In 2016, the U.S. Supreme Court handed down its decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar confirming the viability of the implied false certification theory in False Claims Act (FCA) cases and mandating that claims brought pursuant to that theory satisfy “demanding” materiality and scienter requirements.  As discussed in a prior post, since Escobar, the U.S. Courts of Appeals have wrestled with analyzing and applying the materiality and scienter requirements discussed in the Supreme Court’s opinion, resulting in a number of recent petitions for writ of certiorari filed with the Supreme Court seeking clarification of the Escobar mandates.

In one of its first actions of 2019, the Supreme Court recently denied petitions in two closely-watched FCA cases, U.S. ex rel. Harman v. Trinity Industries, Inc., and Gilead Sciences Inc. v. U.S. ex rel. Campie.

$660 Million Reversal Stands in Harman

The plaintiff-relator in Harman sought review from the Supreme Court after the U.S. Court of Appeals for the Fifth Circuit reversed a $660 million jury verdict, holding that the relator failed to prove that the defendant’s alleged misrepresentations were material to government’s payment decisions.  The relator in Harman claimed that the defendant produced and sold defective highway guardrails to various states, causing them to submit fraudulent claims for reimbursement to the federal government.  However, evidence was presented that the Federal Highway Administration was aware of the alleged defects but continued to pay for the guardrails despite their non-compliance.  Relying on Escobar, the Fifth Circuit held that relator failed to overcome such “strong evidence” that the requirements at issue were not material.   The Supreme Court’s recent denial of the relator’s petition leaves intact the Fifth Circuit’s judgment and precedential opinion, providing a potential defense to FCA defendants in cases where the government was aware of certain conduct but continued to pay claims.


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On Tuesday, November 20, 2018, Defendants-Petitioners Brookdale Senior Living Communities, Inc. et al. (Brookdale) filed a petition for a writ of certiorari with the U.S. Supreme Court asking the Court to resolve circuit splits regarding enforcement of the materiality and scienter elements of the False Claims Act (FCA) in cases involving the implied false certification theory of liability. The relator in the case, styled Brookdale Senior Living Communities, Inc. v. U.S. ex rel. Prather, is a former Brookdale utilization review nurse who alleges that Brookdale did not obtain physician signatures on home health certifications as soon as possible after the physician established a plan of care, in violation of Medicare regulations. The U.S. District Court for the Middle District of Tennessee previously dismissed the lawsuit for failure to plead falsity, but the case was revived on appeal by a divided panel of the Court of Appeals for the Sixth Circuit, which held that the relator adequately pleaded a regulatory violation. After the relator amended her complaint in light of the Supreme Court’s 2016 decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, which addressed the FCA’s materiality requirement, the district court dismissed the case for failure to plead materiality. On appeal, however, the Sixth Circuit again reversed in a 2-1 decision, finding that the relator adequately pleaded materiality and scienter.
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Bass, Berry & Sims and the Tennessee Hospital Association recently sponsored the Nashville Healthcare Fraud Conference, a full-day seminar offering insight into fraud and abuse enforcement issues within the healthcare industry. Panel discussions were focused on providing practical tips and takeaways for preparing for, responding to and resolving a healthcare fraud investigation. A variety of

On August 18, 2017, the U.S. Court of Appeals for the Sixth Circuit reversed the denial of a FCA defendant’s request for attorney’s fees and expenses under the Equal Access to Justice Act (EAJA) and held the government accountable for an unreasonable damages demand.

Background

In U.S. ex. rel. Wall v. Circle C Construction, LLC, a subcontractor for the defendant, Circle C Construction, failed to pay $9,900 in wages for electrical work performed in the construction of warehouses. The subcontractor’s paid wages thus failed to meet the requirements of the Davis-Bacon Act. As a result, Circle C Construction’s subsequent statements of compliance with federal regulations, including the Davis-Bacon Act, were false.


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Bass, Berry & Sims and the Tennessee Hospital Association recently sponsored the Nashville Healthcare Fraud Conference, a day-long CLE program designed to provide insight into the most significant fraud and abuse issues facing the healthcare industry. Panel discussions were focused on providing practical tips and takeaways for preparing for, responding to and resolving a healthcare

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 requiring relators to plead actual claims to satisfy the requirements of Rule 9(b) in order to avoid dismissal.

In the past, the First Circuit has shifted between requiring the identification of a specific false claim and applying a more flexible standard. Compare U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004) (applying strict standard) abrogated on other grounds, Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662 (2008), with U.S. ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009) (applying flexible standard). Last year, the First Circuit explained its approach as requiring “relators to connect allegations of fraud to particular false claims for payment, rather than a fraudulent scheme in the abstract.”


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Earlier this month, the U.S. District Court for the Middle District of Tennessee dismissed a relator’s qui tam lawsuit, finding that the relator had failed to adequately allege the presentment of false claims to the government. In U.S. ex rel. Prather v. Brookdale Senior Living, Inc., the relator alleged that Brookdale submitted false claims for home health services that did not meet the technical requirements for billing under Medicare rules and regulations. Defendants argued that the allegations failed to include sufficient detail regarding the actual submission of requests for anticipated payment (RAP) claims and that the relator failed to plead the requisite legal falsity of both RAP and final episode payment claims.
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