charles J. Stevens (+1 415-393-8391,
Winston Y. Chan (+1 415-393-8362,
© 2017 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.