The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine the Supreme Court’s opinion in Escobar and its impact on the question of the FCA’s materiality requirement.

In addition to tackling the viability of the implied certification theory of liability in Escobar, the Supreme Court also held that the FCA does not restrict liability to noncompliance with express conditions of payment, stating that “[w]hether a provision is labeled a condition of payment is relevant to but not dispositive of the materiality inquiry.”  The Supreme Court explained that any concerns about fair notice or open-ended liability without such a restriction on liability can be addressed through “strict enforcement” of the FCA’s “demanding” and “rigorous” materiality requirement, as well as the FCA’s scienter requirement. 

Continue Reading FCA Deeper Dive: Escobar and Its Aftermath – Part II

U.S. ex rel. Badr v. Triple Canopy, Inc., an intervened case arising out of the Fourth Circuit, has been one of the more closely-watched recent FCA cases. Previously, the Fourth Circuit held that the government’s complaint properly alleged an FCA claim and could survive Triple Canopy’s motion to dismiss. That ruling was subsequently vacated by the Supreme Court following its decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, which we covered here and here. On May 16, 2017, the Fourth Circuit issued its opinion on remand, finding that the complaint satisfied the pleading standards set forth in Escobar and re-affirming its conclusion that the complaint adequately stated an FCA claim.

Continue Reading Fourth Circuit Re-Affirms Sufficiency of Triple Canopy Complaint

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine the Supreme Court’s opinion in Escobar and its impact on the theory of implied certification.

Continue Reading FCA Deeper Dive: Escobar and Its Aftermath – Part I

In one of the few cases to apply the Supreme Court’s recent decision in Universal Health Services v. Escobar, the Seventh Circuit recently revisited and affirmed its prior rejection of an implied certification claim under the FCA.  Whether this is a window into how other circuit courts might implement Escobar remains to be seen.

In United States ex rel. Nelson v. Sanford-Brown, Ltd., 788 F.3d 696 (7th Cir. 2015), the relator brought several claims, one of which was an implied certification claim, alleging that Sanford-Brown College (the “College”), which receives federal subsidies, violated the FCA by maintaining recruiting and retention practices that ran afoul of Title IV.  In particular, the College entered into a Program Participation Agreement (PPA) with the federal government to receive subsidies under the Higher Education Act, and the PPA contained boilerplate language requiring the College to affirm that it would comply with Title IV’s mandates.  The relator claimed that because the College’s practices in actuality violated Title IV, its representations in the PPA, and its attendant subsidy claims, were false.

Continue Reading Seventh Circuit Revisits Sanford-Brown, Rejects Implied Certification Claim

In June, the Supreme Court issued Universal Health Services, Inc. v. U.S. ex rel. Escobar, a landmark opinion in which the Supreme Court addressed the standard for pleading materiality in FCA implied certification cases.  The Supreme Court ultimately remanded the case to the First Circuit to resolve in the first instance whether the alleged violations met that standard, and last week, the First Circuit gave its answer: the violations were material.

Continue Reading On Remand, First Circuit Finds Violations in Escobar Were Material

This summer, the Northern District of California issued an opinion in an intervened case that expanded the theory of express false certification to a startling degree. Ruling on a motion to dismiss, the court in U.S. ex rel. Dresser v. Qualum Corp. (No. 5:2012-cv-01745, N.D. Cal.) held that the defendants, owners and operators of a sleep clinic and a DME company, could be subject to express false certification liability for submitting CMS-1500 claim forms in which they certified their compliance “with all applicable Medicare and/or Medicaid laws, regulations, and program instructions for payment.” According to the court, this general legal certification was sufficient to support an express false certification claim because “by submitting the CMS-1500, Defendants falsely certified that they had complied with Medicare regulations, even though they were not complying with the personnel qualification requirement, and they made this certification knowingly.”

Continue Reading North District of California Misconstrues Express False Certification Liability

The United State District Court for the Eastern District of New York recently dismissed an FCA complaint for failing to plead materiality under the standard announced in Universal Health Services, Inc. v. U.S. ex rel. Escobar, the Supreme Court’s landmark FCA opinion issued in June of this year. The case, U.S. ex rel. Lee v. Northern Adult Daily Health Care Center, 13-cv-4933, 2016 WL 4703653 (E.D.N.Y. Sept. 7, 2016), becomes one of the first to substantively apply Escobar and highlights the barrier the FCA’s materiality requirement poses to FCA relators in the wake of the Supreme Court’s ruling. It also suggests ways in which courts already are divided in their interpretation of Escobar.

Continue Reading Citing Escobar, Court Dismisses Complaint that Alleged Violation of Conditions of Payment

On July 18, 2016, the United States District Court for the Northern District of California issued one of the first post-Escobar decisions addressing a motion to dismiss FCA allegations on grounds that the complaint did not satisfy Rule 9(b)’s pleading standard.  In the intervened case, the United States alleged that diagnostic sleep studies were performed in locations that violated federal law and/or were performed by technicians who were not licensed or certified.  The United States proceeded on multiple FCA theories (including factual falsity, express false certification, fraud in the inducement, and implied false certification).

Continue Reading Escobar Forestalls Government’s Allegations in Intervened Case

On June 16, 2016, the U.S. Supreme Court issued its much-anticipated opinion in Universal Health Services, Inc. v. United States ex rel. Escobar regarding the implied certification theory of False Claims Act (FCA) liability.  The Court’s unanimous opinion, drafted by Justice Clarence Thomas, is significant in three respects, detailed further below:  (1) the Court ruled that, in certain circumstances, the implied certification theory can be a basis for FCA liability; (2) the Court held that an express condition of payment in a statutory, regulatory or contractual requirement is relevant—but “not automatically dispositive”—in determining FCA liability; and (3) the Court clarified how the FCA’s materiality requirement should be enforced by lower courts addressing FCA suits premised on an implied false certification theory.

Continue Reading In Escobar, Supreme Court Endorses, but “Materially” Refines, Implied Certification Theory of False Claims Act Liability

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions considering the requirement that a relator plead and prove falsity to establish an FCA claim and evaluate the different theories of falsity that have emerged during the last several years.

Use of Statistical Sampling to Establish Falsity

Following last year’s landmark ruling in U.S. ex rel. Martin v. LifeCare Centers of America, Inc., 2014 U.S. Dist. LEXIS 142657 (E.D. Tenn. Sept. 29, 2014), statistical sampling has become an increasingly important issue in FCA cases. This year, decisions by the district court in U.S. ex rel. Paradies v. AseraCare, Inc., 2015 WL 8486874 (N.D. Ala. Nov. 3, 2015), reiterated this fact. AseraCare faced allegations that it falsely billed the government for hospice patients that failed to satisfy requirements that patients be terminally ill and have a life expectancy of six months or less. Anticipating lengthy trial testimony concerning the statistical sample of 233 claims, the district court bifurcated the trial for the FCA’s falsity element from trial for all other elements. In arriving at its novel decision, the district court rejected the government’s objections that bifurcation would result in juror confusion and duplicative evidence.

Continue Reading FCA Deeper Dive: Pleading and Proving Falsity under the FCA