July 9, 2014
It has been an explosive past six months in matters under the federal False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., which prohibits the knowing submission of false claims for payment to the government or false statements material to false claims. In that time period alone, the Department of Justice (“DOJ”) has announced scores of settlements and judgments under the FCA, totaling more than $2 billion. And 2014’s second half–the time in which the DOJ usually announces its biggest hauls of the year–is yet to come. As in years past, the sprawl of FCA liability has continued to reach each and every industry that receives or relies on government dollars in any form, from health care to defense work to education to any of the hundreds of other industries where government dollars flow.
In addition to massive government recoveries, 2014 has seen the DOJ placing a “renewed emphasis” on securing nonmonetary remediation as well in resolving FCA matters. Indeed, Assistant Attorney General Stuart Delery told attendees at the American Bar Association’s 10th National Institute on the Civil False Claims Act and Qui Tam Enforcement: “We have made it a priority to continue to use the FCA to encourage the adoption of, and consistent adherence to, best practices.” As a result, the DOJ is increasingly insisting on stringent adherence to expansive and expensive corporate integrity agreements (“CIAs”) as part of FCA settlements. According to Delery, “[t]he FCA works because it provides powerful incentives for companies to do business the right way.”
Meanwhile, whistleblowers–i.e., qui tam “relators” under the FCA–continue to file lawsuits at record pace, with more qui tam lawsuits filed last year than any year before. Indeed, 2013 saw 100 more qui tam lawsuits filed than 2012 (itself a record year), and relators–who can keep up to 30% of what they recover on the government’s behalf–collected more than $387 million in share awards.
Legislative activity has kept pace as well. There have been several important developments in federal legislation and regulation, especially in connection with how the FCA may apply in connection with health care programs. And the states have been legislating at a fervent pace, updating or enhancing their own “mini FCAs” to align them with the federal statute (and thereby reap the significant rewards the federal government has provided them for doing so).
Last, the courts continue to redefine the FCA’s scope and reach with developing case law. A number of important decisions relating to the FCA were issued in the first half of 2014, and a contentious circuit split has deepened over what level of pleading is required for a relator or the government to survive an initial attack on a complaint. The U.S. Supreme Court appeared interested in this issue, seeking the input of the Solicitor General, but ultimately declined to resolve the split. In the meantime, the U.S. circuit courts continue to hand down divergent opinions on FCA pleading standards, and–just last week–the Supreme Court agreed to consider different issues under the FCA relating to the FCA’s statute of limitations and jurisdictional “first-to-file” bar.
As in years past, this mid-year alert first discusses legislative activity at the federal and state levels relating to the FCA. Next, we discuss important FCA settlements that have been announced during the first half of this year. And finally, we discuss important case law developments that have occurred during the last six months. A collection of 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 liability under the FCA, may be found on our Website.
Like the last half of 2013, the first half of 2014 has seen federal activity amidst a wild flurry of state activity, driven primarily by the 2005 Federal Deficit Reduction Act (“DRA”), 42 U.S.C. § 1396h. Before turning to the state-law developments, a number of federal proposals warrant attention.
In our 2013 Mid-Year False Claims Act Update, we reported that the Fairness in Health Care Claims, Guidance, and Investigations Act (H.R. 2931) had been referred by the House Judiciary Committee to the Subcommittee on the Constitution and Civil Justice. There has been no specific further action on this front, nor on the Centers for Medicare and Medicaid Services’ (“CMS”) proposed rules regarding the Medicare Incentive Reward Program and Medicare overpayments under Parts A and B. In the last six months, however, CMS has adopted a final rule addressing Medicare overpayments under Parts C and D–discussed in detail below–with profound implications for FCA cases. In addition, a bill introduced in May 2014 has the potential for arguably expanding the exposure of health care providers under the physician self-referral restrictions in the Social Security Act (commonly known as the Stark Law).
On May 23, 2014, after receiving public comments, CMS published its final rule. Significantly, the final rule retains the six-year “lookback period” and departs dramatically from the language of the PPACA and the FCA’s well-established requirement of “actual knowledge,” “reckless disregard,” or “deliberate ignorance.” Under the rule, a Medicare Advantage organization or Part D sponsor is deemed to have identified an overpayment–and triggered the sixty-day deadline–whenever it “has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.” Relators and the government will argue that this suggests that a mere failure to act reasonably could trigger potential FCA liability, expanding FCA exposure for Medicare Advantage organizations and Part D sponsors that fail to identify overpayments. We will keep a close eye on the enforcement of this new rule.
Meanwhile, Senator Charles Grassley (R-IA), an author of the 1986 update to the federal FCA that included qui tam provisions, announced plans in April 2014 to recruit colleagues in the coming months to join a Senate Whistleblower Protection Caucus and to establish the caucus by the start of the 114th U.S. Congress.
As discussed in prior alerts, the 2005 DRA included a financial incentive designed to prompt states to adopt false claims acts “at least as effective” as the federal FCA in combating false or fraudulent Medicaid claims. The DRA allows states that enact qualifying laws, as determined by HHS OIG, to collect an additional 10% of any federal Medicaid funds recovered through a state action. After important FCA revisions under the PPACA, the Fraud Enforcement and Recovery Act of 2009, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, OIG provided a two-year grace period for states with false claims acts that OIG had previously approved to continue to receive the incentive. Our past alerts documented the spike of activity around the expiration of the grace period for a number of states, as they sought to preserve their incentive by achieving compliance with the DRA requirements. The grace period has now elapsed for all states.
In the 2013 Year-End False Claims Act Update, we noted that several states had passed new false claims laws that were still awaiting HHS OIG determination of DRA compliance. Since that time, several other states have passed or attempted to pass new or amended laws and OIG has made a number of determinations about DRA compliance. Those states are listed below:
A few other bills to enact false claims laws or amend existing statutes continue to proceed through state houses across the country. States with currently pending legislation include Michigan (H.B. 4010) and Pennsylvania (H.B. 1493). In our 2013 Year-End Update, we also reported pending legislation in Alabama, New Mexico, and South Carolina. None of those bills passed before the close of the states’ legislative sessions preceding this update. We also reported that North Dakota had adopted a concurrent resolution to study the use of qui tam actions in other states and to determine whether that approach is “feasible and desirable.” The state’s interim legislature did not prioritize that study. Although state legislative activity has slowed somewhat following the expiration of the HHS OIG grace period, we expect to see continued interest in state FCA enactment and enforcement.
The record run of multi-billion dollar FCA settlements has been well-chronicled in these pages, and the government’s enforcement activity (and resulting resolutions of FCA cases) has continued apace in 2014. As mentioned above, this year has already seen over $2.06 billion in FCA settlements, putting the government on pace for an incredible fifth straight year with more than $3 billion in recoveries. Among other large settlements, the government announced more than $1.2 billion in settlements with three large financial service providers related to their mortgage origination and underwriting practices. The growth in state FCA enforcement activity also continued, as a number of states announced their own individual recoveries.
The DOJ’s “renewed emphasis” on nonmonetary remediation is evident from many of these settlements. Indeed, AAG Delery recently announced that the government will focus on pressing companies to publicly acknowledge their wrongdoing as part of settlements of FCA and related matters. This featured in some of the major settlements announced thus far in 2014, as did other nonmonetary measures such as mandatory compliance programs and reporting. But the government’s core interest clearly remains with monetary recoveries, as numerous settlements in excess of $100 million have already been announced this year. We discuss these and other notable settlements from the past six months below.
Although settlements of health care matters have not made up the majority of the amounts recovered in 2014, they continue to be a key component of the government’s enforcement agenda. Indeed, dozens of health care matters settled since our last update.
Notable settlements from matters involving the government’s procurement activities include the following:
The three largest monetary settlements of the last six months resulted from cases involving allegations of faulty mortgage origination and underwriting related to government insurance programs:
As more states adopt new false claims laws or expand existing ones, individual states’ FCA enforcement activities have grown steadily alongside their involvement in national FCA investigations and resolutions. The first six months of 2014 were no exception to that phenomenon, as a number of states touted recoveries they obtained in FCA cases:
The first six months of 2014 also saw several interesting case law developments. Perhaps most notable was the Supreme Court opting not to resolve the growing circuit split over proper pleading standards in FCA cases, but later deciding to consider specific issues under the FCA relating to the first-to-file bar and statute of limitations. A discussion of the most important case law developments follows below.
Federal Rule of Civil Procedure 9(b) imposes a heightened burden on plaintiffs attempting to plead claims of “fraud.” Specifically, Rule 9(b) provides that a “party must state with particularity the circumstances constituting fraud,” as opposed to the more general pleading rule that applies in most cases. (Emphasis added). Courts universally have recognized that Rule 9(b) applies in FCA cases because they sound in “fraud.” See, e.g., United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 125 F.3d 899, 903 (5th Cir. 1997). What is unclear, however, is exactly what burden Rule 9(b) imposes; in other words, what must a plaintiff plead to satisfy Rule 9(b)’s “particularity” requirement in FCA cases?
On one side of the circuit split on this issue are the Fourth, Sixth, Eighth, and Eleventh Circuits, which have concluded that Rule 9(b) requires the plaintiff (whether the government or a relator) to plead facts showing that “specific false claims actually were presented to the government for payment.” United States ex rel. Nathan v. Takeda Pharm., 707 F.3d 451, 457 (4th Cir. 2013) (emphasis added), cert. denied, 81 U.S.L.W. 3650 (U.S. Mar. 31, 2014) (No. 12-1349); see also United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 504 (6th Cir. 2007); United States ex rel. Joshi v. St. Luke’s Hospital, Inc., 441 F.3d 552, 560 (8th Cir. 2005). Courts imposing this standard often require the plaintiff to identify at least some specific false claims in the complaint and state that a complaint should be dismissed where the alleged conduct “could have led, but need not necessarily have led, to the submission of false claims . . . .” Nathan, 707 F.3d at 457 (emphasis in original).
On the other side of the split are the First, Fifth, Seventh, and Ninth Circuits, which have generally applied a more plaintiff-friendly standard, merely requiring a complaint to include “details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 192 (5th Cir. 2009) (emphasis added); see also Ebeid v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010) (same); United States ex rel. Duxbury v. Ortho Biotech Prods., LP, 579 F.3d 13, 30 (1st Cir. 2009), cert. denied, 130 S. Ct. 3454 (2010); United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir. 2009). Courts applying this standard generally do not require plaintiffs to plead specific examples of false claims; rather, a fraudulent scheme along with “reliable indicia” that claims were submitted is enough.
While there is a clear circuit split over this issue, individual circuits themselves are also in flux as to the standard they will impose. For instance, the First Circuit recently seemed to apply the stricter approach, see United States ex rel. Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116, 124 (1st Cir. 2013), despite earlier indications. Around the same time, the Eighth Circuit adopted the lower standard, see United States ex rel. Simpson v. Bayer Healthcare, 732 F.3d 869, 876-77 (8th Cir. 2013), at least for a subset of FCA cases. And in the recent case of United States ex rel. Dunn v. North Memorial Health Care, 739 F.3d 417 (8th Cir. 2014), the Eighth Circuit further suggested that it will apply the lower standard only in certain cases: those in which the government or relator alleges fraud in the inducement of a contract (thereby making all claims submitted under the contract allegedly fraudulent). The Eighth Circuit indicated that in other types of FCA cases, where a plaintiff alleges false claims for payment, “[the plaintiff] must provide some representative examples of [the defendant’s] fraudulent conduct” under Rule 9(b). Id. at 420 (emphasis added).
Joining the fray in the last six months was the Third Circuit, which staked its position by siding with the looser standard. See United States ex rel. Foglia v. Renal Ventures Mgmt., LLC, No. 12-4050, 2014 U.S. App. LEXIS 10549 (3d Cir. June 6, 2014); see also United States ex rel. Foglia v. Renal Ventures Mgmt., LLC, No. 12-4050, 2014 U.S. App. LEXIS 10726 (3d Cir. June 10, 2014) (notice of amended opinion). In Foglia, the trial judge dismissed the relator’s claims for failure to “identify representative examples of specific false claims . . . .” Foglia v. Renal Ventures Mgmt., No. 1-09-cv-01552, 2012 U.S. Dist. LEXIS 139160 (D.N.J. Sept. 26, 2012). The Third Circuit reversed, pointing to “details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.” Foglia, 2014 U.S. App. at *11 (quoting Kanneganti, 565 F.3d at 190).
The Supreme Court had the opportunity to resolve this split earlier this year–and looked primed to do so. Indeed, the Court asked for the input of the Solicitor General on whether to grant certiorari on this issue in the Fourth Circuit case of United States ex rel. Nathan v. Takeda Pharm., 707 F.3d 451 (4th Cir. 2013). In its brief, the government wholeheartedly embraced the lower standard for Rule 9(b): “Several courts of appeals have correctly held that a qui tam complaint satisfies Rule 9(b) if it contains detailed allegations supporting a plausible inference that false claims were submitted . . . even if the complaint does not identify specific requests for payment.” Brief for the United States as Amicus Curiae at 10, Nathan, 81 U.S.L.W. 3650 (U.S. Feb. 25, 2014) (No. 12-1349). Yet, instead of confronting this issue, the Supreme Court denied certiorari, see 81 U.S.L.W. 3650 (U.S. Mar. 31, 2014) (No. 12-1349), and the circuit split remains.
We have written in these pages about the ever-expanding scope of FCA liability since the 1986 amendments. In many cases, the reach of the law seemingly expanded from traditional false claims for payment (i.e., false invoices) to regulatory compliance in government programs. Nowhere has this been more evident than in the development of the “false certification” theory of liability, under which the government and relators argue that a defendant can be liable under the FCA if the defendant, in submitting claims for payment to the government under a government program, either expressly or impliedly falsely certified compliance with laws or rules relating to that program. In general, courts have been receptive to this argument, albeit with limitations, and the theory has caused the FCA to cover more territory than ever before.
A recent decision from the Fourth Circuit, United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014), however, reinforces a well-needed curb on these types of claims. In that case, a relator sued Omnicare for allegedly selling drugs to government programs while in violation of various rules and regulations prohibiting the cross-contamination of penicillin and non-penicillin drugs. Id. at 697. The relator argued that this contamination “adulterated” the drugs under the Food, Drug, and Cosmetic Act and that the defendant therefore committed “fraud” by selling those drugs and then receiving reimbursement from government programs. The Fourth Circuit rejected this argument, holding that the alleged misconduct was not actionable under the FCA because compliance with the applicable Food and Drug Administration (“FDA”) safety regulations is not an explicit “prerequisite to gaining a [government] benefit.” Id. at 702. Further, “[t]o qualify as a ‘covered outpatient drug’ as defined in the Medicare and Medicaid statutes [and as necessary to be reimbursable], a drug merely must be approved by the FDA,” and the drug at issue was approved. Id. at 701 (emphasis in original). As the Fourth Circuit recognized: “Were we to accept relator’s theory of liability based merely on a regulatory violation, we would sanction use of the FCA as a sweeping mechanism to promote regulatory compliance, rather than a set of statutes aimed at protecting the financial resources of the government from the consequences of fraudulent conduct.” Id. at 702. Indeed, “[w]hen an agency has broad powers to enforce its own regulations, as the FDA does . . . , allowing FCA liability based on regulatory non-compliance could short-circuit the very remedial process the Government has established to address non-compliance . . . .” Id. (internal quotation marks omitted).
Rostholder makes clear that a regulatory violation cannot provide the basis for an FCA action on its own; rather, a violation of a regulation or law is only actionable under the FCA if payment is expressly conditioned on compliance with that regulation or law. This concept, which other circuits have recognized over the years as well, is critical for defendants responding to so-called “false certification” claims.
Along similar lines, the Fifth Circuit also recently reiterated the limits that exist over false certification claims. In United States ex rel. Spicer v. Westbrook, 751 F.3d 354 (5th Cir. 2014), the government sued a military contractor that built combat vehicles pursuant to government contracts. The government claimed the contractor cut corners on costs and, by nevertheless delivering the end product, falsely certified compliance with a term of the contract that “imposed a duty . . . to inspect the [vehicles] to ensure compliance with the . . . requirements of the contract.” Id. at 366. The Fifth Circuit rejected this argument, concluding that the government had not identified a potentially materially false statement. “Even assuming arguendo that [the defendant] did falsely certify compliance with the . . . system by delivering the [vehicles], [the plaintiff] d[id] not allege . . . that such certification was a prerequisite to receiving payment under the contract.” Id.
Finally, the Third Circuit also recently handed down a notable decision on the FCA’s application to allegations of regulatory violations. In United States ex rel. Arnold v. CMC Engineering, No. 13-2759, 2014 U.S. App. LEXIS 10150 (3d Cir. June 2, 2014), the relator alleged that during highway construction, his boss paid an excessive rate to inspectors in violation of federal contracts. Id. at *1. According to the relator, his boss “knowingly request[ed] payment at certain rates for certain inspectors it knew did not meet credentialing requirements.” Id. at *10. (Internal quotation marks omitted.) In response, the defendant argued that it had relied upon a provision that permitted qualification by “any equivalent combination of experience and/or training which provides the required knowledge, skills, and abilities.” Id. at *11. The Third Circuit concluded that “[a]s a result of [this] ambiguity” in the regulatory language, there was no evidence from which a jury could find that the defendant “knowingly” overpaid. Id. at *13. Indeed, “the contracts themselves are ambiguous concerning the credentials required for particular positions that justify particular pay rates.” Id. at *11. Because reasonable people might differ on the “combination of experience and/or training” that would warrant a particular grade, the relator did not adequately allege that defendant “knowingly” overpaid. This case provides another important defense for FCA defendants sued for alleged violations of vague or ambiguous regulations that they have relied upon and attempted to meet in good faith.
The first-to-file bar is the source of one of the most important defenses for defendants sued under the FCA. That statutory bar states, “[w]hen a person brings an action under [the qui tam provisions of the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). In essence, the first-to-file bar provides that once a qui tam lawsuit has been filed, all qui tam lawsuits that are filed in that action afterward are barred. The idea behind this rule is simple: after the government has been notified of allegations by one qui tam action, no further actions are needed to protect the government’s interests and alert the government to the fraud or related frauds. As with the application of Rule 9(b), however, the exact application of the first-to-file bar has been contested.
One of the key questions that has developed–and one that has gained attention recently–is whether an earlier-filed qui tam action can have preclusive effect even if it had been dismissed before the latter case was filed. Relators who have filed latter cases, in an attempt to avoid dismissal, often rely on the phrase “pending action” in the statute. To relators, this language means that the earlier action must be “active” or “pending” at the time the latter action is filed to have preclusive effect. Defendants, on the other hand, have asserted that “pending action” merely refers to the first-filed action and that only giving preclusive effect to active cases would be inconsistent with the purposes of the first-to-file bar.
Earlier this year, the D.C. Circuit addressed this issue and decided in defendants’ favor. United States ex rel. Shea v. Cellco P’ship, 748 F.3d 338 (D.C. Cir. 2014). The Shea court squarely held that the first-to-file rule bars new suits “even if the initial action is no longer pending.” Id. at 343–44. To reach this conclusion, the court determined that, in context, the phrase “pending action” is “shorthand for first filed action,” not something akin to “still active action.” Id. at 343. This places the D.C. Circuit in arguable conflict with courts from the Fourth, Seventh, and Tenth Circuits, which have arguably indicated in dicta that the earlier-filed action must be active at the time the latter action is filed for it to have preclusive effect. United States ex rel. Carter v. Halliburton Co., 710 F.3d 171, 183 (4th Cir. 2013) (“[O]nce a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.”); United States ex rel. Chovanec v. Apria Healthcare Grp., Inc., 606 F.3d 361, 365 (7th Cir. 2010) (“As we explained . . . , § 3730(b)(5) applies only while the initial complaint is ‘pending'”); In re Natural Gas Royalties Qui Tam Litig., 566 F.3d 956, 964 (10th Cir. 2009) (“[Section] 3730(b)(5) applies only when another qui tam action is ‘pending’ . . . .”).
On July 1, 2014, the Supreme Court announced that it would take up this very issue, when it granted the petition for writ of certiorari in the Fourth Circuit’s Carter case. Specifically, there, the Court certified the question (as framed by the petitioner) of “Whether . . . the False Claims Act’s so-called ‘first-to-file’ bar . . . functions as a ‘one-case-at-a time’ rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.” See Brief for Petitioner at I, Carter, 82 U.S.L.W. 3010 (June 24, 2013) (No. 12-1497). The Court likewise agreed to consider the other, very important issue raised in Carter: “Whether the Wartime Suspension of Limitations Act–a criminal code provision that tolls the statute of limitations for ‘any offense’ involving fraud against the government ‘[w]hen the United States is at war’ . . . applies to claims of civil fraud brought by private relators [under the FCA], and is triggered without a formal declaration of war, in a manner that leads to indefinite tolling.” Id. This will be a closely watched issue for government contractors and many other recipients of federal funds because, as we highlighted in our 2013 Year-End Update, some courts have begun to apply the WSLA expansively to civil FCA cases having nothing to do with the government’s military engagements. The Court’s review of this issue hopefully will provide clarity for those who face the uncertainty of a potentially indefinite suspension of the statute of limitations. We will, of course, keep an eye on the Supreme Court’s review of Carter.
Finally, in addition to Shea, other courts of appeals also have issued important decisions on the first-to-file bar and, particularly, how much detail must be included in an earlier case to bar a latter case. In United States ex rel. Johnson v. Planned Parenthood of Houston and Southeast Texas, Inc., No. 13-20206, 2014 U.S. App. LEXIS 10604 (5th Cir. June 4, 2014), for instance, the Fifth Circuit was faced with a claim by a relator who alleged that her former employer falsely billed the Texas Women’s Health Program (“TWHP”), a Medicaid waiver program, for unperformed laboratory tests and non-reimbursable services and procedures. Id. at *1–3. The defendant argued that the relator’s suit was barred by an earlier qui tam case, even though the earlier relator had not mentioned the TWHP at all (or any other specific Medicaid programs) and had instead focused on improperly coded billing (not billing for unperformed tests). Id. at *3–4. The Fifth Circuit nevertheless concluded that the second relator’s case was barred under the first-to-file rule: “The focus is on whether an investigation into the first claim would uncover the same fraudulent activity alleged in the second claim.” Id. at *6. According to the Fifth Circuit, the first-to-file rule should be construed broadly enough to ensure that the second relator supplies the government with “genuinely valuable information”; if the second relator does not, the case should be dismissed. Id. at *5–6.
Similarly, in United States ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F. 3d 111 (1st Cir. 2014), a former pharmaceutical sales representative accused his former company of off-label promotion of two medications. Id. at 113. An earlier relator had filed a case alleging improper promotion of those drugs, but did not allege the same off-label uses. Id. at 114. Nonetheless, the First Circuit ruled that the first-to-file bar applied: “Under the essential facts standard . . . the first-to-file rule still bars a later claim even if that claim incorporates somewhat different details.” Id. at 118. The First Circuit reasoned that after the government learns the “the essential facts of a fraudulent scheme, it has enough information to discover related frauds.” Id. (internal quotation marks omitted) (citations omitted).
The recent decisions in Shea, Johnson, and Wilson (and potentially the Supreme Court’s review in Carter) present important clarification for defendants with potential first-to-file arguments in FCA cases. As these cases show, the first-to-file bar is concerned primarily with putting the government on notice of allegations of fraud so those allegations can be investigated, and courts are taking an increasingly expansive view of what satisfies that goal and triggers the statutory bar. We hope the Supreme Court does the same.
As indicated above, FCA lawsuits increasingly arise out of transactions in highly regulated industries, each with their own complicated rules and procedures. The question then is, if those rules or procedures conflict with general FCA litigation rules, what wins? On February 5, 2014, the Second Circuit found that at least when it comes to specific time periods for contesting claims, the administrative rules do not trump general FCA rules.
In United States ex rel. Grupp v. DHL Express (USA), Inc., 742 F.3d 51 (2nd Cir. 2014), the relator accused DHL of inflating its remuneration under contracts with federal agencies by including a standard fuel surcharge on all of its deliveries, even if fuel was not spent. Id. at 52–53. DHL claimed that the lawsuit should not be allowed to proceed because Title 49 states that “[a] shipper must contest the original bill . . . within 180 days of receipt of the bill in order to have the right to contest [improper] charges.” Id. at 53 (quoting 49 U.S.C. § 13710(a)(3)(B)). Because the lawsuit was filed more than 180 days after receipt of the bill, DHL argued that relator’s claims were barred.
The Second Circuit disagreed, concluding that the requirement to contest charges within 180 days is inapplicable to complaints under the FCA, as such a restriction “would undermine both the FCA’s seal provisions and statute of limitations.” Id. at 54. Emphasizing the importance of the tolling provisions under the FCA, the court quoted the legislative history of the 1986 FCA amendments: “[F]raud is, by nature, deceptive [and] such tolling . . . is necessary to ensure the Government’s rights are not lost through a wrongdoer’s successful deception.” Id. (quoting S. Rep. No. 99-345, at 15 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5280).
This case is yet another example of courts finding that FCA claims are immune from many arguments that might otherwise counter administrative or other claims.
The first half of 2014 was very active, and we anticipate that the second half of 2014 will be even more so when it comes to legislative, enforcement, and case law developments relating to the FCA. We will of course continue to monitor these developments, and you can look forward to a comprehensive summary in our 2014 Year-End FCA Alert, which we will publish early in January 2015.
 Erica Teichert, DOJ Placing ‘Renewed Emphasis’ On FCA Compliance Fixes, Law360 (June 5, 2014), last accessed at http://www.law360.com/governmentcontracts/articles/545244?nl_pk=f39d1d7e-5067-4377-909c-58b0fd672114&utm_source=newsletter&utm_medium=email&utm_campaign=governmentcontracts (quoting Assistant General Stuart Delery’s comments at the American Bar Association’s 10th National Institute on the Civil False Claims Act and Qui Tam Enforcement).
 Medicare Program; Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 79 Fed. Reg. 1918 (proposed Jan. 10, 2014), available at http://www.gpo.gov/fdsys/pkg/FR-2014-01-10/pdf/2013-31497.pdf.
 Id. at 79 Fed. Reg. 29,844, at 29,958, 29,963 (May 23, 2014) (to be codified at 42 C.F.R. pts. 422 and 423), available at http://www.gpo.gov/fdsys/pkg/FR-2014-01-10/pdf/2013-31497.pdf.
 See Joe Carlson, Stark Threat on Medicaid, Modern Healthcare, Aug. 12, 2013, at 10, available at http://www.modernhealthcare.com/article/20130810/MAGAZINE/308109971.
 See Press Release, Office of Sen. Charles Grassley, Grassley Announces Plan to Create Senate Whistleblower Caucus (Apr. 10, 2014), available at http://www.grassley.senate.gov/news/news-releases/grassley-announces-plan-create-senate-whistleblower-caucus.
 See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep’t of Health & Human Servs., to Samuel S. Olens, Att’y Gen. of Ga. (May 22, 2014), available at http://oig.hhs.gov/fraud/docs/falseclaimsact/Georgia.pdf.
 See Steve Lash, Expanded Whistleblower Law Dies in Senate, Maryland Daily Record, April 7, 2014, http://thedailyrecord.com/2014/04/07/expanded-whistleblower-law-dies-in-senate.
 See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep’t of Health & Human Servs., to Catherine Cortez Masto, Att’y Gen. of Nev. (Mar. 12, 2014), http://oig.hhs.gov/fraud/docs/falseclaimsact/Nevada.pdf.
 N.Y. State Office of the Att’y Gen., Text of Proposed Regulations, here (last visited June 4, 2014).
 See N.Y. Comp. Codes R. & Regs. tit. 13, §§ 400.1–.8 (2014), available at http://www.ag.ny.gov/whistleblowers/procedural-regulations-false-claims-act.
 See Letter from Daniel R. Levinson, Inspector Gen., U.S. Dep’t of Health & Human Servs., to Monica J. Hickey-Martin, Special Deputy Att’y Gen. for N.Y. (Feb. 19, 2014), http://oig.hhs.gov/fraud/docs/falseclaimsact/NewYork.pdf.
 See N.D. Legislative Council, Study Directives Considered and Assignments Made by the Legislative Management for the 2013-14 Interim, 12­­–13 (Jan. 21, 2014), available at http://www.legis.nd.gov/files/resource/63-2013/study-directives/study-directives-considered-2013-14-interim.pdf.
 See Erica Teichert, DOJ Placing ‘Renewed Emphasis’ On FCA Compliance Fixes, Law360 (June 5, 2014), http://www.law360.com/health/articles/545244/doj-placing-renewed-emphasis-on-fca-compliance-fixes.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Genzyme Corp. to Pay $22.28 Million to Resolve False Claims Allegations Related to “Slurry” Used in Patients (Dec. 20, 2013), http://www.justice.gov/opa/pr/2013/December/13-civ-1358.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Abbott Laboratories Pays U.S. $5.475 Million to Settle Claims That Company Paid Kickbacks to Physicians (Dec. 27, 2013), http://www.justice.gov/opa/pr/2013/December/13-civ-1367.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, CareFusion to Pay the Government $40.1 Million to Resolve Allegations That Include More Than $11 Million in Kickbacks to One Doctor (Jan. 9, 2014), http://www.justice.gov/opa/pr/2014/January/14-civ-021.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Nationwide Contract Therapy Providers to Pay $30 Million to Resolve False Claims Act Allegations (Jan. 17, 2014), http://www.justice.gov/opa/pr/2014/January/14-civ-060.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Kentucky Hospital Agrees to Pay Government $16.5 Million to Settle Allegations of Unnecessary Cardiac Procedures (Jan. 29, 2014), http://www.justice.gov/opa/pr/2014/January/14-civ-095.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Government Settles False Claims Act Allegations Against Kentucky Addiction Clinic, Clinical Lab and Two Doctors for $15.75 Million (Feb. 10, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-138.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Washington-Based Medical Device Manufacturer to Pay up to $5.25 Million to Settle Allegations of Causing False Billing of Federal Health Care Programs (Feb. 19, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-173.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Endo Pharmaceuticals and Endo Health Solutions to Pay $192.7 Million to Resolve Criminal and Civil Liability Relating to Marketing of Prescription Drug Lidoderm for Unapproved Uses (Feb. 21, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-187.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Diagnostic Imaging Group to Pay $15.5 Million for Allegedly Submitting False Claims to Federal and State Health Care Programs (Feb. 25, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-200.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Florida Hospital System Agrees to Pay the Government $85 Million to Settle Allegations of Improper Financial Relationships with Referring Physicians (Mar. 11, 2014), http://www.justice.gov/opa/pr/2014/March/14-civ-252.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Pharmaceutical Company to Pay $27.6 Million to Settle Allegations Involving False Billings to Federal Health Care Programs (Mar. 11, 2014), http://www.justice.gov/opa/pr/2014/March/14-civ-251.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Memorial Hospital in Ohio Pays Government $8.5 Million to Settle False Claims Act Allegations (Mar. 13, 2014), http://www.justice.gov/opa/pr/2014/March/14-civ-270.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Astellas Pharma US Inc. to Pay $7.3 Million to Resolve False Claims Act Allegations Relating to Marketing of Drug Mycamine (Apr. 16, 2014), http://www.justice.gov/opa/pr/2014/April/14-civ-391.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Tennessee Substance Abuse Treatment Facility Agrees to Resolve False Claims Act Allegations for $9.25 Million (Apr. 16, 2014), http://www.justice.gov/opa/pr/2014/April/14-civ-395.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Amedisys Home Health Companies Agree to Pay $150 Million to Resolve False Claims Act Allegations (Apr. 23, 2014), http://www.justice.gov/opa/pr/2014/April/14-civ-422.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, King’s Daughters Medical Center to Pay Nearly $41 Million to Resolve Allegations of False Billings for Unnecessary Cardiac Procedures and Kickbacks (May 28, 2014), http://www.justice.gov/opa/pr/2014/May/14-civ-567.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Minnesota-Based Medtronic Inc. to Pay $9.9 Million to Resolve Claims That Company Paid Kickbacks to Physicians (May 28, 2014), http://www.justice.gov/opa/pr/2014/May/14-civ-571.html.
 See Erica Teichert, Shands Settles Remainder of $26M FCA Suit (June 12, 2014), http://www.law360.com/health/articles/547263?nl_pk=e74caebe-c678-4136-8e21-d6fb0277f050&utm_source=newsletter&utm_medium=email&utm_campaign=health.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Nation’s Largest Nursing Home Pharmacy Company to Pay $124 Million to Settle Allegations Involving False Billings to Federal Health Care Programs (June 25, 2014), http://www.justice.gov/opa/pr/2014/June/14-civ-670.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Michigan Companies to Pay $3.8 Million to Resolve Allegations of Falsely Claiming Disadvantaged Business Credits (Jan. 9, 2014), http://www.justice.gov/opa/pr/2014/January/14-civ-022.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, General Electric Hitachi Nuclear Energy Americas Agrees to Pay $2.7 Million for Alleged False Claims Related to Design of Advanced Nuclear Reactor (Jan. 23, 2014), http://www.justice.gov/opa/pr/2014/January/14-civ-069.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Sanborn Map Co. Pays $2.1 Million to Resolve Allegations of False Claims for Map Work Related to United States Military Convoy Routes in Iraq and Marine Corps Bases in United States (Feb. 7, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-135.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, MPRI Inc. Agrees to Pay $3.2 Million for False Labor Charges on Contract to Support Army in Afghanistan (Feb. 12, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-155.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Virginia-Based Contractor to Pay $6.5 Million to Settle Allegations of False Claims on Navy Contracts (Feb. 18, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-167.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Two Ocean Shipping Companies to Pay $3.4 Million to Settle Claims of Price Fixing Government Cargo Transportation Contracts (Mar. 7, 2014), http://www.justice.gov/opa/pr/2014/March/14-civ-242.html.
 See Press Release, Illinois Attorney General, Madigan, U.S. Attorney Strike $12 Million Whistleblower Settlement With McHugh for Illegally Securing Federal, State Construction Funds (May 1, 2014), http://illinoisattorneygeneral.gov/pressroom/2014_05/20140501.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, JPMorgan Chase to Pay $614 Million for Submitting False Claims for FHA-insured and VA-guaranteed Mortgage Loans (Feb. 4, 2014), http://www.justice.gov/opa/pr/2014/February/14-civ-120.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, Federal Government and State Attorneys General Reach Nearly $1 Billion Agreement with SunTrust to Address Mortgage Loan Origination as Well as Servicing and Foreclosure Abuses (June 17, 2014), http://www.justice.gov/opa/pr/2014/June/14-civ-638.html.
 See Press Release, Office of Pub. Affairs, U.S. Dep’t of Justice, U.S. Bank to Pay $200 Million to Resolve Alleged FHA Mortgage Lending Violations (June 30, 2014), http://www.justice.gov/opa/pr/2014/June/14-civ-684.html.
 See Press Release, Attorney General of Texas, Texas Attorney General’s Office Secures $25 Million Agreement with Drug Manufacturer over Medicaid Fraud Allegations (Jan 7, 2014), https://www.texasattorneygeneral.gov/oagnews/release.php?id=4622.
 See Press Release, Attorney General of Massachusetts, Shell to Pay $4 Million over Allegations of False Reimbursement Claims for Environmental Cleanup Projects (Feb. 27, 2014), http://www.mass.gov/ago/news-and-updates/press-releases/2014/2014-02-27-shell-settlement.html.
 See Press Release, New York State Office of the Attorney General, A.G. Schneiderman Announces $6.2 Million Settlement With Lantheus Medical Imaging & Bristol-Myers Squibb for Failing to Pay New York Corporate Income Taxes (Mar. 14, 2014), http://www.ag.ny.gov/press-release/ag-schneiderman-announces-62-million-settlementwith-lantheus-medical-imaging-bristol.
 See Whistleblower Practice Group, Texas Grocery Chain Pays $12 Million in Settlement of Medicaid Fraud Case (Mar. 21, 2014), http://www.natlawreview.com/article/texas-grocery-chain-pays-12-million-settlement-medicaid-fraud-case.
 See Robert M. Wolff, Hospital Settles Whistleblower Stark Act Case for $7 Million (Apr. 29, 2014), here.
 See Press Release, New York State Office of the Attorney General, A.G. Schneiderman Announces $475,000 Settlement With Office Depot for Overcharging New York State and Local Entities (May 7, 2014), http://www.ag.ny.gov/press-release/ag-schneiderman-announces-475000-settlement-office-depot-overcharging-new-york-state.
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