FROM THE EDITOR

Without a doubt, issues stemming from the United States Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar have dominated False Claims Act litigation in the time since the decision was issued in 2016. What at first seemed to be a relatively relator-friendly opinion has become a minefield for relators’ counsel and the government to navigate.

The Court’s decision did two things. First, it found that implied false certification was a viable theory of liability in FCA cases. The court found held that government contractors could be held liable under the FCA for requesting payment for goods or services while in violation of a material statutory, regulatory, or contractual requirement, and that the requirement need not be labeled a condition of payment to satisfy the FCA’s materiality element. That is certainly a relator-friendly outcome. Second, the Court opined on issues of materiality and falsity that were not necessarily before the court, and in what many consider to be dicta, Justice Thomas, who authored the opinion, expounded on what made a regulatory or statutory violation material. The Court found that the “implied certification theory can be a basis for 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.”

The court went on to list several considerations to keep in mind when evaluating materiality. These included the action or inaction of the government after receiving“actual knowledge” of the violation; whether compliance with the regulation is labeled a condition of payment; and whether the violation goes to the essence of the bargain. To be clear, the FCA has already defined materiality as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property” (31 U.S.C. § 3729(b)(4)), and the Court acknowledged that definition and did not change it. However, the Court’s comments have created substantial argument in the lower courts as to what constituted a material violation.

You will find that the significant majority of cases summarized in this volume address these issues in one way or another. We will continue to see courts scrutinizing facts through the prism of Escobar until and unless the Supreme Court accepts a petition for certiorari and issues an opinion that clears up some of the uncertainty stemming from the language of the Escobar decision.

We hope you enjoy this volume and that it is a useful resource for your practice and legal education.

All the best,
Jacklyn N. DeMar, Esq.

I. FALSE CLAIMS ACT LIABILITY

A. Violations of the Anti-Kickback Statute and/or Stark Law


U.S. ex rel. Bookwalter v. UPMC, 2017 WL 2672288 (W.D. Pa. June 21, 2017)

Holding: The U.S. District Court for the Western District of Pennsylvania granted the defendant’s motion to dismiss the relators’ claims of AKS and Stark Law violations for failure to plead fraud with particularity under Rule 9(b).

The relators brought a qui tam action against the hospital where they were formerly employed, alleging that the defendant’s physician-compensation system, which was based on the complexity of the procedures performed, violated the Anti-Kickback Statute and Stark Law and caused claims tainted by the kickbacks to be submitted to the government in violation of the False Claims Act. The relators alleged that the compensation system encouraged physicians to perform medically unnecessary procedures and to submit false claims for reimbursement to the government. The defendant moved to dismiss for failure to meet the particularity requirements of Rule 9(b).

The court granted the defendant’s motion to dismiss. The court determined that the relators did not allege specific and plausible facts in support of their allegations, and that their claims were conclusory. The court noted that the relators were required to plead more specifics about how the compensation system fell outside of the exceptions to the AKS and Stark Law.


U.S. ex rel. O’Donnell v. Am. At Home Healthcare and Nursing Serv., Ltd., 2017 WL 2653070 (N.D. Ill. June 20, 2017)

Holding: The U.S. District Court for the Northern District of Illinois granted in part the defendants’ motion to dismiss the relator’s overbilling and kickback allegations for failure to plead fraud with particularity as required by Rule 9(b).

The relator brought a qui tam action against the home healthcare provider where she was formerly employed and against individual employees, alleging that the defendants submitted claims for upcoded, unnecessary, and duplicative services in violation of the False Claims Act. She also alleged that the defendants paid kickbacks to physicians in exchange for referrals in violation of the Anti-Kickback Statute and submitted claims tainted by those kickbacks in violation of the FCA. Additionally, she alleged that the defendants unlawfully solicited patients for home health services in violation of Medicare regulations and falsely certified that they were in compliance with the regulations. The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and
failure to plead fraud with particularity under Rule 9(b).

The court denied the defendants’ motion to dismiss in part. The court noted that the relator sufficiently alleged details about the submission of false statements to the government, in falsified forms certifying the need for home health services, in its Medicare enrollment application and yearly certifications, and in the bills themselves. The court also found that the relator sufficiently pled that the false statements were material to the government’s decision to pay, observing that she explicitly alleged that compliance with the relevant regulations was a condition of payment and that courts had routinely found that the regulations were central to the Medicare program. Further, the court found that the relator sufficiently alleged the submission of false claims by detailing the fraudulent scheme and alleging that the defendants intentionally submitted false claims to the government. Additionally, the court found that the relator met the requirements of Rule 9(b) on some of her kickback allegations by providing specific examples, including the names of the physicians involved in the kickback scheme and the specific remuneration involved. The court also found that the relator properly pled her claims relating to medically unnecessary services, and rejected the defendants’ argument that the relator’s claims involved a difference of medical opinion rather than false claims. However, the court found that the relator failed to meet the requirements of Rule 9(b) as to her additional upcoding and kickback allegations because she failed to identify any particular patients for whom fraudulent bills were submitted. The court also granted the motion to dismiss with respect to one of the individual defendants, concluding that the relator failed to make specific allegations against that individual and improperly lumped her in with the other defendants.

U.S. ex rel. Forney v. Medtronic, Inc., 2017 WL 2653568 (E.D. Pa. June 19, 2017)

Holding: The U.S. District Court for the Eastern District of Pennsylvania granted the defendant’s motion to dismiss the relator’s kickback allegations for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam action against the medical device manufacturer where she was formerly employed, alleging that the defendant paid physicians illegal kickbacks in the form of free services and staff in order to induce the physicians to use the defendant’s devices, and caused claims tainted by those kickbacks to be submitted to the government in violation of the False Claims Act.   The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6), arguing that the services provided constituted product support which was not an illegal kickback.

The court granted the defendant’s motion to dismiss, explaining that the relator failed to allege how the free services constituted illegal remuneration under the AKS.  The court indicated that the guidance from the Office of the Inspector General suggested that the provision of services tied to the support of a purchased product could not, standing alone, violate the AKS.  Rather, the court explained, the relator was required to allege that the services were of “substantial independent value to the purchaser.”  Additionally, the court found that the relator failed to connect any kickbacks with particularity to a resulting false claim.


U.S. ex rel. Penelow v. Johnson & Johnson, 2017 WL 2367050 (D.N.J. May 31, 2017)

Holding: The U.S. District Court for the District of New Jersey denied a subsidiary pharmaceutical company’s motion to dismiss the relators’ off-label promotion and kickback allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b), but granted the parent company’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b).  

The relators brought a qui tam action against a pharmaceutical company, Janssen Products (“Janssen”), and its parent corporation, Johnson & Johnson, alleging that the defendants engaged in off-label marketing for certain drugs, causing medically unreasonable and unnecessary claims to be submitted to government healthcare plans in violation of the False Claims Act.  They also alleged that the defendants paid illegal kickbacks to physicians to induce them to prescribe the drugs for off-label uses, causing claims tainted by kickbacks to be submitted to the government in violation of the FCA.  Janssen moved to dismiss the relators’ allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  Johnson & Johnson moved to dismiss the relators’ allegations for failure to plead fraud with particularity under Rule 9(b), arguing that the allegations were based solely on Janssen’s conduct and that its status as parent company was insufficient to render it liable under the FCA.

The court denied Janssen’s motion to dismiss.  The court rejected Janssen’s argument that FDA approval rendered a drug “reasonable and necessary” per se, explaining that the determination should be made as to each individual patient and based on accepted standards for medical practice.  The court also found that the relators properly pled materiality by alleging the government would have refused reimbursement if it had known of Janssen’s misconduct.  Next, the court found that the relators satisfied Rule 9(b) despite not alleging representative examples of false claims by sufficiently alleging a nationwide scheme of misbranding and kickbacks that caused improper prescribing of the drugs and resulted in “substantial financial success.”  However, the court granted Johnson & Johnson’s motion to dismiss, explaining that the relators did not plead any specific allegations against it or set forth liability on an agency theory with the requisite detail.


U.S. ex rel. Colquitt v. Abbott Lab., 2017 WL 2347091 (5th Cir. May 31, 2017)

Holding: The U.S. Court of Appeals for the Fifth Circuit upheld the district court’s decision to grant the defendant’s motion to dismiss the relator’s kickback allegations and fraudulent inducement claims.  The circuit court also upheld the district court’s decision granting the defendant partial summary judgment on the relator’s false presentment claims. 

The relator brought a qui tam suit against the medical device manufacturer where he was formerly employed, alleging that the defendant violated the False Claims Act by fraudulently inducing the FDA to approve its biliary stent and subsequently promoting off-label uses of the stent, including the promotion of biliary stents for vascular uses. The relator also alleged that the defendant engaged in a kickback scheme to induce physicians to use the stent, causing claims tainted by the kickbacks to be submitted to the government in violation of the FCA.  The U.S. District Court for the Northern District of Texas dismissed the relator’s kickback allegations for failure to plead fraud with particularity under Rule 9(b), explaining that the relator did not describe details of an actual claim stemming from the kickback scheme.  The district court also granted the defendant’s motion to dismiss the relator’s fraudulent inducement claims, explaining that the claims were precluded by the public disclosure bar, citing the defendant’s 501(k) statements, which contained FDA summaries that included the dimensions of the stents.  Furthermore, the district court granted the defendant’s partial motion for summary judgment restricting the relator’s false presentment allegations to the duration of the relator’s employment.  The remaining claims went before a jury and the jury found in favor of the defendant.   The relator appealed the district court’s decisions on the defendant’s motions to dismiss and for summary judgment to the Fifth Circuit.

The circuit court upheld the district court’s decisions.  First, the circuit court found that though the district court’s Rule 9(b) analysis “may have been too rigid” in requiring the relator to allege details of actual claims, the relator’s kickback allegations could not satisfy Rule 9(b) because they did not include details of the scheme.  Second, the circuit court upheld the district court’s dismissal of the relator’s fraudulent inducement claims under the public disclosure bar, explaining that the relator admitted that he relied on the public 501(k) summaries in drafting his complaint, and finding that he was not an original source of his claims because he did not have direct and independent knowledge of the defendant’s FDA approval process.  Third, the circuit court affirmed the district court’s decision narrowing the relevant time period of the relator’s  presentment claims, explaining that the relator could  not have direct knowledge of any fraudulent activity taking place prior to his hiring or after he was terminated.


U.S. ex rel. Elliott-Lewis v. Abbott Labs., 2017 WL 1826627 (D. Mass. May 5, 2017)

Holding: The U.S. District Court for the District of Massachusetts denied the relator leave to amend her fraudulent inducement, off-label promotion, and kickback allegations, but granted the relator leave to amend her retaliation claims. 

The relator brought a qui tam suit against the health care company where she was formerly employed, alleging that the defendant violated the False Claims Act by fraudulently inducing the government to pay for non-reimbursable prescriptions for its medical devices.  The relator alleged that the defendant engaged in unlawful promotion of its medical device prior to FDA-approval, conduct that the relator contended was “tantamount to initiating an unapproved clinical trial.”  This, the relator argued, was in effect “medical battery,” and because no patient could give valid informed consent to a trial that would involve medical battery, the “trials” were conducted in violation of the Medicare regulations governing human subject protection. As a result, the relator alleged the certifications that the defendant submitted affirming that it obtained informed consent from patients were false. The relator also alleged that the defendant engaged in off-label promotion that caused medically unreasonable and unnecessary reimbursements and caused the submission of claims tainted by Anti-Kickback Statute violations. Additionally, she alleged that she was terminated in retaliation for complaining about the alleged conduct.  The defendant moved to dismiss and the relator moved to amend her complaint.

The court denied the relator’s motion to amend, with exception to the retaliation claims, finding that amendment was futile because the relator failed to state a claim under Rule 121(b)(6).  First, the court concluded that the proposed amendments to the fraudulent inducement claims failed to connect the defendant’s pre-approval promotion to actual use or to an actual claim.  Second, the court explained that the relator failed to identify a human subject protection regulatory compliance requirement that was also a precondition of Medicare payment in connection with her false certification claims.  Third, the court determined that the relator did not sufficiently allege off-label promotion in the proposed amendments because she did not demonstrate a link between the defendant’s promotional materials and the physicians’ prescription decisions.  Fourth, the court concluded that the relator failed to establish that an actual false claim resulted from the alleged kickback payments or that the payments were a form of remuneration actionable under the FCA.  Lastly, the court found that the relator’s proposed amendments to her retaliation claims sufficiently stated a claim and granted her motion to amend those claims.


U.S. ex rel. Brown v. Pfizer, Inc., 2017 WL 1344365 (E.D. Pa. Apr. 12, 2017)

Holding: The United States District Court for the Eastern District of Pennsylvania denied the defendant’s motion to dismiss the rela- tors’ off-label promotion and kickback allegations pursuant to the first-to-file bar and the statute of limitations, as well as for failure to state a claim under Rule 12(b)(6).

The relators brought a qui tam suit against a major pharmaceutical company alleging that they submitted false documentation to the Food and Drug Administration (FDA) in order to obtain approval for the use of a drug for an additional purpose and engaged in the off-label promotion which caused fraudulent claims for reimbursement to be submitted to Medicare in violation of the False Claims Act. The relators also alleged that the defendants paid kickbacks to doctors and pharmacies in order to induce them to prescribe the new drug, and caused claims tainted by the kickbacks to be submitted to the government. The defendant moved to dismiss, arguing that the relators’ claims were precluded by the first-to-file bar and that the relators’ claims were time-barred. The defendant also moved to dismiss for failure to state a claim under Rule 12(b)(6), arguing that the off-label use of the drug was covered by Medicare and other healthcare programs, and that the kickback claims failed because the payments fell under the safe harbor exception. The defendant also moved to dismiss on materiality grounds.

The court denied the defendant’s motion to dismiss. The explained that the relators were able to cure the first-to-file defect by amending their complaint after the previously filed case was dismissed. Further the court found that the relators’ allrgations in the operative Second Amended Complaint were not time-barred because the allegations therein arose out of conduct alleged in the First Amended Complaint, which was filed within the statute of limitations period. The court also denied the defendant’s motion to dismiss the relators’ claims based on violations of the Anti-Kickback Statute (AKS), finding that the relators’ allegations met the requirements of Rule 9(b) by detailing the defendant’s marketing tactics and alleging that it “utilized deceit and misrepresentations” in addition to paying kickbacks in order to induce doc- tors to prescribe the drug. The court rejected the defendant’s argument that the pay- ments it made were protected by the AKS’s safe harbor provision, explaining that the defendant failed to state how payments to physicians and pharmacists were consistent with “fair market value” for their services. The court also denied the defendant’s motion to dismiss for failure to adequately plead materiality, scienter, and falsity, finding that the relators successfully stated a claim under a theory of fraudulent inducement. The court explained that the relators sufficiently alleged falsity by claiming that the defendant “submitted ‘a false and misleading New Drug Application to the [FDA]’” and by including allegations that the defendant “withheld or concealed adverse test results from the FDA.” The court also found that the relators sufficiently pled materiality, observing that the relators “provided factual allegations that [demonstrated] how defendant’s misrepresentations caused the FDA” to issue its approval for the new use of the drug. The court also rejected the defendant’s argument that the government’s continued payment after it was appraised of the fraud indicated that the defendant’s actions were not material, explaining that “knowledge of allegations regarding non- compliance is insufficient to prove actual knowledge of non-compliance,” and that continued payment after the relators brought their claims “was insufficient to establish that relators’ claims lack[ed] materiality.” The court also found that the relators adequately pled scienter by alleging that the defendant knew that studies that it submit- ted to the FDA were“seriously flawed and… grossly misleading.”


U.S. ex rel. Emanuele v. Medicor Assoc., 242 F.Supp.3d 409 (W.D.Pa. Mar. 15, 2017)

Holding: The United States District Court for the Western District of Pennsylvania granted in part and denied in part the relator’s motion for summary judgment on his AKS and Stark Law claims, denied the corporate defendants’ motion for summary judgment, and granted the individual physician defendants’ motion for summary judgment.

The relator brought a qui tam suit against a private practice medical group, Medicor, where he was formerly employed, a hospital where the group provided cardiology services, Hamot, and several individual doctors, alleging the defendants falsely certified compliance with the Stark Act and Anti-Kickback Statute (AKS) in claims submitted to Medicare in violation of the False Claims Act.  The relator alleged that Hamot and Medicor entered into a series of medical directorship agreements beginning in 2006 in which Hamot paid Medicor for several different medical services and responsibilities and several of the individual physician defendants were assigned to provide these services.  The relator alleged that although the agreements officially expired at the end of the year, both entities continued to operate as if the agreements were still in effect until November 2007.  They then stipulated that the agreements would last until the end of the 2007.  After the agreements’ expiration in December 2007, the relator alleged that both parties “continued to tender invoices and payments” as if the agreements were still in effect, backdated the agreements to expire in June 2009, and acted in accordance with the backdated agreement until the end of March 2010.  He also alleged that Hamot made payments to Medicor through 2010 pursuant to an unsigned agreement which would have implemented a Women’s Heart Program, and that Hamot and Medicor paid one of the individual defendants for a chair position, though no formal documentation of this arrangement existed.  The relator alleged that these agreements were entered into in order to induce unlawful patient referrals.  The relator moved for partial summary judgment as to the existence of a “financial relationship” between Hamot and the physician defendants after the official end of the initial agreements, as well as a ruling that no Stark Law “safe harbor” exemption applied to that relationship.  The defendants also moved for summary judgment, arguing that the relator was unable to satisfy the scienter and materiality requirements of the FCA. They also argued that the relationship that existed between Hamot, Medicor, and the individual physician defendants was protected by multiple safe harbor exceptions, including the fair market value exception, the personal services arrangements exception, and the isolated transaction exception.

The court granted in part and denied in part the relator’s motion for summary judgment.  The court found that the medical directorship agreements fell within the fair market value and personal services arrangements exceptions of the Stark Act.  The court concluded that the “checks and invoices exchanged throughout the duration of the agreements,” combined with the original contracts and addenda, could allow a reasonable jury to conclude that the defendants satisfied the writing requirement for both Stark Act safe harbor exceptions.  However, the court differentiated between the general medical directorship agreements and those concerning the Women’s Heart Health and chair directorships.  The court found that none of the documentation surrounding the latter two directorships met the standards for compliance with either the fair market value or the personal service arrangement exceptions to the Stark Act.  The court explained that the writing requirements demanded that materials contain “at an absolute minimum, identifiable services, a timeframe, and a rate of compensation,” and that no documents associated with the Women’s Heart Health or chair directorships satisfying those requirements were produced.  The court denied the corporate defendants’ motion for summary judgment, finding that the relator sufficiently alleged scienter and materiality.  The court applied a “holistic approach” to determining materiality and found that the alleged violations were material to the government’s decision to pay, noting that “the Stark Act expressly prohibits Medicare from paying claims that do not satisfy each of its requirements” and that the writing requirement was not “minor or insubstantial.”  The court also observed that health care providers had paid penalties after self-reporting similar violations. The court granted the individual physician defendants’ motion to dismiss, finding that the relator failed to adduce evidence satisfying the scienter requirement “as to each individual defendant, rather than as a collective.”


U.S. ex rel. Barko v. Halliburton Co., 241 F.Supp.3d 37 (D.C. Cir. Mar. 14, 2017)

Holding: The United States District for the District of Columbia granted the defendants’ motion for summary judgment on the relator’s AKS claims.

The relator brought a qui tam action against the government contractor, Kellogg Brown & Root (KBR), where he was formerly employed, its affiliates, and a subcontractor, Daoud & Partners (D&P), alleging they committed violations of the False Claims Act by fraudulently inflating the costs of laundry facilities and services for troops in Iraq.  The relator alleged that defendant KBR improperly engaged in anti-competitive bidding practices and accepted kickbacks in order to ensure defendant D&P was awarded subcontracts under several government contracts. The relator also alleged that the defendants double-billed the government for services rendered on several of the contracts.  The relator alleged that “KBR improperly steered business to D&P” and rigged bidding to favor D&P over its competitors during fulfillment of those contracts. The defendants moved for summary judgment, arguing that the relator’s allegations of an improper relationship between subcontractor D&P and a KBR employee were “rumors [and] speculation” and not supported by the evidence, and that the relator was “unable to tie any alleged kickback to an inflated cost to the government.”  Further, the defendants argued that the relator failed to sufficiently establish the materiality of their alleged false statements, or that they possessed the requisite scienter.

The court granted the defendants’ motion for summary judgment.  The court found that the relator failed to show that KBR received kickback payments from D&P in exchange for services, explaining that declarations from employees and evidence that KBR received internal complaints about the alleged fraud was not evidence that kickbacks were actually paid. The court noted that the reports were “allegations, not evidence.”  The court also held that KBR’s decision to assert privilege over the content of the reports did not justify the relator’s assertion the reports revealed wrongdoing.  The court also noted that, although the declarations contained allegations of an “improper relationship,” the relator’s colleagues neither adduced specific descriptions of kickbacks or bribes nor any assertion that kickbacks or bribes were given or received.  The court found that the relator’s allegations of anticompetitive bidding could not serve as the basis of an FCA claim because there was no underlying falsity or fraudulent inducement, explaining that the relator did not allege that any claims submitted to the government were false as a result of the bidding process, and did not establish that either defendant engaged in the express false certification of compliance with contractual guidelines or government regulation during the bidding process.  Further, the court found that the defendants were not liable under a theory of express false certification, because the invoices defendant KBR submitted to the government for payment did not require certification that the subcontract was competitively bid, or even that it was in compliance with the terms of the contract or relevant regulations.  Additionally, the court rejected the relator’s argument that the defendants were liable under an implied false certification theory of liability because they failed to disclose the alleged noncompliant conduct, because it found that the relator did not create a genuine dispute of material fact regarding whether the alleged improprieties occurred.  The court explained that the relator failed to show that KBR procured its government contracts by fraud or that it intended to break any promises it made at the time of contracting, and thus did not provide evidence of fraudulent inducement.  The court found that allegations concerning performance defects could not serve as the basis of the relator’s FCA action, explaining that “the FCA does not reach all complaints involving contractual performance” and that allegations of poor performance were not covered by the FCA.  The court also dismissed all of the relator’s claims that arose from allegations of double billing and the defendants’ failure to backcharge, finding that he failed to meet his burden of proof for providing evidence that KBR failed to backcharge its subcontractor or possessed the requisite scienter for an FCA claim.


U.S. ex rel. Vavra v. Kellogg Brown & Root, Inc., 848 F.3d 366 (5th. Cir. Feb. 3, 2017)

Holding: The United States Court of Appeals for the Fifth Circuit affirmed in part and reversed in part the district court’s decision granting the defendant’s motion to dismiss the plaintiffs’ claims related to AKS violations for failure to state a claim under Rule 12(b)(6).

In this intervened case, the relator brought a qui tam suit against a government contractor, alleging that it accepted kickback payments from a subcontractor performing work on the United States Army contract Logistics Civil Augmentation Program III (LOGCAP III) in violation of the Anti-Kickback Statute, and submitted claims tainted by those payments to the government in violation of the False Claims Act.  The plaintiffs alleged that two of the defendant’s employees accepted the kickback money and that the defendant was vicariously liable for the employees’ actions.  The United States District Court for the Eastern District of Texas granted the defendant’s motion to dismiss, finding that the employees’ actions could not be imputed to the defendant because the plaintiffs had failed to properly allege that the employees were acting for the defendant’s benefit.  The plaintiffs appealed to the Fifth Circuit, which reversed and remanded the decision, explaining that the district court had applied the wrong standard for vicarious liability.  On remand, the district court held a bench trial and found that the defendant was liable for the AKS violations of the two employees and for the resultant violations of the FCA.  The defendant appealed to the Fifth Circuit.

The circuit court reversed in part and affirmed in part the district court’s decision.  First, the court reiterated its previous holding in the case and observed that the AKS, “like common law, impos[ed] ‘vicarious liability for employee actions taken under apparent authority.’”  However, the court noted that the knowledge of an agent could not be attributed to a corporation and held that the only proper circumstances for imputing knowledge was in the case of “knowing violations of those employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.”  Second, the circuit court affirmed the district court’s holding that one of the employees’ knowledge could be imputed to the defendant because he possessed sufficient authority and responsibility to meet the standard.  However, the court reversed the district court’s holding as to the other employee, explaining that although he had some authority as to the initial award of the contract, he had minimal involvement after that decision.  Third, the court affirmed the district court’s holding that the bribes accepted by the employee were illegal kickbacks under the AKS.


U.S. ex rel. Stop Ill. Mktg. Fraud, LLC v. Addus HomeCare Corp., 2017 WL 467673 (N.D. Ill. Feb. 3, 2017)

Holding: The United States District Court for the Northern District of Illinois granted in part and denied in part the defendants’ motions to dismiss the relator’s claims related to AKS violations for failure to plead fraud with particularity under Rule 9(b).

The relator, a limited liability company formed for purposes of bringing this case, brought a qui tam action against a health care corporation and its parent company, alleging that the defendants engaged in several schemes to pay kickbacks in order to secure referrals from other entities in violation of the Anti-Kickback Statute and caused claims tainted by the kickbacks to be submitted to the government in violation of the False Claims Act.  The relator alleged that the defendants colluded with several senior living facilities to provide marketing services to these facilities in exchange for referrals.  The relator also alleged that the defendants secured referrals from a doctor by hiring his daughter.  Further, the relator alleged that the defendants schemed to market skilled services to patients who were not eligible for Medicare reimbursement, and fraudulently submitted claims to Medicare for the services.  The defendants moved to dismiss the relator’s complaint.  The parent company argued that the relator failed to sufficiently allege that it was liable for the actions of its corporate subsidiary.  The subsidiary defendant moved to dismiss all counts against it for failure to plead fraud with particularity under rule 9(b) and argued that the relator’s claims were time-barred.

The court granted in part and denied in part the defendants’ motions.  The court granted the motion to dismiss the claims against the parent company, rejecting the relator’s argument that the parent company was liable as a successor-in-interest and finding that the relator failed to sufficiently allege that the parent company was on notice of the fraud when it acquired the subsidiary.  The court also determined that the relator failed to sufficiently allege continuity of operations after the acquisition, explaining that the subsidiary continued to operate as a distinct entity under the parent company’s ownership.  The court denied the defendants’ motion to dismiss the relator’s claims against the subsidiary company related to AKS violations, and rejected the defendants’ argument that certifying compliance with the AKS was not a “condition of payment” under Medicare.  Further, the court found that the marketing services provided were remuneration under the AKS.  The court also found that the relator pled fraud with sufficient particularity regarding the fraudulent referral scheme with one particular senior living facility, explaining that the “relator has described the scheme in detail and identified specific patients whose care followed the [fraud] scheme,” which allowed “the court to infer that claims were submitted to the government.”  However, the court found that the relator failed to meet the requirements of Rule 9(b) with respect to the alleged wrongful conduct at other facilities because she did not allege examples of any specific patients who were part of the referral schemes.  The court also dismissed the relator’s false certification allegations for failure to meet the requirements of Rule 9(b), noting that she did not identify specific patients who received false certifications of eligibility for skilled services.  The court denied the defendants’ motion to dismiss the remaining claims pursuant to the statute of limitations, finding that the relator’s allegations of conduct that took place more than six years earlier than the most recent amendment of the complaint related back to the original complaint.


U.S. ex rel. Booker v. Pfizer, Inc., 847 F.3d 52 (1st Cir. Jan. 30, 2017)

Holding: The U.S. Court of Appeals for the First Circuit affirmed the district court’s decision to grant the defendant’s motion to dismiss the relators’ reverse-false-claims, off-label promotion, AKS, and retaliation allegations.

The relators brought a qui tam action against the pharmaceutical company where they were formerly employed as sales representatives, alleging that the defendant violated the False Claims Act by engaging in off-label marketing and causing claims tainted by Anti-Kickback Statute violations to be submitted to the government.  The relators also alleged that the defendant violated the reverse false claims provision of the FCA by avoiding the payment of penalty fees for the violation of its Corporate Integrity Agreement (“CIA”).  The relators alleged that an email one relator sent to the defendant’s compliance department reporting the ongoing fraud constituted a “Reportable Event” under their CIA, and that by failing to disclose the email to the government, the defendant avoided paying penalties for violation of the CIA. Additionally, one of the relators alleged that the defendant terminated him in retaliation for complaining to supervisors that the defendant was engaged in off-label promotion.  The U.S. District Court for the District of Massachusetts granted the defendant’s motion to dismiss the relators’ reverse false claims allegations and granted the defendant summary judgment on the remaining claims.  The relators appealed the rulings to the First Circuit.

The circuit court affirmed the district court’s decisions on the motions to dismiss and for summary judgment.  As to the relators’ reverse false claims allegation, the court observed that under the CIA, conduct constituted a Reportable Event only after the defendant investigated and determined that a violation of the CIA probably occurred.  Because the relators did not allege that the defendant made this determination after the email was sent, the court concluded that the relators failed to sufficiently allege a reverse false claims violation.  Next, the court determined that relators’ off-label promotion and AKS claims failed because the relators did not offer any evidence of an actual false claim.  The court explained that the relators had only offered aggregate data reflecting the amount of money spent by Medicaid for off-label prescriptions, which was insufficient if not accompanied by strong circumstantial evidence of a causal link between the fraudulent marketing and the actual prescriptions.  Lastly, the circuit court affirmed the district court’s decision to grant the defendant summary judgment on the relators’ retaliation claim, explaining that the complaints to the relators’ supervisors did not involve the submission of false claims to the government.


U.S. ex rel. Hanlon v. Columbine Mgmt. Servs., 676 Fed.Appx. 787 (10th Cir. Jan. 23, 2017)

Holding: The U.S. Court of Appeals for the Tenth Circuit upheld the district court’s decision to dismiss the relators’ kickback allegations for failure to state a claim under Rule 12(b)(6).

The relators, two nursing home center employees, brought a qui tam action against a competing hospital system and its affiliates alleging that the defendants improperly formed a joint venture in order to funnel patients between the hospital and the defendants’ other facilities in violation of the Anti-Kickback Statute.  The relators alleged that the defendants submitted claims tainted by kickbacks related to the scheme in violation of the False Claims Act.  The defendant was the only hospital system that served the area where the relators were located, and as such was the only local “Medicare A” patient referral source.  The U.S. District Court for the  District of Colorado granted the defendants’ motion to dismiss for failure to state a claim under Rule12(b)(6), finding that the relators did not allege specific contractual or statutory violations and failed to cite specific payment requests that the government would refuse to pay if aware of the alleged conduct.  The relators appealed to the Tenth Circuit.

The circuit court affirmed the district court’s decision.  The court explained that the relators failed to “point to a single claim by the defendants which the government would not have paid had it known of any alleged falsity.”  The court indicated that the relators failed to make any showing that the funneling scheme was illegal or that any disclosures made to patients were inadequate.


U.S. ex rel. Coyne v. Amgen, Inc., 229 F.Supp.3d 159 (E.D.N.Y. Jan. 17, 2017)

Holding: The U.S. District Court for the Eastern District of New York granted the defendant’s motion to dismiss the relator’s off-label marketing allegations, finding that the relator’s complaint was precluded by the public disclosure bar.

The relator brought a qui tam suit against the biopharmaceutical manufacturer that had previously hired him as a physician speaker, alleging that the defendant caused false claims to be submitted to the government for off-label uses of its drug Epogen in violation of the False Claims Act.  The relator alleged that the defendant provided materials to him during his presentations that falsely stated that the administration of Epogen, a red blood cell production drug, would improve the quality of life in certain patients.  After receiving the materials, he alleged that he investigated the defendant’s statements further, conducting his own statistical analysis of Epogen’s clinical trials and obtaining data through FOIA requests to the FDA.  The defendant moved to dismiss the relator’s claims, arguing that the claims were precluded by the public disclosure bar.

The court granted the defendant’s motion to dismiss.  The court explained that the documents that the relator used to form his allegations fell “squarely within the category” of public disclosures because he obtained them through FOIA requests from the FDA.  Furthermore, the court found that the relator was not an original source of his claims because his individual calculations and suspicions were not “qualitatively different from the core information within the government’s possession…”


U.S. ex rel. Brown v. Celgene Corp., 2016 WL 7626222 (C.D. Cal. Dec. 28, 2016)

Holding: The U.S. District Court for the Central District of California granted in part and denied in part the defendant’s motion for summary judgment on the relator’s off-label marketing and kickback allegations.

The relator brought a qui tam suit against the pharmaceutical company where she was formerly employed in sales, alleging that the defendant engaged in off-label promotion of two cancer drugs, causing false claims to be submitted in violation of the False Claims Act. The relator also alleged that the defendant paid illegal kickbacks to physicians through speaker fees, paid clinical trials, advisory board positions, and authorship of ghost-written articles in exchange for prescribing and recommending the drugs, and caused claims tainted by those AKS violations to be submitted to the government in violation of the FCA. The defendant moved for summary judgment, arguing that (1) the relator could not demonstrate that the defendant’s marketing campaign caused off-label prescriptions and (2) that the relator’s claims were precluded by the FCA’s six year statute of limitations.

The court granted in part and denied in part the defendant’s motion for summary judgment. The court explained that the relator presented “sufficiently detailed circumstantial evidence” connecting false claims to the defendant’s marketing campaign by demonstrating that claims for off-label prescriptions were submitted to the government following the defendant’s promotions and that the physicians who received more promotional contacts prescribed the drugs at a greater rate than their counterparts with fewer contacts. Next, the court concluded that any claim submitted to Medicaid for non-medically accepted use was false because it was “statutorily ineligible for reimbursement.” Further, the court held that the defendant’s false statements were material, explaining that the requirement that the drugs were prescribed for medically accepted indications was an “essential feature” central to the functioning of the Medicare program. Moreover, the court rejected the defendant’s argument that it could not possess the required scienter for liability under the FCA because its interpretation of the Medicare rules was “objectively reasonable.” The court explained that all guidance and statutory text clearly communicated that medically unaccepted uses were not reimbursable, and pointed out that the defendant itself gave multiple presentations communicating this standard. However, the court granted the defendant’s motion for summary judgment on the relator’s AKS claims, observing that the relator failed to present evidence to show that the defendant’s payments to physicians were excessive or that the amount the physicians were paid was tied to the volume of prescriptions they wrote. Finally, the court rejected the defendant’s argument that the relator’s claims were barred by the statute of limitations, explaining that although the relator knew of the alleged fraudulent conduct for many years before she filed her qui tam action, she would not have had reason to know that the conduct was illegal because the defendant had assured her that its actions were lawful.


U.S. ex rel. Greenfield v. Medco Health Sys., Inc., 2016 WL 7408843 (D.N.J. Dec. 22, 2016)

Holding: The U.S. District Court for the District of New Jersey granted the defendants’ motion for summary judgment on the relator’s kickback allegations.

The relator brought a qui tam suit against the health services provider where he was formerly employed and its affiliates, alleging that the defendants violated the False Claims Act by falsely certifying compliance with the Anti-Kickback Statute and caused tainted claims to be submitted to the government.  The relator alleged that the defendant engaged in a kickback scheme in which it made charitable contributions to a tax-exempt organization that works with hemophilia patients in order to “buy, influence, and induce” referrals for the defendants’ hemophilia products.  The defendants and the relator both moved for summary judgment.

The court granted the defendants’ motion for summary judgment, concluding that the relator failed to demonstrate that the government would not have reimbursed the defendant if it had known about the alleged violations of the AKS.  The court also held that the relator failed to demonstrate that any one of the defendants’ hemophilia clients was linked to the defendants’ charitable donations.  Further, the court noted that the tax-exempt organization’s policy of listing donors as “preferred providers” on its website did not create a causal connection between the defendants’ donations and referrals.


State of New York ex rel. Khurana v. Spherion Corp., 2016 WL 6652735 (S.D.N.Y. Nov. 10, 2016)

Holding: The U.S District Court for the Southern District of New York granted the defendant’s motion to dismiss the relator’s implied certification allegations related to Anti-Kickback Statute violations finding that the public disclosure bar precluded the relator’s allegations, the relator failed to plead fraud with particularity under Rule 9(b), and failed to state a claim under Rule 12(b)(6).  The court also found that the defendant was not vicariously liable for its consultants’ fraudulent activity.

The relator brought a qui tam suit against his former employer, a corporation contracted by New York City’s Office of Payroll Administration (“OPA”) to provide quality assurance over the OPA’s automated time-keeping and payroll function project.  The relator alleged that the defendant made multiple false certifications that the project would succeed as planned and that all subcontracts were made without conflicts of interest, and that the defendant violated the Anti-Kickback Statute and submitted tainted claims in violation of the False Claims Act.  The relator also alleged that the defendant terminated the relator in retaliation for raising concerns about the project’s failure and potential fraud.  Further, the relator alleged that because consultants working for the defendant participated in fraudulent billing and awarded contracts to family or friends in exchange for kickbacks the defendant was vicariously liable for the actions of the consultants.  In addition to filing suit, the relator mailed his allegations to the New York City Department of Investigations (“DOI”) and posted information to CNN’s online citizen journalism forum.  He also met with DOI investigators and provided a flash drive of information which he alleges was not available in any public sources.  Alongside the relator’s efforts, the New York media covered the alleged conduct, causing the Office of the Comptroller of the City of New York to audit the defendant corporation’s oversight on the project and publish a report.  Shortly after, a criminal complaint against the consultants was unsealed and a federal grand jury issued an indictment.  The defendant moved to dismiss arguing that the relator’s claims were precluded by the public disclosure bar and that the relator failed to state a claim under Rule 12(b)(6) and failed to plead with particularity pursuant to Rule 9(b).

The court granted the defendant’s motion to dismiss with respect to all allegations except relator’s retaliation claims.  The court explained that the criminal complaint, report, and media coverage qualified as public disclosures and that the disclosures were substantially similar to the relator’s allegations, as they set forth the essential elements of the relator’s vicarious liability claims and provided sufficient information to put the government on notice of potential fraudulent activity.  The court determined that the relator was not an original source of his claims because the disclosures he made to the government before filing suit did not reference the fraudulent kickback or overbilling schemes, but only referenced the project’s failure.  Additionally, the court found that the information the relator provided in his disclosures was vague or conclusory and his complaint did not materially add to the already publically disclosed material.  The court also found that the relator failed to state a claim under Rule 12(b)(6) because he did not adequately allege that the defendant failed to provide quality assurance services or that it provided an incorrect description to the government.  Furthermore, the court explained that the relator failed to allege an implied false certification theory, as he did not identify specific misrepresentations or “misleading half-truths” made by the defendant.  Next, though the court found the relator’s fraudulent billing allegations plausible, it concluded that the relator failed to plead fraud with sufficient particularity, as he did not identify who was involved in submitting claims, what the claims regarded, when they were submitted, and also did not offer identifying information for submitted or false claims.  Finally, the court denied the defendant’s motion to dismiss the relator’s retaliation claims, finding that the relator plausibly alleged he was terminated as a result of voicing concerns and that the defendant was aware of his protected conduct.

 

U.S. ex rel. Ruscher v. Omnicare, Inc., 2016 WL 6407128 (5th Cir. Oct. 28, 2016)

Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision to grant summary judgment to the defendant on relator’s allegations stemming from Anti-Kickback Statue violations.

The relator brought a qui tam suit against the pharmacy services provider where she was formerly employed and its affiliates, alleging that the defendants violated the Anti-Kickback Statute (“AKS”) by paying kickbacks in the form of non-collection of Medicare Part A debt and offering prompt payment discounts (“PPDs”) to skilled nursing facilities (“SNFs”) in exchange for patient referrals, and caused claims tainted by those kickbacks to be submitted to the government in violation of the False Claims Act.  The relator also alleged that the defendant caused SNFs submit false cost reports, as the defendant did not pay for the reported costs within the required time.  Further, during the time period that the realtor alleged, the defendants were obligated to report any potential fraud to the government pursuant to a Corporate Integrity Agreement (“CIA”).  The relator alleged that the defendants violated the reverse false claims provision of the FCA by failing to report the fraud after she had informed her supervisors of her concerns via email. The U.S. District Court for the Southern District of Texas granted the defendants’ motion for summary judgment, and the relator appealed to the Fifth Circuit.

The circuit court affirmed the district court’s decision to grant the defendant summary judgment.  The court explained that the relator provided no evidence demonstrating that the SNFs knew how the defendant designed its negotiation settlements and debt collection practices or that the SNFs were aware of the benefits that they were receiving, which the court reasoned was necessary to prove the relator’s alleged AKS violation.  Furthermore, the court explained that the relator failed to show that defendant’s PPDs were designed to induce referrals or offered illegitimately.  The court also determined that the relator did not sufficiently allege that the defendant caused an SNF to submit a false cost report because the relator’s evidence did not include the entire time period in which the defendant could have submitted costs.  Finally, the circuit court affirmed the district court’s summary judgment ruling on the relator’s reverse false claims allegation, finding that the email that she wrote to her supervisors did not indicate a probable violation of federal health care laws such that it was reportable to the government under the CIA.


U.S. ex rel. Bingham v. HCA, Inc., 2016 WL 6027115 (S.D. Fla. Oct. 14, 2016)

Holding: The U.S. District Court for the Southern District of Florida granted the defendant’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b) on this Anti-Kickback Statute and Stark Law claims.

The relator, a commercial real estate appraiser, brought a qui tam suit against his former employer’s client, a national health care services provider, alleging that it violated the Stark Law and Anti-Kickback Statute through a fraudulent real estate scheme that illegally paid remuneration to referring physicians in the form of free parking benefits and equity interest. The relator alleged that the defendant violated the False Claims Act by submitting claims to the government tainted by these AKS and Stark Law violations.  The defendant moved to dismiss the relator’s claims for failure to plead with particularity pursuant to Rule 9(b), arguing that the relator impermissibly relied on information obtained through discovery to draft his Second Amended Complaint in order meet the particularity requirements of Rule 9(b).

The court granted the defendant’s motion to dismiss, agreeing with the defendant that the relator could not plead the “who, what, where, when, and how” of his alleged fraud without information acquired in discovery, and his conclusory allegations were not sufficient to meet the requirements of Rule 9(b).


U.S. v. Alphatec Spine, Inc., 2016 WL 5408265 (S.D. Ohio Sept. 28, 2016)

Holding: The U.S. District Court for the Southern District of Ohio denied the defendants’ motion for summary judgment. 

The relators filed a qui tam suit against a multi-specialty outpatient surgery center where they were former patients, its parent organization, and the president and CEO of the parent organization, alleging that the defendants knowingly billed Medicare and Medicaid for unnecessary surgery and billed for the improper use of the surgical device, PureGen, without patient consent in violation of the False Claims Act. Additionally, the relators contended that PureGen manufacturers paid direct kickbacks to the defendants’ doctors to induce them to use PureGen’s in surgeries. The defendants moved for summary judgement, arguing that Pure Gen was not used at their facilities, and thus no false claims could have been submitted.

The court denied the defendants’ motion for summary judgment. The court explained that the relators provided sufficient conflicting evidence in the form of operative reports filled out by doctors at the defendants’ facilities to counter the affidavits of former employees stating that PureGen was not used by the defendants. The court noted that the relators’ inability to identify specific claims submitted to the government was due to legitimate discovery issues, and not the merit of their allegations.


U.S. ex rel. Schiff v. Marder, 2016 WL 5404303 (S.D. Fla. Sept. 23, 2016)

Holding: The U.S. District Court for the Southern District of Florida granted the plaintiffs’ motion for summary judgment on their claims that the defendants submitted false claims to Medicare for services not performed and falsely certified that they were in compliance with the Anti-Kickback Statue claims in part. 

In this intervened case, the relator brought a qui tam suit against a fellow dermatologist, Gary Marder, and the clinic that he owned, as well as a pathologist, Robert Kendall, and the laboratory that he operated, alleging that they conspired to create and submit claims to Medicare for pathology and dermatology services that were never actually performed in violation of the False Claims Act. The plaintiffs alleged that the defendants submitted claims indicating that they performed daily radiation treatments and pathology services although the dermatologist, who was the only physician performing services and requesting pathology services, was out of the office more than 50% of all business days that the treatments purportedly took place. The plaintiffs provided evidence that Marder never met with or assessed patients prior to or during radiation treatments, as required by Medicare regulations. Additionally, the plaintiffs alleged that the defendants routinely upcoded claims submitted to Medicare. Further, the plaintiffs alleged that Marder and Kendall had an improper employment relationship wherein Marder paid Kendall to perform pathology service on biopsied specimens the he sent in exchange for referrals to Marder’s practice in violation of the Anti-Kickback Statute and the Stark Law. They alleged that the defendants submitted false claims tainted by these acts in violation of the FCA. The plaintiffs moved for summary judgment on the FCA allegations and the defendants’ affirmative defenses.

The court granted the plaintiffs’ motion for summary judgment in part and denied it in part. The court concluded that any reasonable jury would find that the defendants knowingly submitted claims to Medicare for services not actually performed, given the physical impossibility that Marder actually performed the services he requested. However, the court found that factual issues remained regarding upcoding and conspiracy claims, as well as the defendants’ scienter. As to the AKS claims, the court denied the plaintiffs’ motion for summary judgment, explaining that it could not rule as a matter of law that the defendants’ employment relationship was a not within the AKS and Stark law safe harbors, and that a jury was required resolve the question of whether or not Kendall’s fee aligned with fair market value. The court granted the plaintiffs’ motion for summary judgment on some of the defendants’ affirmative defenses that challenged the sufficiency of the government’s prima facie case and Stark Law violations. The court reasoned that the defendants’ plain denial of a prima facie case was an insufficient defense and that the defendants did not provide record support against the government’s Stark Law allegations.


U.S. ex rel. Stop Ill. Health Care Fraud, LLC v. Sayeed, 2016 WL 4479542 (N.D. Ill. Aug. 25, 2016)

Holding: The U.S. District Court for the Northern District of Illinois granted the defendant’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b). 

The relator, a non-profit organization, brought a qui tam suit against multiple healthcare organizations—Healthcare Consortium (“HCI”), Physician Care Services (“PCS”), Management Principles, Inc. (“MPI”), and Vital Home and Healthcare (“Vital”)—and an Illinois resident, alleging that the defendants conspired to defraud Medicare in violation of the False Claims Act. Specifically, the relator alleged that the defendants garnered patient information from HCI’s wellness and safety assessments and provided it to MPI, Vital, and PCS, so that they could directly contact patients in order to solicit Medicare-eligible services. Additionally, the relator alleged that while directly contacting patients MPI, Vital, and PCS falsely stated that they represented the federal Department of Aging and that Vital paid kickbacks in the form of gift cards and meals to HCI for access to its confidential patient files. The defendants filed motions to dismiss the relators claims for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state claim under Rule 12(b)(6).

The court granted the defendants motion to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b). The court explained that the complaint failed to identify an individual who received a kickback and failed to demonstrate that the defendants submitted a claim to Medicare on behalf of a particular patient, thus the complaint only amounted to generalized accusations that the defendants were aware of a kickback scheme.


U.S. ex rel. Herman v. Coloplast, 2016 WL 4483869 (D. Mass. Aug. 24, 2016)

Holding: The U.S. District Court for the District of Massachusetts granted the relator’s motion for reconsideration of his allegations related to claims involving the Anti-Kickback Statute, and found the relator pled fraud with sufficient particularity under Rule 9(b). 

The relator brought a qui tam action alleging that the defendants, a Medicare-licensed supplier and a manufacturer of continence care products, engaged in a scheme in which the supplier boosted the manufacturer’s market share by encouraging new patients to purchase from the manufacturer and converting patients with competitors’ products to the manufacturer’s products, in violation of the Anti-Kickback Statute (“AKS”). The relator alleged that claims tainted by the AKS violations were submitted to the government for reimbursement in violation of the False Claims Act. The supplier moved to dismiss the relator’s allegations for failure to plead fraud with particularity under Rule 9(b). The U.S. District Court for the District of Massachusetts granted the defendant’s motion to dismiss, finding that the defendants’ conduct was protected by the AKS’s safe harbor provision. The relator moved for reconsideration and the United States filed a Statement of Interest in support of the relator’s motion for reconsideration.

The court granted the relator’s motion for reconsideration. The court found that the relator sufficiently pled its false claims and conspiracy allegations by providing an abundance of information including a submission and processing date for each claim, the amount paid by the government, discount negotiation emails between the defendants, and tied the National Provider Identification codes and generic codes to the defendant using the public record. Moreover, the court rejected the defendants’ arguments that in order to identify the manufacturer, the relator must provide product codes for claims submitted, explaining that the relator was entitled to reasonable inferences to fill in some gaps in detail at the pleadings stage. Finally, the court noted that the relator could meet Rule 9(b) without proving the defendant supplier’s performance, as it is the agreement between the defendants that renders its claims false, not the defendants’ performance, and that the relator was not required to plead that any individual claim resulted from the performance of the alleged promotional services.


U.S. ex rel. Herman v. Coloplast Corp., 2016 WL 4483868 (D. Mass. July 29, 2016) 

Holding: The U.S. District Court for the District of Massachusetts denied defendants’ motion to dismiss the relators’ False Claims Act claims, and granted defendants’ motion to dismiss relators’ Anti-Kickback Statute claims. 

The relators brought a qui tam action against their employer, a manufacturer of ostomy and continence care products, alleging that the defendant conspired to submit false claims through telephone solicitation in violation of Medicare prohibitions and also engaged in a kickback scheme. Specifically, the relators allege that the defendants conspired to commit fraud by transferring patient phone calls and patient information from one defendant to another in violation of Medicare provisions. Additionally, the defendants engaged in a kickback scheme by offering volume-based discounts in exchange for increased sales, which the defendant obtained by lying to patients about availability of other brand’s products or contacting patients directly, as prohibited by Medicare. The defendants moved to dismiss relators’ claims for failure to state a claim.

The court denied defendant’s motion to dismiss relators’ conspiracy claims, and granted defendants’ motion to dismiss relators’ kickback claims. First, the court found that Medicare unambiguously precludes telemarketing on behalf of another company, and therefore determined that relators’ sufficiently alleged that defendants engaged in a conspiracy to circumvent Medicare prohibitions and therefore violate the FCA. Second, the court dismissed relators’ kickback claims, finding that the relators’ claims describe discount negotiations that occurred before sales between defendants, which is permissible under the Anti-Kickback (“AKS”) statute, as it requires discounts to be fixed “at the time of initial sale.”


U.S. ex rel. Dresser v. Qualium Corp., 2016 WL 3880763 (N.D. Cal. July 18, 2016) 

Holding: The U.S. District Court for the Northern District of California granted defendant’s motion to dismiss the government’s claims based on implied certification theory, and denied the defendant’s motion to dismiss relator’s Anti-Kickback Statute claims. 

In this intervened case, the relator brought a qui tam suit alleging that the defendant, a corporation that owns a chain of sleep-disorder treatment clinics that dispense durable medical equipment (“DME”) and sleep disorder-related devices, submitted payment forms that expressly certified compliance with Medicare laws, when in fact the defendant violated multiple Medicare requirements. Specifically, the government alleges that the defendant violated Medicare laws by conducting sleep and titration tests in unapproved locations, employing unlicensed personal to conduct sleep disorder tests, and dispensing DME in unapproved locations based on tests performed by unqualified personnel or from an unapproved provider. Additionally, the relator alleges that the defendant violated the Anti-Kickback Statute by paying physicians to refer patients to defendant’s sleep clinics. The defendant moved to dismiss the relator’s and government’s complaints.

The court granted defendant’s motion to dismiss the government’s complaint in part, and denied the defendant’s motion to dismiss the relator’s complaint. First, the court explained that the government sufficiently pled its claims under the literally false certification theory, express false certification theory, and fraud in the inducement theory. However, the court held that the government’s implied certification theory claims did not meet the heighted materiality standard required by Universal Health Services, as the government failed to indicate why Medicare would not have paid defendants’ claims if it were aware of its conduct. Second, the court rejected the defendant’s argument that the government’s claims were only non-actionable regulatory violations and that the government failed to delineate each of the defendant’s roles in the alleged fraud, instead finding that the government provided sufficient detail for this stage in the proceedings. Additionally, the court denied the defendant’s motion to dismiss the relator’s kickback claims, finding that her claims were not barred by the public disclosure bar, as without the relator’s additional information, the publically available information does not identify the fraud scheme.

B. Procurement Fraud


U.S. ex rel. Uchytil v. Avanade, Inc., 2017 WL 2806798 (W.D. Wash. June 29, 2017)

Holding: The U.S. District Court for the Western District of Washington denied the defendants’ motion to dismiss in part, finding that the relator properly pled that the defendant committed promissory fraud by making misrepresentations to the government during contract procurement.

The relator brought a qui tam action against the technology services provider where she was formerly employed and its parent company, alleging that the defendants fraudulently procured contracts with the federal government to supply it with software in violation of the False Claims Act.  She alleged that the defendant acquired rights to the software from a third party and that the software development was partially funded by the government, thus the government possessed “government purpose rights” (GPRs) to use the software for free.  Despite the defendants’ knowledge of the GPRs, the relator alleged that the defendants made it appear as if the software was a proprietary commercial product and the government was required to pay to use it.  The relator alleged that this constituted promissory fraud, and argued that the government would not have entered into the contract to buy the software if it had known that it had the GPRs.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court denied the defendants’ motion to dismiss in part and granted it in part.  The court granted the defendants’ motion to dismiss the claims against the parent company, explaining that the relator failed to make any specific allegations against it.  However, the court denied the defendants’ motion to dismiss the claims against the relator’s former employer.  The court rejected the defendants’ arguments that the GPRs did not strip the defendants of their proprietary rights and that the partial government funding did not automatically entitle the government to use the software, holding that these were factual issues that could not be resolved on a motion to dismiss.  In addition, the court found that the relator properly pled materiality, observing that she explained at length how the misrepresentations induced the government to pay for the software.

 

U.S. v. Odyssey Marketing Grp., Inc., 2017 WL 2484180 (E.D.N.C. June 8, 2017)

Holding: The U.S. District Court for the Eastern District of North Carolina granted the defendants’ motion for summary judgment on the government’s allegations that the defendants requested payment for unauthorized work under their government contract.

The government brought an action under the False Claims Act alleging corporate defendant Odyssey Marketing (“Odyssey”) and its owners conspired with the contracting officer assigned to a government contract with the Army Reserves Family Program (“ARFP”), as well as the former director of ARFP, to bill the government for unauthorized work under the contract.  The government alleged that the contracting officer and former director awarded Odyssey the contract based on false records and statements and then directed Odyssey to submit claims to the government for unauthorized work.  The government moved for partial summary judgment and the defendant moved for summary judgment.

The court granted the defendants’ motion for summary judgment.  The court found that the government failed to create a genuine issue of material fact as to whether the defendants possessed the requisite scienter. The court explained that while the government clearly alleged irregularities with the contract award and billing, it failed to show that Odyssey acted with knowledge because it was acting at the behest of the individual government defendants.  Additionally, the court noted that the defendants provided services to the government, which failed to show that it suffered damages as a result of the alleged false claims. The court also determined that the government failed to present any evidence that a “meeting of the minds” occurred to support its conspiracy allegations.  Lastly, the court found that because the government’s allegations against Odyssey failed, it could not prevail on its claims against Odyssey’s owners and the government employee defendants.


U.S. ex rel. Perry v. Pacific Maritime Indus. Corp., 2017 WL 2348930 (S.D. Cal. May 30, 2017)

Holding: The U.S. District Court for the Southern District of California granted the defendants’ motion for summary judgment on the relator’s false certification claims.

The relator brought a qui tam suit against the government contractor where he was formerly employed and its owner and affiliates, alleging that defendants falsely certified that the products they delivered to the Navy under their contract complied with certain material contractual requirements, in violation of the False Claims Act.  Specifically, the relator alleged that the defendants falsely certified that the doors they manufactured under the contract were of the required weight and equipped with the required locks.  Further, the relator alleged that the defendants falsely certified that the doors had passed the required shock-testing. The defendants moved for summary judgment.

The court granted the defendants’ motion for summary judgment.  First, the court concluded that the relator’s claims regarding the doors’ weight failed because he did not establish that a certain weight was required by the contract. The court noted that, at best, the contractual clause relating to weight was ambiguous, and therefore the relator could not prove that the defendants acted with the requisite scienter under the FCA.  Next, the court found that the relator failed to prove scienter for the claims relating to the locks, explaining that the contract terms were also ambiguous as to those requirements as well.  Finally, the court found that the relator failed to present evidence to show that the certifications regarding the shock-testing were false in the face of the defendants’ evidence showing that they did perform the required testing.


U.S. ex rel. Hall v. LearnKey, Inc., 2017 WL 1592472 (D. Utah Apr. 28, 2017)

Holding: The United States District Court for the District of Utah denied the relator’s motion for summary judgment on his procurement fraud claims, and granted the defendants’ motion for partial summary judgment, finding the relator failed to proffer any evidence of falsity.

The relator brought a qui tam suit against her former employer, a corporation that provided video training courses to disabled veterans who qualified for benefits under the Vocational Rehabilitation and Employment program, as well as several individual defendant employees, alleging the defendants violated the False Claims Act by seeking funding from the Department of Veterans Affairs (VA) for non-qualifying educational courses. The relator also alleged that the defendants routinely billed the VA for employee commissions in violation of applicable regulations.  The relator moved for partial summary judgment and the defendants cross-moved for partial summary judgment.

The court granted the defendants’ cross motion for partial summary judgment and denied relator’s motion for partial summary judgment.  The court found that the relator did not provide evidence that the defendants misrepresented the course offerings to the VA or that the invoices submitted contained false statements made for the purpose of obtaining compensation for employee commissions. The court also found that the relator failed to provide evidence of materiality, explaining that the evidence showed the VA “knew what it was funding.”  The court noted that the VA consistently approved the defendants’ courses for funding and enrolled students in these courses despite the accurate description of the course listings and the notations on the invoices that the money was requested for “incentives.”  The court concluded that, “the VA’s complacency [was] very strong evidence that the minor regulatory violations alleged by [the relator] were not material to the VA’s decision to reimburse” the defendants. , arguing that the defendants’ courses did not qualify for funding because they did not meet certain requirements, including being offered in a “given period of time” and offering credit toward “graduation or certification.”


U.S. ex rel. Heath v. Indianapolis Fire Dept., 2017 WL 1435711 (S.D. Ind. Apr. 24, 2017)

Holding: The United States District Court for the Southern District of Indiana court granted in part and denied the defendant’s motion for summary judgment on the relator’s grant fraud claims, finding that there were genuine disputes of material fact regarding falsity and scienter.  The court granted the defendant’s motion for summary judgment on the relator’s retaliation claims, finding that the FCA did not protect applicants for employment.

The relator brought a qui tam suit against the fire department where he was formerly employed alleging that the defendant made false statements to the Federal Emergency Management Agency (FEMA) in order to receive a grant in violation of the False Claims Act.  The relator alleged that, contrary to the terms of the grant, the IT specialist that the defendant hired in connection with the grant did not perform traditional IT functions, failed to spend 80% of his time working on arson investigation, as required by the terms of the grant, and left the position after six months. The relator alleged that the defendant did not report this position vacancy to FEMA and did not fill the position for the final six months of the grant year. The relator also alleged that the defendant retaliated against his son as a result of his protected activity by failing to select his son for a job with the department. The defendant moved for summary judgment, arguing that the relator failed to provide sufficient evidence of scienter or falsity.  The defendant also moved for summary judgment on the relator’s retaliation claim, arguing that the FCA’s retaliation provision did not apply to prospective employees.

The court granted in part and denied in part the defendant’s motion for summary judgment.  The court granted the motion with respect to the relator’s claims that the IT specialist did not perform traditional duties, explaining that the specialist’s projects aligned with the broadly-worded IT roles outlined in the grant.  The court granted the motion with respect to the relator’s claim that the defendant’s representations to FEMA were rendered false as a result of its failure to report the vacancy of the IT position six months after award of the grant, explaining that the FCA imposed liability for false statements only when the person making the false statement knew the statement was false at the time it was made.  The court concluded that the defendant could not have anticipated that the position would be vacated halfway through the grant cycle; thus the vacancy and failure to report it to FEMA did not render the grant statements false at the time they were made. However, the court denied the defendant’s motion for summary judgment as to the relator’s claims that the IT Specialist failed to use 80% of his time on grant-related activities, finding that there was a dispute of material fact as to what the defendant’s intentions were when it made the grant agreement.  Additionally, the court held that there was a genuine dispute of fact as to whether the defendant’s misrepresentations were material, explaining that, while FEMA had already decided to approve the grant when both statements were made, reviewed, and approved; FEMA asserted in an affidavit that it “relied on the accuracy of [the defendant’s] material representations in its grant application when deciding whether to award the grant.”  The affidavit also stated that FEMA would not have awarded the grant if it knew that the defendant’s statements were false. The court granted the defendant’s motion for summary judgment on the retaliation claims, explaining that Fire Department’s motion for summary judgment on Quinn Health’s unlawful retaliation allegations, noting that the retaliation provisions did not apply to prospective employees.


U.S. ex rel. Al-Sultan v. The Pub. Warehousing Co. K.S.C., 242 F.Supp.3d 1351, 2017 WL 1021745 (N.D. Ga. Mar. 16, 2017)

Holding: The United States District Court for the Northern District of Georgia granted in part and denied in part the defendants’ motions to dismiss the relator’s claims related to DOD contract fraud for failure to plead fraud with particularity under Rule 9(b) and denied the defendants’ motion to dismiss the portions of the federal government’s complaint in intervention.

The relator brought a qui tam complaint against a large Kuwaiti logistics company, several of its employees, and a subcontractor, alleging they submitted false claims under three government contracts to provide food and other items to soldiers stationed in the Middle East in violation of the False Claims Act.  The relator alleged that the defendants colluded to inflate invoices and withhold discounts from the federal government by using a subcontractor “as a middleman to increase the price paid by the government.”   The relator also alleged that the defendants participated in a kickback scheme involving agreements with vendors for discounts not reported to the government in order to increase defendants’ margins.  The relator alleged that, in order to avoid passing the discounts on to the government, the defendants falsely called the discounts “prompt payment discounts.”   The federal government elected to intervene as to the claims against the corporate entities but declined to intervene in the claims against individual employees.    The defendants moved to dismiss both the relator’s complaint and the government’s complaint in intervention for failure to plead fraud with particularity per Rule 9(b) and failure to state a  claim under Rule 12(b)(6).  The defendants also argued that the relator’s claims against them should be dismissed due to the government’s intervention.

The court granted in part and denied in part the defendants’ motion to dismiss the relator’s claims.  The court denied the motion based on the government’s intervention, explaining that the FCA gave the relator an interest in the lawsuit, and not merely the right to retain a fee out of the recovery.  The court noted that the government’s complaint in intervention would become the operative complaint as to all claims in which the government had intervened.   The court also denied the defendants’ motion to dismiss the relator’s conspiracy claims on 9(b) grounds, explaining that the relator clearly alleged collaboration among the defendants, including allegations that the defendants’ opted not to work with the relator after he refused to participate in the scheme.  However, the court did grant the defendants’ motion to dismiss all of the relator’s claims against the individual defendants.  The court noted the individual defendants were seldom mentioned in the relator’s complaints, and that the relator presented no allegations that “the individual defendants themselves presented claims for payments.”  The court denied in the defendants’ motion to dismiss the government’s complaint in intervention, rejecting the defendants’ argument the government failed to plead with adequate particularity because it did not include examples of actual claims for payment submitted by the defendants.  The court clarified that the particularity requirements of Rule 9(b) were “assessed on a case-by-case basis,” and found that the government adequately pled its claims by providing numerous details about the claims as well as “a detailed list of the different orders [the defendants] sent to the United States.”  The court also found that the government sufficiently pled materiality, rejecting the defendants’ argument regarding the government’s continued payment and noting that “the fundamental claim of the [government’s] complaint is that the defendants lied,” and that the government knowledge defense would only apply had the government known the defendants’ underlying deception.  The court also observed that service of a relator’s complaint on the government did not equate to actual knowledge of the alleged fraud, and that continued payment might be due to the government’s essential interest in executing the contract — in this case, procuring necessary supplies for troops in an active war zone — rather than the immateriality of the fraudulent claims.  The court found that the government sufficiently alleged that the defendants also submitted legally false monthly reports by not including the “prompt payment discounts” as contractually required by the contracts.


U.S. ex rel. Abbott v. BP Expl. & Prod., Inc., 851 F.3d 384 (5th Cir. Mar. 14. 2017)

Holding: The United States Court of Appeals for the Fifth Circuit affirmed the decision of the district court granting the defendant’s motion for summary judgment, finding that the relator failed to prove materiality.

A former employee and an environmentalist consumer advocacy organization brought a qui tam action against an oil company and its affiliates alleging that they violated the False Claims Act by falsely certifying regulatory compliance.  The relators alleged that the defendants did not have all necessary documentation for an oil production facility, and that documents it possessed were not approved by engineers per regulatory guidelines.  The plaintiffs’ complaints led to Congressional hearings and a Department of the Interior (DOI) investigation.  The DOI investigation concluded that the plaintiffs’ allegations were “without merit” and that “no grounds” existed for suspending the defendants’ operation of the facility.  The United States District Court for the Southern District of Texas granted summary judgment in favor of the defendant, finding that the violations were not material, and the relators appealed to the Fifth Circuit.

The circuit court affirmed the ruling of the district court, finding that the plaintiffs were unable to create a genuine dispute of material fact as to materiality.  The court explained that the DOI decision to allow the defendant to continue facility operation “represent[ed] ‘strong evidence’ that the requirements in those regulations [were] not material.”


U.S. ex rel. McLain v. Fluor Enter., Inc. 681 Fed.Appx. 355 (5th Cir. Mar. 10, 2017)

Holding: The United States Court of Appeals for the Fifth Circuit upheld the ruling of the district court granting the defendants’ motion for summary judgment on the relator’s claims that the defendants defrauded the government under their contract to provide government housing.

Inspectors from the Liquefied Petroleum Gas Commission (LPGC) brought a qui tam suit against  government contractors tasked with installing temporary housing units (THUs) for Gulf Coast residents displaced by Hurricanes Katrina and Rita alleging that the defendants falsely certified compliance with material terms of the contracts in violation of the False Claims Act.  The relators alleged that the defendants enlisted the services of subcontractors in order to install the THUs, with their subcontracts requiring that “all work performed [by the subcontractor] shall be in accordance with all applicable federal, state, and local codes and regulation.”  The relator alleged that the defendants were cited by the LPGC as being noncompliant with Louisiana liquefied petroleum regulations, and that they reported it to FEMA and were instructed to continue installation of THUs in compliance with regulatory requirements.  The defendants reached a settlement agreement with LPGC, which dismissed the citations. However, the relators alleged that the defendants submitted false claims to the government due to noncompliance with Louisiana liquefied petroleum statutes during THU installation.  The relators argued that the defendants’ noncompliance rendered the original contract to be null under Louisiana law, and therefore any claims for payment resulting from those contracts were false claims.  The relators also alleged that the defendants “misrepresented to FEMA that their subcontractors and staff had the proper training and licensing to perform” the installations.  The United States District Court for the Eastern District of Louisiana granted the defendants’ motion for summary judgment, and the relators appealed to the Fifth Circuit.

The circuit court affirmed the ruling of the district court, finding that because the FEMA contracts were not null, the defendants assumed no FCA liability.  The court explained that the “object of the subcontracts” was to perform the installations of THUs “in accordance with all federal, state, and local codes and regulations,” thus the Louisiana Civil Code did not render the subcontracts “absolutely null” because they neither had an object that was “illicit” or “immoral,” nor did they “violate a rule of public order.”


U.S ex rel. Dittmann v. Quest Diagnostics, Inc., 2017 WL 770176 (N.D. Ind. Feb. 27, 2017)

Holding: The United States District Court for the Northern District of Indiana granted the defendants’ motion to dismiss the relator’s claims that the defendants overbilled the government under their contract for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam action against Xerox, a document solutions company where he was formerly employed and Quest Diagnostics, a laboratory company hired by Xerox to administer blood tests to its employees, alleging that the defendants violated the False Claims Act by fraudulently obtaining government grants under the National Tobacco Control Program.  The relator alleged that, as part of Xerox’s health care plan, it required employees to complete a wellness screening to determine whether they were smokers, which was administered by Quest.  If they were smokers, or if they refused the screening, they were charged a $500 surcharge for health insurance.  The relator alleged that this policy resulted in the defendants falsely labeling him and other non-smokers as smokers, thereby charging the employees $500 and obtaining additional grant funds which were calculated based on the total number of smokers reported to the Centers for Disease Control.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss.  First, the court found that that the relator failed to identify which defendant made the false claims or falsified a report, instead lumping both together in a vaguely pleaded accusation.  Next, the court observed that the relator’s complaint was so generally pled that the court could not determine what the nature of the scheme actually was.  The court noted that the relator did not plead what reports were submitted to the government, who submitted them, how they were prepared, or who prepared them.  Further, the court noted that the relator did not identify a single report or an example of a report that was submitted as a fraudulent claim.  The relator also failed to allege with requisite particularity that either defendant requested or received any payment from the government.

 

U.S. ex rel. Searle v. DRS C3 & Aviation Co., 680 F. App’x 163 (4th Cir. Feb. 23, 2017)

Holding: The United States Court of Appeals for the Fourth Circuit upheld the decision of the district court to grant the defendants’ motion for summary judgment on the relator’s government contracting fraud claims.

The relator filed a qui tam suit against his former employer and another government contractor alleging that the defendants violated the False Claims Act by falsely stating that technical manuals supplied to the government complied with the requirements of their government contract.  The relator alleged that the defendants requested and received payment for the manuals despite the fact that they were unable to obtain all of the necessary technical data information to include in the manuals.  The relator also alleged that the defendants conspired together to defraud the government.  The evidence showed that when the government’s contracting officer was apprised of the situation, rather than terminating the contract, he allowed the defendants to continue work and updated the contract requirements to reflect the unavailability of the technical data.  The defendants produced several declarations from the contracting officers responsible for completion of the contract which indicated that the government knew about the defendants’ inability to obtain the data, accepted it, and instructed them to continue work.  Both parties moved for summary judgment and the United States District Court for the Eastern District of Virginia granted the defendants’ motion, finding that the relator “failed to establish a single element of his [FCA] claims under either an express or implied theory of certification and that there was no evidence of a conspiracy.  The relator appealed to the Fourth Circuit.

The circuit court upheld the ruling of the district court, finding that there was no evidence that the defendants had made a false statement or participated in a fraudulent course of conduct in light of the government’s explicit instructions to continue work on the project despite the inability to obtain the data information and the updates to the contract terms.

 

U.S. ex rel. McBride v. Halliburton Co., 848 F.3d 1027 (D.C. Cir. Feb. 17, 2017)

Holding: The United States Court of Appeals for the District of Columbia Circuit upheld the decision of the district court to grant the defendants’ motion for summary judgment on the relator’s claims that the defendants overbilled the government under its contract finding that the relator did not sufficiently allege materiality.

The relator brought a qui tam action against the government contractor where he was formerly employed and its parent company and affiliates, alleging that the defendants artificially inflated the headcount of troops using its recreation centers in Iraq in order to obtain additional payments from the government in violation of the False Claims Act.  The relator also alleged that the defendants destroyed documentation in order to conceal the data’s falsity, and stopped engaging in methods to inflate the headcount after she reported the improprieties to her superiors.  The relator also alleged that the defendants failed to disclose violations of its obligations to maintain accurate headcount information to the federal government.  After the relator’s case was unsealed, the Defense Contract Audit Agency (DCAA) investigated the claims, but no government agency ever disallowed or challenged the amounts of the defendants’ bills.  The United States District Court for the District of Columbia granted the defendants’ motion for summary judgment, concluding that the relator failed to offer evidence that any misrepresentation regarding headcount was material to the government’s payment decision.  The relator appealed to the District of Columbia Circuit.

The circuit court upheld the district court’s decision.  Though the court noted that the defendants’ government contract did not require them to maintain headcount data, rather the defendants “voluntarily undertook to track this data and, at times, provided it to the government.”  The court rejected the relator’s argument that the defendants used these inflated headcounts to justify “unreasonable” staffing levels under the Federal Acquisition Regulation, finding that she adduced no evidence showing “that accurate headcount data was relevant to determining the reasonableness of costs.”  The court also cited Army witness testimony that “headcount data (false or not) had no bearing on costs billed to the government” or additional award fee decisions.  The court went on to explain that despite an Administrative Contracting Officer’s statement that an investigation might have resulted had the improper headcount information been known, said speculation did not meet the FCA’s “rigorous” materiality standard.  Further, the court observed that the DCAA investigated the relator’s claims and did not disallow any charged costs and the defendants continued to receive award fees for “exceptional performance” after the allegations were disclosed.  The court found that this was “very strong evidence” of immateriality.


U.S. ex rel. Berg v. Honeywell Int’l., Inc., 2016 WL 7478959 (D. Alaska Dec. 29, 2016)

Holding: The U.S. District Court for the District of Alaska granted the defendants’ motion for summary judgment on the relators’ fraudulent-inducement claims, finding that the relators failed to present sufficient evidence that the defendant knowingly violated the False Claims Act.

The relators brought a qui tam suit against a government contractor and its subsidiaries alleging that they fraudulently induced the government into awarding them a contract to provide energy-saving improvements to Army buildings.  The relators alleged that the defendants knowingly presented false calculations of sales, costs, and savings to the government in order to receive certain contracts in violation of the False Claims Act.  The defendants moved for summary judgment, arguing that they made extensive disclosures to the government about the underlying calculations and data in an open and collaborative process, thus they could not have the requisite scienter to defraud the government in violation of the FCA.

The court granted the defendants’ motion for summary judgment.  The court concluded that the defendants could not be liable under the FCA for misrepresenting projected sales because the defendants disclosed extensive, transparent calculations to the government, and the relator failed to demonstrate that the defendant knew its projected savings costs were inaccurate.  Additionally, the court found that the relators did not provide any evidence to demonstrate that the defendants did not use due diligence in reaching their projected numbers.


U.S. ex rel. Beauchamp v. Academi Training Ctr., Inc., 2016 WL 7030433 (E.D. Va. Nov. 30, 2016)

Holding: The U.S. District Court for the Eastern District of Virginia denied the defendant’s motion to dismiss the relators’ allegations of false claims stemming from false certifications of employee qualifications.

The relators brought a qui tam suit against their former employer, a private security company providing protective security services to U.S. government officials in Afghanistan, alleging that the defendant submitted false reports and fraudulently billed the government for services provided by defendant’s security personnel.    The relators alleged that the defendant falsely certified that the security personnel passed the contractually required weapon qualifications test when in reality, they often failed the tests or were not properly tested at all.  They alleged that the defendant fabricated test scores to submit fake scorecards to the government in order to receive payment for the security services under the government contract.  The defendant moved for judgment on the pleadings under Rule 12(c), arguing that the relators failed to properly allege their false certification claims under the standard announced by the Supreme Court in Universal Health Services v. U.S. ex rel. Escobar.

 

The court denied the defendant’s motion to dismiss, finding that the relators sufficiently alleged that the defendant made “specific representations” to the government that were false.
The court explained that the billing codes and job titles contained in the invoices submitted to the government, when viewed in conjunction with the contract, specifically represented to the government that the defendant’s personnel were properly qualified when they actually were not.  Additionally, the court found that the defendant’s argument that the relators must allege facts demonstrating that the government’s payment decision would likely or actually have been influenced if it knew of the defendant’s noncompliance was “meritless because it requires leaving common sense at the door.”  The court explained that it “strains credulity to argue that the government’s payment decision would not have been affected had the government known that the [employees] responsible for protecting U.S. officials in Afghanistan had not fulfilled the weapons qualifications requirement.”


U.S. ex rel. Keaveney v. SRA Int’l, Inc., 2016 WL 6988787 (D.D.C. Nov. 29, 2016)

Holding: The U.S. District Court for the District of Columbia granted the defendants’ motion to dismiss the relator’s allegations that the defendants submitted false claims pursuant to their government contract for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b) in part.

The relator brought a qui tam suit against a government defense contractor, Systems Research and Applications Corporation (“SRA”), its wholly-owned subsidiary, and Triton, a company that SRA entered into a joint venture with to work on the relevant government contract,  alleging that the defendants violated the False Claims Act through various forms of government contract fraud.  The relator worked for a defense contractor that was formerly subcontracted to work on a government contract with the defendants.  The relator alleged that the defendants fraudulently induced the government into entering into the contract by employing a “bait and switch” method, concealing their insolvency, and misrepresenting the relator’s expertise as their own.  Additionally, the relator contends that the defendant charged excessive pass-through fees, made false statements in monthly status reports, created a kickback scheme, and misrepresented key information including overtime and direct labor charges, travel expenses, and personnel identities. The defendants moved to dismiss all of relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity pursuant to Rule 9(b), and additionally argued that the relator’s complaint was barred by the FCA’s statute of limitations and that the relators failed to comply with the FCA’s pre-filing requirements.

The court granted the defendants’ motion to dismiss in large part, and denied it in part. First, the court determined that the relator’s allegations were not barred by the statute of limitations because the amended complaint addressed the same underlying fraud as the original complaint, and thus related back to the original complaint, which was filed within the statute of limitations.  Second, the court concluded that the relator met the FCA’s pre-filing requirements, as the complaint was only unsealed once the government declined to intervene.  Third, the court concluded that all of the relator’s fraudulent inducement allegations failed because he did not adequately allege that the defendants actually made misrepresentations.  Fourth, the court found that the relator sufficiently pled his fraudulent overtime billing claims against Triton by alleging that a discrepancy existed between Triton’s actual overtime hours and overtime hours billed,  identifying a specific time period in which the fraud occurred, and identifying specific invoices containing misrepresentations.  However, the court granted SRA’s motion to dismiss the overtime claims against it, explaining that the realtor failed to allege that SRA took any improper action related to overtime charges and also did not allege that SRA had knowledge of overtime misrepresentations.  Fifth, the court determined that the relator failed to sufficiently allege that the defendants misrepresented travel expenses, as he did not allege who made the misrepresentations, when they were made, which defendants were involved, and did not identify any instance in which the defendants billed the government for the difference between the travel expense maximum and actual incurred travel costs.  Sixth, the court dismissed the relator’s fraudulent direct labor invoice allegations, finding that the relator did not explain or provide a statutory or regulatory authority explaining how the alleged lack of detail resulted in a false statement.  The court also found that the relator’s excessive pass-through fee allegations failed because his allegations were based on regulations that were not effective at the time the contract was awarded.  Seventh, the court found that relator’s kickback scheme allegations failed because the relator did not allege any underlying false claims and did not demonstrate how the defendant’s coding system actually rendered false claims under the FCA.  Additionally, the court concluded that the relator’s falsely stated personnel identity allegations failed because the relator did not explain how the replacement of personnel was material to the government’s payment decision or how the relator possessed standing to bring the claim, as the relator acknowledged it was a breach of contract dispute.  Finally, the court found that the relator’s false monthly status reports claims survived the defendants’ motion to dismiss because the relator identified with requisite specificity invoices that contained alleged misrepresentations.

 

U.S. ex rel. Uhlig v. Fluor Corp., 2016 WL 5905714 (7th Cir. Oct. 11, 2016)

Holding: The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision to grant the defendant’s motion for summary judgment on the relator’s government contracting false certification and retaliation allegations.

The relator brought a qui tam suit against his former employer, a government contractor that provided electrical engineering services to the  the United States Army, alleging that the defendant knowingly breached its contract with the government by employing unlicensed journeyman electricians and then submitting false invoices for their work, in violation of the False Claims Act.  Additionally, the relator alleged that the defendant terminated his employment in retaliation for emailing his concern that the defendant was violating the contract terms to a website dedicated to defense contractor fraud.  The U.S. District Court for the Central District of Illinois granted the defendant’s motion for summary judgment on both the relator’s FCA  and retaliation claims, explaining that the defendant’s contract did not require journeyman electricians to possess licenses and that the relator was not engaged in protected activity, as he did not have an objectively reasonable basis for his allegations.  The relator appealed to the Seventh Circuit.

The circuit court affirmed the district court’s decision, explaining that the defendant did not breach its contract because the contract language clearly stipulated that the defendant could establish an employee’s qualifications outside of licensure, thus the relator could not establish falsity.  The court also explained that the relator was not engaged in protected activity because he did not demonstrate that a reasonable employee in his position would have believed that the defendant violated the FCA because the relator did not review the contract language, thus he could not have known what the defendant’s obligations were under the contract.

 

U.S. ex rel. Knudsen v. Spring Commc’ns Co., 2016 WL 4548924 (N.D. Cal. Sept. 1, 2016)

Holding: The U.S. District Court for the Northern District of California granted the defendants’ motion to dismiss for failure to plead fraud with particularity under Rule 9(b) with prejudice. 

The relator, a former outside telecommunications consultant brought a qui tam action against several telephone companies that he investigated while performing consulting work alleging that they fraudulently overcharged the government for cellular and data plan services in violation of the False Claims Act. Specifically, the relator alleged that the defendants did not provide federal agencies with price reductions congruent with those afforded to other customers, improperly added state and local taxes, and failed to monitor usage in order to ensure the plan was appropriate in violation of the terms of the government contracts. The relator based his claims on data received through a General Services Administration (“GSA”) permitted direct evaluation of the defendants’ customer billing data, customer monthly usage, price plan analysis, and quarterly accounts rate plans reviews and recommendations. The defendants moved to dismiss the relator’s complaint for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss, finding that the relator failed to plead fraud with particularity under Rule 9(b) and failed to state a claim under Rule 12(b)(6). The court explained that the relator failed to identify an actual relationship between the defendants and the federal government because he did not identify particular federal agencies, support his alleged time span with contractual terms, and only relied on blank forms instead of actual contracts. Secondly, the court determined that the relator failed to differentiate between the defendants, and instead insufficiently relied on future discovery to determine which defendants were responsible for which acts. Third, the relator failed to allege specific individuals involved in the fraud or their particular roles, a specific time period, or how the alleged discounts were applied to the defendants’ non-governmental customers, but not to the government. Moreover, the relator did not identify specific improper taxes or when they were charged. Fourth, the court found that the relator did not sufficiently plead scienter, rejecting the relator’s argument that the defendants’ duty to execute compliance and review programs under their government contracts was sufficient to establish scienter and explained that the relator’s scienter arguments failed because he did not allege how discounts were applied under the government contracts versus the contracts with other customers. Fifth, the court determined that the relator insufficiently alleged materiality, finding the relator’s claims conclusory. The court considered the Supreme Court’s recent ruling in U.S. ex rel. Escobar and found that the relator’s claims failed under the standard set out in Escobar, observing that Escobar required allegations such as “the government consistently refused to pay claims that violate [price reduction clause] terms or that the government did not know that it was not receiving the required price reductions…to adequately plead materiality.” Lastly, the court noted that the relator’s allegations of express false certification were only asserted in a conclusory fashion.


U.S. ex rel. Hedley v. Abhe & Svoboda, Inc., 2016 WL 4060738 (D. Md. July 29, 2016)

Holding: The U.S. District Court for the District of Maryland denied the defendant’s motion to dismiss the relator’s second amended complaint, finding that the relator met the particularity requirements of Rule 9(b).

The relators brought a qui tam action against their employer’s contractor, a company contracted by the Maryland State Highway Administration (“MSHA”), alleging that the defendant falsely represented and certified their use of a Disadvantaged Business Enterprise (“DBE”) in their bid proposals, employee payrolls, participation reports, and contractor progress estimates in order to obtain the government contract and receive final payment. The relators contend that the defendant submitted a bid proposal to MSHA certifying its intention to subcontract a DBE, but in fact, the defendant paid a certified DBE a percentage of the contract, agreeing that the DBE would not actually perform any work, and instead subcontracted relators’ employer, who is not a certified DBE. The defendant moved to dismiss relators’ claims for failure to plead fraud with particularity under Rule 9(b).

The court denied the defendant’s motion to dismiss the relators’ second amended complaint, finding that the relators plead all claims with sufficient particularity. The court rejected the defendant’s argument that relators must prove both MSHA’s actual damages and that MSHA submitted claims after the defendant submitted false documents, reasoning that this standard is too strenuous for the pleading stage.

See U.S. ex rel. Barko v. Halliburton Co., 241 F.Supp.3d 37 (D.C. Cir. Mar. 14, 2017)

C. Reverse False Claims


Graves v. Plaza Med. Cent., Corp., 281 F.Supp.3d 1260, 276 F.Supp.3d 1335 (S.D. Fla. Mar. 20, 2017)

Holding:  The United States District Court for the Southern District of Florida denied the defendant’s motions for summary judgment on the relator’s Medicare fraud claims.

The relator brought a qui tam suit against the defendants, a healthcare provider, Plaza Medical Centers, its medical director, and a major health insurance company, Humana, alleging that they violated the False Claims Act by engaging in a scheme to overbill Medicare.  The relator alleged that Plaza and the medical director provided fake diagnosis codes to Humana to submit in its claims to the Center for Medicare and Medicaid Services (CMS), and that Humana in turn made false statements regarding the accuracy of risk assessment data that it submitted to the government.  The relator also alleged that the defendants did not return overpayments on claims to the government in violation of the reverse false claims provision of the FCA.  Humana moved for summary judgment, arguing that the relator failed to create a genuine dispute of material fact regarding whether it knowingly submitted false claims and failed to recompense the government for overpayments.  Plaza and the medical director moved separately for summary judgment on the same grounds, but also argued that the statute of limitations barred a portion of the relator’s claims.

The court denied the defendants’ motions for summary judgment.  With respect to the claims against Humana, the court found that a genuine dispute of material fact existed regarding whether Humana complied with its reporting obligations to CMS based on data from Plaza, and whether it made “good faith efforts” to implement a compliance program.  The court noted that the relator presented evidence that Humana acted with “reckless disregard,” by failed to design internal audit procedures to find fraud and that it ignored “red flags” from doctors as well as internal data suggesting irregularities in the data from Plaza.  The court further observed that the relator produced evidence that Humana’s reviewers “did not look for fraud [and] did not understand fraud detection to be a job responsibility.” Additionally, the court rejected Humana’s argument that of the terms “effective” and “good faith” were overly vague, thus it could not have had the requisite scienter to violate the regulations.  The court explained that previous courts had held that CMS’ guidelines on data submission were “clear [and] authoritative” in requiring insurers “to undertake ‘due diligence’ to ensure the accuracy, completeness, and truthfulness” of submitted data.  The court also found that Humana was not entitled to summary judgment on the relator’s reverse false claims allegations.  The court explained that the relator presented evidence that Humana ignored many red flags which should have necessitated an investigation into Plaza’s data and would have resulted in the return of overpayments.  The court noted that Humana purportedly sent a letter to CMS regarding the potentially incorrect data and that Humana claimed that it did not receive a response.  The court rejected Humana’s argument that CMS’s failure to respond to the letter did not prove that CMS excused or approved of Humana’s failure to remit overpayments to the government.  The court also denied Plaza and the medical director’s motion for summary judgment.  The court rejected their argument that the relator’s claims failed because she did not allege that Plaza submitted the claims directly, finding that the submissions to Humana constituted a direct submission for FCA purposes.  The court noted that the medical director admitted that many of the codes submitted were not supported by medical evidence, and a question of fact remained as to whether the codes were submitted in error or whether the defendants knowingly submitted false codes.  Further, the court rejected the defendants’ argument the relator’s reverse false claims were time-barred.  The court noted that the Plaza was legally obligated to report and refund overpayments to the government within 60 days of identifying the overpayment, not within 60 days of when payment was made, and that the statute of limitations period thus ran from when Plaza failed to refund the overpayments after notice.


U.S. ex rel. Kelly v. Serco, Inc., 846 F.3d 325 (9th Cir. Jan. 12, 2017)

Holding: The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s decision to grant the defendant’s motion for summary judgment on the relator’s implied false certification and reverse false claims allegations.

The relator brought a qui tam suit against his former employer, a technology project management services provider, alleging that the defendant violated the False Claims Act by falsely certifying compliance with its government contract terms regarding the proper tracking of costs for the projects under the contract and by falsifying actual costs to match the government’s expected budget.  Additionally, the relator alleged that the defendant failed to return overpayments it received as a result of its fraudulent conduct, in violation of the reverse false claims provision of the FCA.  The U.S. District Court for the Southern District of California granted the defendant’s motion for summary judgment, finding that the relator’s claims failed because there was not a “statute, regulation, or contract” that expressly conditioned payment on compliance with the cost-tracking provisions.   The relator appealed to the Ninth Circuit.

The Ninth Circuit affirmed the district court’s decision to grant the defendant summary judgment.  The court concluded that the relator’s allegations failed because he did not provide any evidence that the claims the defendant submitted made any specific representations about the defendant’s performance or contained any false or inaccurate statements.   Further, the court rejected the relator’s argument that, because the government relied on the reports to manage the project, the alleged conduct was material to the government’s payment decision.  The court explained that it was insufficient to allege materiality solely on the basis that the government was able to refuse payment if it became aware of the alleged incompliance.  Lastly, the court found that because the relator’s false certification claims allegations were deficient, his reverse false claims allegations also failed.

 


U.S. ex rel. Harper v. Muskingum Watershed Conservancy Dist., 842 F.3d 430 (6th Cir. Nov. 21, 2016)

Holding: The U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s decision to dismiss the relator’s reverse false claims allegations, finding that the relator failed to state a claim for which relief could be granted under Rule 12(b)(6).

The relators brought a qui tam suit against an entity that was deeded an area of government land, alleging that the defendant violated the reverse false claims provision of the False Claims Act by violating their deed requirement to use the land only for “recreation, conservation, or reservoir-development purposes.”  Specifically, the relators alleged that the defendant violated these restrictions by selling rights to begin a hydraulic fracturing operation on the land.  The U.S. District Court for the Northern District of Ohio granted the defendant’s motion to dismiss the relator’s allegations.  The court found that the relators failed to demonstrate how the defendant knowingly took action to avoid its obligation to the government.  The relators appealed to the Sixth Circuit.

The circuit court affirmed the district court’s decision to grant the defendant’s motion to dismiss.  The court explained that the relators did not allege facts that created an inference that the defendant was aware of its violation of deed restrictions or that the defendant acted in “deliberate ignorance” or “reckless disregard.”  The court remarked that, “[a]lthough there is little established case law, given that Congress only recently amended the reverse-false-claim provision, the term ‘knowingly’ must be interpreted to refer to a defendant’s awareness of both an obligation to the United States and his violation of that obligation.  Because the relators have not pleaded facts that show such awareness, the district court properly dismissed their ‘reverse’ false claim.”   Additionally, the circuit court found that the relators only reached conclusory allegations that the defendants violated the FCA’s conversion provision by delivering “less than all” of the government’s property, as the relators failed to allege facts demonstrating that the defendants were aware or knew the title to the property presently belonged to the government or that they were violating deed restrictions.


U.S. ex rel. Customs Fraud Investigations, LLC. v. Victaulic Co., 2016 WL 5799660 (3rd Cir. Oct. 5 2016)

Holding: The U.S. Court of Appeals for the Third Circuit reversed and remanded the district court’s decision to dismiss the relator’s reverse false claims allegations with prejudice.

The relator, a limited liability company made up of former insiders from the pipe fitting industry, brought a qui tam suit against the defendant, a global manufacturer and distributor of pipe fittings, alleging that it avoided paying required marking duties by systematically importing millions of pounds of improperly marked pipe fittings without disclosing the improper markings to the government, in violation of the reverse false claims provision of the False Claims Act.  The relator alleged that its principals had worked on numerous pipe and tube trade investigations and were able to uncover the alleged fraudulent scheme through an analysis of the defendant’s shipping manifest data and studying the defendant’s secondary market through eBay.  The U.S. District Court for the Eastern District of Pennsylvania granted the defendant’s motion to dismiss for failure to state a claim under Rule 12(b)(6) with prejudice, finding that the reverse false claims provision did not encompass a failure to pay marking duties.  The relator promptly moved for leave to amend, including a First Amended Complaint that contained far more specific details regarding its fraud allegations.  The district court denied the relator’s motion for leave to amend, finding that the relator unduly delayed its motion for leave to file an amended complaint, and that the relator’s amendment would be futile because the failure to pay marking duties could not, as a matter of law, give rise to reverse false claims liability.  The relator appealed to the Third Circuit.

The circuit court reversed and remanded the district court’s decision.  The court found that the relator did not delay its motion for leave to file an amended complaint, explaining that the defendant’s motion to dismiss and judges’ questions and comments during oral argument did not put the relator on notice that the court would grant the motion to dismiss.  The court observed that the relator filed promptly once the court granted the defendant’s motion, which was all that was required.  Further, the circuit court reversed the district court’s holding that amendment would be futile, explaining that the failure to pay marking duties could potentially create FCA liability, as post-FERA statutory language, legislative history, and public policy all indicated that knowingly avoiding marking duties gives rise to FCA liability.  The court also held that the relator’s complaint met the requirements of Rule 9(b), explaining that it provided voluminous records, detailed methodology, and supporting expert opinions to sufficiently support its claims.  The court also instructed the district court that upon remand, they must determine an appropriately limited discovery plan to diminish excessive expense based on the relator’s allegations.


Hamilton v. Yavapai Cmty. Coll., 2016 WL 7102973 (D. Ariz. Dec. 6, 2016)

Holding: The U.S. District Court for the District of Arizona denied in part the defendants’ motion to dismiss the relator’s claims related to fraudulent education funding for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the community college where he was formerly employed and a flight school that ran the airplane program at the school, alleging that the defendants conspired to submit false claims to the Department of Veteran’s Affairs (“VA”) in order to obtain education benefit funding.  Specifically, the relator alleged that the defendants knowingly and falsely represented compliance with the “85/15” rule, which required that no more than 85% of a program’s students were federally financially supported.  The relator alleged that the defendants employed several methods to falsely satisfy the 85/15 rule including counting ineligible students as “non-supported students,” paying for non-veteran tuition only, participating in a scholarship program that targeted only students who would later become “non-supported,” and improperly combining four independent programs into a single program when reporting.  The relator also alleged that the defendants violated the reverse false claims provision of the FCA by failing to self-report their misconduct and return the fraudulent funding.  The defendants moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6).

The court denied the defendants’ motion to dismiss all of relator’s claims except the reverse false claims allegations.  The court found that the relator adequately pleaded scienter by demonstrating through the defendants’ own records, the text of the 85/15 rule, a warning from the VA that students needed to be admitted to be counted, and internal staff warnings that the defendants failed to meet their “duty to make a limited inquiry” that would have alerted them to the FCA violations.  Furthermore, the court determined that the relator met the particularity requirements of Rule 9(b) by sufficiently demonstrating “the who, what, when, where, and how” of the fraud.  The court also found that the relator adequately alleged conspiracy because the relator properly alleged that the defendants were a joint venture.  However, the court granted the defendants’ motion to dismiss the relator’s reverse false claims allegations, finding that the relator failed to allege an obligation to pay the government.


U.S. ex rel. Lee v. N. Adult Daily Health Care Ctr., 2016 WL 4703653 (E.D. N.Y. Sept. 7, 2016)

Holding: The U.S. District Court for the Eastern District of New York denied the defendants’ motion to dismiss for failure to plead fraud with particularity under Rule 9(b), but granted it as to the relators’ reverse false claims allegations and for failure to state a claim under Rule 12(b)(6). The court also denied the defendants’ motion to dismiss the relators’ retaliation claims in part and granted it in part.

The relators filed a qui tam action against their former employer, an adult day care center, and their former supervisor, alleging that the defendants falsely certified compliance with Title VI of the Civil Rights Act of 1964 and federal Medicare regulations, and terminated the relators’ in retaliation for reporting the violations. Specifically, the relators alleged that over several years the defendants committed violations including providing unhealthy food, cutting and eliminating staff training, mistreating and humiliating patients, and racially discriminatory conduct. The relators also alleged that the defendants violated the reverse false claims provision of the FCA by keeping overpayments from the government for substandard services. The defendants moved to dismiss the allegations for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss in part and denied it in part. The court determined that the relators sufficiently pled the “who, what, when, where and how” of the fraud, as they provided sixteen examples in which they adequately described the nature of the fraud and identified specific individuals responsible for the violations, linking all examples with actual claims submitted to the government. However, the court found that the relators only alleged that the defendants sought payment from the government, not that they concealed an obligation to repay the government, and therefore they did not sufficiently allege a reverse false claim. Moreover, the court explained that both the relators’ express and implied false certification theories failed to state a claim under Rule 12(b)(6). The court observed that the relators’ express false certification claims failed because they did not allege that the defendants certified of compliance with an express condition of payment when submitting any claims. Further, the court found that relators’ implied false certification claims failed because the relators failed to meet the materiality standards that the Supreme Court set out in U.S. ex rel. Escobar. The court determined that the relators did not sufficiently plead that the misrepresentations were material to the government’s decision to pay. Lastly, the court determined that two of the relators sufficiently alleged that they engaged in protected activity and were terminated as a result of that activity in violation of the retaliation provisions of the FCA, however the court found that the remaining relator failed to plead facts to support an inference that the defendants’ retaliated against her.


U.S. ex rel. Olson v. Fairview Health Serv., 2016 WL 4169134 (8th Cir. Aug. 8, 2016) 

Holding: The U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s decision to grant the defendant’s motion to dismiss the relator’s claims, finding that the relator failed to sufficiently plead scienter because the defendant’s interpretation of the statute was reasonable, and that the relator failed to allege its reverse false claims allegations with sufficient particularly pursuant to Rule 9(b).

The relator brought a qui tam action against his former employer, a hospital and its parent corporation, alleging that the defendants fraudulently induced the government to over-reimburse the hospital for medical services in violation of the False Claims Act. The relator alleged that the defendant knowingly failed to apply a ten-percent reimbursement rate reduction for “children’s hospitals” to its children’s unit and instead requested the full reimbursement amounts for services provided in the children’s unit in violation of an amendment to the state healthcare laws. While the relator contended that the defendant knew that “children’s hospital” as used in the amendment to the law did not include the defendant’s children’s unit, the defendant argued that its interpretation of “children’s hospital” was reasonable and it did not act with the requisite scienter under the FCA. The U.S. District Court for the District of Minnesota granted the defendant’s motion to dismiss the relator’s complaint, finding that the definition of “children’s hospital” was ambiguous, and therefore the relator did not sufficiently allege that the defendant acted knowingly under the FCA. The relator appealed to the Eighth Circuit.

The circuit court affirmed the district court’s decision, reasoning that the defendant’s interpretation of the ambiguous statute was reasonable. The court explained that “children’s hospital” was not defined in the amendment and that reliance on the definition of the term as it is used in other federal laws was reasonable, noting that the federal laws did not require that a children’s hospital have its own license or disqualify children’s units within a larger hospital. Additionally, the court held that the relator did not plead his reverse false claims allegations with sufficient particularity, as he failed to demonstrate “the who, what, where, when, and how” of the defendant’s concealment and failed to show that the defendant knew it had an obligation to return its reimbursement.

See U.S. ex rel. Booker v. Pfizer, Inc., 847 F.3d 52 (1st Cir. Jan. 30, 2017)

D. Off-Label Marketing


U.S. ex rel. Gohil v. Aventis, 2017 WL 85375 (E.D. Penn. Jan. 10, 2017)

Holding: The U.S. District Court for the Eastern District of Pennsylvania denied the defendants’ motion to dismiss the relator’s off-label marketing allegations as barred by the statute of limitations and precluded by the First Amendment.

The relator brought a qui tam suit against his former employer, a pharmaceutical company, and the company’s subsidiaries, alleging that the defendants violated the False Claims Act and caused healthcare providers to submit fraudulent claims to the government for off-label uses of Taxotere, a chemotherapy agent.  The relator alleged that the defendants trained their employees to misrepresent the safety and effectiveness of off-label uses of Taxotere.  Further, the relator alleged that the defendants paid healthcare providers kickbacks in order to incentivize the providers to prescribe Taxotere for off-label uses, causing the submission of claims tainted by those kickbacks in violation of the FCA.  The defendants moved to dismiss the relator’s claims, arguing that the claims in the amended complaint were barred by the statute of limitations because they did not appear in the original complaint, and that the claims were precluded by the First Amendment.

The court denied the defendants’ motion to dismiss.  The court determined that the allegations added in relator’s amended complaints were not time-barred and related back to the claims in the original complaint. Additionally, the court found that the defendants’ motion to dismiss on First Amendment grounds was not ripe for review, explaining that the question of whether the off-label promotion was actually false or misleading was a question of disputed fact to be decided by a jury.

See U.S. ex rel. Penelow v. Johnson & Johnson, 2017 WL 2367050 (D.N.J. May 31, 2017)

See U.S. ex rel. Booker v. Pfizer, Inc., 847 F.3d 52 (1st Cir. Jan. 30, 2017)

See U.S. ex rel. Coyne v. Amgen, Inc., 229 F.Supp.3d 159 (E.D.N.Y. Jan. 17, 2017)

See U.S. ex rel. Brown v. Celgene Corp., 2016 WL 7626222 (C.D. Cal. Dec. 28, 2016)

E. False Certification of Compliance


U.S. ex rel. Williams v. City of Brockton, 2016 WL 7429176 (D. Mass. Dec. 23, 2016)

Holding: The U.S. District Court for the District of Massachusetts granted the defendants’ motion to dismiss the relator’s retaliation claims, but denied the defendants’ motion to dismiss the relator’s other allegations (that the defendant falsely certified compliance with civil rights and antidiscrimination laws in order to receive grants) for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The court also held that the relator’s claims were not barred by the statute of limitations or the public disclosure bar.

The relator brought a qui tam action against the city and police department where he was formerly employed as a police officer, alleging that the defendants violated the False Claims Act by obtaining grants through falsely certifying compliance with civil rights and anti-discrimination laws.  Specifically, the relator alleged that the defendants engaged in an “ongoing pattern and practice” of discrimination against residents and employees, with disparate impact on minority residents, by failing to provide a multilingual website, and violated the “non-supplanting” conditions of their grant by unlawfully reducing the number of sworn officers.   Additionally, the relator alleged that the defendants violated the anti-retaliation provision of the FCA by terminating the relator in response to his complaints about the defendants’ alleged misconduct.  The defendants moved to dismiss the relator’s claims, arguing that he failed to state a claim under Rule 12(b)(6), failed to plead fraud with particularity under Rule 9(b), and was unable to overcome the public disclosure bar and the FCA’s statute of limitations.

The court denied the defendant’s motion to dismiss except as to the relator’s retaliation claims.  Applying the “holistic” approach to determining materiality, the court concluded that the relator sufficiently alleged materiality on the other claims, finding that the relator demonstrated that compliance with civil rights laws was a “central tenet” and “core value” of the program, providing strong evidence that the government would not have awarded the grants to the defendants if it had known of the their noncompliance.  The court also found that the relator alleged scienter and falsity on these claims, explaining that the relator demonstrated that defendants “knew or should have known” that their conduct had a discriminatory impact on residents and employees.  The court also held that the relator met the particularity requirements of Rule 9(b) by identifying several claims for payment.  The court concluded that the relator’s allegations fell within the FCA’s statute of limitations because there was no reason that a government official with the responsibility to act knew or should have known of the misconduct prior to the relator’s initial complaint.  Additionally, the court rejected the defendant’s argument that the relator’s claims should be barred because they were based on publicly available newspaper articles, website documents, and grant recipient lists.  The court ruled that the information contained in these documents was not substantially similar to the facts underlying relator’s claims, and that the relator brought new allegations to light and allegations that “significantly differ in scope and kind.”  The court granted the defendants’ motion to dismiss the relator’s retaliation claims, finding that the relator did not engage in protected activity under the FCA because he alleged only that he was investigating misrepresentations made to the public, not to the government.

U.S. ex rel. Schneider v. J.P. Morgan Chase, 2016 WL 7408826 (D.D.C. Dec. 22, 2016)

Holding: The U.S. District Court for the District of Columbia granted the defendant’s motion to dismiss the relator’s claims that the defendant failed to comply with required servicing terms under HAMP.

The relator brought a qui tam suit against his mortgage loan servicer, alleging that the defendant violated the False Claims Act by falsely certifying compliance with servicing standards delineated in the National Mortgage Settlement and falsely certifying that it met the servicing standards specified in the Home Affordable Modification Program (“HAMP”).  The defendant moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity pursuant to Rule 9(b).

The court granted the defendant’s motion to dismiss.  The court found that the relator was required to exhaust the alternate dispute procedures laid out in the National Mortgage Settlement before filing his complaint.  Additionally, the court found that relator failed to allege that the defendant’s HAMP certifications were false, explaining that the defendant’s misconduct had no “material effect on [the defendant’s] ability to comply with the Making Home Affordable program.”

 

U.S. ex rel. Johnson v. Golden Gate Nat’l Senior Care, LLC, 2016 WL 7197373 (D. Minn. Dec. 9, 2016)

Holding: The U.S. District Court for the District of Minnesota denied in part the defendants’ motion for summary judgment on the relator’s claims of false certification of compliance with Medicare therapy regulations.

The relators, an occupational therapist and her employer, brought a qui tam suit against a rival provider of nursing home therapy services and the nursing homes where the individual relator was formerly employed, alleging that the defendants violated the False Claims Act by falsely certifying compliance with Medicare’s statutory and regulatory requirements for physical and occupational therapy.  The relator alleged that the defendants billed for services provided by unlicensed therapists, failed to ensure proper supervision,  did not properly document therapy provided, mischaracterized the monitoring of group therapy, billed for therapy that was not actually provided, failed to accurately track and record therapy time, and provided services without a physician-certified plan of care.  The defendants moved for summary judgment.

The court denied in part the defendants’ motion for summary judgment.  The court determined that the relators provided sufficient evidence to create a dispute of material fact as to their unlicensed therapy claims, group therapy monitoring allegations, and allegations that the defendants billed for services that were not provided.  Additionally, the court denied the defendants’ motion to dismiss the relators’ supervision allegations, rejecting the defendants’ argument that the relevant requirements were ambiguous.  Further, the court denied summary judgment on the relators’ skilled therapy services allegations concluding that  a jury should hear scientific expert testimony to interpret the term “skilled services” as used in the regulations.  The court granted the defendants’ motion as to the documentation related claims, finding that the defendants’ interpretation of the Medicare regulations was objectively reasonable and the relators failed to provide evidence that the defendants knew their documentation practices were not in compliance with Medicare regulations.  The court also granted the defendants’ motion as to the relators’ inaccurate time keeping allegations, finding that the relators asserted the theory only upon learning new information through discovery.  Finally, the court granted the defendants’ motion on the relators’ improper certification claims, explaining that the relators did not specifically plead these allegations in their amended complaints.


U.S. ex rel. Escobar v. Universal Health Servs., 842 F.3d 103 (1st Cir. Nov. 22, 2016)

Holding: The U.S. Court of Appeals for the First Circuit reversed and remanded the district court’s decision to grant the defendant’s motion to dismiss relator’s implied false certification claims for  failure to state a claim under Rule 12(b)(6).

The relators brought a qui tam action against the defendant, a mental health facility treating the relators’ daughter, alleging that the defendant violated the False Claims Act by falsely certifying that its employees were qualified to provide mental health treatment in order to receive payments from government healthcare programs.  The relators alleged that the defendant billed the government for services using codes reserved for “professional staff member[s]” regardless of the staff’s actual qualifications.  Additionally, the relators alleged that 22 of the defendant’s employees used fake National Provider Identification numbers to misrepresent their status as social workers or licensed mental health counselors and that the defendant prescribed medication without the required supervision of a board certified psychiatrist.  The U.S. District Court for the District of Massachusetts dismissed relators’ claims, finding that the relators failed to state a claim under the implied certification theory, as the defendant’s false certifications did not violate an explicit condition of payment.  The relators appealed to the U.S. Court of Appeals for the First Circuit, which reversed the district court’s decision, finding that the defendant’s violations were material conditions of payment.  The defendant was granted certiorari from the Supreme Court and the Court concluded that the implied certification theory of liability could be a basis for a FCA claim, and vacated and remanded the decision for consideration of whether the defendant’s alleged violations were material to the government’s payment decision.

The circuit court reaffirmed its decision to reverse and remand the district court’s decision to grant the defendant’s motion to dismiss.  Using the holistic approach laid out by the Supreme Court, the circuit court found that the relators sufficiently alleged that the defendant made material misrepresentations because the relators demonstrated that regulatory compliance was a relevant condition of payment, the licensing and supervision requirements of the facility go to the “very essence of the bargain,” and the defendant’s contractual relationships with Medicaid providers showed that compliance was influential on the government’s payment decision.  Moreover, the court noted that the government’s effort to implement a series of regulations ensuring that mental health professionals were qualified to treat patients further supported the conclusion that the defendant’s violations were material to the government’s payment decision.  Finally, the court rejected the defendant’s argument that the government’s continued payment after it was aware of the violations showed that compliance was not material, “mere awareness of allegations concerning noncompliance with regulations is different from knowledge of actual noncompliance.”


U.S. ex rel. Nelson v. Sanford-Brown, Ltd., 2016 WL 6205746, (7th Cir. Oct. 24, 2016)

Holding: The U.S. Court of Appeals for the Seventh Circuit found its prior dismissal of the relator’s allegations of false certification of compliance with an educational institution’s Program Participation Agreement comported with the Supreme Court’s ruling in Universal Health Services v. U.S. ex rel. Escobar.

The relator brought a qui tam suit against the for-profit educational institution where he was formerly employed as the Director of Education, alleging that the defendant violated the False Claims Act by falsely certifying compliance with the U.S. Department of Education’s Title IV Program Participation Agreement (“PPA”) requirements in order to obtain federal funding.  The relator alleged that the defendant violated the regulations by causing its students to submit false requests for loans and grants and engaged in incentive-based compensation for admissions recruiters.  In light of its ruling in Universal Health Services v. U.S. ex rel. Escobar, The U.S. Supreme Court remanded for reconsideration the U.S. Court of Appeals for the Seventh Circuit’s previous affirming the U.S. District Court for the Eastern District of Wisconsin’s dismissal of the relator’s claims for determination of whether the defendant’s false certifications were material to the government’s payment decision.

The circuit court affirmed its prior decision, explaining that the relator’s allegations amounted only to speculation, as he did not independently establish materiality and failed to provide evidence demonstrating that the defendant made any representations in connection with its claims for payment.  The court noted that the relator failed to provide evidence of materiality to the government’s payment decision that could overcome the contrary evidence that the defendant’s subsidizing agency and other federal agencies that examined the defendant’s conduct did not issue administrative penalties or termination.

 

U.S. v. Dynamic Visions, Inc., 2016 WL 6091099 (D.D.C. Oct. 24, 2016)

Holding: The U.S. District Court for the District of Columbia granted the government’s motion for summary judgment on allegations that the defendants billed for unauthorized care in part.

The relator brought a qui tam suit against a home-health care provider and its owner alleging that the defendants violated the False Claims Act by submitting claims to Medicaid for services that were not authorized by a “plan of care” signed by a physician or other qualified healthcare worker, or were authorized with forged or untimely signatures.  The relator supported her allegations with the defendant’s written agreement to comply with Medicare regulations, testimony from the Medicaid Director of the District of Columbia indicating that proper authorization was central to the Medicaid reimbursement decision, and a FBI review of the defendant’s patient files.  The relator moved for summary judgment.

The court granted the relator’s motion for summary judgment in part and denied it in part.  The court found that the relator’s forgery allegations could not be supported without supplemental affidavits from physicians.  However, the court found no genuine dispute that the defendant made impliedly false claims.  The court first explained that the undisputed evidence demonstrated that the defendants withheld information about their regulatory violations and that they were on notice of the importance of complying with the regulations and their obligation to report violations because they entered into a Medicaid Provider Agreement which spelled out the requirements.  Additionally, the court indicated that the relator’s testimonial evidence from the Medicaid Director of the D.C. Medicaid Program stating that compliance with these regulations was the only way Medicaid could determine whether services were medically reasonable was sufficient to demonstrate that the defendant’s conduct was material to Medicaid’s payment decision.  Further, the court observed that the defendant’s records and preparation of an employee Medicaid compliance manual indicated that the defendant was at least reckless in not knowing that its violations were material to Department of Health Care Finance’s payment.  The court also noted that the evidence showed many records were missing plans of care and proper documentation and signature, and that “even a cursory review” of the files would have led the defendants to the conclusion that the records were not in compliance with the relevant regulations.

See U.S. ex rel. Beauchamp v. Academi Training Ctr., Inc., 2016 WL 7030433 (E.D. Va. Nov. 30, 2016)

F. Incentive Compensation Ban


U.S. ex rel. Rose v. Stephens Inst., 2016 WL 5076214 (N.D. Cal. Oct. 28, 2016)

Holding: The U.S. District Court for the Northern District of California granted the defendant’s motion to certify the court’s order denying its motion for summary judgment with respect to the relators’ incentive compensation ban allegations for interlocutory appeal, citing the Supreme Court’s recent ruling in Universal Health Services v. U.S. ex rel. Escobar.

The relators brought a qui tam action against an educational institution alleging that the defendant fraudulently obtained funds from the Department of Education (“DOE”) by falsely certifying compliance with Title IV’s incentive compensation ban (“ICB”) in violation of the False Claims Act.  The court denied the defendant’s motion for summary judgment. However, the court also narrowed the relator’s claims to a singular implied false certification claim.  In light of the Supreme Court’s ruling in Universal Health Services v. U.S. ex rel. Escobar, the defendant moved for reconsideration, arguing that the relator’s allegations failed Universal Health’s two-part test for falsity and that the ICB was not material under the test articulated in Universal Health. The court held that Universal Health did not stipulate a two part test, and that Universal Health did not affect the Ninth Circuit’s holding in Hendow, thus, compliance with the ICB remained material to the government’s payment decision and summary judgment was not warranted.  The defendant moved to certify the aforementioned order for interlocutory appeal for four questions: (1) “whether Universal Health’s ‘two conditions’ are necessary conditions for liability”; (2) “whether a failure to comply with the ICB automatically causes a loss of institutional eligibility”; (3) whether Hendow remains good law; and (4) given the DOE’s past practice, have Universal Health’s materiality standard has been met.

The court certified the defendant’s motion for interlocutory appeal on all of defendants’ questions except whether Universal Health’s materiality standard was satisfied considering the DOE’s past practice, explaining that the question was not a “question of law.”  The court noted that the remaining questions were suitable for interlocutory appeal, as the question of whether  Universal Health created a two-part test for falsity was treated differently among the district courts and the remaining questions constituted issues of law on which reasonable jurists could disagree.

G. Mortgage Fraud


U.S. ex rel. Jacobs v. Bank of Am. Corp., 2017 WL 2361943 (S.D. Fla. Mar. 21, 2017)

Holding: The United States District Court for the Southern District of Florida denied the defendants’ motion to dismiss the relator’s mortgage fraud claims pursuant to the public disclosure bar, and found that the relator plead his claims with sufficient particularity under Rule 9(b).

The relator, an attorney who practiced foreclosure defense and consumer protection, brought a qui tam suit against several mortgage banks alleging that they violated the False Claims Act by submitting fraudulent documentation to courts in order to receive federal funds in the form of mortgage insurance.  The relator alleged that the defendants falsified transactional documents through use of a surrogate to sign endorsements and mortgage assignments, and later presented these falsified documents to foreclosure courts.  The relator also alleged that the defendants violated the reverse false claims provision of the FCA by making false statements when signing documents in connection with a government investigation and consent judgment certifying their compliance with The Department of Housing and Urban Development servicing standards and regulations, knowing that they did not intend to perform as promised.  He alleged that after signing the certifications, the defendants litigated foreclosure cases relying on endorsements that were robo-signed and submitted false statements and testimony in connection with the claims in order to continue to receive federal funds to which they were not entitled.  The relator also alleged that the defendants violated the FCA by falsely certifying compliance with FHA regulations for mortgage insurance involving foreclosures obtained by submitting fraudulent documents.  The defendants moved to dismiss, arguing that the relator’s claims were precluded by the public disclosure bar.  The defendants also argued that the relator failed to plead fraud with adequate particularity under Rule 9(b) or state an claim according to Rule 12(b)(6).

The court denied the defendant’s motion to dismiss. The court found that although the relator’s claims were publicly disclosed in an article covering the government investigation and consent judgment, he qualified as an original source.   The court explained that the relator had independent knowledge of defendants’ conduct after entering into the consent judgment based on his own experience in litigating foreclosure cases.  Further, the court found that the relator materially added to the publicly disclosed information.  The court also denied the defendants’ motion to dismiss pursuant to Rule 9(b) and Rule 12(b)(6), finding that the relator adequately pled his reverse false claims allegations.  The court observed that the relator alleged the defendants had an obligation to pay the federal government, and that the defendants made false statements in contravention of the consent judgment by using rubber-stamped endorsements on promissory notes.    The court also found that the relator sufficiently alleged defendants’ knowledge of the falsity by pleading facts that gave rise to a reasonable inference that the defendants signed the consent judgment with the intent to continue making false claims.  Additionally, the court found that the relator sufficiently alleged materiality, explaining that there was “little question” that “had the government known the defendants would continue to violate” FHA regulations, “it might have crafted a different consent agreement or, possibly, chosen not to agree to any consent judgment.”   The court also found that the relator adequately pled his implied false certification claims, rejecting the defendants’ argument that the promissory notes obtained by submitted the rubber-stamped endorsements were not false for purposes of the FCA because they did not convey marketable title.  Rather, the court found that it was plausible that the promissory notes did convey marketable title.  The court also rejected the defendants’ arguments that the relator failed to plausibly allege knowing violations of the False Claims Act and the materiality of those claims to the government’s decision to pay.  The court explained that the relator plausibly alleged facts giving rise to a reasonable inference that the defendants knowingly submitted claims that falsely certified compliance with the “good marketable title requirement.”  The court found that that the defendant’s use of fraudulently signed promissory notes to foreclose on properties and, thereafter, collect FHA mortgage insurance, was material because it would have a “natural tendency” to influence the government’s decision to pay.


U.S. v. Quicken Loans Inc. 239 F.Supp.3d 1014 (E.D. Mich. Mar. 9, 2017)

Holding: The United States District Court for the Eastern District of Michigan granted in part and denied in part the defendant’s motion to dismiss the government’s mortgage fraud claims, finding that some of the claims were time-barred, and that the government failed to state a claim under Rule 12(b)(6) as to some claims.  The court also found that the government properly calculated actual damages.

The federal government brought a False Claims Act suit against a mortgage lender alleging it knowingly approved loans which violated Fair Housing Act (FHA) regulations and submitted claims for payments on those loans after they defaulted.  The government alleged that the defendant falsified information submitted electronically to the Department of Housing and Urban Development (HUD) in order to receive approval for otherwise-ineligible loans in order to receive FHA funds through the Direct Insurance Lender (DEL) program.  The government also alleged that the defendant inappropriately solicited specific mortgage values from appraisers in violation of FHA guidelines.  Further, the government alleged that the defendant improperly established a process whereby mortgage underwriters could request that management grant an exception for loans unable to meet underwriting requirements. The government also alleged that the defendant intentionally misreported and inflated prospective borrowers’ income in order to issue large loans to unqualified borrowers and certified that the issued loans were eligible for FHA insurance, even though income data was calculated and reported in violation of regulations.  The government alleged that the defendant’s underwriters manipulated information submitted electronically in order to obtain favorable decisions on prospective mortgages’ eligibility for FHA insurance.  The government claimed the defendants’ employees manipulated the electronic submission system used to check FHA insurance eligibility “by entering hypothetical data in order to determine the minimum amount of a given variable” needed for approval.  The government also alleged that the defendant “ignored obvious red flags” indicating that borrowers would be unable to make mortgage payments on their FHA-insured mortgages.  The government claimed that the defendant fraudulently certified these loans as compliant with FHA guidelines, and that the defendant’s submissions led the government to reimburse the defendant for the value of the defaulted loans in violation of the FCA.  The defendant moved to dismiss the government’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b). The defendant also moved to dismiss some of the government’s claims as time-barred.

The court granted in part and denied in part the defendant’s motion to dismiss.  First, the court found that all allegations related to claims submitted before April 23, 2009 were time-barred, and granted the defendant’s motion to dismiss for those claims.  Next, the court rejected the defendant’s argument that the government did not sufficiently alleged scienter with respect to its claims that the defendant inflated the value of the properties in submissions to HUD in order to induce HUD to approve “more and larger FHA-insured loans,” explaining that the government properly alleged that the defendant knew it was submitting false information to HUD, and that such “value-appeals” were “unambiguously prohibited by HUD at the time the loans were made.”  The court noted that the defendant received notice that its practices were illegal, that the statute was not ambiguous, and that the defendant’s unreasonable interpretation of the statute satisfied the “reckless disregard” standard for liability because the defendant “ran an unjustifiably high risk of violating FHA requirements.”  The court similarly denied the defendant’s motion to dismiss with respect to the government’s claims arising from the defendant’s management-exception process.  The court found that the government clearly alleged the fraud scheme and that the defendant “had knowledge of this management exception process.”  The court also noted that the examples proffered by the government “illustrate underwriters requesting, and receiving, management exceptions for their loans.”  The court also denied the defendant’s motion to dismiss the government’s claims related to the miscalculation of income, noting that multiple errors, whether intentional or not, were present in the submissions, and that errors and omissions in the data “allow[ed] for the reasonable inference that the underwriter acted with reckless disregard.”  However, the court granted the defendant’s motion to dismiss government claims relating to alleged manipulation of data, but denied it as to “red flags.”  The court found that the government failed to prove scienter with regard to the defendant’s alleged manipulation of data, explaining that the government did not allege that the defendant knowingly manipulated the data as defined by FHA regulation, explaining that the government did not allege that data entered was “untrue, incomplete, or inaccurate” in violation of HUD requirements.  Conversely, the court found that the government properly pled its claims that the defendant ignored red flags, finding that it sufficiently alleged “due diligence” was required by FHA regulation, and that in the government plausibly stated claims that the defendant falsely certified the integrity of the data submitted electronically.  Additionally, the court found that the government plausibly alleged materiality, and that the defendant “knew its noncompliance with FHA’s certification requirement was material to the government’s payment decision.”  The court adopted a holistic approach for determining materiality, and found that the government’s allegations supported an inference that the FHA would not have insured the loans at issue in this case had it known of the defendants’ noncompliance with mortgage underwriting requirements.  Finally, the court rejected the defendant’s argument that the government did not sufficiently allege causation with respect to damages, explaining that the government’s factual allegations supported “an inference that it was reasonably foreseeable that the false claim would result in the default of the mortgage loan.”  The court also stated that questions of proximate cause and foreseeability remain questions for the jury in the absence of incontrovertible facts or inferences.

 

U.S. ex rel. Szymoniak v. Am. Home Mortg. Serv., Inc. 679 F. App’x 299 (4th Cir. Feb. 16, 2017)

Holding: The United States Court of Appeals for the Fourth Circuit upheld the district court’s decision granting the defendants’ motion to dismiss the relator’s mortgage fraud claims for failure to plead fraud with particularity under Rule 9(b).

The relator, an attorney who defaulted on a mortgage on her Florida home in 2008, brought a qui tam suit against several trustees and servicers of mortgage-backed securities trusts alleging that the defendants violated the False Claims Act by forging mortgage assignment documents.  The relator alleged that the defendants charged the government for custodial services and filing fees related to falsified documents or fraudulent assignments and sold the government fraudulent mortgage-backed securities using false assignments to apply for payments from The Department of Housing and Urban Development (HUD) through the Federal Housing Administration’s (FHA) mortgage assurance program.  The defendants moved to dismiss the relator’s claims and the United States District Court for the District of South Carolina granted the motion for failure to plead fraud with particularity under Rule 9(b).  The relator appealed the decision to the Fourth Circuit.

The circuit court upheld the decision of the lower court, finding that while the relator alleged an elaborate fraudulent scheme, she failed to sufficiently allege that the scheme that resulted in the submission of false claims to the federal government.  The court rejected the relator’s argument that she was only required to identify “the who, what, where, when, and how” of a fraud as opposed to individual false claims, explaining that the relator must identify “specific false claims or allege a scheme that necessarily resulted in the submissions of false claims” (emphasis in original).

 

U.S. ex rel. Brown v. BankUnited Trust, 235 F.Supp.3d 1343 (S.D. Fla. Jan. 30, 2017)

Holding: The U.S. District Court for the Southern District of Florida granted the defendants’ motion to dismiss the relators’ claims that the defendants fraudulently induced the government to purchase legally deficient mortgage-backed securities, finding that the relators’ claims were precluded by the public disclosure bar.

The relators brought a qui tam action against a savings and loan institution and its affiliates alleging that the defendant violated the False Claims Act by fraudulently inducing the government into purchasing mortgage-backed securities that included missing or forged assignments and were not properly negotiated or endorsed.  The relators alleged that they discovered the defendants’ fraudulent conduct through “personal and private investigations” during foreclosure proceedings on the relators’ refinanced mortgage and also through personally witnessing the conduct during the course of one relator’s employment with a competitor of the defendants.   The defendants moved to dismiss the relators’ allegations, arguing that the relators’ claims were precluded by the public disclosure bar.

The court granted the defendants’ motion to dismiss.  The court observed that the relators’ complaint paraphrased or inserted verbatim paragraphs from a FCA suit filed in another district.  The court also noted that the relators’ explicitly relied on other publicly disclosed information obtained through requests for information from the government to form their exhibits and allegations.  Further, the court concluded that the relators could not qualify as original sources, explaining that their purported extensive background experience may have demonstrated that the relators could understand the public disclosures, but not that they possessed knowledge independent of the public disclosures.  Moreover, the court rejected the relators’ conclusory arguments that they “were privy to “nonpublic information.”  The court explained that the relators were never employed by the defendants and that one relator’s knowledge gained through employment with a competitor was not considered direct knowledge of the defendants’ conduct.

H. Grant Fraud


U.S. ex rel. Brinkley v. Univ. of Louisville, 2017 WL 210244 (W.D. Ky. Jan. 17, 2017)

Holding: The U.S. District Court for the Western District of Kentucky granted the defendants’ motion to dismiss the relator’s grant fraud and retaliation allegations, finding that the defendants were arms of the state. 

The relators brought a qui tam action against the University where they were formerly employed, its research foundation, and individual researchers, alleging that the defendants violated the False Claims Act by fraudulently obtaining research grants from the federal government and terminating the relators in retaliation for complaining about the alleged conduct.  The defendants moved to dismiss the relators’ allegations, arguing that they were arms of the state not subject to FCA liability.

The court granted the defendants’ motion to dismiss, finding that all four Ernst factors for determining whether an entity is an arm of the state indicated that both the University and its Research Foundation qualified as arms of the state.  The court explained that because state statutes indicated that the state was potentially liable for any judgment against the University and the research foundation’s funds belonged to the University, the defendants met the “foremost factor” in determining immunity under the Ernst factors.  Furthermore, the court found that because the University was subject to state control, the Research Foundation’s board was appointed by the governor, the state had veto power over some University actions, and “higher education” fell under the purview of the state, the University and Research Foundation further qualified as arms of the state.  Next, the court found that because Congress did not make it “unmistakably clear” in the text of the FCA that it intended to abrogate states’ Eleventh Amendment immunity, the defendants were also immune to the relators’ retaliation claims.  Lastly, the court dismissed the relators’ claims against the individual researcher defendants, reasoning that though the complaint was unclear as to whether the individuals were being sued in their official or individual capacities, the relators did not allege any facts to support individual liability, and an official-capacity suit was effectively against the state, and thus precluded.

I. Higher Education Fraud


U.S. ex rel. Jajdelski v. Kaplan, Inc. 684 Fed.Appx. 660 (9th Cir. Mar. 22, 2017)

Holding: The United States Court of Appeals for the Ninth Circuit affirmed the ruling of the district court granting the defendant’s motion for summary judgment on the relator’s higher education fraud claims, finding that the relator failed to provide details of any false claims.

The relator brought a qui tam suit against the for-profit college where she was formerly employed alleging they used “phantom students,” students that were listed but not actually enrolled, on enrollment forms to induce additional student aid funds from the government in violation of the False Claims Act.  The United States District Court for the District of Nevada granted the defendant’s motion for summary judgment, and the relator appealed the district court’s ruling to the Ninth Circuit.

The circuit court upheld the findings of the district court, explaining that “there was no genuine dispute of material fact” precluding summary judgment because the relator “failed to detail any particular false claim” or provide detailed circumstantial evidence of a false claim.

 

U.S. ex rel. Lynn v. Delta CareerEduc. Corp., 2017 WL 2455210 (D.Ariz. Mar. 15, 2017)

Holding: The United States District Court for the District of Arizona denied the defendant’s motion to dismiss the relators education fraud claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam suit against the for-profit college where he was formerly employed alleging it violated the False Claims Act by violating the terms of its Program Participation Agreement (PPA) and falsely certifying compliance with Title IV regulations in order to obtain government funds.  The relator alleged that the defendant knowingly violated the “incentive compensation ban,” a regulation prohibiting employees from earning commission based on student enrollment. The relator also alleged the defendant falsely certified compliance with a regulation banning on “substantial misrepresentation” by collecting information on prospective military recruits from a third-party website.  The defendant moved to dismiss for failure to state a claim under Rule 9(b) and failure to plead fraud with particularity under 12(b)(6).

The court denied the defendant’s motion to dismiss.  The court found that the relator sufficiently pled his claims related to violations of the incentive compensation ban.  The court explained that the allegations that the defendants provided prizes, parties, promotions, and overtime to recruiters who met or exceeded their quota of enrollments constitute violations of the ban.  The court also found that the relator sufficiently alleged scienter, noting that the relator did not need to “prove specific intent to defraud.”  Additionally, the court found that the relator sufficiently pled materiality, explaining that “the statute, regulation, and the PPA all explicitly condition[ed] participation and payment…on compliance with the incentive compensation ban.”  The court further found that the relator sufficiently alleged that the defendant engaged in “substantial misrepresentations.” The court explained that substantial misrepresentations included statements made in advertising or promotional materials, and noted that the PPA contained language that constituted its certification of compliance with the substantial misrepresentation regulation. The court also found that the relator sufficiently alleged materiality and scienter on the same basis as in his other claims.

 

U.S. v. FastTrain II Corp., 2017 WL 606346 (S.D. Fla. Feb. 15, 2017)

Holding: The United States District Court for the Southern District of Florida granted the government’s motion for summary judgment on its claims that the defendants defrauded the Department of Education, holding that a defendant’s prior criminal conviction estopped him from contesting liability in the FCA cause of action.

The federal government brought an action under the False Claims Act against a for-profit education company and its president alleging that the defendants falsified information and submitted false claims to the Department of Education (DOE) in order to participate in federal student aid programs authorized under Title IV.  The government also alleged that the defendants coached students to lie on their Free Application for Federal Student Aid (FAFSA) forms when applying for federal loans.  The government alleged that the defendants improperly received millions of dollars in funding from Title IV programs as a result of their scheme.  In a separate criminal case involving the same claims, the president of the company was convicted on one charge of conspiracy to steal government funds as well as twelve counts of theft of government funds.  The government filed a motion for summary judgment, arguing that the president’s conviction estopped him from denying any of the elements of the fraudulent claims alleged in the FCA action.  The government also argued that the defendants’ false claims were material to the government’s willingness to pay. The defendants filed a cross-motion for summary judgment, arguing that the government’s claims were precluded by the public disclosure bar and failed to meet the particularity requirements of Rule 9(b).

The court granted the government’s motion for summary judgment and denied the defendants’ cross-motion.  First, the court rejected the defendants’ argument that the government’s claims were precluded by the public disclosure bar, ruling that the allegations were never disclosed publicly.  Second, the court found that the government’s allegations met the particularity requirements of Rule 9(b), explaining that the government addressed each fraudulent act in sufficient detail to meet the pleading standard.  Third, the court found that the president’s prior conviction estopped him from contesting the government’s claims, rejecting the defendants’ argument that estoppel did not apply because the elements of his criminal charges were different from the elements of the FCA claims.  The court explained that preclusion applied where the essential elements of the offenses involved the same transaction.  Finally, the court awarded damages for the “amount of federal student aid [the defendants] actually stole through its false claims and false certifications,” trebled, and awarded the government the statutory maximum civil penalty of $11,000 per claim for 924 claims.

J. Risk-Adjustment Fraud


U.S. ex rel. Ramsey-Ledesma v. Censeo Health, LLC, 2016 WL 5661644 (N.D. Tex. Sept. 30, 2016)

Holding: The U.S. District Court for the Northern District of Texas denied the defendants’ motion to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6) in part and granted it in part.

The relator brought a qui tam suit against her former employer, Censeo, which provided risk adjustment services to various Medicare Advantage (“MA”) organizations, as well as its contracted MA organizations, and associated individual defendants, alleging that the defendants presented or caused to be presented false claims to the government through unsupported diagnostic codes and falsely certified the accuracy of risk assessment data. The relator alleged that the defendants conspired to incentivize and pressure unqualified physicians to diagnose unsupported high-risk conditions and instruct inexperienced medical coders to enter and generate unsupported diagnoses so that the MA organizations’ risk assessment data would cause Medicare to make higher payments to the organizations. Additionally, the relator alleged that the MA organizations failed to return the overpayments they received as a result of false risk assessment data, in violation of the FCA’s reverse false claims provision. The defendants moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court denied the defendants’ motion to dismiss in part and granted it in part. The court found that the relator properly pled her presentment, conspiracy, and false certification claims against Censeo, noting that she alleged that she had first-hand experience as lead coder within the organization and alleged details about the scheme and the submission of the false claims, including several representative examples. The court rejected the defendants’ argument that the relator failed to sufficiently plead falsity because her allegations were based on a physician’s clinical judgment, explaining that the relator alleged not that the diagnoses were false, but that the codes used to bill Medicare were not even based on a diagnosis, but were created by non-physician coders who were instructed to draw medical conclusions from assessment forms. The court further found that the relator properly pled that Censeo falsely certified that the risk adjustment data it submitted was accurate in violation of the FCA. The court also found that the relator sufficiently pled Censeo’s director’s involvement in the fraudulent scheme by alleging that she witnessed the director instructing coders to improperly determine codes, but only alleged conclusory allegations against the other individual defendants, failing to meet the requirements of Rule 9(b). Moreover, the court found that the relator sufficiently pled that one MA organization participated in the scheme by knowingly following Censeo’s directions to include the codes for unsupported diagnoses that it knew to be inaccurate in the risk adjustment data that it submitted to Medicare, explaining that the relator created a strong inference of the organization’s involvement by identifying individuals involved in the scheme by positions and titles in conjunction with personal knowledge of meetings and conferences. However, the court determined that the relator failed to sufficiently plead her claims against the other MA organization defendants, explaining that she did not provide specific content of the alleged meetings related to the fraud, and improperly lumped the defendants together. Furthermore, the relator failed to allege that the MA organizations violated the reverse false claims provision as she only alleged that they failed to return payments they already were not entitled to, which was not a separately actionable claim under the FCA.

K. Medical Necessity


U.S. ex rel. Petratos v. Genentech Inc., 2017 WL 1541919 (3rd Cir. May 1, 2017)

Holding: The U.S. Court of Appeals for the Third Circuit affirmed in part and reversed in part the district court’s decision to grant the defendants’ motion to dismiss the relator’s claims that the defendant caused the government to reimburse claims that were not medically necessary or reasonable. 

The relator brought a qui tam suit against the pharmaceutical manufacturer where he was formerly employed and against its affiliates, alleging that the defendants violated the False Claims Act by causing physicians to submit claims to Medicare for their cancer drug Avastin that were not medically reasonable or necessary.  Specifically, the relator alleged that the defendants suppressed data about the health risks of Avastin, causing physicians to prescribe the drug in greater doses and frequencies than they otherwise would have.   The U.S. District Court for the District of New Jersey granted the defendants’ motion to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6).  The relator appealed to the Third Circuit.

The circuit court affirmed the district court’s decision in part and reversed it in part.  The circuit held that the relator did not sufficiently plead materiality as clarified by Universal Health Services Inc. v. United States ex rel. Escobar because he failed to allege that the government would not have paid the claims had it known about the data suppression.  Further, the court clarified that the relevant inquiry into materiality was whether the government’s payment decision was affected by the misrepresentation in medical necessity cases, not whether the misrepresentation influenced physicians’ prescription decisions.  However, circuit court reversed the district court’s holding that if a drug is approved by the FDA and supported by the compendia, a relator could not argue that prescriptions for the drug were not “reasonable and necessary” and therefore not reimbursable by Medicare.  The circuit court rejected the district court’s conclusion that “‘reasonable and necessary’ is a determination made by the relevant agency, not individual doctors.”


U.S. ex rel. George v. Fresenius Med. Care Holdings, 2016 WL 5361666 (N.D. Ala. Sept. 26, 2016)

Holding: The U.S. District Court for the Northern District of Alabama granted the defendant’s motion for summary judgment on the relator’s claims that the defendant overbilled Medicare and denied the defendant’s motion to dismiss the relator’s retaliation claims.

The relator brought a qui tam suit against her former employer, a nation-wide operator of outpatient dialysis clinics, alleging that she witnessed its nurses double bill Medicare through improperly reenter single-entry drug vials, inefficiently administer medication and bill Medicare for the unnecessary waste, and unsafely shorten run-time of patients’ treatments to earn incentives for quickly moving patients through the clinic in violation of the False Claim Act. Additionally, the relator alleged that the defendant forced her to take a position with a reduced bonus and inability to receive future bonuses in retaliation for reporting potentially fraudulent conduct. The defendant moved for summary judgment.

The court granted the defendant’s motion in part. The court explained that the relator failed to identify an actual false claim submitted to the government or allege any double billing claims beyond mere speculation. Furthermore, the relator court found that the relator failed to allege unnecessary waste because she did not provide evidence that the defendant’s leadership institutionalized unnecessary waste or that nurses manipulated doses, as partial vials were medically reasonable and it was undisputed that the nurses administered the medication according to physician prescriptions. Additionally, though the court found that the relator demonstrated that decreased run-times occurred systematically and that a deviation that causes insufficient treatment is material to the government’s payment decision, the court determined that because the relator did not specify the amount of time the nurses shortened the run-times or what run-times were required, the court could only speculate about whether any deviation actually caused insufficient treatment. As to the relator’s retaliation claims, the court denied the defendant’s motion for summary judgment, explaining that a dispute of material fact existed as to whether the relator’s complaints about the fraudulent conduct constituted protected conduct, as well as whether her change in position constituted a demotion.

L. Medicaid Fraud


U.S. v. Dynamic Visions, Inc., 2016 WL 7115946 (D.D.C. Dec. 6, 2016)

Holding: The U.S. District Court for the District of Columbia granted the government’s motion for summary judgment on its allegations that a home health care provider and its owner submitted false claims to Medicaid for reimbursement.

The government brought an action under the False Claims Act alleging that a home health care provider and Isaiah Bongam, its sole owner and president, submitted claims to the government for reimbursement on services that did not comply with applicable regulations.  The government alleged that the defendants failed include “plans of care” in patient files or included plans of care in patient files that were not signed by qualified health care workers or were signed with forged signatures.

The court granted the government’s motion for summary judgment.  The court observed that the government offered the declarations of FBI agents who participated in the fraud investigation and that the declarations provided undisputed evidence that the defendant submitted claims containing forged plans of care.  Additionally, the court found that due to Bongam’s ownership interest in the corporation and the commingling of his personal funds with those of the company, a sufficient degree of unity existed to pierce the corporate veil and hold Bongam liable.


U.S. ex rel. Ruckh v. CMC II LLC, 2016 WL 7665187 (M.D. Fla. Dec. 1, 2016)

Holding: The U.S. District Court for the Middle District of Florida denied the defendant’s motion for summary judgment on relator’s Medicare and Medicaid billing fraud claims.

The relator brought a qui tam suit against the operator of skilled nursing facilities where she was formerly employed, alleging that the defendant violated the False Claims Act by fraudulently billing Medicaid and Medicare.  The relator alleged that the defendant fraudulently overstated the amount of therapy that it administered to patients, misrepresented patients’ medical conditions, and falsified records in order to obtain inflated reimbursements from the government.  The defendant moved for summary judgment, primarily arguing that the relevant regulations were not in effect during the alleged time period, the relevant regulations served only as a condition of participation, and the relator relied on unreliable expert testimony.

The court denied the defendant’s motion for summary judgment.  After noting the relator’s complaint provided little evidence, conclusory allegations, and lacked quantification, the court concluded that the defendant failed to demonstrate that there was no issue of material fact.  The court explained that if the realtor’s testimony was assumed admissible, it provides “at least somewhat more than no evidence,” which created some issue of material fact.

II. JURISDICTIONAL ISSUES 

A. Section 3730(b)(5) First-to-File Bar


U.S. ex rel. Brown v. Pfizer, Inc., 2017 WL 2691927 (E.D. Pa. June 22, 2017)

Holding: The U.S. District Court for the Eastern District of Pennsylvania granted the defendant’s motion for an interlocutory appeal on first-to-file and materiality questions.

The relators brought a qui tam action against a pharmaceutical manufacturer alleging the defendant misled the FDA in order to gain approval for its antifungal drug Vfend, and engaged in off-label marketing causing non-reimbursable claims for the drug to be submitted to the government in violation of the False Claims Act.  The relators also alleged that the defendant paid kickbacks to physicians in order to induce them to prescribe Vfend and caused claims tainted by those kickbacks to be submitted to the government in violation of the FCA.    The court denied the Pfizer’s motion to dismiss, and the company moved for an interlocutory review of three issues: 1) whether relators can meet the FCA’s materiality standard when the government continues to pay the claims despite knowledge of the relators’ allegations; 2) whether amending a complaint after an earlier-filed suit is dismissed can cure a first-to-file defect; and 3) whether the Medicare regulations Pfizer allegedly violated applied to Vfend even though it was not an anticancer drug.

The court granted the defendant’s motion for an interlocutory appeal. As to the first-to-file question, the court explained that there was a lack of controlling authority on whether amendment was sufficient to defeat a first-to-file defect, and that several district courts had a difference of opinion on the issue. The court also determined that there was a lack of controlling authority as to what constituted “knowledge” under the FCA’s materiality requirement such that the government could be said to have paid the claims despite actual knowledge of the alleged fraud.  Finally, the court concluded that there was also a lack of binding precedent as to the question of whether the cited Medicare regulations applied to Vfend.


U.S. ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 686 Fed.Appx 23 (2nd Cir. Apr. 4, 2017)

Holding: The United States Court of Appeals for the Second Circuit upheld the district court’s decision holding that the first-to-file bar was not jurisdictional and its decision to dismiss the relator’s complaint with prejudice for failure to state a claim and its issuing of Rule 11 sanctions was justified. 

The relator brought a qui tam suit against more than 60 companies —mainly liability insurance companies — alleging systematic noncompliance with statutory obligations to reimburse Medicare in violation of the False Claims Act.  The United States District Court for the Western District of New York dismissed the relator’s complaint with prejudice as a Rule 11 sanction, finding that he had no knowledge of whether all of the named defendants participated in the fraud.  Alternatively, the court found that with respect to some of the defendants, even if the case had not been dismissed as a sanction, it would have been dismissed pursuant to the first-to-file bar because a related complaint was pending when the relator filed his complaint.  The relator then appealed to the Second Circuit, arguing that dismissal as a Rule 11 sanction was not warranted.  Some of the relators also argued on appeal that the first-to-file bar was jurisdictional, thus the court did not have jurisdiction over the case anyway, and it was correctly dismissed.

The court upheld the decision of the district court.  The court explained that the district court judge did not err in finding that the relator’s allegations were made with “subjective bad faith” and that dismissing his complaint with prejudice was justified.  The court noted that the relator’s explanation for his erroneous claim that he had personal knowledge of all the defendants’ involvement in the scheme were inconsistent and did not demonstrate that he was not acting in bad faith.  In addition, the court determined that the first-to-file bar was not jurisdictional, and therefore it had jurisdiction over the case.


U.S. ex rel. Carson v. Manor Care, Inc. 851 F.3d 293 (4th Cir. Mar. 16, 2017)

Holding: The United States Court of Appeals for the Fourth Circuit affirmed in part and vacated in part the district court’s decision to grant the defendants’ motion to dismiss the relator’s healthcare fraud claims pursuant to the first-to-file bar, finding that the relator’s substantive FCA claims were precluded by the first-to-file bar but that the bar did not apply to retaliation claims.

The relator brought a qui tam suit against the healthcare services provider where he was formerly employed, as well as its affiliates, alleging they violated the False Claims Act by overbilling federal and state governments for medical services.  The relator also alleged that he was fired after internally reporting the alleged overbilling, in violation of FCA’s anti-retaliation provisions.  The relator alleged that the defendant intentionally overbilled for therapy services, billed for therapy services not provided, billed non-skilled services as skilled therapy, and billed for unnecessary or harmful treatment.    His case was consolidated with another related qui tam case brought in the same district, and the federal government elected to intervene.  The defendants moved to dismiss the relator’s claims, arguing that they were precluded by the first-to-file bar.  The United States District Court for the Eastern District of Virginia granted the defendants’ motion to dismiss, and the relator appealed to the Fourth Circuit.

The Fourth Circuit affirmed in part and vacated in part the decision of the district court.  The court explained that the relator’s claims were “essentially the same” as those found in a previous qui tam action.   The court rejected the relator’s attempt to distinguish his complaint by “arguing he [was] the sole relator to argue [the defendants] ‘improperly increased their billing to government-funded health programs’” through use of particular procedures, explaining that the previous complaint had already alleged that the defendants overbilled for unnecessary procedures.  The court also rejected the relator’s argument that his complaint should not be dismissed under the first-to-file bar because it was consolidated with the previous action and that the government intervened, explaining that the FCA did not make an exception to the first-to-file bar for consolidated complaints.  However, the circuit court overturned the district court’s decision to grant the defendants’ motion to dismiss the relator’s retaliation claim, finding that the first-to-file bar had “no relation to a claim for retaliation,” and that retaliation claims stood independently and dealt with an entirely different subject matter. The circuit court noted that allowing the first-to-file bar to apply to FCA retaliation claims would undermine the effectiveness and intent of the FCA, causing relators to hesitate to report fraud to their employers and the Government because, if another suit has already been filed, they would not have any recourse for retaliatory actions by their employers.


U.S. ex rel. Berkowitz v. Automation Aids, 2017 WL 1036575 (N.D. Ill. Mar. 16, 2017)

Holding: The United States District Court for the Northern District of Illinois granted the defendants’ motions to dismiss the relator’s claims that the defendants sold the government noncompliant goods under their government contracts for failure to plead fraud with sufficient particularity per Rule 9(b).  One defendant also moved to dismiss under the first-to-file bar and the court denied that motion.

The relator, the president of a contractor selling office supplies to the government, brought a qui tam suit against the defendants, competing vendors in the same industry, alleging they violated the False Claims Act by making false statements about products they sold to the General Services Administration (GSA) pursuant to their government contracts.  The relator alleged that the defendants impliedly certified their products complied with federal vendor regulations even though some products violated “country of origin” restrictions. The relator claimed he determined this by comparing lists of products’ countries of origin with data on products sold to the government by other vendors.  The relator argued that, because contracts between the government and private vendors contained a “Trade Agreements Certificate,” the defendants must have not identified non-complaint products’ true country of origin on the certificate before making the sale to the government.  The defendants moved to dismiss the claims for failure to plead fraud with sufficient particularity under Rule 9(b).  One defendant, Aprisa, also moved to dismiss pursuant to the first-to-file bar.

The court granted the defendants’ motions to dismiss, finding that the relator failed to meet the requirements of Rule 9(b).  Though the court noted that the relator provided evidence that gave rise to the reasonable inference defendants sold good from non-designated nations to the government, the court found that the relator’s allegations failed for lack “particular allegations on specifically who engaged in the fraud, and what they did to execute it.”  The court also found the relator did not sufficiently allege scienter, explaining that the standard for a “knowing” violation required one individual in each company know all details of the fraud scheme.  The court rejected the relator’s argument that GSA notifications of defendants’ potential non-compliance with the Trade Agreements Act were suggestive of fraud.  Because “those notices were based on review of catalogs, not submitted claims,” the court reasoned “inferring fraud from those general notices [was] not reasonable” within the contemporary regulatory framework.  However, the court denied Aprisa’s motion to dismiss pursuant to the first-to-file bar, finding that the bar was not jurisdictional  and therefore a Rule 12(b)(1) motion to dismiss was the “wrong vehicle to make the argument.”    The court found that even if the defendant had properly moved under Rule 12(b)(6), it failed to establish the relator’s claims were precluded by the first-to-file, explaining that the relator’s claims were sufficiently different from a previously filed qui tam action.


U.S. ex rel. Doe v. Lincare Holdings, Inc., 2017 WL 752288 (S.D. Miss. Feb. 27, 2017)

Holding: The United States District Court for the Southern District of Mississippi granted in part and denied in part the defendant’s motion to dismiss the relator’s Medicare overbilling claims, finding that the relator’s claims were precluded by the first-to-file bar and that he failed to plead fraud with particularity under Rule 9(b).  The court also found that the relator properly pled his retaliation claim, but held that he was required to disclose his identity or his retaliation case would be dismissed.

The relator brought a qui tam action as a “John Doe” against the national respiratory care provider where he was formerly employed alleging that the defendant submitted fraudulent bills to the government in violation of the False Claims Act.  The relator alleged that the defendant falsified and manipulated arterial oxygen saturation tests in order to sell patients oxygen and other services that they did not need, and then billed Medicare and Medicaid for those services.  The relator alleged that the office manager and a nurse employed by the defendant instructed employees to administer arterial oxygen saturation tests in a manner which would produce false results.  The relator also claimed he was terminated after reporting said conduct to the defendant’s internal compliance department, and that his employer pretextually cited “insubordination” and “causing discord” as the reasons for his termination.  The defendant moved to dismiss, arguing that the relator’s claims were precluded by the FCA’s first-to-file bar.  The defendant claimed that the relator’s allegations were duplicative of those in a pending case in the United States District Court for the District of Massachusetts.   The defendant also moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The defendant also argued that the relator should be required to disclose his identity in order to proceed and the federal government concurred with this point in a Statement of Interest filed with the court.

The court granted in part and denied in part the defendant’s motion to dismiss. The court found that the relator’s substantive FCA claims were precluded by the first-to-file bar because his claims were substantially similar to those in the Massachusetts case.  The court rejected the relator’s argument that the fraudulent scheme he alleged was different because he provided additional details about how the defendant instructed patients to take unnecessary tests, finding that the complaints were based on the same underlying facts.  The court also found that even if his claims were not precluded by the first-to-file bar, the relator failed to meet the particularity requirements of Rule 9(b) because he failed to allege the “who, what, when, where, and how” regarding the submission of the false claims. Rather, the court observed, the relator only alleged “a general scheme by which false claims could have eventually been submitted” (emphasis in original).  Conversely, the court denied the defendant’s motion to dismiss the relator’s retaliation claim, explaining that he had adequately pled the elements of a FCA retaliation claim by alleging facts regarding his internal reports about the non-compliant conduct twice and his termination after the second instance.  However, the court held that the relator was required to reveal his identity in order to pursue his retaliation claims, explaining that Rule 10(a) required the names of all parties be included in the complaint, and that the relator failed to “demonstrate a substantial privacy right” or any “facts, circumstances, or legal authority” which justified abandoning the presumption of openness in the case.


U.S. ex rel. Denis v. Medco Health Solutions, Inc., 2017 WL 63006 (D. Del. Jan. 5, 2017)

Holding: The U.S. District Court for the District of Delaware granted the defendant’s motion to dismiss the relator’s false claims allegations stemming from alleged violations of its Corporate Integrity Agreement, finding that the relator’s claims were precluded by the public disclosure bar and the first-to-file rule.

The relator brought a qui tam suit against the pharmacy benefit manager where he was formerly employed, alleging that the defendant knowingly manipulated the terms of its Corporate Integrity Agreement (“CIA”) in order to continue its fraudulent conduct, and that the defendant further violated the CIA and the False Claims Act by engaging in the same fraudulent conduct that initially resulted in imposition of CIA.  The relator also alleged that the defendant violated the Anti-Kickback Statute by improperly soliciting and receiving rebates in exchange for favoring certain drugs and by disguising the rebates in order to avoid sharing the discount with clients in violation of Medicare’s “Best Price” requirements.

Before the relator filed suit, several civil complaints and media reports had disclosed similar allegations.  The government intervened in the earlier suits, and the settlement with the defendant in those cases prompted the CIA.  Additionally, when the relator filed suit, another action was pending and alleged similar fraudulent conduct.  The government subsequently intervened in that matter for purposes of settlement and the case was dismissed.  The defendant moved to dismiss the relator’s allegations arguing that the  relator’s claims were precluded under the public disclosure bar and the first-to-file rule, and further that the relator failed to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss.  First, the court concluded that the relator could not overcome the public disclosure bar by alleging that a different federal program was affected by the fraud, or that the fraud occurred during a different time period or involved an additional drug.  The court explained that the public disclosure bar did not require allegations to have the same statutory basis and barred complaints that were “even partly based” upon previous disclosures.    Further, the court observed that allegations of fraud that continued into a time period different from the period that was publicly disclosed were “substantially similar” to the publicly disclosed allegations and thus barred by those public disclosures.   Next, the court concluded that the relator was not an original source because his allegations were based on second-hand information or asserted on information and belief.  Finally, the court found that the relator’s claims were also barred by the first-to-file rule.  The court determined that although the case pending when the relator filed his complaint did not name the same defendant, the pending case was related to the relator’s action because it identified the defendant named in the relator’s case as a participant in the fraud and provided sufficient information for the government to identify the defendant and alleged fraud.  Additionally, the court held that amendment could not cure a jurisdictional defect under the first-to-file rule and dismissed the relator’s complaint without prejudice to allow refiling.


U.S. ex rel. Palmieri v. Alpharma, Inc., 2016 WL 7324629 (D. Md. Dec. 16, 2016)

Holding: The U.S. District Court for the District of Maryland granted the defendants’ motion to dismiss the relator’s off-label marketing allegations, finding that the claims were barred by the FCA’s first-to-file rule.

The relator brought a qui tam suit against the pharmaceutical manufacturer where he was formerly employed as a sales representative, alleging that the defendant violated the False Claims Act by promoting off-label prescribing of its pain relief skin patch.  Four days before the relator filed his complaint, a suit containing allegations regarding the same fraudulent scheme was filed and remained pending when the relator first filed suit.  The U.S. District Court for the District of Maryland initially dismissed the relator’s claims with prejudice for failure to plead fraud with particularity under Rule 9(b).  On appeal, the U.S. Court of Appeals for the Fourth Circuit reversed and remanded to the district court, concluding that the district court erred in dismissing the relator’s complaint with prejudice under Rule 9(b) without addressing whether the relator’s claims were barred by the first-to-file rule or public disclosure bar.

The district court found that the relator’s claims were barred by the first-to-file rule.  The court explained that because the case filed prior to the relator’s suit alleged the same material facts and was pending when the relator’s case was filed, the relator’s claims were precluded by the first-to-file bar.  The court noted that because the first-filed case had been dismissed, the relator could refile.


U.S. ex rel. Cunningham v. Millennium Labs., 2016 WL 4717783 (D. Mass. Aug. 19, 2016) 

Holding: The U.S. District Court for the District of Massachusetts denied the relator’s cross-claim seeking a declaratory judgment that he was entitled to the relator’s share, finding that claims were barred on first-to-file grounds. 

Eight relators brought separate qui tam cases against the defendant, alleging that the defendant submitted claims to the government for excessive and medically unnecessary testing. The government intervened on three of the cases and reached a settlement agreement, in which seven of the eight relators joined and agreed to dismiss their actions and apportion a 15% relators share between them. One of the relators, McGuire, filed a cross-claim against the others, seeking a declaratory judgment that he was entitled to the relators share, in response four other relators moved to dismiss the cross-claim for lack of subject matter jurisdiction and failure to state a claim pursuant to Rule 12(b)(6).

The court granted the four relators’ motions to dismiss, finding that the McGuire’s cross-claim was barred by the first-to-file bar. First, the court rejected McGuire’s argument that his claim should not be barred because it is not an affirmative FCA claim, explaining that the bar applies to all “related actions,” and McGuire did not demonstrate how his claim was not a “related action.” Secondly, the court noted that the first-to-file bar is applicable even though the barring claim is not presently a pending action, because it held “pending” status at the time McGuire filed his complaint. Lastly, the court determined that McGuire’s inclusion of the defendant’s revised incentive and billing policies did not comprise a “wholly different fraud” because the preceding relator’s complaint alleged the essential facts of the fraud that would allow the government to discover the changed policies upon investigation.

B. Section 3730(e)(4) Public Disclosure Bar and Original Source Exception


U.S. ex rel. Aaron v. Durrani, 2017 WL 2443405 (S.D. Ohio June 6, 2017)

Holding: The U.S. District Court for the Southern District of Ohio granted the defendant’s motion to dismiss the relators’ medical necessity claims pursuant to the public disclosure bar.

The relators brought a qui tam suit against a surgeon who performed spinal surgeries on them,  his corporation, and a hospital where he formerly practiced, alleging that the defendants billed Medicare and Medicaid for medically unnecessary surgeries performed without consent, in violation of the False Claims Act.  The hospital defendant moved to dismiss the relator’s allegations, arguing that the relators’ allegations were publically disclosed in state court complaints, a complaint filed by one relator’s parents, and a website news story.  The defendant also moved to dismiss the relators’ complaint for failure to state a claim under Rule 12(b)(6) and for seal violations.

The court granted the defendant’s motion to dismiss.  The court found that though the public disclosures did not specifically discuss Medicare and Medicaid fraud, “so long as the government was on notice of [the doctor’s] underlying fraud with regards to the surgeries, it was on notice that this fraud could potentially extend to the billing procedures used for those surgeries.”  Furthermore, the court concluded that the relators were not original sources because they could not gain independent or direct knowledge of claims submitted to the government merely by being a patient in a medical procedure.  In addition, the court held that even if the allegations were not barred by the public disclosure provision, the claims failed under Rule 9(b) because the relators did not identify any false claims actually submitted to the government or allege who submitted the claims, when they were submitted, what was submitted, or whether the defendants were reimbursed by the government.


U.S. ex rel. Amphastar Pharm. v. Aventis Pharma SA, 2017 WL 1947890 (9th Cir. May 11, 2017)

Holding: The U.S. Court of Appeals for the Ninth Circuit upheld the district court’s decision to grant the defendants’ motion to dismiss the relator’s claims pursuant to the public disclosure bar and reversed the district court’s decision denying the defendants’ motion for attorney’s fees.

The relator, a generic pharmaceutical firm, brought a qui tam suit against a competing pharmaceutical company, alleging that the defendant fraudulently obtained a patent for the drug enoxaparin, and then overcharged the government for prescriptions for the drug in violation of the False Claims Act.  The relator brought the qui tam suit after prevailing in a patent infringement suit brought by the defendant over enoxaparin.  The court in the patent litigation concluded that the defendant intentionally made material nondisclosures and false representations in its patent application.  The U.S. District Court for the Central District of California granted the defendants’ motion to dismiss, finding that the relator’s allegations were precluded by the public disclosure bar.  Subsequently, the district court denied the defendant’s motion for attorney’s fees, explaining that the defendants were not entitled to fees because they did not prevail on the merits.  The relator appealed the dismissal to the Ninth Circuit and the defendant cross-appealed the denial of attorney’s fees.

The circuit court affirmed the district court’s decision to dismiss the relator’s allegations and reversed the district court’s decision denying the defendants’ motion for attorney’s fees.  The court concluded that the relator’s allegations were precluded by the public disclosure bar, explaining that the relator’s allegations were either “nearly identical” to the allegations in the patent infringement case or could obviously be inferred from the previous litigation.  Further, the circuit court found that the district court did not commit reversible error in holding that the relator was not an original source of its claims, explaining that relator failed to offer sufficient factual proof to support its legal arguments that it had direct and independent knowledge of the alleged false claims.  The circuit court also determined that, notwithstanding the fact that the district court dismissed the case on jurisdictional grounds, it was permitted to award attorney’s fees if it determined that the relator’s case was frivolous or vexatious.


U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 2017 WL 1902159 (D. Nev. May 9, 2017)

Holding: The U.S. District Court for the District of Nevada denied the defendant’s motion to dismiss the relator’s medical necessity claims and granted the motion to dismiss the relator’s upcoding claims.

The relator brought a qui tam suit against her former employer, a children’s speech and physical therapy provider, alleging that the defendant violated the False Claims Act by billing the government for medically unnecessary services.  Specifically, the relator alleged that the defendant required therapists to unnecessarily treat every patient with all forms of therapy, recommend the highest number of therapy sessions, alter progress reports, refrain from discharging patients, and upcode bills by using the same code on all services.  The defendant moved to dismiss the relator’s claims, arguing that the relator failed to plead fraud with particularity under Rule 9(b) and failed to state a claim under Rule 12(b)(6).  The defendant also argued that the relator’s claims were precluded by the public disclosure bar.

The court denied the defendant’s motion in part and granted it in part.  The court denied the defendant’s motion to dismiss the relator’s falsified progress report and medical necessity claims, finding that they met the particularity requirements of Rule 9(b).  The court explained that it could be reasonably inferred from the relator’s allegations that the defendant’s policies caused the submission of materially false statements to the government and had an impact on the treatment provided to government beneficiaries.  The court further acknowledged that the relator properly pled that the defendant acted with reckless disregard for the truth.  However, the court determined that the relator’s upcoding claims were precluded by the public disclosure bar, explaining that those allegations were based substantially on the information disclosed during a public meeting of the Nevada State Board of Physical Therapy Examiners, which the court found was an “administrative hearing” for the purposes of the FCA’s public disclosure bar.  The court also found that the relator was not an original source of her claims because she failed to allege that she had a part in disclosing the information at the hearing.

 

U.S. ex rel. Ambrosecchia v. Paddock Labs., Inc., 2017 WL 1749677 (8th Cir. May 5, 2017)

Holding: The U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s decision to grant the defendants’ motion to dismiss the relator’s claims, finding that the relator’s allegations were precluded by the public disclosure bar.

The relator brought a qui tam suit against the pharmaceutical manufacturers where she was formerly employed, alleging that the defendants fraudulently reported reimbursement-eligible classification codes to the government for drugs that were ineligible for reimbursement in violation of the False Claims Act.  The U.S. District Court for the Eastern District of Missouri granted the defendants’ motion to dismiss the relator’s allegations, finding that the claims were precluded by the public disclosure bar. The relator appealed to the Eight Circuit.

The circuit court affirmed the district court’s decision.  First, the court rejected the relator’s argument that application of the public disclosure bar is a fact question reserved for summary judgment or a jury.  Next, the court concluded that the relator’s claims were publicly disclosed in various federal reports and in a previously unsealed qui tam action.  The court found that the relator was not an original source because she did not provide the government with information regarding her suit prior to the public disclosures and offered only “simple, conclusory allegations” regarding the nature of her purportedly independent knowledge.


U.S. ex rel. Lager v. CSL Behring, LLC, 2017 WL 1749669 (8th Cir. May 5, 2017)

Holding: The U.S. Court of Appeals for the Eighth Circuit upheld the district court’s decision to grant the defendants’ motion to dismiss the relator’s allegations that the defendants conspired to overcharge the government for prescription drugs pursuant to the public disclosure bar.

The relator brought a qui tam suit against the drug manufacturer where he was formerly employed, its parent corporation, and two pharmacies, alleging that the defendants conspired to inflate Average Wholesale Prices (AWPs) reported to the government and profited from the difference between the actual cost and reported AWPs by targeting sales to government beneficiaries in violation of the False Claims Act.  The U.S. District Court for the Eastern District of Missouri granted the defendants’ motion to dismiss the relator’s allegations under the public disclosure bar, observing that multiple government reports and several media sources publicly disclosed “all the essential elements of the relator’s claims.”  The relator appealed to the Eighth Circuit.

The circuit court affirmed the district court’s decision.  The circuit court found that the relator’s claims were publicly disclosed despite the fact that the defendants were not named in the public disclosures, reasoning that the disclosures of the particular drugs involved along with the industry-wide fraud allegations “set the government squarely on the trail” of the specific defendants’ participation in the fraud.    Additionally, the court noted that the public disclosures also included all elements central to the relator’s theory of liability.


U.S. ex rel. Jacobs v. Bank of Am., 2017 WL 2361943, 2361944 (S.D. Fla. Apr. 27, 2017)

Holding: The United States District Court for the Southern District of Florida granted in part and denied in part the defendant’s motion for reconsideration, holding that unadjudicated claims did not create an obligation to pay the government for the purposes of the FCA.

The relator, a foreclosure defense and consumer protection attorney, brought a qui tam action against several mortgage lenders alleging that the defendants falsified evidence in the form of surrogate signed rubber-stamped endorsements and mortgage assignments documenting transactions that never occurred (“robosigning”), and presented that false evidence to foreclosure courts to obtain foreclosure judgments and to make false claims for payment of mortgage insurance. The relator based his allegations on discoveries he made during his own foreclosure case and his litigation of other foreclosure cases, where he alleged that he learned that one of the defendants, Bank of America, would produce false documents as evidence of standing to foreclose, and create and rely upon false assignments in order to establish the transfer of the relator’s note and others.  In 2012, the government settled claims with the defendants and other mortgage lenders in which the defendants paid $25 billion with Bank of America to settle allegations of misconduct involving foreclosures. The defendants signed a consent judgment which required them to ensure that factual assertions in pleadings were accurate; that affidavits, sworn statements, and declarations were based on personal knowledge; and that mortgage assignments by or on behalf of the defendants were executed with the appropriate legal authority, accurately reflected the completed transaction, and were properly acknowledged.   The defendants moved to dismiss the relator’s claims, arguing that they were precluded by the public disclosure bar because of the public nature of the settlement terms, and for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The court denied the defendant’s motion to dismiss, finding the relator both qualified as an original source under the public disclosure bar and pled his allegations with the particularity required under Rule 9(b).  The defendant then motioned for partial reconsideration of the court’s prior ruling, claiming the relator failed to plausibly allege an “obligation” to pay the government in relation to the claims brought under a reverse false claims theory of liability.  The defendant argued that both the FCA and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) required the government to bring a civil action “and obtain a judicial determination of liability before an established duty to pay is created.”  The defendant also argued that a broad interpretation of FCA obligation would “put current and future settlements by the government in jeopardy” by exposing parties to liability in circumstances where settlements did not require payment of damages for all alleged claims.

The court granted in part and denied in part the defendant’s motion for reconsideration, and found in erred in determining “unadjudicated” claims created an obligation to pay under the FCA.  The court noted that “unadjudicated [sic] and unproven” violations of FIRREA did not qualify as “obligations” for the purposes of reverse false claims brought under the FCA.  The court also noted neither the FCA nor the FIRREA created an obligation for defendants to pay the government   The court further stated the FCA did not “attach liability to contingent obligations” to pay, and that because unadjudicated violations of the FCA required a preponderance of evidence to prove, they qualified as “contingent obligations” for purposes of determining an “obligation to pay” under the False Claims Act.  The court then determined that because “[the] relator only alleges a reverse false claim based on Defendants decreasing “their obligations to pay damages and penalties under the FCA and FIRREA,” the relator failed to establish the defendant possessed an obligation to pay the government under a theory of reverse false claims FCA liability.  The court also opted to dismiss the relator’s FCA conspiracy claim because the underlying FCA reserve false claim failed as a matter of law.


U.S. ex rel. Rahimi v. Zydus Pharm., 2017 WL 1503986 (D.N.J. Apr. 26, 2017)

Holding: The United States District Court of New Jersey denied the defendant’s motion to dismiss the relators’ Medicaid fraud claims pursuant to the public disclosure bar and under Rule 9(b).

The relators, both of whom were pharmacists who processed claims for the defendant’s generic drugs, alleged that the defendant violated the False Claims Act by fraudulently inflating its prices by reporting inflated Average Wholesale Prices (AWP) to drug price publishers with the awareness that state Medicaid programs and the federal government would rely on the reported prices in setting reimbursement rates for the defendants generic drugs. Additionally, the relators alleged that in selling the generic drugs to the pharmacies at rates significantly below Medicaid reimbursement rates, the defendant induced the purchase of its drugs in violation of the Anti-Kickback Statute.  The defendant moved to dismiss the relators’ claims pursuant to the public disclosure bar, for failure to state a claim under Rule 12(b)(6), and because the relators did not plead fraud with particularity under Rule 9(b).

The court denied the motion to dismiss.  First, the court determined that prior public disclosures regarding industry-wide AWP fraud did not encompass the relators’ allegations because the defendant was not “immediately identifiable” from said disclosures because the disclosures covered a very large industry, in which the defendant was not a large player.  Further, the court explained that the disclosures did not provide the “essential elements” of relators’ claims – namely, the identity of the defendant or the specific drug transactions in dispute.  The court also noted that the defendant had not even obtained FDA approval to sell the drugs at issue in the complaint until after the majority of those public disclosures. Additionally, the court found that, even if there had been public disclosures of the allegations in the complaint, the relators would not be barred because they were original sources of the information.  The court explained that the relators, through working at pharmacies that purchased and sold the defendants’ generic drugs, learned first-hand about the prices paid by their pharmacies and the specific claims submitted to Medicaid, moreover, they voluntarily disclosed this information to the government prior to filing this case. Second, the court denied the defendant’s motion to dismiss under Rule 9(b), finding that the relators provided specific examples of false claims that they submitted to state Medicaid agencies that showed the reported AWP, which the defendant conceded was often used as a benchmark for reimbursement decisions by government agencies. The court also rejected out of hand the defendant’s contention that the relators had not alleged the materiality of AWP to payment, chastising defendant for an argument that “borders on the disingenuous.”


U.S. ex rel. Graziosi v. Accretive Health Inc., 2017 WL 1079190 (N.D. Ill. Mar. 22, 2017)

Holding: The United States District Court for the Northern District of Illinois granted in part and denied in part the defendants’ motions to dismiss the relator’s claims pursuant to the public disclosure bar and for failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam action against her employer, MedStar Health, and several subsidiary hospitals, including Washington Hospital Center (“WHC”), where she worked, Methodist Health System, Baptist Health System, and Southeast Health System, as well as Accretive Health, a revenue management company alleging the submitted false claims to federal healthcare programs in violation of the False Claims Act.  The relator alleged that she helped implement an “admissions certification scheme,” in which she communicated information from the WHC emergency department to the staff of Accretive to enable them to generate false written recommendations of medically necessary hospital admissions for patients who did not meet the requirements for admission.  She also alleged that she became aware of various other defendants’ involvement in similar admissions certification fraud schemes with Accretive through “non-public information.”  The relator further alleged that Accretive’s recommendations for inpatient treatment were made by unqualified individuals, and that the defendant hospitals pressured medical staff to adopt Accretive’s recommendations when submitting claims to federal healthcare programs.  She alleged that this fraud scheme allowed Accretive to receive remuneration based on the numbers of recommendations it provided to defendant hospitals.   The defendants moved to dismiss for failure to meet the particularity requirements of Rule 9(b).

The court granted in part and denied in part the defendants’ motion to dismiss.  First, the court granted defendants motion to dismiss relating to her claims against Baptist as precluded by the public disclosure bar.  The court explained that the relator’s allegations were substantially similar to those revealed in a 2008-2009 audit and later settlement related to FCA liability arising from false claims submitted to Medicare, which was announced in a Department of Justice press release.  The court noted that the relator “[had] not alleged any facts indicating that she [had] personal knowledge of the allegations,” and that both the lawsuit and DOJ press release alleged the same fraud scheme, despite the additional details the relator provided.  Second, the court granted Methodist and Southeast’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b).  The court found that the relator failed to create a strong inference that the arrangements with Accretive resulted in submission of false claims to the federal government.  The court explained that the relator failed to clarify the “who, what, when, where, and how” of the fraud as it relates to Methodist and Southeast, rather, the relator simply concluded that both defendants submitted false claims because their relationship with Accretive mirrored the other defendants’ relationship.  The court also noted that the relator failed to identify any patients improperly admitted for inpatient care, or any specific or representative false claims Methodist or Southeast submitted for payment.

Third, the court denied MedStar’s motion to dismiss, finding that the relator’s allegations were sufficient to allow the reasonable inference that MedStar submitted false claims to the government.  The court noted that the relator properly alleged falsity by claiming that the physicians who actually saw specific patients determined that no admission was necessary, yet for each of her nine specific examples, Accretive’s recommendation that the patient be admitted led to the submission of false claims to Medicare.  The court found that the relator sufficiently alleged MedStar paid kickbacks to Accretive to induce medically unnecessary inpatient care recommendations for federal healthcare beneficiaries.  The court rejected MedStar’s argument that it was not liable under the Anti-Kickback Statute because Accretive’s recommendations had no bearing on patient care.  Instead, the court noted that the AKS “does not require that a patient actually receive a recommended service,” only that the service was recommended in exchange for payment and the government was billed for service.  Fourth, the court granted in part and denied in part Accretive’s motion to dismiss.  The court granted the motion with respect to those claims based on Accretive’s agreements with Methodist, Southeast, and Baptist, but denied the motion with respect to MedStar.  The court explained that the relator specifically alleged that certifications of medical necessity were required, and that, taking the relator’s allegations as true, she properly alleged that material false claims were submitted.


U.S. ex rel. Rembert v. Bozeman Health Deaconess Hosp., 2017 WL 514205 (D. Mont. Feb. 7, 2017)

Holding: The United States District Court for the District of Montana denied the defendants’ motion to dismiss the relators’ claims related to AKS violations, finding that the claims were not precluded by public disclosure bar and that the relators adequately pled fraud with particularity under Rule 12(b)(6) and Rule 9(b).

The relators brought a qui tam suit against the defendants — a Montana-based hospital, corporate group of radiologists, and associated corporate entities — alleging that the defendants illegally traded patient referrals for remuneration in violation of the Anti-Kickback Statute and caused claims tainted by the kickbacks to be submitted to the government in violation of the False Claims Act.  The defendants moved to dismiss the relators’ complaint, arguing that the relators’ claims were precluded by the public disclosure bar and that the relators failed to state a claim under Rule 12(b)(6) and to plead fraud with particularity under Rule 9(b).

The court denied the defendants’ motion to dismiss, finding that the relators’ claims were not publicly disclosed because the state court action cited by the defendants did not involve an FCA violation.  The court also found that the relators sufficiently pled fraud with particularity by adducing sufficient detail on the nature of the fraud scheme, including facts related to the various defendants’ corporate structures and how they were connected, as well as listing the types of services for which false claims were allegedly submitted.

 

U.S. ex rel. Prather v. AT&T, Inc., 847 F.3d 1097 (9th Cir. Feb. 6, 2017)

Holding: The United States Court of Appeals for the Ninth Circuit upheld the district court’s decision granting the defendants’ motion to dismiss pursuant to the public disclosure bar.

The relator brought a qui tam suit against several major telecommunications companies, alleging that they violated the False Claims Act by fraudulently overcharging the government for electronic surveillance services.  The relator served as the Deputy Attorney General in charge of the New York Attorney General’s Office’s (NYOAG) Organized Crime Task Force, and in that position he supervised many wiretaps.  The relator alleged that the fees that the defendants charged did not fit the definition of “reasonable expenses” as defined by the Federal Communications Commission’s (FCC’s) interpretation of Communications Assistance to Law Enforcement Agencies Act amendments to the Omnibus Crime Control and Safe Streets Act of 1968. He alleged that he learned the information underlying his suit from his experience overseeing wiretaps and reviewing telecom companies’ rate sheets.  The United States District Court for the Northern District of California granted the defendants’ motion to dismiss, finding that the relator’s claims were precluded by the public disclosure bar because they were disclosed during a previous FCC investigation. The relator appealed to the Ninth Circuit.

The circuit court upheld the district court’s decision.  Applying the pre-2010 version of the public disclosure bar, the court found that the relator’s claims were publicly disclosed and that he was not an original source of his claims because he did not possess “direct and independent knowledge” of the fraud scheme.  The court explained that the relator relied upon speculation and lacked essential information to buttress his FCA claim, as shown by his concession “that he [did] not know… what costs are incurred [for surveillance].”  The circuit court also found that the district court correctly held the relator did not voluntarily disclose his claims, explaining that he submitted his affidavit to the FCC describing the alleged overcharges only after an official specifically requested an affidavit on behalf of the NYOAG.


U.S. ex rel. Solomon v. Lockheed Martin Corp., 2016 WL 7188298 (N.D. Tex. Dec. 12, 2016)

Holding: The U.S. District Court for the Northern District of Texas granted the defendants’ motion for summary judgment on public disclosure grounds.

The relator brought a qui tam action against a government defense contractor and the subcontractor where he was formerly employed as a compliance review specialist, alleging that the defendants conspired to conceal cost overruns on their defense contract with the government by misrepresenting their cost estimates and performance reports.  While employed, the relator reported the alleged conduct to the Defense Contract Management Agency (“DCMA”) and assisted with the DCMA investigation into his allegations.  The DCMA and Government Accountability Office (“GAO”) released reports detailing the alleged violations.  After the relator completed his work on the defense contract, he received an internal memorandum that supported his allegations, but did not disclose the memorandum to the government while employed with the defendant.  Once retired, the relator continued to alert the government about the defendants’ alleged misrepresentations and forwarded the memorandum to a senator and the GAO.  The defendants moved for summary judgment on all of the relator’s claims, arguing that his claims were precluded by the public disclosure bar and that he was not an original source of his claims.

The court granted the defendants’ motion for summary judgment.  The court found that the relator’s allegations were publicly disclosed in the DCMA and GAO reports.  Additionally, the court concluded that the relator was not an original source because, while the relator reported the fraud to the government before bringing his suit, his disclosure was not “voluntary” as required by the FCA because the terms of his employment obligated him to report fraud to the government.  The court observed that the relator’s employer’s contract with the government required it to report fraud to the government, and thus the relator had an affirmative duty to report the fraud to the government due to his position in compliance.  The court noted that the information the relator disclosed when no longer working for the company, including the internal memorandum, was insufficient to overcome the bar because it only reiterated his previous disclosure, and “once a relator involuntarily provides information, he may not subsequently voluntarily provide the same information.”


U.S. ex rel. Proctor v. Safeway, Inc., 2016 WL 7017231 (C.D. Ill. Dec. 1, 2016)

 Holding: The U.S. District Court for the Central District of Illinois denied the defendant’s motion to dismiss the relator’s claims that the defendant overbilled government healthcare plans by failing to report accurate “usual and customary” prices for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).  The court also found that the relator’s claims were not precluded by the public disclosure bar.

The relator, a licensed pharmacist, brought a qui tam suit against a nationwide grocery retailer and its pharmacy affiliates, alleging that the defendant caused the government to overpay for prescriptions through its healthcare programs by offering discounts to its customers through a membership program but failing to report those discounted prices to the government as “usual and customary” when seeking reimbursement.  The defendant moved to dismiss the relator’s claims, arguing improper venue, failure to plead fraud with particularity under Rule 9(b), and that the suit was precluded by the public disclosure bar.

The court denied the defendant’s motion to dismiss.  First, the court determined that the case was brought in the proper venue because the complaint alleged a nationwide scheme that was executed at numerous stores within the judicial district.  Second, the court found that the relator met the particularity requirements of Rule 9(b), as he identified who submitted false claims, the nature of the fraud, the fraud’s time period, where the fraud took place, and detailed how the fraud was executed.  The court also found that the relator stated a claim under the FCA by alleging that because the defendant failed to offer the government the usual and customary price, the government did not get the benefit of its bargain with the defendant.  The court also noted that the relator provided details of the alleged scheme along with representative examples.  Lastly, the court determined that a second qui tam suit and a legal news report did not constitute a prior public disclosure.  The court reasoned that even though the relator’s amended complaint contained more detail after the second qui tam suit was filed, the relator’s claims were not barred because he was the first to allege the relevant fraud claim.  Moreover, the relator qualified as an original source because he acquired independent knowledge through his work in a pharmacy operating under the defendant’s policies.


U.S. ex rel. Silver v. Omnicare, Inc., 2016 WL 6997010 (D.N.J. Nov. 28, 2016)

Holding: The U.S. District Court for the District of New Jersey granted the defendants’ motion for summary judgment on the relator’s kickback allegations, finding that the relator’s allegations were precluded by the public disclosure bar and the relator did not qualify as an original source.

The relator brought a qui tam suit against two long-term care pharmacies alleging that the defendants engaged in a kickback scheme in which they offered drugs prices below market value to nursing homes in exchange for Medicare Part D or Medicaid prescription referrals.  The relator based his claims on his experience in the nursing home and pharmacy business, though he never worked for either of the defendants.  He allegedly discovered the kickback scheme by reading several public publications on the industry.  He alleged that he deduced that the defendants engaged in illegal swapping arrangements that violated the Anti-Kickback Statute and submitted false claims to the government that were tainted by the AKS violations in violation of the False Claims Act after reading  online financial information that he claimed showed the defendants were selling drugs below market value.  The defendants moved for summary judgment, arguing that the relator’s allegations were precluded by the public disclosure bar.

The court granted the defendants’ motion for summary judgment.  The court explained that “the information cumulatively disclosed in the publicly available documents was sufficient to support an inference that [the defendants] allegedly engaged in swapping transactions…” The court rejected the relator’s arguments that “the revenue side” was unknown and that he independently supplied specific dollar figures, noting that during the relator’s deposition he stated the opposite, indicating that he did not need to know the “individual costs and prices” or any non-publicly disclosed information in order to conclude that the defendant engaged in a swapping scheme.  Finally, the court concluded that the relator did not qualify as an original source because he did not materially add to the publicly disclosed information.


U.S. ex rel. Saldivar v. Fresenius Med. Care Holdings, Inc., 2016 WL 841 F.3d 927 (11th Cir. Nov. 8, 2016)

Holding: The U.S. Court of Appeals for the Eleventh Circuit reversed and remanded the district court’s decision, finding that the relator’s claims were precluded by the public disclosure bar because he did not qualify as an original source of his allegations of overfill billing violations.

The relator brought a qui tam action against an End Stage Renal Disease outpatient services provider where he was formerly employed as chief technician, alleging that the defendant violated the False Claims Act by billing the government for the overfill in its drug vials, a practice that allegedly violated CMS billing statutes.  The relator alleged these violations based on his personal experience monitoring the use of overfill in conjunction with inter-employee conversations and corporate policies.  The U.S. District Court for the Northern District of Georgia concluded that while the allegations at the basis of the relator’s action were publically disclosed, the relator qualified as an original source due to his experience with the relevant drugs’ inventory, discussions related to overfill use and billing with supervisors and coworkers, and his knowledge of the defendant’s corporate policy.  However, the district court granted the defendant summary judgment, finding that although claims submitted were false, the defendant did not possess the required intent.  The relator appealed to the Eleventh Circuit.

The circuit court reversed and remanded the district court’s decision.  The circuit court explained that the district court was correct in concluding that the allegations at the basis of the relator’s suit were publically disclosed in various public sources and it was clear that the government was aware of the defendant’s billing practices.  However, the circuit court found that the district court erred in concluding that the relator was an original source of his claims, explaining that the relator’s direct and independent knowledge only related to administration and inventory, but did not give relator direct insight into price-related contracts or any other pricing and billing information.  Furthermore, the court determined that the information that relator gained from coworker conversations was indirect.


U.S. ex rel. Pospisil v. Syngenta AG, 2016 WL 5851795 (D. Kan. Oct. 6, 2016)

Holding: The U.S. District Court for the District of Kansas granted the defendant’s motion to dismiss, finding that the relator could not qualify as an original source and failed to plead fraud with particularity pursuant to Rule 9(b).

The relator, a corn farmer, brought a qui tam action against the manufacturer of genetically-modified corn alleging that the commercialization of its products depressed the corn market, causing the government to pay millions of dollars in crop insurance claims that it otherwise would not have paid in violation of the False Claims Act.  Specifically, the relator contends that the defendant’s commercialization caused its genetically-modified corn to comingle within the larger United States’ corn supply, which led to China refusing all corn imports due to the presence of genetically-modified seeds, consequently lowering corn prices and economically harming farmers.  The defendant moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The defendant also moved to dismiss on public disclosure grounds, arguing that the relator’s claims were publically disclosed in news articles reporting on the thousands of similarly situated plaintiffs who filed class-action suits against the defendant based on the same allegations.

The court granted the defendant’s motion to dismiss.  The court found that the relator’s claims were precluded by the public disclosure bar and that the relator was not an original source.  The court rejected the relator’s argument that  meetings he had with the defendant to discuss its plan to isolate the genetically-modified corn, in which the relator allegedly told the defendant that the plan was a “fraud” which would not work, qualified him as an original source because he provided evidence of the defendant’s scienter that materially added to the publicly disclosed allegations.  The court explained that the relator’s allegations only added detail to the “universe of allegations” that were already publically disclosed in the class action suits.  Moreover, the court found that the relator failed to plead fraud with particularity under Rule 9(b) because he failed to allege how any crop insurance claim was false, identify a specific false statement associated with a crop insurance claim, or point to a source of duty for farmers who submitted crop insurance claims.  Finally, the court noted that the relator failed to plead a plausible claim of causation because he did not allege any affirmative steps taken by the defendant to submit actual false claims.


U.S. ex rel. Conroy v. Select Med. Corp., 2016 WL 5661566 (S.D. Ind. Sept. 30, 2016) 

Holding: The U.S. District Court for the Southern District of Indiana granted the defendant’s motions to dismiss pursuant to the public disclosure bar and for failure to plead fraud with particularity under Rule 9(b) in part. 

The relators brought a qui tam suit against their former employer—a long-term acute care hospital, its parent company, and an individual nephrologist employed at the hospital, alleging the defendants overbilled Medicare in violation of the False Claims Act. The relators – the former CEO, an admissions coordinator, and a case manager – alleged that the defendants engaged in a corporate-wide scheme to manipulate patient care and lengths of hospital stays in order to improperly obtain maximum Medicare payments. Specifically, the relators alleged that it was company policy to submit improperly upcoded bills to Medicare containing incorrect patient diagnoses and to transfer patients to hospitals for unnecessary treatment in order to claim additional “interrupted stay” payments. Further, the relators alleged that the defendants implemented company-wide case management training directing case managers on how to fraudulently bill Medicare. Additionally, the relators claim that the defendants terminated the CEO relator and constructively discharged the others in retaliation for raising concerns and presenting evidence of fraudulent practices. The defendants moved to dismiss the relators’ allegations for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6). Furthermore, the defendants moved to dismiss the relators allegations pursuant to the public disclosure bar, citing a New York Times article, U.S. Senate Committee on Finance press release, and prior qui tam action that detailed the alleged conduct.

The court granted the defendants motions in part and denied them in part. First, the court granted the defendants’ motion to dismiss the relator’s pre-2010 claims, finding that the allegations were publicly disclosed in the news media and previous qui tam actions, and that the relator was not an original source because she did not plead new information that materially added to the publicly disclosed information. However, the court denied the defendants’ motion to dismiss the relator’s post-2010 claims pursuant to the public disclosure bar, explaining that the 2010 amendments to the FCA made the public disclosure bar no long jurisdictional, and because the government exercised its right to “veto” the dismissal of the relator’s claims, the relator’s claims could proceed. The court rejected the defendants’ argument that the “government veto” violated separation of powers principles, the non-delegation doctrine, and due process. , explaining that because the amended public disclosure bar was not jurisdictional there was no violation of the non-delegation doctrine, no effect the adjudicatory process, and no separation of powers issue because the court cannot override the government’s opposition to dismissal. Second, the court denied in part and granted in part the defendants’ motion to dismiss for failure to meet the particularity requirements of Rule 9(b). The court rejected the defendants’ argument that relators were required to specify the individual defendant’s role in billing. Rather, the court found that the allegations regarding unnecessary medical care, manipulation of stay length, and a representative example of a Medicare patient’s improper discharge was sufficient to meet the requirements of Rule 9(b). Moreover, the court found that the relators sufficiently pleaded their upcoding allegations, but the relators’ interrupted stay and premature discharge claims failed, because the relators did not sufficiently describe the relationship between the individual defendant and representative patient’s interrupted stay and did not factually support the contention that the defendants submitted actual claims for premature discharges. Lastly, the court denied the defendants’ motion to dismiss the relators’ retaliation claims, explaining that the relators’ failure to cite the amended retaliation provisions as a basis for their claims did not preclude their claims. However, the court dismissed relators’ retaliation claims against the individual defendant, finding that the retaliation provision only supported claims against employers, not individual supervisors.


U.S. ex rel. Frawley v. McMahon, 2016 WL 5404598 (N.D. Ill. Sept. 28, 2016)

Holding: The U.S. District Court for the Northern District of Illinois granted the defendant’s motion to dismiss pursuant to the public disclosure bar, finding that the relators did not voluntary disclose the fraudulent conduct to the government.

The relators brought a qui tam suit against their first cousins, alleging that the defendants falsely represented their businesses as meeting Minority and Women Owned Business Enterprise requirements that a minority or woman owns or controls 51% of the independent business and is involved in management and daily operations in order to secure government contracts in violation of the False Claims Act. They alleged that the defendants falsely listed their mother, teenage daughter, wives, and a Hispanic front person in various business ventures in order to obtain large municipal contracts. The relators alleged details of 23 fraudulently obtained contracts detailing dates awarded, contract numbers, services provided, and contract values. In addition, the relators alleged that through the defendants’ various businesses they submitted invoices for unused materials and unperformed work, conspired to submit rigged bids that constricted competition, used false suppliers, falsely notarized paperwork, fixed the price of milk sold to municipal agencies, and falsely represented that they maintained non-segregated work facilities. The defendants moved to dismiss pursuant to the public disclosure bar, and for failure to plead fraud with particularity pursuant to Rule 9(b), and failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss, finding that the relators’ allegations were publically disclosed and they were not original sources. The court found that the relators’ allegations were previously detailed a civil suit, multiple news articles, and in an FBI investigation that was initiated as the result of one relator’s cooperation with the government to alleviate his criminal bank fraud charges. The court reasoned that because there was no indication that the relators would have disclosed the fraudulent conduct or cooperated with the government without the possibility of a reduced sentence in the bank fraud case, the relators’ disclosures were not voluntary and therefore they do qualify as original sources. Additionally, the court noted that even if relators’ claims were not precluded by publically disclosure bar, the court would dismiss the majority of the claims for failure to plead fraud with particularity under Rule 9(b). The court explained that on these claims the relators failed to provide sufficient detail regarding the nature of federal subsidies, connection to federal funds, and pleaded on information and belief without pleading grounds for their suspicions.


U.S. ex rel. Singer v. Progressive Care, 2016 WL 4245503 (N.D. Ill. Aug. 11, 2016)

Holding: The U.S. District Court for the Northern District of Illinois granted the defendant’s motion to dismiss for failure to state a claim under Rule 12(b)(6). 

The relator brought a qui tam action against his former employer, an oncology and hematology medical practice where he served as the Chief Operating Officer, and several employees, alleging that the defendants intentionally disregarded both the Stark Law’s requirements and the FDA’s regulations surrounding the administration of a high-risk cancer drug. The relator also brought a retaliation claim, alleging that the defendants terminated him in retaliation for his complaints about the fraudulent conduct. Specifically, the relator alleged that the defendants improperly referred patients to an offsite PET scan site in which they had a financial interest, and did not conduct the FDA required pre-use testing before administering a high-risk cancer drug. The defendants moved to dismiss the relator’s claims, arguing that the claims had been publicly disclosed in a previous, non-FCA lawsuit and were precluded by the public disclosure bar, as well as equitably and judicially estopped. In addition, the defendants moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6).

The U.S. District Court for the Northern District of Illinois denied the defendants’ motion to dismiss pursuant to the public disclosure bar and estoppel, but granted defendants’ motion to dismiss for failure to state a claim under with Rule 12(b)(6). The court found that the relator’s claims were not precluded by the public disclosure bar because he was an original source of his allegations, explaining that the relator’s position within the organization allowed him to learn about the fraud through his own efforts. Additionally, the court found that the relator’s claims were not barred by equitable or judicial estoppel. However, the court determined that the relator could not satisfy Rule 12(b)(6)because he did not plead any specific examples of individual false claims. The court rejected the relator’s argument that because the defendants had exclusive control over the billing records the relator was entitled to a relaxed pleading standard, finding that the relator’s previous executive position would have given him access to the records. Furthermore, the court found that, because the relator failed to state a claim for his underlying FCA allegations, his conspiracy and retaliation claims failed as well.

See U.S. ex rel. Jacobs v. Bank of Am. Corp., 2017 WL 2361943 (S.D. Fla. Mar. 21, 2017)

See U.S. ex rel. Brown v. BankUnited Trust, 235 F.Supp.3d 1343 (S.D. Fla. Jan. 30, 2017)

See U.S. ex rel. Coyne v. Amgen, Inc., 229 F.Supp.3d 159 (E.D.N.Y. Jan. 17, 2017)

See U.S. ex rel. Denis v. Medco Health Solutions, Inc., 2017 WL 63006 (D. Del. Jan. 5, 2017)

See State of New York ex rel. Khurana v. Spherion Corp., 2016 WL 6652735 (S.D.N.Y. Nov. 10, 2016)

III. REVERSE FALSE CLAIMS


Smith v. LHC Grp., Inc., 2017 WL 2838048 (E.D. Ky. June 30, 2017)

Holding: The U.S. District Court for the Eastern District of Kentucky granted the defendant’s motion to dismiss the relator’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation action under the False Claims Act against the home healthcare provider where she was formerly employed, alleging that the defendant constructively discharged her after she complained about fraudulent billing practices.  She alleged that she quit her job after the defendant failed to take any action to stop the fraudulent conduct she complained of and argued that “[n]o reasonable person could be expected to continue [his or her] employment” in such an unethical work environment.  The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss.  The court explained that the circumstances of the plaintiff leaving her job did not constitute constructive discharge because, regardless of how intolerable she may have found the working conditions, the defendant did not act with an intention to force her to quit her job.


U.S. ex rel. Hull v. Restore Mgmt. Co. LLC, 2017 WL 2797141 (N.D. Ala. June 28, 2017)

Holding: The U.S. District Court for the Northern District of California denied the relator’s motion for leave to file a fourth amended complaint on her false certification claims.

The relator brought a qui tam action against the home healthcare services provider where she was formerly employed and its affiliates and individual employees, alleging that the defendants falsified patient records and billed the government for medically unnecessary therapy in violation of the False Claims Act.  The relator also alleged that she was terminated in violation of the FCA’s retaliation provision after complaining about the fraudulent billing and convening a quality assurance team to investigate the defendants’ billing practices.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity as required by Rule 9(b).

The court denied the defendants’ motion to dismiss.  The court explained that while the relator did not plead details regarding specific patients or actual false claims, she provided indicia of reliability that false claims were submitted by alleging her personal knowledge of the defendants’ billing practices.  Additionally, the court noted that the relator identified specific categories of patients for whom false claims were allegedly submitted.  The court also denied the defendants’ motion to dismiss the relator’s retaliation claims, noting that she sufficiently alleged that she was engaged in protected activity and that she was terminated as a result of that protected activity.


U.S. ex rel. Lord v. Napa Mgmt. Serv. Corp., 2017 WL 2653164 (M.D. Pa. June 20, 2017)

Holding: The U.S. District Court for the Middle District of Pennsylvania granted the defendant’s motion to dismiss the relator’s overbilling and retaliation claims against the hospital where he performed services pursuant to his contract with a perioperative management company.

The relator was an anesthesiologist employed by a perioperative management company that provided services at Pocono Medical Center (“PMC”).  He brought a qui tam action against the his former employer and PMC, alleging that the defendants violated the False Claims Act by submitting claims to Medicare for anesthesiology services that were provided in violation of the Medicare regulations.  Relator alleged that the defendants overbilled Medicare by claiming that they were delivering “medically directed” services when they were actually providing only “medical supervision” to Medicare patients.  The relator also alleged that the defendants terminated him in retaliation for reporting the fraud to his supervisors.  PMC moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted PMC’s motion to dismiss, explaining that the relator improperly grouped the defendants together and did not allege any specific wrongful conduct on the part of PMC.  Further, the court observed that the relator did not allege specific facts regarding PMC’s involvement in the actual submission of false claims.  Additionally, the court granted PMC’s motion to dismiss the relator’s retaliation claims, ruling that the relator was not an employee of PMC, but instead was employed by the management company and only performed services at PMC.


U.S. ex rel. Ameti v. Sikorsky Aircraft Corp., 2017 WL 2636037 (D. Conn. June 19, 2017)

Holding:  The U.S. District Court for the District of Connecticut granted the defendant government contractor’s motion to dismiss the relator’s fraudulent billing and retaliation allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam action against his former employer, a defense contractor that designed and manufactured helicopters for the United States armed forces, alleging that the defendant violated the False Claims Act by fraudulently billing the government for helicopter parts that were defective or damaged.  The relator alleged that the defendant falsely certified that the parts met the requirements of the contract even though it knew that the parts did not meet the requirements and were defective or manufactured with improper materials.  The relator also alleged that he was terminated after complaining about and investigating the use of the faulty parts.  The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted the defendant’s motion to dismiss.  The court explained that the relator failed to allege the specifics of any particular false claim, noting that he did not include details of dates, individuals, or specific contracts involved, or even which military branch purchased the allegedly defective parts.  The court also granted the defendant’s motion to dismiss the relator’s retaliation claim.  The court conceded that the relator alleged that he investigated the defective parts and reported his findings to his supervisors, but failed to allege that he was engaged in protected activity because he did not state that the investigations and reports were designed to expose fraud on the government, rather than general quality control issues.


Hernandez v. Hernandez, 2017 WL 2557066 (M.D. Fla. June 12, 2017)

Holding: The U.S. District Court for the Middle District of Florida granted the defendants’ motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation action under the False Claims Act against the cancer treatment center where he was formerly employed and its owner, alleging that the defendants withheld bonuses, refused his vacation days, improperly changed his employment status, and ultimately terminated him in retaliation for reporting that the defendants altered patient records and submitted inflated claims to the government.  The plaintiff alleged that the defendants became aware of his whistleblowing through audio and video surveillance.  The defendants moved to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss.  The court explained that the plaintiff’s job duties involved oversight of the treatment services, which included reviewing medical records and files.  The court observed that even if the defendants saw him reviewing the allegedly fraudulent records, that behavior would be indistinguishable from his normal job performance.    The court also noted that the plaintiff admitted that he did not proactively raise his concerns for fear of termination.  Additionally, the court noted that the fact that the defendants asked another employee whether the plaintiff was a whistleblower was simply evidence that the defendants did not know.  The court found that the temporal proximity between the protected conduct and retaliatory action was insufficient to overcome the evidence that the defendant did not know about the protected activity.


Cody v. Mantech Int’l. Corp., 2017 WL 2215672 (E.D. Va. May 19, 2017)

Holding: The U.S. District Court for the Eastern District of Virginia granted in part the defendant’s motion for judgment as matter of law on the plaintiffs’ retaliation claims.      

The plaintiffs brought retaliation claims under the False Claims Act against the multinational government contractor where they were formerly employed, alleging that the defendant terminated them in retaliation for bringing a qui tam suit.  The case went before a jury, which found in favor of the plaintiffs and awarded damages in the form of back pay and compensatory damages for emotional distress.  The defendant moved for judgment as a matter of law on the issues of liability and the award of compensatory damages, arguing that the evidence at trial did not support a causal connection between the plaintiffs’ termination and qui tam action or an award of damages for emotional distress.

The court granted the defendant’s motion in part and denied it in part.  The court concluded that the evidence at trial was sufficient for the jury to find a causal connection between the plaintiffs’ lawsuit and termination and that the jury could reasonably infer retaliatory animus given the employment history.  However, the court found that the evidence at trial was insufficient to support an award of damages for emotional distress, explaining that the evidence was relevant only to plaintiffs’ emotional distress prior to their termination and involved an unrelated pre-termination dispute.


U.S. ex rel. Aquino v. Univ. of Miami, 250 F.Supp3d 1319 (S.D. Fla. Apr. 26, 2017)

Holding: The United States District Court for the Southern District of Florida granted the defendants’ motion to dismiss the relator’s Medicare overbilling claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The court also granted in part and denied in part the defendants’ motion to dismiss the relator’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam action against a physician’s office where she was formerly employed which was affiliated with the University Of Miami Miller School Of Medicine, and her former supervisor, Dr. Nelson De La Cruz-Munoz alleging that the defendants overbilled Medicare for surgeries in violation of the False Claims Act.  The relator alleged that she learned of the fraud in the course of her work as the Patient Access Coordinator and Senior Surgical Coordinator for the defendants.  She alleged that she was responsible for collecting and depositing patient payments into a bank account managed by the defendants, and alleged that she learned of the Miami, and that she learned that the defendants billed Medicare for surgical weight loss procedures, which are not covered by Medicare, by falsely claiming that De La Cruz was performing different surgeries that were covered.  The relator also alleged that De La Cruz changed or instructed staff members to alter patient data in order to falsely represent a body mass index which met the criteria for Medicare payments. She alleged that she complained about the “illegal” billing to her supervisors, including De La Cruz, multiple times, and that after she began complaining, De La Cruz began to fabricate complaints against her.  The relator alleged that the defendants contrived charges that she stole money from the office and fired her on that pretextual basis. The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with the requisite particularity under Rule 9(b).

First, the court granted the defendants motion to dismiss the relator’s substantive FCA claims for failure to plead fraud with particularity under Rule 9(b).  The court determined that, despite the relator’s knowledge of De La Cruz’s falsifications of patient records, and his statements that the services would be paid for by Medicare, she lacked first-hand knowledge that the defendants were actually submitting these claims to Medicare for reimbursement. The court explained that although the relator provided details regarding the questionable internal procedures at the office, she did not allege “with any particularity even one claim for payment to Medicare or any other government program.”  Next, the court granted in part and denied in part the defendants’ motion to dismiss the relator’s retaliation claims.  The court dismissed the retaliation claims against De La Cruz, finding that the claim was time-barred and that the relator’s employer was the University Of Miami Miller School Of Medicine, not De La Cruz.  The court held that liability could only be extended to employers and excluded supervisors. However, the court denied the motion to dismiss with respect to the School of Medicine, finding that the relator satisfied both prongs of an FCA retaliation claim. First, the fact that relator raised multiple concerns regarding the legality of billing practices and questioned De La Cruz on the hospital’s payment policies were deemed sufficient evidence to support a reasonable conclusion that UM may have had concerns about being reported to the government or facing a qui tam suit. Second, the court found that the relator alleged a causal connection between relator’s termination and her protected conduct because the timeline of events supported relator’s allegations that, after questioning the hospital’s practices, she faced multiple false theft allegations levied by De La Cruz and was subsequently terminated by the school without an investigation to support De La Cruz’s claims.


Cash v. Lockheed Martin Corp., 684 Fed.Appx. 755 (10th Cir. Apr. 13, 2017)

Holding: The United States Court of Appeals for the Tenth Circuit upheld the district court’s decision granting summary judgment in favor of the defendant on the plaintiff’s retaliation claims.

The plaintiff brought a retaliation action under the False Claims Act against the government contractor where he was formerly employed as an electronic technician, alleging that he was terminated as a result of his protected activity.  The plaintiff alleged that other employees deliberately inflated their work-order numbers in order to obtain higher payments from the government.  He alleged that he was fired after he reported the work-order fraud to management.  The defendant provided evidence that showed that  the plaintiff had been warned multiple times about insubordination and sub-par performance prior to his termination.  The defendant further showed that the relator was placed on a 90-day Performance Improvement Plan before his termination. The defendant moved for summary judgment, and the United States District Court for the District of New Mexico granted the motion.  The plaintiff appealed to the Tenth Circuit.

The circuit court upheld the ruling of the district court, finding that the plaintiff failed to provide evidence that showed that he notified the defendant of his intent to report the fraud to the government.  The court also found that the plaintiff failed to adduce evidence that “he was fired because he reported coworkers’ inflation of time.” The court held that causation could not be proved purely due to the temporal proximity between his reports and his termination.  The court noted that the evidence showed that the plaintiff was performing poorly and that his termination was not pretextual.


Irving v. PAE Gov’t Serv., Inc., 249 F. Supp. 3d 826 (E.D. Va. Apr. 11, 2017)

Holding: The United States District Court for the Eastern District of Virginia granted the defendants’ motion to dismiss the plaintiff’s retaliation claims, finding that the retaliation provisions only allow for liability on part of the employer, not individual employees.

The plaintiff brought a retaliation action under the False Claims Act against the government contractor where he was formerly employed and four individual executives, alleging that he was terminated following his internal complaints about illicit conduct.  He alleged that he complained six or more times to his superiors regarding violations of the terms of the company’s government contract, which included overbilling, use of non-compliant goods, failure to follow protocol, and misuse of government-furnished resources to conduct black market activity.  After he notified both his superiors and individuals within the government, the plaintiff was terminated.  The defendants moved to dismiss the plaintiff’s complaint against the individual executives for failure to state a claim under to Rule 12(b)(6), arguing that  individual employees could not be held liable under the FCA’s retaliation provisions.

The court granted the defendants’ motion to dismiss.  The court explained that “the FCA, both before and after the 2009 amendments, [did] not permit a plaintiff to sue individual employees of the corporate employer for retaliation.”  The court observed that the language in the 2009 amendments to the FCA only expanded “the universe of individuals who could sue under the FCA’s retaliation provision from an ‘employee’ to an ‘employee, contractor, or agent,’” and did not expand the range of entities that could be held liable under the FCA.


Chapins v. NW Cmty. Serv. Bd., 243 F.Supp.3d 739 (W.D. Va. Mar. 20, 2017)

Holding: The United States District Court for the Western District of Virginia granted the defendant’s motion for summary judgment on the plaintiff’s retaliation claims, finding that the she was unable to create a genuine dispute of material fact to show that her termination was a result of her protected conduct.

The plaintiff brought a retaliation action under the False Claims Act against the healthcare provider where she was formerly employed  alleging that they retaliated against her after she lodged an internal report in February of 2011 that a colleague had submitted false Medicaid claims and false timesheets to her superior.  The colleague was subsequently terminated, but after lodging the complaint, the plaintiff claimed that she experienced harassment throughout her remaining years of employment and was hospitalized due to the stress.  In spring 2014, the defendant discontinued the treatment program the plaintiff worked in, firing her and thirty-three others.  Though the plaintiff later interviewed for a different position at the company, she reported that she was subject to a “hostile, intimidating, and antagonistic” interview by her former superiors and she was not hired for the position despite a positive interview evaluation.    The defendant moved for summary judgment, arguing that the plaintiff was unable to establish that she engaged in “protected activity” as defined by the FCA and that the plaintiff failed to prove causation.

The court granted the defendant’s motion for summary judgment.  The court rejected the defendant’s argument that the plaintiff was not engaged in protected conduct, explaining that the plaintiff showed that her actions were intended to stop FCA violations.  The court found that a reasonable jury could have found that the plaintiff “demonstrated a good faith, objectively reasonable belief in potential fraud against the government.”   However, the court found that the plaintiff did not show that her termination was a result of her protected activity.  .  The court explained that the plaintiff’s allegations of harassment by coworkers at work in retaliation for her protected activity were “far from specific,” and did not “constitute a pattern of retaliation on part of her employer; rather, they, at worst, impl[ied] discord among co-equal employees.”  The court also found that the plaintiff failed to prove that her eventual termination was connected with her protected conduct, explaining that the shutdown of the program that she worked in resulted in thirty-three other employees losing their jobs. Further, the court noted that the lack of temporal proximity between her protected conduct and the adverse employment decision weighed against a finding of retaliation.  Additionally, the court rejected the plaintiff’s argument that the failure to re-hire her for a separate position was an instance of retaliation, noting that even more time had passed by the time of that hiring decision, and that the defendant had articulated a non-retaliatory reason for choosing not to hire her.


Waiting v. Blue Hills Bank, 2017 WL 1054485 (D. Mass. Mar. 20, 2017)

Holding: The United States District Court for the District of Massachusetts adopted the magistrate judge’s Report and Recommendation and denied both parties’ motions for summary judgment on the plaintiff’s retaliation claims.

The plaintiff brought a retaliation claim under the False Claims Act against the bank where he was formerly employed alleging that he was fired after he complained internally that the defendant was misclassifying loans in documents submitted to the government in order to receive federal funds.   The Magistrate Judge found the record reflected genuine disputes of material fact precluding summary judgment, and recommended both motions be denied.  The defendants objected to the Magistrate Judge’s findings, claiming that they engaged in a multi-step process designed to ensure proper loan classification, and that the plaintiff was aware of the process, so he could not have had a good faith belief that the defendant was knowingly violating the FCA.

The court accepted the Magistrate Judge’s Report and Recommendation and denied both motions for summary judgment.  The court noted that the plaintiff clearly described the manner in which the defendant failed to comply with regulations regarding the loans and how his superiors “brushed him off” after making internal complaints.  The court explained that the plaintiff produced evidence showing that he had personal knowledge of the defendant’s deliberate miscalculation of loans, and that a reasonable jury could infer from the record that the plaintiff possessed a reasonable belief that defendants were knowingly misclassifying loans, regardless of his knowledge of some internal compliance mechanisms.


U.S. ex rel. Lupo v. Quality Assurance Servs. Inc., 242 F.Supp.3d 1020 (S.D. Cal. Mar. 16, 2017)

Holding: The United States District Court for the Southern District of California granted in part and denied in part the defendants’ motion to dismiss the relator’s healthcare fraud claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claims under Rule 12(b)(6).

The relator brought a qui tam suit against a corporation that performs inspections and diagnostic testing of medical equipment for healthcare providers, where she was formerly employed, as well as several individual shareholders, alleging they violated the False Claims Act by conspiring to falsify medical device certification reports that were submitted to the government.  The relator also alleged that she was fired after exposing the allegedly fraudulent activity.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted in part and denied in part the defendants’ motion to dismiss.  The court found that the relator pled her claims against one individual defendant and the corporation with sufficient particularity, noting that she alleged particular details of a scheme to submit false claims paired with reliable indicia that led to a strong inference that claims were actually submitted.  The court observed that the relator pled details about the defendants providing falsified data to the government and that it was reasonable to infer that various healthcare providers used the equipment in question to treat patients and then billed the government, a described the role that one individual played in the scheme.  However, the court found that the relator failed to sufficiently plead her substantive FCA claims against the remaining individual defendants.  The court explained that the relator’s allegation that the other individuals were “aware of” that fraudulent practices was not sufficient to put the defendants on notice of their alleged participation in a fraudulent scheme.  The court also granted the defendants’ motion to dismiss the conspiracy claims, explaining that the claims were barred by the intra-corporate conspiracy doctrine.  Additionally, the court denied the defendants’ motion to dismiss the retaliation claims as to the corporate defendant, but granted the motion as to the individual defendants.  The court observed that the defendants’ alleged scheme could reasonably have led to a viable FCA action, and that retaliation provisions protected the relator’s internal reporting.  The court also found that the relator sufficiently alleged that her employer knew she was engaged in protected conduct by alleging that she showed various reports to the defendants that demonstrated the fraudulent nature of the activity.  Additionally, the court found that the relator’s allegations that her employment was terminated two days after she showed the defendants the reports was sufficient to show causation.  However, the court dismissed the retaliation claims against the individual defendants.


Gierer v. Rehab Med., Inc., 2017 WL 976931 (E.D. Mo. Mar. 14, 2017)

Holding: The United States District Court for the Eastern District of Missouri granted the defendant’s motion for summary judgment on the relator’s retaliation claim, finding that the reasoning for the plaintiff’s termination was not solely that she engaged in protected activity.

The plaintiff brought a retaliation action under the False Claims Act against the electric-motorized wheelchair manufacturer where she was formerly employed alleging that she was terminated in retaliation for internally reporting the defendant’s falsification of documents submitted to Medicare.  She alleged that there were multiple instances where she was asked to improperly report or mislabel procedures, improperly perform tasks reserved for doctors or nurses, or backdate forms for Medicare submission.  The plaintiff admitted that she did not internally report alleged misconduct associated with her refusal to improperly upcode procedures, draft attestation letters and medical record templates, or coach nurses on how to write false chart note. She alleged that she did internally report that her superior falsified certifications. The defendant moved for summary judgment, arguing that the plaintiff was fired for her poor sales performance and failure to satisfy the conditions of her performance improvement plan (PIP).

The court granted the defendant’s motion for summary judgment, finding that the plaintiff failed to show that she was engaged in protected activity by refusing to upcode procedures, explaining that the refusal was not an act taken “in furtherance” of an FCA action.  However, the court found that the plaintiff engaged in protected conduct when she refused to backdate documents, as well as when she received copies of allegedly altered documents from the Medicare Review Team, but that because she did not inform the defendant about those actions, the activity could not serve as the basis of her retaliation claims.  Even if the plaintiff had shown that she was engaged in protected activity, the court found that the defendant produced sufficient evidence that the termination was not pretextual, because the defendant had “a well-documented record of plaintiff’s poor sales performance” and “had alerted plaintiff to her unsatisfactory sales performance and her need to increase sales.”


Salagh v. Va. Int’l Univ., 2017 WL 976620 (E.D. Va. Mar. 13, 2017)

Holding: The United States District Court for the Eastern District of Virginia granted the defendants’ motion to dismiss the relator’s retaliation claim for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation suit under the False Claims Act against the university where she was formerly employed alleging that she was fired after internally complaining about immigration, tax, and accreditation violations. The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6), noting that the plaintiff did not even identify a specific whistleblower statute in her complaint.

The court granted the defendant’s motion to dismiss, explaining that the plaintiff failed to allege conduct that could reasonably lead to a viable FCA action.  The court observed that the plaintiff pled no facts to establish a likely fraud on the government or false claims for federal funds, and noted that the retaliation provisions did not cover complaints about general ethical misconduct.


Guilfoile v. Shields Pharm., LLC., 2017 WL 969329 (D. Mass. Mar. 10, 2017)

Holding: The United States District Court for the District of Massachusetts granted the defendants’ motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6). 

The plaintiff brought a retaliation action under the False Claims Act against a pharmacy parent company and several subsidiary pharmacies and his former supervisor, John Shields, alleging that he was fired in because of his complaints about potentially fraudulent billing.  The plaintiff alleged that he witnessed what he believed was a contract between the defendants and a consulting firm that violated the terms of the Anti-Kickback Statute, and that when he expressed concerns about the contract he was ignored and harassed.  He also alleged that Shields unethically diverted business resources intended for his business in a breach of fiduciary duty.  The plaintiff further alleged that his superior refused to revise a contract to remove a fraudulent representation concerning the non-existence of a 24/7 call center, and refused to implement such a call center in accordance with contractual obligations.  The plaintiff alleged he was fired from his position after reporting the violations. The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss, finding that the plaintiff failed to allege facts allowing the inference that he believed the defendants’ fraudulent representations and actions would lead to the submission of false claims to the government.  The court explained that the lack of an alleged connection between the fraudulent representations and false claims could not support the plaintiff’s assertion that he engaged in protected activity that could have reasonably led to an FCA action.  Regarding the plaintiff’s allegations of AKS violations, the court found that the plaintiff “[had] not alleged facts that [the consulting firm] could or did play a role in referring or recommending federal program patients to Defendants through his financial consultant work…”


Rodriguez v. Reston Hosp. Ctr., LLC, 2017 WL 772348 (E.D. Va. Feb. 28, 2017)

Holding:  The United States District Court for the Eastern District of Virginia denied the defendant’s motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation claim under the False Claims Act against the hospital where he was formerly employed alleging that he was terminated as a result of his refusal to falsely certify documents that were submitted to the government.  The plaintiff alleged that the defendant instructed him to falsely certify that his supervisor had completed her yearly competency assessments in order for the hospital to be re-accredited.  The plaintiff alleged that he was demoted and eventually terminated from his position as a result of his refusal.  The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6), arguing that the plaintiff’s demotion stemmed from the improper use of his authority to hire someone that he had referred for an open position at the company, rather than from his refusal to falsify the accreditation forms.

The court denied the defendant’s motion to dismiss, explaining that the relator sufficiently alleged a prima facie case of retaliation. The court found that the relator engaged in protected activity when he refused to backdate the competency assessments as part of the accreditation process, and then notified the defendant of potential FCA liability in a letter.  The court noted that relator also included factual allegations related to adverse employment actions that the defendant took in response to his complaints, specifically his demotion and eventual dismissal.


Stailey v. Gila Reg’l Med. Ctr., 2017 WL 3602057 (D.N.M. Feb. 21, 2017)

Holding:  The United States District Court for the District of New Mexico granted the defendants’ motion to dismiss the relator’s retaliation claim, finding that individuals could not be held liable under FCA’s anti-retaliation provisions.

The plaintiff brought a retaliation action under the False Claims Act against the regional medical center where she was formerly employed and several individual employees, alleging that the defendants terminated her for complaining about the defendants’ fraudulent billing.  The plaintiff alleged that she learned of the defendants’ scheme to submit fraudulent claims to Medicare through her position as the Director of Patient Financial Service, and that when she raised concerns about the fraudulent claims to her supervisor, she was terminated.  The individual defendants moved to dismiss for failure to state a claim under Rule 12(b)(6), arguing that the FCA’s retaliation provisions did not create a cause of action against individual employers or employees.

The court granted the defendants’ motion to dismiss, explaining that the FCA’s retaliation provisions did not allow for individual liability in retaliation claims.  The court noted that legislators never intended “to expand the scope of liability to include individuals” when they passed the 2009 amendments to the retaliation provisions.


Nifong v. SOC, LLC, 234 F.Supp.3d 739 (E.D. Va. Feb. 13, 2017)

Holding: The United States District Court for the Eastern District of Virginia granted the defendant’s motion for summary judgment on the plaintiff’s retaliation claims, finding that the plaintiff was not engaged in protected activity and that the defendant had a legitimate, non-retaliatory reason for terminating his employment.

The plaintiff brought an action under the retaliation provisions of the False Claims Act against the government contractor where he was formerly employed, alleging that he was fired in response to his complaints that the defendant overbilled the government for security services provided at the United States embassy in Iraq.  The plaintiff alleged that the defendant falsely designated employees at high pay-grades in order to bill the government at a higher rate.  The plaintiff claimed he was terminated after reporting the alleged overcharges to his supervisor and to the United States Department of State.  The defendant moved for summary judgment, arguing that the plaintiff’s termination was justified and not in retaliation for reporting the billing error.  The defendant asserted that the plaintiff acted in violation of internal company guidelines and International Traffic in Arms Regulations (ITAR) by providing U.S. manufactured ammunition to U.S. Special Forces for distribution to Iraqi Special Forces in order to gain access to an Iraqi military firing range.  The defendant issued a written warning to the plaintiff noting his “unprofessional conduct” and “insubordination and failure to follow proper safety protocols.”

The court granted the defendant’s motion for summary judgment.  The court found that the record showed that the plaintiff did not engage in protected activity because he did not demonstrate a reasonable belief that the defendant had submitted or would submit false claims.  The court explained that the plaintiff knew that the defendant had not yet billed the government for any services under the contract when he complained about the potential overbilling and that his supervisor commended him for catching the error and instructed him to correct it.  Further, the court found that even if he could show that his complaints constituted protected activity, the plaintiff failed to show that the supervisors responsible for the decision to terminate his employment knew about the complaints.  Finally, the court concluded that no reasonable jury could find that the plaintiff was fired because of his complaints, explaining that he had multiple adverse employment actions taken against him for his performance and behavior and that the termination was not close in time to his complaints.  Further, the court found that the evidence showed there was an “obvious non-retaliatory ground” for the defendant’s termination in that he had violated ITAR and internal company policy.


Waiting v. Blue Hills Bank, 2017 WL 1074952 (D. Mass. Feb. 8, 2017)

Holding: The United States District Court for the District of Massachusetts denied both the plaintiff’s and defendant’s motions for summary judgment on the plaintiff’s retaliation claims, finding that significant disputes of material fact existed regarding whether or not the plaintiff was engaged in protected conduct, as well as whether the stated reason for his termination was a pretext for retaliation.

The plaintiff brought a retaliation action under the False Claims Act against the bank where he was formerly employed  alleging that he was terminated after he made internal and external complaints regarding the defendant’s participation in the Small Business Lending Fund (SBLF) and its investment portfolio outsourcing.  The plaintiff alleged that the defendant deliberately misclassified loans as SBLF qualifying loans and violated FDIC regulations by choosing to outsource its investment portfolio to a third-party.  The plaintiff alleged that he was terminated after repeatedly raising concerns to his superiors as well as the FDIC.  The defendant moved for summary judgment, arguing that the plaintiff’s position was eliminated due to internal restructuring and that he was not terminated as a result of his protected conduct.  The relator cross-moved for partial summary judgment.

The court denied both motions for summary judgment.  The court found that that a sufficient dispute of material fact existed with respect to whether or the plaintiff “[reasonably], and/or in good faith” believed that the defendant violated the FCA and whether the defendant acted with knowledge of the plaintiff’s protected conduct.  The court explained that there was evidence that showed that the defendant relied on advice from a number of entities in making its banking decisions and that the plaintiff knew about this advice, and therefore it was not reasonable for him to believe that the defendant was violating the FCA.  Additionally, the court observed that there were disputed facts as to whether the executive who made the reorganization decision knew about the plaintiff’s complaints.  The court explained that disputes of fact also existed regarding whether the reason given for the plaintiff’s termination was pretextual.


U.S. ex rel. Morison v. Res-Care, Inc., 2017 WL 468287 (S.D. Ind. Feb. 3, 2017)

Holding: The United States District Court for the Southern District of Indiana granted the defendant’s motion to dismiss the relator’s claims that the defendant overcharged the government for services provided to disabled individuals for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam suit against a disability services provider where she was formerly employed, alleging that the defendant violated the False Claims Act by falsifying records in order to overbill the government for services provided to patients.  The relator alleged that the defendant instructed its employees to falsely record time spent preparing developmental and behavioral plans as “direct care” time in order to fulfill its obligations to provide a certain amount of direct care time to patients.  She also alleged that she was terminated in violation of the FCA’s retaliation provisions for failing to comply with those instructions.  The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted the defendant’s motion to dismiss, finding that the relator failed to plead fraud with adequate particularity because she did not identify any employees who actually falsified hours.  The court noted that, due to her position at the company, the relator could not be required under Rule 9(b) to produce details of the invoices that the defendant submitted , but that “one would expect her to have the ability to identify [one employee] who allegedly falsified his or her hours at least once.”  Additionally, the court granted the defendant’s motion to dismiss the relator’s retaliation claim, explaining that her claim was fatally deficient because it did not contain an allegation that “she was contemplating filing an FCA enforcement action” prior to her termination.


U.S. ex rel. Taul v. Nagel Enters., Inc., 2017 WL 432460 (N.D. Ala. Feb. 1, 2017)

Holding: The United States District Court for the Northern District of Alabama granted in part and denied in part the defendants’ motion to dismiss the relator’s AKS claims for failure to plead fraud with particularity under Rule 9(b).

The relator filed a qui tam suit against a cremation company where he was formerly employed, and against its owner and another employee, alleging that the defendants violated the Anti-Kickback Statute by paying kickbacks to workers at the Alabama Organ Center in order to secure business for the transportation, tissue harvesting, embalming, and cremation of deceased organ donors.  The relator also alleged that the defendants submitted claims tainted by these kickbacks to the government in violation of the False Claims Act.  The defendants allegedly paid the kickbacks from June 2003 to approximately June 2011, during which time they also allegedly fabricated charges and overbilled the government for transportation and embalming services.  When the relator confronted the owner of the company about the fraud scheme, the owner allegedly “became physically abusive” and threatened “to cremate [the relator] alive.”  The relator alleged that he was eventually fired and that the defendants interfered with his ability to gain employment in his chosen field in the region where he lived. The defendants moved to dismiss the relator’s complaint, arguing that some claims were barred by the statute of limitations and that the relator failed to state a claim under Rule 12(b)(6) and failed to plead fraud with particularity under Rule 9(b) with respect to the relator’s reverse false claims allegations.

The court granted the defendants’ motion in part and denied it in part.  The court, noting that the relator filed his operative complaint in May of 2015, found that the relator’s retaliation claims dating from the fall of 2012 survived the defendant’s motion to dismiss, but all earlier retaliation claims were barred by the applicable three-year statute of limitations. Further, the court found that the relator’s qui tam claims from prior to 2008 were time-barred by the FCA’s 6-year statute of limitations. The court found that the relator sufficiently stated a claim with respect to his post-2008 kickback allegations, but granted the defendants’ motion to dismiss the reverse false claims count, finding that the relator did not plead “facts as to the time, place, or substance of any retained overpayments sufficient to sustain a reverse false claim under Rule 9(b).”  The court also denied the relator’s request for leave to amend his complaint for failure to sufficiently argue a “good cause” for amendment.

 

Verble v. Morgan Stanley Smith Barney, LLC, 676 Fed.Appx. 421 (6th Cir. Jan. 13, 2017)

Holding: The U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s decision to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation action against the wealth management company where he was formerly employed as a financial advisor, alleging that the defendant violated the anti-retaliation provision of the False Claims Act by illegally terminating him in retaliation for informing the Federal Bureau of Investigation of the defendant’s illegal activity.  The U.S. District Court for the Eastern District of Tennessee granted the defendant’s motion to dismiss the plaintiff’s claims, ruling that he did not adequately allege facts to support a finding that he had engaged in “protected activity.”  The plaintiff appealed to the Sixth Circuit.

The circuit court affirmed the district court’s decision.  The court found that the plaintiff’s allegations were conclusory, explaining that he failed to provide any factual information to support his claims that he assisted the FBI.  Additionally, the court noted that the statement of plaintiff’s counsel that the plaintiff would respond to the court’s inquires under seal was insufficient, as the plaintiff did not allege any additional facts or file any additional pleadings attempting to cure his complaint despite his awareness of the complaint’s deficiencies.

 

Thurlow v. York Hospital, 2017 WL 90345 (D. Me. Jan. 10, 2017)

Holding: The U.S. District Court for the District of Maine denied the defendant’s motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff, a surgeon, brought a retaliation action against the hospital where he was formerly employed, alleging that the defendant terminated him in retaliation for expressing concerns that a fellow doctor was violating the False Claims Act.  The plaintiff allegedly raised concerns that the doctor performed medically unnecessary nerve surgeries, falsified surgical notes, and upcoded for surgical procedures.  The defendant allegedly continued to allow the doctor to practice at the hospital, and when the plaintiff refused to work with the doctor he was fired without cause or notice.  Though terminated, the plaintiff retained admitting privileges at the hospital, but was required to sign a “behavioral compact” that prohibited him from speaking negatively or voicing concerns or criticisms about the hospital or past decisions. The defendant moved to dismiss the plaintiff’s claims for failure to state a claim under Rule 12(b)(6) and the plaintiff moved for leave to amend his complaint.

The court denied the defendant’s motion to dismiss.  The court found that the plaintiff properly alleged that he was terminated due to his protected activity.  The court explained that the plaintiff alleged temporal proximity between his termination and protected activity by alleging that he continued to oppose the doctor’s activities until three months before his termination.  Further, the court found that the behavioral compact suggested retaliatory animus by creating an inference that the defendant wanted to silence the plaintiff to prevent exposure of the fraud.


Skrynnikov v. Fed. Nat’l Mortgage Assoc., 226 F.Supp.3d 26 (D.D.C. Jan. 3, 2017)

Holding: The U.S. District Court for the District of Columbia denied both parties’ motions for summary judgment on the plaintiff’s retaliation claims.

The plaintiff brought a False Claims Act retaliation action against Fannie Mae, the government-sponsored corporation where he was formerly employed, alleging that the defendant terminated him in retaliation for voicing his concerns that the defendant was intentionally misreporting to the government how much it was paying its executives.  The plaintiff alleged that his supervisor responded to his complaints about the potential fraud with “agitation and anger” and gave the plaintiff a written warning for poor job performance.  Prior to his termination, the plaintiff took the maximal medical leave statutorily permitted, utilized one week of vacation time to recover from an injury, and did not return to work on his approved return-to-work date.  Subsequently, the plaintiff received a letter from the defendant indicating that he no longer had leave available and that the defendant had made a “business decision” to close his position, terminating the plaintiff a few days later.  Both parties moved for summary judgment, and the court denied both motions.

In denying the plaintiff’s motion, the court explained that there was an issue of material fact as to whether he had an objectively reasonable belief that the defendant was committing fraud, based on the information that he had at his disposal through his employment.  The court also indicated that there was a dispute as to whether the plaintiff raised his concerns to the appropriate supervisors such that the defendant had knowledge of the plaintiff’s protected activity. Conversely, in denying the defendant’s motion, the court found that those same disputed facts prevented the court from granting summary judgment in its favor.   Additionally, the court found that there was also a dispute as to whether the plaintiff was fired because of his investigation into the defendant’s disclosures to the government.  The court noted that the plaintiff alleged that his negative treatment began after he voiced his concerns, but the defendant claimed that the plaintiff was fired after he had exhausted his leave, resulting in a business decision to eliminate the plaintiff’s position.


U.S. ex rel. Complin v. N.C. Baptist Hosp., 2016 WL 7471311 (M.D.N.C. Dec. 28, 2016)

Holding: The Magistrate Judge for the U.S. District Court for the Middle District of North Carolina recommended that the court grant the defendants’ motion to dismiss with prejudice the relator’s retaliation claims and allegations that the defendants inflated their Medicare reimbursements claims.

The relator brought a qui tam suit against the hospital system where he was formerly employed an associate director, alleging that the defendants failed to disclose their employees’ healthcare claims on their Medicare Cost Report, causing falsely increased reimbursements and an inflated Medicare “Wage Index” in their geographic area.  Additionally, the relator alleged that he was fired in retaliation for his internal complaints about fraud.  The defendants moved to dismiss the relator’s complaint for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim upon which relief can be granted under Rule 12(b)(6).

The Magistrate Judge recommended that the court grant the defendants’ motion to dismiss the relator’s claims with prejudice.  The court concluded that the relator met the particularity requirements of Rule 9(b), noting that, contrary to the defendants’ argument, the relator was not required to identify the names of officers who made the false statements on the cost reports, and that neither the FCA nor Rule 9(b) required the relator to possess personal knowledge of the alleged fraud.  However, the court found that the relator failed to allege any evidence that could create an inference that the defendant possessed knowledge or awareness of the alleged misconduct.  Moreover, the court rejected the relator’s attempt to establish scienter by demonstrating recklessness through a failure to become aware of industry laws and regulations, by inferring “motive and opportunity” to defraud the government via complex employment benefit plans, or through allegations that the hospital claimed fictitious costs.  Finally, the court determined that the relator failed to allege that the defendant took adverse employment action against him, as the time between the defendants’ discovery of the relator’s suit and the relator’s termination was too great to satisfy the FCA’s causation element.  The court also found that the relator’s proposed amendments failed to plausibly establish scienter or causation, warranting the dismissal of all relator’s claims with prejudice.


U.S. ex rel. Salters v. American Family Care, Inc. 2016 WL 7242180 (N.D. Ala. Dec. 15, 2016)

Holding: The U.S. District Court for the Northern District of Alabama denied the defendant’s motion for partial summary judgment on the relator’s retaliation claim.

The plaintiff brought a retaliation action under the False Claims Act against the medical care provider where she was formerly employed, alleging that the defendant improperly terminated her in retaliation for her protected whistleblowing activity.  The plaintiff alleged that she raised concerns that the defendant’s practice of billing for laboratory tests ordered by a physician who was not actually in the clinic violated the FCA.  The defendants moved for partial summary judgment, arguing that they had a non-retaliatory basis to terminate the plaintiff.

The court denied the defendants’ motion for partial summary judgment.  The court concluded that the plaintiff demonstrated the first two elements of a prima facie retaliation case, as her email to the president regarding potential violations qualified as protected activity and her termination qualified as an adverse employment action.  Further, the court explained that the close temporal proximity between her protected activity and her termination demonstrated that the events could be related, particularly because the executive who ultimately terminated the relator was aware of her protected activity and terminated her only six weeks after she raised concerns.  Lastly, the court found that though the defendants offered a non-retaliatory reason for the plaintiff’s termination, the plaintiff presented sufficient evidence that the proffered non-retaliatory reason was pretextual to allow the case to proceed.


Steele v. Great Basin Sci., Inc., 2016 WL 6839384 (D. Utah Nov. 21, 2016)

Holding: The U.S. District Court for the District of Utah granted the defendant’s motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff brought a retaliation claim under the False Claims Act against the diagnostic blood pathogen testing kit manufacturer where she was formerly employed alleging that the defendant terminated her in retaliation for attempting to stop FCA violations by raising concerns about potential testing kit contamination.  The defendant moved to dismiss the plaintiff’s allegations for failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss.  The court found that the plaintiff’s activity was not protected under the FCA because she only attempted to improve the quality of the defendant’s products and did not put the defendant on notice that she was preparing a qui tam suit or preventing fraud.  The court rejected the plaintiff’s argument that because her complaints were unrelated to her job as the director of recruitment, her employer was put on notice of a potential suit, explaining that the plaintiff did not allege in the complaint that her job was unrelated to regulating the facility’s contamination and that acting outside of one’s stated duties is insufficient to put an employer on notice.  Additionally, the court noted that the defendant did not submit any requests for payment to the government, and it would be “less than apparent” that the defendant would be liable under the FCA for knowingly selling substandard products that may eventually be purchased by the government.


Drumm v. Triangle Tech, Inc., 2016 WL 6822422 (M.D. Penn. Nov. 18, 2016)

Holding: The U.S. District Court for the Middle District of Pennsylvania granted the defendant’s motion to dismiss two of the four plaintiffs’ retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiffs brought retaliation claims against the technical school where they were formerly employed, alleging that the defendant terminated two plaintiffs, Joseph Drumm and Ronald McElwee in retaliation for attempting to stop False Claims Act violations and terminated the remaining plaintiffs, Carol Beck and Lisa Delbaugh, due to their well-known close personal relationship with Drumm and McElwee.  The plaintiffs alleged that the defendant asked Drumm produce false documents to allow disbursement of government funds, but that he refused and contacted his supervisor and the vice president of human resources.   They alleged that Drumm reported the request to the Department of Education (“DOE”) and met with McElwee and the Office of the Inspector General (“OIG”) to investigate the defendant.  The OIG concluded that the defendant wrongfully received $70,000, which was returned to the DOE to resolve the issue.  However, the plaintiffs alleged that soon after the defendant discovered that Drumm and McElwee met with the OIG, the defendant closely monitored the four relators performance and terminated the under false pretenses.  The defendant moved to dismiss the plaintiffs’ allegations for failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss with respect to Beck and Delbaugh, explaining that they failed to allege that they  took action in furtherance of a qui tam suit.  The court found that Drumm and McElwee sufficiently demonstrated that they engaged in protected activity by contacting the DOE and meeting with the OIG.  The court rejected Beck and Delbaugh’s argument that they were protected through the “zone of interest” theory due to their close friendships with Drumm and McElwee, indicating that they did not cite any authorities supporting the extension of the theory to friendship.


U.S. ex rel. Herman v. Coloplast Corp., 2016 WL 7042191, (D. Minn. Nov. 9, 2016)

Holding: The Magistrate Judge in the U.S. District Court for the District of Minnesota recommended that the court grant the defendant’s motion for summary judgment on relators’ retaliation claims, finding that the relators’ allegations were barred by their Separation Agreements and the FCA’s statute of limitations.

The relators brought a qui tam action against their former employer, a ostomy and continence care product manufacturer, alleging that the defendant terminated them in retaliation for their investigation of and refusal to participate in an alleged fraudulent scheme that provided illegal kickbacks to suppliers in exchange for switching to the defendant’s products, in violation of the False Claims Act’s retaliation provisions.  While employed by the defendant, the relators signed an Employment Agreement that dictated severance terms, and at the time of termination the relators signed a Separation Agreement that included their severance packages and an agreement not to bring claims related to their employment against the defendant in any form, excluding claims that arise after the date of the Separation Agreement.  The defendant moved to dismiss the relators’ allegations for failure to state a claim under Rule 12(b)(6), or in the alternative, for summary judgment, arguing that the relators’ claims were nullified by their Separation Agreements and were time-barred.

The court recommended that the court grant the defendant’s motion for summary judgment.  The court rejected the relators’ argument that the Separation Agreement was a prospective and thus void as against public policy, explaining that the releases only applied to claims “up  to the date” they were signed.  The court noted that the relators’ argument that the Separation Agreements ran contrary to the FCA and public policy was misplaced because the releases did not foreclose the relators from bringing substantive qui tam actions, but only from bringing retaliation claims, which the court determined were related to the relators’ employment only.  The court explained that the “FCA retaliation claims…[were] personal to the individual employee” and that the releases had “no impact on the qui tam claims.”  Lastly, the court concluded that the relator’s retaliation claims were also time-barred because they only appeared in the amended complaint filed after the statute of limitations had passed for retaliation claims and the claims did not relate back to or arise from the original complaint.


Scates v. Shenandoah Memorial Hosp., 2016 WL 6270789 (W.D. Va. Oct. 26, 2016)

Holding: The U.S. District Court for the Western District of Virginia granted the defendant’s motion for summary judgment on the relator’s retaliation claims, finding that the relator was not engaged in protected activity and the defendant provided a legitimate reason for termination.

The plaintiff brought a retaliation action under the False Claims Act against a medical imaging facility where she was formerly employed as an ultrasound technician, alleging that the defendant terminated her in retaliation for reporting her concern that the defendant was engaged in fraudulent billing.  The relator alleged that the defendant’s technicians took fewer ultrasound photos than billing standards required.  The defendant moved for summary judgment, arguing that the relator’s belief that the defendant was committing fraud was objectively unreasonable.

The court granted the defendant’s motion for summary judgment, finding that the relator was not engaged in protected activity because she did not demonstrate an objectively reasonable belief that the defendant was committing fraud.   The court noted that the relator only alleged that the defendant underbilled the government, which was not a violation of the FCA, and that the relator’s concerns were based on  a general conversation about the industry that she overheard and then applied to her employer.  The court explained that the defendant’s  claims that it terminated the relator due to poor coworker relationships, history of workplace conflict, and refusal to change her behavior during a performance improvement plan were acceptable non-retaliatory reasons.


U.S. ex rel. Crockett v. Complete Fitness Rehab., Inc., 2016 WL 5476277 (E.D. Mich. Sept. 29, 2016)

Holding: The U.S. District Court for the Eastern District of Michigan granted the defendant’s motion to dismiss for failure to plead fraud with specificity under Rule 9(b). 

The relator brought a qui tam suit against her former employer, a rehabilitation services provider, alleging that the defendant violated the False Claims Act by requiring employees to treat all incoming patients at the highest level of therapy without requisite medical assessments or doctor’s notes and required increased length of therapy in order to maximize government funding. Additionally, the relator alleged that the defendant stopped or postponed therapy despite medical necessity, promoted falsification of time records, billed for services that were not provided, and violated the reverse false claims provision of the FCA. Finally, the relator alleged that the defendant terminated her in retaliation for her complaints via email indicating that she viewed the defendant’s billing and therapy practices as inappropriate. The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim pursuant to Rule 12(b)(6).

The court granted the defendant’s motion to dismiss, finding that the relator failed to identify an actual fraudulent claim. The court explained that the emails that the relator produced to support her claims contained details about the fraudulent scheme and gave examples of instances wherein patients were treated at an unnecessarily high treatment level, however, they did not show the time, place, or contents of an actual false claim submitted to the government. Additionally, the court granted the defendant’s motion to dismiss the relator’s reverse false claims allegation, explaining that the relator failed to sufficiently allege that the defendant had a concrete obligation to return overpayments. Finally, the court granted the defendant’s motion to dismiss the relator’s retaliation claims, concluding that the relator’s email complaints to her supervisors did not constitute protected activity under the FCA’s retaliation provision because she did not connect her concerns to fraud against the government.


U.S. ex rel. Chase v. LifePath Hospice, Inc., 2016 WL 5239863 (M.D. Fla. Sept. 22, 2016)

Holding: The U.S. District Court for the Middle District of Florida granted the defendant’s motion to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b). 

The relator brought a qui tam suit against the hospice care provider where she was formerly employed and its parent company and subsidiaries alleging that they conspired to submit false claims to Medicare for hospice care that was not actually provided or provided to ineligible patients in violation of the False Claims Act. Specifically, the relator alleged that the defendants falsified medical records to upcode patient care and administer more intensive and costly treatment, instructed nurses to “find a reason to admit” patients including falsely certifying that a patient was terminally ill, interfered with and deceptively obtained patients’ informed consent, and created barriers to ending hospice treatment even when care was not medically necessary or legally permitted. Furthermore, the relator alleged that the defendants incentivized employees with quotas, bonuses, and performance evaluations to find referral sources and conspired with other assisted-living and medical providers (also defendants in the case) to garner referrals in exchange for kickbacks such as marketing advantage, necessary supplies, or payment for necessary materials. She alleged that the defendants submitted claims to Medicare which were tainted by these Anti-Kickback Statute and Stark Law violations. Finally, the relator alleged that the defendants demoted and terminated her in retaliation for her complaints about their fraudulent conduct. The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity as required by Rule 9(b).

The court granted the defendants’ motion to dismiss. The court indicated that by failing to identify any claim actually submitted to the government, when a claim was submitted, or an individual who submitted a claim, the relator failed to meet the requirements of Rule 9(b). The court explained that while the relator’s status as an employee was sufficient to establish first-hand knowledge of admission policies and medical practices, she did not have first-hand knowledge of false claims submitted to the government. Additionally, the court granted the defendants’ motion to dismiss the relator’s retaliation claims, finding that the relator’s complaints did not constitute protected activity because she did not allege that the defendants were engaged in fraud in her complaints, rather, she framed her complaints as ethical concerns.


U.S. ex rel. Cody v. Mantech Int’l Corp., 2016 WL 4940332 (E.D. Va. Sept. 14, 2016) 

Holding: The U.S. District Court for the Eastern District of Virginia denied the defendant’s motion for summary judgment on the plaintiffs’ retaliation claim in part and granted it in part. 

The plaintiffs brought a retaliation action against a multinational government contractor where they were formerly employed as executives, alleging that the defendant reduced the plaintiffs’ responsibilities and ultimately terminated them in retaliation for questioning the defendant’s bidding practices on a large U.S. Army contract. In particular, the plaintiffs raised concerns before and after the contract was awarded that the defendant did not disclose all costs anticipated in the contract, as the defendant allegedly purposefully underestimated the number of hours employees would work in its representations to the government. The defendant moved for summary judgment.

The court denied the defendant’s motion for summary judgment in part and granted it in part. The court determined that the act of bringing the qui tam suit was protected activity and the totality of events indicated a reasonable inference of retaliation to be assessed by a fact finder and denied the defendant’s motion for summary judgment with respect to the relators’ filing of the qui tam suit. However, the court granted the defendant’s motion as to any conduct other than the filing of the suit, explaining that while the relators may have subjectively believed that the defendant’s conduct was illegal, they did not characterize the conduct as fraudulent or illegal when complaining about it to their supervisors. Rather, the court determined that the conduct the relators were concerned about amounted to “accounting issues, business judgments, and market condition projections,” and therefore the relators’ complaints did not put the defendant on notice that the plaintiffs believed the defendant was engaged in fraudulent behavior.


Carlson v. Dyncorp Int’l LLC, 2016 WL 4434415 (4th Cir. Aug. 22, 2016)

Holding: The U.S. Court of Appeals for the Fourth Circuit upheld the district court’s decision to grant the defendant’s motion to dismiss the plaintiff’s complaint for failure to state a claim under Rule 12(b)(6), finding that the relator failed to demonstrate that he held an objectively reasonable belief that the defendant violated the False Claims Act. 

The plaintiff brought a retaliation action against a government contractor where he was formerly employed as a director, alleging that the defendant terminated the plaintiff in retaliation for raising concerns that the defendant violated the False Claims Act by submitting lower-than-average indirect cost rates in its bid for a government contract. The U.S. District Court for the Eastern District of Virginia granted the defendant’s motion to dismiss the plaintiff’s claims for failure to state a claim under Rule 12(b)(6), finding that the plaintiff did not demonstrate a “distinct possibility of legislation.” The plaintiff appealed to the Fourth Circuit.

The circuit court upheld the district court’s decision; though found that the district court erroneously applied pre-2009 amendment standards to the plaintiff’s claims. The court agreed with the plaintiff’s argument that the district court erred in applying the pre-2009 amendment retaliation provisions, since the amended FCA only requires an “effort to stop” violations instead of a “distinct possibility of legislation.” However, the court held that the plaintiff failed to demonstrate that he held an objectively reasonable belief that the defendant violated the FCA, as he did not include a theory of fraud alleging financial loss to the government, did not identify specific provisions the defendant may have falsely certified, and only speculated that the defendant was going to make a false claim.


McCrary v. Knox Cty., 2016 WL 4140982 (S.D. Ind. Aug. 4, 2016)

Holding: The U.S. District Court for the Southern District of Indiana granted defendant’s motion to dismiss the plaintiff’s retaliation claims for failure to state a claim under Rule 12(b)(6).

The plaintiff, who was formerly employed by a county’s highway department, brought a retaliation claim against the county alleging that the county terminated him in retaliation for making written and oral statements on his timesheet about the county’s alleged misuse of federal government funding. The plaintiff alleged he was directed to perform work on a private road that was not owned by the county, and thus the work was not eligible for government funding, but that the defendant claimed government money for the work anyway. He alleged that he was fired after making a notation about the private road on his timesheet and meeting with his supervisors to discuss his concerns with county officials. The defendant moved to dismiss the relator’s retaliation allegations for failure to state a claim upon under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss. The court explained that the plaintiff failed to sufficiently allege that federal dollars were involved in the project or that the federal government was defrauded. The court also found that the relator failed to demonstrate that the defendant submitted any requests for payment related to the road at issue. The court concluded that because the relator did not sufficiently allege that he was terminated due to actions taken to stop fraud against the federal government, his claims failed.


U.S. ex rel. Feaster v. Dopps Chiropractic Clinic, LLC, 2016 WL 3855560 (D. Kan. July 15, 2016)

Holding: The U.S. District Court for the District of Kansas denied defendant’s motion to dismiss relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state claim under Rule 12(b)(6). 

The relator brought a qui tam action against the chiropractic clinic where he was formerly employed and its owner alleging that the defendant engaged in four fraudulent billing schemes in order to gain unjustified Medicare reimbursements. The relator also alleged that the defendants retaliated against him when he opposed the fraudulent conduct by negatively altering his salary, forcing him to quit, and then making false statements to the relator’s prospective employers in order to prevent him from obtaining employment. The defendant moved to dismiss relator’s claims against all defendants for failure to plead fraud with particularity under Rule 9(b) and against the owner of the clinic for failure to state claim under Rule 12(b)(6).

The court denied the defendants’ motion to dismiss. First, the court rejected the defendants’ argument that the relator failed to state a claim against the owner of the clinic because only the clinic was the relator’s “employer” for purposes of the FCA. The court reasoned that the relator satisfied Rule 12(b)(6) because the FCA holds employers vicariously liable for employees’ actions and the relator alleged that the defendant owner, as an employee of the clinic, “performed FCA-violating acts ‘in the course and scope of his actual and apparent agency with [the clinic].’” The court also found that the relator met the requirements of Rule 9(b) in pleading his fraud allegations against all defendants, explaining that he alleged with specific detail particular individuals involved in the alleged schemes, described patients’ medical conditions, detailed the services that patients received, and identified which services defendant billed to Medicare. Finally, the court denied the defendants’ motion to dismiss the relator’s retaliation claims, finding that the relator properly stated a claim against both the owner and the clinic.

 

Howell v. Town of Ball, 2016 WL 3595722 (5th Cir. July 1, 2016)

Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision to dismiss plaintiff’s retaliation claims finding that the FCA does not extend to individual defendants.

The plaintiff brought a retaliation claim under the False Claims Act against his former employer, a town and individual town officials, alleging that the he was harassed and terminated in retaliation for serving as a confidential informant in the FBI investigation of his report that the defendant fraudulently obtained funds from the government. The U.S. District Court for the Western District of Louisiana granted the defendant’s motions to dismiss the plaintiff’s retaliation claims against the individual defendants, finding that the FCA only created cause of action against an employer, not individual defendants. The district court denied the defendant’s motion for summary judgment against the town. The plaintiff appealed the ruling regarding the individuals to the Fifth Circuit.

The circuit court affirmed the district court’s decision granting the individual defendants’ motion for summary judgment. The court explained in considering the 2009 amendments to the FCA it is evident that the changes in language were intended to “broaden[] the class of FCA plaintiffs to include ‘contractors’ and ‘agents,’ not to provide liability for individual, non-employer defendants.”

 

Farmer v. Eagle Sys. and Serv. Inc., 2016 WL 3564386 (4th Cir. July 1, 2016)

Holding: The U.S. Court of Appeals for the Fourth Circuit affirmed the district court’s decision granting the defendants’ motion to dismiss the plaintiff’s retaliation claims on grounds that the plaintiff was not engaged in protected activity under the FCA. 

The plaintiff brought a retaliation claim under the False Claims Act against the defendants, federal government contractors that jointly operated a supply warehouse, alleging that the defendants retaliated against him for reporting a supervisor stealing government-owned equipment. The plaintiff alleged that the defendants retaliated against him through isolation, threats, and frivolous disciplinary write-ups, and that he was eventually constructively terminated. The U.S. District Court for the Eastern District of North Carolina granted the defendants’ motion to dismiss plaintiff’s claims for failure to state a claim under Rule 12(b)(6), reasoning that the plaintiff did not have a reasonable belief that it the alleged theft violated the FCA. The plaintiff appealed to the Fourth Circuit.

The circuit court affirmed the district court’s decision, holding that a single report of theft without underlying fraud did not qualify as an activity in furtherance of an FCA action. The court rejected plaintiff’s argument that his reported theft could indirectly prevent future FCA violations and thus qualified as protected activity, explaining that the plaintiff did not allege facts to support a connection to any future FCA violations.


U.S. ex rel. Voss v. Monaco Enter., Inc., 2016 WL 3647872 (E.D. Wash. July 1, 2016)

Holding: The U.S. District Court for the Eastern District of Washington granted the defendant’s motion to dismiss relators’ non-intervened and retaliation claims for failure to plead with particularity.

The relators brought two qui tam actions against their former employer, a security and fire detection alarm company, alleging multiple violations of the False Claims Act including billing for services not received and services that did not meet contractual requirements, fraudulently reporting employees’ hours and travel expenses, mislabeling products, and misrepresenting the company’s capabilities and regulatory compliance. Additionally, one relator alleged that the defendant withdrew the relator’s medical leave permission, harassed, and terminated him in retaliation for questioning the defendants’ compliance with federal statutes. The government chose only to intervene on the relator’s claims that the defendant billed for services not rendered and concealed deceptive travel costs. The defendants moved to dismiss the remaining, non-intervened and retaliation claims for failure to meet the particularity requirements of Rule 9(b).

The court granted defendant’s motion to dismiss relator’s non-intervened and retaliation claims for failure to plead with particularity under Rule 9(b). First, the court determined that the relators’ inclusion by reference of multiple paragraphs in the government’s intervenor complaint was insufficient to establish the relators’ separate claims under Rule 9(b), rather to meet Rule 9(b), relators’ claims needed to be able to stand on their own. Second, the court held that relator’s retaliation complaint failed to provide the “who, what, when, and where” necessary to allege that he was engaged in protected activity.

See U.S. ex rel. Heath v. Indianapolis Fire Dept., 2017 WL 1435711 (S.D. Ind. Apr. 24, 2017)

See U.S. ex rel. Carson v. Manor Care, Inc., 851 F.3d 293 (4th Cir. Mar. 16, 2017)

See U.S. ex rel. Doe v. Lincare Holdings, Inc., 2017 WL 752288 (S.D. Miss. Feb. 27, 2017)

See U.S. ex rel. Williams v. City of Brockton, 2016 WL 7429176 (D. Mass. Dec. 23, 2016)

See U.S. ex rel. Uhlig v. Fluor Corp., 2016 WL 5905714 (7th Cir. Oct. 11, 2016)

IV. COMMON DEFENSES TO FCA ALLEGATIONS

A. Scienter


U.S. ex rel. Phalp v. Lincare Holdings, Inc., 2017 WL 2296878 (11th Cir. May 26, 2017)

Holding: The U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s decision to grant the defendants’ motion for summary judgment on the relators’ allegations that the defendants billed for unauthorized products and made unsolicited telemarketing calls in violation of Medicare regulations.

The relators brought a qui tam action against the therapy services and diabetic testing supplier where they were formerly employed, as well as the supplier’s affiliates, alleging that the defendants violated the False Claims Act by submitting claims to Medicare without the required authorization from the Medicare beneficiaries.  They also alleged that the defendants submitted claims that were the product of improper, unsolicited telemarketing that violated Medicare regulations.  The U.S. District Court for the Southern District of Florida granted the defendants’ motion for summary judgment, finding that the relators failed to prove scienter.  The court explained that the evidence the relators submitted in the form of two tangential emails from the defendants was insufficient to create a genuine issue of material fact.  The court also explained that the defendants’ claim that its actions were consistent with a reasonable interpretation of the governing law “belie[d] the scienter necessary to establish a claim of fraud under the FCA.”  The relator appealed to the Eleventh Circuit.

The circuit court affirmed the district court’s decision, but rejected the district court’s conclusion that the defendants’ identification of a reasonable interpretation of an ambiguous law could preclude scienter.  Instead, the circuit court explained, a court was required to determine whether a defendant actually knew or should have known that its conduct violated a regulation.  However, the circuit court upheld the outcome of the decision, finding that the relators failed to properly allege scienter because the emails, which the court noted were largely irrelevant to the regulations at hand, were insufficient to establish the defendants’ knowledge.    Further, the circuit court affirmed the district court’s decision holding that the relators failed to establish that the defendants’ claims stemming from the unsolicited calls were false, explaining that the calls were permitted under an exception to Medicare’s telemarketing prohibition.

See Graves v. Plaza Med. Cent., Corp., 281 F.Supp.3d 1260, 276 F.Supp.3d 1335 (S.D. Fla. Mar. 20, 2017)

B.Not Knowingly False


U.S. ex rel. Johnson v. Golden Gate Nat’l Senior Care, LLC, 2016 WL 7197373 (D. Minn. Dec. 9, 2016)

Holding: The U.S. District Court for the District of Minnesota denied in part the defendants’ motion for summary judgment on the relator’s claims of false certification of compliance with Medicare therapy regulations.

The relators, an occupational therapist and her employer, brought a qui tam suit against a rival provider of nursing home therapy services and the nursing homes where the individual relator was formerly employed, alleging that the defendants violated the False Claims Act by falsely certifying compliance with Medicare’s statutory and regulatory requirements for physical and occupational therapy.  The relator alleged that the defendants billed for services provided by unlicensed therapists, failed to ensure proper supervision,  did not properly document therapy provided, mischaracterized the monitoring of group therapy, billed for therapy that was not actually provided, failed to accurately track and record therapy time, and provided services without a physician-certified plan of care.  The defendants moved for summary judgment.

The court denied in part the defendants’ motion for summary judgment.  The court determined that the relators provided sufficient evidence to create a dispute of material fact as to their unlicensed therapy claims, group therapy monitoring allegations, and allegations that the defendants billed for services that were not provided.  Additionally, the court denied the defendants’ motion to dismiss the relators’ supervision allegations, rejecting the defendants’ argument that the relevant requirements were ambiguous.  Further, the court denied summary judgment on the relators’ skilled therapy services allegations concluding that  a jury should hear scientific expert testimony to interpret the term “skilled services” as used in the regulations.  The court granted the defendants’ motion as to the documentation related claims, finding that the defendants’ interpretation of the Medicare regulations was objectively reasonable and the relators failed to provide evidence that the defendants knew their documentation practices were not in compliance with Medicare regulations.  The court also granted the defendants’ motion as to the relators’ inaccurate time keeping allegations, finding that the relators asserted the theory only upon learning new information through discovery.  Finally, the court granted the defendants’ motion on the relators’ improper certification claims, explaining that the relators did not specifically plead these allegations in their amended complaints.


U.S. ex rel. Ruscher v. Omnicare, Inc., 2016 WL 6407128 (5th Cir. Oct. 28, 2016)

Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision to grant summary judgment to the defendant on relator’s allegations stemming from Anti-Kickback Statue violations.

The relator brought a qui tam suit against the pharmacy services provider where she was formerly employed and its affiliates, alleging that the defendants violated the Anti-Kickback Statute (“AKS”) by paying kickbacks in the form of non-collection of Medicare Part A debt and offering prompt payment discounts (“PPDs”) to skilled nursing facilities (“SNFs”) in exchange for patient referrals, and caused claims tainted by those kickbacks to be submitted to the government in violation of the False Claims Act.  The relator also alleged that the defendant caused SNFs submit false cost reports, as the defendant did not pay for the reported costs within the required time.  Further, during the time period that the realtor alleged, the defendants were obligated to report any potential fraud to the government pursuant to a Corporate Integrity Agreement (“CIA”).  The relator alleged that the defendants violated the reverse false claims provision of the FCA by failing to report the fraud after she had informed her supervisors of her concerns via email. The U.S. District Court for the Southern District of Texas granted the defendants’ motion for summary judgment, and the relator appealed to the Fifth Circuit.

The circuit court affirmed the district court’s decision to grant the defendant summary judgment.  The court explained that the relator provided no evidence demonstrating that the SNFs knew how the defendant designed its negotiation settlements and debt collection practices or that the SNFs were aware of the benefits that they were receiving, which the court reasoned was necessary to prove the relator’s alleged AKS violation.  Furthermore, the court explained that the relator failed to show that defendant’s PPDs were designed to induce referrals or offered illegitimately.  The court also determined that the relator did not sufficiently allege that the defendant caused an SNF to submit a false cost report because the relator’s evidence did not include the entire time period in which the defendant could have submitted costs.  Finally, the circuit court affirmed the district court’s summary judgment ruling on the relator’s reverse false claims allegation, finding that the email that she wrote to her supervisors did not indicate a probable violation of federal health care laws such that it was reportable to the government under the CIA.

 

U.S. ex rel. Warder v. Shaw Grp., 2016 WL 4802783, 4799073 (E.D. La. Sept. 14, 2016) 

Holding: The U.S. District Court for the Eastern District of Louisiana granted the defendants’ motions for summary judgment.

The relators, formerly employed by the Federal Emergency Management Agency (“FEMA”), brought a qui tam suit alleging that FEMA contractors that were hired to inspect, haul, install, maintain, and deactivate temporary housing duplicatively and falsely billed FEMA in violation of the False Claims Act. Specifically, the relators contend that the defendant double and triple billed FEMA for the placement of the same trailer and billed FEMA for work performed outside of the contracted location. The defendant moved for summary judgment, arguing the relators’ evidence did not raise a genuine dispute of fact that the defendant presented false claims.

The court granted the defendants’ motion for summary judgment. The court explained that the relators’ dependence on invoices that showed that the trailer was moved twice alone was insufficient to demonstrate that the defendant submitted claims with the requisite scienter to constitute a false claim, because the backup documentation provided by the defendants showed that the contract contemplated moving the trailer multiple times.


U.S ex rel. Hamilton v. Yavapai Cmty. Coll. Dist., 2016 WL 5408320 (D. Ariz. Sept. 28, 2016)

Holding: The U.S. District Court for the District of Arizona denied the defendant’s motion for partial summary judgment on the relator’s false certification claims.

The relator, a former employee of Yavapai Community College (“YC”), brought a qui tam action alleging that YC and Guidance Academy (“GA”) and their directors defrauded the Veteran’s Administration (“VA”) by falsely certifying their education programs were in compliance with certain regulations in order to receive federal funds, in violation of the False Claims Act.  The relator alleged that the defendants submitted claims for federal education funds for their flight programs despite knowledge that they violated VA’s regulations.  Specifically, the relator alleged that the defendants knowingly violated the “85/15” rule, which required that more than 85% of a program’s students were federally financially-supported, yet it presented claims for payment to the VA anyway.  The VA later found their method of calculating the numbers of federally-supported students improper and discontinued the defendants’ funding for the degree program in question.  The defendants moved for summary judgment, arguing that they lacked the requisite scienter to violate the FCA.

The court denied the defendants’ motion, finding that genuine issue of material fact existed with respect to defendants’ scienter.  The court explained that when confusion exists regarding the legal requirements of a regulation, an institution seeking government funding has a duty to “make a limited inquiry” to clarify the regulation.  Given this standard, the court found that the documents presented by the relator, including meeting minutes in which defendants stated that they doubted their calculation method, as well as  ambiguous the text of the 85/15 regulation indicated that a genuine dispute of fact remained regarding whether the defendants met their duty to engage in limited inquiry.  Further, in considering the defendants’ argument that they fully disclosed their methods of calculation to the VA and that the VA approved of their methods, thus negating scienter, the court found that a genuine dispute of material fact existed as to whether the defendants’ disclosed “all underlying facts” to the VA, explaining that there was evidence they did not disclose their new calculation methods fully.


U.S. ex rel. Donegan v. Anesthesia Assoc. of Kansas City, PC, 2016 WL 4254939 (8th Cir. Aug. 12, 2016)

Holding: The U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s ruling granting the defendant’s motion for summary judgment, finding that the defendant’s interpretation of CMS’s regulations was objectively reasonable and the claims were not knowingly false. 

The relator brought a qui tam suit against his former employer, an anesthesia services provider, alleging that the defendant violated the False Claims Act by submitting claims for Medicare reimbursement at the “Medical Direction” rate, when it knowingly did not comply with the “Medical Direction” requirement that an anesthesiologist must be present during the patients’ emergence from anesthesia. The U.S. District Court for the Western District of Missouri granted summary judgment to the defendant, reasoning that the term “emergence” was ambiguous and the defendant’s interpretation was objectively reasonable, thereby negating the necessary scienter for a false claim under the FCA. The relator appealed to the Eighth Circuit.

The circuit court affirmed the district court’s ruling. The circuit court found that CMS’s lack of specificity on the definition of “emergence” and the absence of input by a controlling source established that the term “emergence” was ambiguous. Further, the court observed, the defendant’s interpretation was objectively reasonable, given the relator presented no evidence to indicate the government warned the defendant that their interpretation did not conform to CMS’s requirements. Additionally, the court rejected the relator’s argument that the defendant’s failure to properly record the anesthesiologist’s presence in billing records entitled it to partial summary judgment. The court explained that the CMS’s regulations required recording in only the patient’s medical record—not in the billing records, and the relator failed to exercise sufficient effort to obtain the relevant portions of the patient records.

 

U.S. ex rel. Sheet Metal Workers Int’l Assoc. v. Horning Inv., LLC, 2016 WL 3632616 (7th Cir. July 7, 2016)

Holding: The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision granting the defendant’s motion for summary judgment.

The relator, a union representing roofers employed by the defendant, filed a qui tam suit alleging that the defendant, a subcontractor on a government roofing construction project, violated the False Claims Act by falsely certifying that its wages complied with the Davis-Bacon Act as required by its contract. Specifically, the relator alleged that the defendant continually confirmed it paid its workers fringe benefits in accordance with Davis-Bacon Act despite its practice of deducting a flat hourly fee from employees’ paycheck for insurance benefits. The relator alleged that the flat fee was not representative of the benefits’ actual monetary value and was deducted regardless of whether the employee qualified for the benefits. The U.S. District Court for the Southern District of Indiana granted the defendant’s motion for summary judgment, finding that because the defendant relied on the advice of its accountant to develop its fringe benefit practice, it could not possess the requisite knowledge to constitute a violation under the FCA. The relator appealed to the Seventh Circuit.

The circuit court affirmed the district court’s decision on other grounds. The circuit court rejected the defendant’s “advice-of-accountant” defense, explaining that the defendant did not develop the necessary facts to support this defense. However, the court upheld the grant of summary judgment, finding that the relator did not demonstrate that the defendant acted with the required scienter. The court explained the Davis-Bacon Act did not obligate the defendant to calculate the value of its benefits in any particular way, and that the defendant had a good faith belief that is practices were compliant. The court indicated that because the Davis-Bacon requirements contained “enough ambiguity,” it could not infer the defendant’s knowledge.

See U.S. ex rel. Olson v. Fairview Health Serv., 2016 WL 4169134 (8th Cir. Aug. 8, 2016)

C. Pro Se Relator


Maldonado v. Bank of Am., 2016 WL 5660293 (E.D. N.Y. Sept. 30, 2016)

Holding: The U.S. District Court for the Eastern District of New York dismissed the plaintiff’s claims on the grounds that pro se plaintiffs are prohibited from bringing False Claims Act actions. 

The plaintiff filed a qui tam action against the several banks alleging that the defendants violated the False Claims Act by engaging fraudulent lending practices that discriminated against minorities and deprived the plaintiff of his constitutional rights. The defendants moved to dismiss the plaintiff’s complaint.

The court granted the defendants’ motion to dismiss, explaining that pro se plaintiffs are not permitted to pursue actions under the FCA.


Palmer v. Fannie Mae, 2016 WL 5338542 (E.D. N.Y. Sept. 23, 2016)

Holding: The U.S. District Court for the Eastern District of New York granted the defendant’s motion to dismiss the plaintiff’s claims because pro se plaintiffs are prohibited from bringing FCA actions. 

The plaintiff filed a qui tam claim alleging that the defendant discriminated against her and her fiancé under the Fair Housing Act when the defendant refused to sell her property obtained through a foreclosure sale in violation of the False Claims Act. Previously, the defendant moved to dismiss and a Magistrate Judge issued a Report and Recommendation to the court recommending that the court grant defendant’s motion to dismiss.

The court concurred with the Report and Recommendation and dismissed the plaintiff’s claims, explaining that pro se plaintiffs are prohibited from bringing qui tam actions.


Pierce v. California Dept. of Corr. and Rehab., 2016 WL 4126713 (E.D. Cal. Aug. 2, 2016) 

Holding: The U.S. District Court for the Eastern District of California denied the plaintiff’s motion for reconsideration and motion for disqualification on the grounds that pro se plaintiffs are prohibited from bringing False Claims Act actions. 

The plaintiff, a state prisoner, filed an action accusing the court of fraud. The U.S. District Court for the Northern District of California dismissed the plaintiff’s complaint with prejudice. The action was then transferred to the U.S. District Court for the Eastern District of California, where the plaintiff filed a motion for reconsideration, arguing that the court incorrectly classified his suit as a civil rights action, and a motion to disqualify the magistrate and district judge.

The court denied the plaintiff’s motion for reconsideration and motion for disqualification explaining that pro se plaintiffs are not allowed to prosecute False Claims qui tam actions, and therefore the plaintiff was prohibited from pursing the action.

D. Sovereign Immunity


U.S. ex rel. Doughty v. Or. Health and Sci. Univ., 2017 WL 1364208 (D. Or. Apr. 11, 2017)

Holding: The United States District Court for the District of Oregon granted the defendant’s motion to dismiss the relator’s complaint, finding that the defendant was an arm of the state, not subject to FCA liability.

In this intervened case, the relator brought a qui tam suit against Oregon Health and Sciences University (OHSU) alleging that it violated the False Claims Act by applying improper reimbursement rates to federally-funded projects, resulting in overpayments by the government.  The defendant moved to dismiss, arguing that it qualified as an arm of the state, and was not subject to FCA liability.

The court granted the defendant’s motion to dismiss.  The court rejected the plaintiffs’ argument that even if the defendant qualified as an arm of the state, the federal government could still bring an FCA action against states and arms of the state.  The court explained that Supreme Court precedent in Vermont Agency of Natural Resources v. U.S. ex rel. Stevens had determined that “the FCA ‘does not subject a State (or state agency) to liability in [FCA] actions.’”  The court noted that the decision in Stevens “did not hinge on the fact that the FCA action was brought by a private individual,” and quoted the opinion’s finding that the FCA “liability provision… bore no indication that States were subject to its penalties.”   Further, the court held that the defendant was an arm of the state, not subject to FCA liability, observing that the defendant was “a public corporation created by the State of Oregon and defined by the Oregon Legislature as a governmental entity.”  The court noted that “every court that [had] addressed the issue and conducted an arm-of-the-state analysis has concluded that OHSU [was] an arm of the State of Oregon entitled to Eleventh Amendment immunity.”  The court further rejected the relators’ contention that the federal government could bring an FCA case against the defendant because the holding in Stevens only applied to individuals.


Dahlstrom v. Sauk-Suiattle Indian Tribe, 2017 WL 1064399 (W.D. Wash. Mar. 21, 2017)

Holding: The United States District Court for the Western District of Washington granted in part and denied in part the defendants’ motion to dismiss, finding that only the Sauk-Suiattle Indian Tribe was entitled to tribal sovereign immunity.

The relator brought a qui tam action against the Sauk-Suiattle Indian Tribe, where he was formerly employed, as well as  a health clinic its owners that were associated with the tribe, alleging that they engaged in various schemes to  violate the False Claims Act.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6).  The defendants argued that they were immune from suit due to tribal sovereign immunity.

The court granted the motion with respect to the tribe, but denied it with respect to the remaining defendants.  The court explained that the tribe was immune from FCA liability because it was a legal sovereign akin to a state and did not fall into the definition of “person” under the FCA.    However, the court found that the remaining defendants did not meet their burden of establishing that they were “arms of the tribe.”  As to the individual employees, the court noted that precedent allowed for state employees to be liable under the FCA even while acting in the course of their official duties, despite state sovereign immunity from FCA suits.


O’Connell v. Regents of the Univ. of California, 2016 WL 6872948 (9th Cir. Nov. 22, 2016)

Holding: The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal of the relator’s claims against a state entity.

The relator filed a qui tam action against the governing board of The University of California , alleging that the defendant violated the False Claims Act. The U.S. District Court for the Northern District of California dismissed the relator’s action, finding that the university was a state entity immune from suit under the FCA. The relator appealed to the Ninth Circuit.

The circuit court affirmed the district court’s dismissal. The court explained that the defendant was a state entity and therefore the relator did not have a statutory basis under the FCA to file a private action against it.


U.S. ex rel. Guardiola v. Renown Health, 2016 WL 6803078 (D. Nev. Nov. 15, 2016)

Holding: The U.S. District Court for the District of Nevada denied the relator’s motion for leave to file a third amended complaint against the government for a share of an alternate remedy, finding that the False Claims Act does not waive sovereign immunity.

The relator brought a qui tam suit against a medical center alleging that the defendant violated the False Claims Act by improperly billing government-funded health insurance programs.  The relator settled her suit and filed a joint stipulation of dismissal with the defendant, but alleged that after declining to intervene, the government pursued some of the claims brought in her FCA suit through a Recovery Audit Contract (“RAC”).  The relator filed suit, arguing that she was entitled to a share of the recovery because the RAC constituted an “alternate remedy.”  The U.S. District Court for the District of Nevada found that because the United States declined to intervene in the qui tam action, it was not a party in the suit and the court lacked jurisdiction.  Subsequently, the relator moved for leave to file a third amended complaint in order to add the United States as a party.  The United States did not respond, but moved for leave to file an amicus curiae brief in opposition, arguing that granting leave to amend would be futile as sovereign immunity would bar any claim the relator brought against the United States.

The court denied the relator’s motion for leave to file a third amended complaint.  First, the court determined that the United States’ motion to file an amicus brief was improper because it was an opposing party.  Next, the court rejected the relator’s argument that the FCA waived sovereign immunity by granting the relator a share of the government’s direct or alternate remedy recovery.  The court explained that the FCA did not waive sovereign immunity because there was no statutory text that explicitly allowed a relator to bring a suit against the United States in order to recover an alternate remedy.


U.S. ex rel. Fields v. The Bi-State Dev. Agency, 2016 WL 4944097 (E.D. Mo. Sept. 16, 2016) 

Holding: The U.S. District Court for the Eastern District of Missouri denied the defendant’s motion for summary judgment, finding that it was not entitled to Eleventh Amendment immunity. 

The relator brought a qui tam action against his former employer, a corporate entity created by a joint compact between the states of Missouri and Illinois, alleging that it violated the False Claims Act by falsely certifying compliance with the Hatch Act and Uniform Relocation Act in order to receive federal public transit funds. Previously, the court found that the defendant was not an arm of the state, and therefore not entitled to sovereignty immunity. The defendant appealed to the U.S. Court of Appeals for the Eight Circuit, which dismissed the appeal for lack of jurisdiction. The defendant again moved for summary judgment, arguing that it was immune to FCA allegations under the Eleventh Amendment because it is an arm of the state.

The court denied the defendant’s motion for summary judgment, upholding its previous determination that the defendant was a local government entity. The court adopted its prior reliance on the Eighth Circuit’s factors in determining whether the compacting states intended the defendant to enjoy Eleventh Amendment protection. It concluded that while the defendant’s commissioner appointment provisions and veto power favored an arm of the state classification, the compacting states’ characterization of defendant and lack of responsibility for defendant, its funding scheme, and its functions all weighed in favor of finding it a local government entity.

See U.S. ex rel. Brinkley v. Univ. of Louisville, 2017 WL 210244 (W.D. Ky. Jan. 17, 2017)

E. Employment Agreements


U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 2016 WL 5867410 (D. Nev. Oct. 6, 2016)

Holding: The U.S. District Court for the District of Nevada denied the defendant’s motion to stay pending the outcome of its appeal on its motion to compel arbitration.

The relator brought a qui tam action against her former employer, a provider of children’s speech and physical therapy, alleging that the defendant violated the False Claims Act by charging government insurance programs for medically unnecessary services.  The relator entered into an employment agreement wherein she agreed to arbitrate claims stemming from her employment by the defendant.  The defendant moved to compel arbitration and the U.S. District Court for the District of Nevada denied the defendant’s motion.  The defendant then filed a motion to stay pending their appeal of the court’s denial of its motion to compel arbitration, or in the alternative, pending the decision on its motion to dismiss.

The court denied the defendant’s motion to stay.  The court explained that the defendant did not demonstrate that it was likely to succeed on the merits of the motion to compel arbitration because the government was the real party in interest and the defendant could not compel the government to arbitrate, as it did not agree to the arbitration agreement.  Additionally, the court observed that defendant failed to demonstrate that it would be irreparably injured without a stay, noting that the only harms it alleged were the monetary harms of discovery and filing a motion to dismiss, which would occur anyway during arbitration.  Finally, the court determined that granting the defendant’s motion to stay would be unfair to the relator and would not serve the public interest.

 

Knight v. Amedisys Holding, LLC, 2016 WL 5661227 (W.D. Ky. Sept. 28, 2016)

Holding: The U.S. District Court for the Western District of Kentucky granted the defendants’ motion to compel arbitration, finding that the plaintiff did not allege a qui tam claim.

The plaintiff brought a suit against her former employer, a home health care center, alleging False Claims Act violations, retaliatory termination, and other common law employment claims after continual disagreements with her supervisor over a timesheet. While employed by the defendant, the plaintiff acknowledged her receipt of Dispute Resolution Agreement materials and did not submit an opt-out form. The agreement required employees to resolve all legal disputes, with exception to qui tam claims, via arbitration. The defendant moved to compel arbitration, or alternatively stay the litigation, arguing that the agreement encompassed the plaintiff’s claims.

The court granted the defendant’s motion to compel arbitration. The court explained that the plaintiff’s acknowledgment that she received and understood the agreement constituted assent to the agreement to arbitrate and claims arising out of her employment. The court determined that the exception in the agreement for qui tam claims did not apply to the plaintiff because she did not assert her claims in the name of the government or follow the procedural and statutory requirements for qui tam claims.

See U.S. ex rel. Herman v. Coloplast Corp., 2016 WL 7042191 (D. Minn. Nov. 9, 2016)

F. Issue Preclusion/Res Judicata


U.S. ex rel. Nguyen v. City of Cleveland, 2017 WL 1345293 (N.D. Ohio Apr. 12, 2017)

Holding: The United States District Court for the Northern District of Ohio granted the defendant’s motion to dismiss the relator’s complaint, finding it was barred by issue and claim preclusion.

The relator brought a qui tam action against the City of Cleveland, alleging that the city violated the False Claims Act by falsely certifying that the Cleveland Hopkins Airport maintained emissions below the maximum allowed under federal law in order to obtain money from the Federal Aviation Authority.   The relator had previously filed two actions involving same claims —Nguyen I and Nguyen II — both of which resulted in verdicts for the defendant.  The defendant moved to dismiss, arguing that the relator’s claims were barred by issue and claim preclusion.

The district court granted the defendant’s motion, finding that the relator’s claims were barred by both issue and claim preclusion based on the prior holdings in Nguyen I and Nguyen II.   The court noted that the Sixth Circuit previously upheld the district court’s decision granting the defendant’s motion for summary judgment in Nguyen II because “[the relator] lacked standing to assert the claims.”  The court explained that the relator’s current claims were “based on the same events and issues” as those in Nguyen II and were barred by claim preclusion.  The court also held that the relator’s claims were barred by issue preclusion because he “had a full and fair opportunity” to dispute the issue of standing when arguing his prior claims in front of the district court and later in front of the Sixth Circuit.

 

U.S. ex rel. Lockey v. City of Dallas, 2016 WL 5794745 (5th Cir. Oct. 4, 2016)

Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision, finding that the relator’s housing false certification claims were barred largely by issue preclusion.

The relators filed a qui tam suit against the defendant city of Dallas and its Housing Authority, alleging that the defendants violated their federal civil rights obligations, namely their obligation to affirmatively further fair housing, but submitted claims for federal funding containing false certifications that they had met those obligations in violation of the False Claims Act.  The U.S. District Court for the Northern District of Texas granted the defendants’ motion for summary judgment on these claims, finding that the public disclosure bar precluded the relators’ claims.  On appeal, the Fifth Circuit affirmed the district court’s decision.  The relators subsequently filed a new action in which the district court granted defendant’s motion to dismiss holding that the realtors’ suit was barred by issue preclusion and the public disclosure bar.  The relator appealed to the Fifth Circuit.

The circuit court affirmed the district court’s decision, agreeing that the realtors’ new action only restated their previous claims more narrowly and therefore their allegations were barred by issue preclusion.

G. Materiality


U.S. ex rel. Oberg v. Penn. Higher Edu., 2017 WL 1758074 (E.D. Va. May 3, 2017)

Holding: The U.S. District Court for the Eastern District of Virginia denied the defendant’s motion for judgment on the pleadings on the relator’s implied certification claims.

The relator brought a qui tam action against the defendant student loan corporations, alleging that the defendants violated the False Claims Act by knowingly submitting prohibited tax-exempt bonds to the Federal Family Education Loan Program in order to fraudulently obtain additional loans.  After the court denied the defendant’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6), the defendant moved for judgment on the pleadings arguing that the relator could not meet the heightened materiality threshold set forth by the Supreme Court in Escobar.

The court denied the defendant’s motion for judgment on the pleadings.  First, the court explained that while the defendant fashioned their motion as a motion for judgment on the pleadings, it was actually a motion for reconsideration.  With that in mind, the court found that Escobar’s guidance on the FCA’s materiality requirement did not constitute a significant change in existing law and did not warrant reconsideration of the court’s previous ruling.

 

U.S. ex rel. Howze v. Sleep Ctrs. of Fort Wayne, LLC, 2017 WL 652179 (N.D. Ind. Feb. 1, 2017)

Holding: The United States District Court for the Northern District of Indiana denied the defendant’s motion for judgment on the pleadings relating to the defendant’s alleged Medicare and Medicaid overbilling.

The relator brought a qui tam suit against the sleep therapy center where he was formerly employed, alleging that the defendant violated of the False Claims Act by knowingly misrepresenting its facility’s credentials in its submissions to Medicare and Medicaid.  He alleged that the defendant, in order to obtain higher reimbursement rates from the government, used the incorrect application form and falsely designated the center as being a “Group Practice” when it should have been designated an “Independent Diagnostic Testing Facility.” The relator alleged that the defendant consulted the Centers for Medicare and Medicaid Services (CMS) to determine the proper way to fill out the required forms, and then knowingly filled them out incorrectly anyway.  He also alleged that he brought his concerns to the attention of his supervisors, who denied that they had misrepresented the center’s credentials, and that his employment was terminated in violation of the retaliation provisions of the FCA as a result of his complaints.   The defendant moved for judgment on the pleadings, arguing that the relator failed to allege scienter and materiality with respect to his implied certification claims because he did not allege that the credentialing was a condition of payment.

The court denied the defendant’s motion for judgment on the pleadings.  The court noted that the defendant repeatedly “mischaracterized” the relator’s arguments and attempted to convince the court to draw inferences in favor of the defendant rather than the relator.  The court explained that the relator clearly alleged that the defendant was not following guidance from CMS when it deliberately completed the credentialing forms incorrectly, finding that this properly stated a claim for FCA liability.  The court also rejected the defendant’s contention that the relator failed to sufficiently allege FCA liability under the theory of implied false certification because implied certification was not a basis for liability in the Seventh Circuit.  The court found the relator was not proceeding on the basis of a theory of implied false certification, but even if it were, the Supreme Court in United Health Services, Inc. v. U.S. ex rel. Escobar held implied false certification could serve as a basis for FCA liability.

See U.S. ex rel. Petratos v. Genentech Inc., 2017 WL 1541919 (3rd Cir. May 1, 2017)

See U.S. ex rel. Abbott v. BP Expl. & Prod., Inc., 851 F.3d 384 (5th Cir. Mar. 14. 2017)

See U.S. ex rel. McBride v. Halliburton Co., 848 F.3d 1027 (D.C. Cir. Feb. 17, 2017)

See U.S. ex rel. Kelly v. Serco, Inc., 846 F.3d 325 (9th Cir. Jan. 12, 2017)

H. Corporate Structure


U.S. ex rel. Bunk v. Gov’t Logistics N.V., 842 F.3d 261, (4th Cir. Nov. 15, 2016)

Holding: The U.S. Court of Appeals for the Fourth Circuit reversed and remanded the district court’s decision to grant summary judgment on the relator’s successor corporation liability claims, finding that the relator successfully pled a theory of fraudulent transaction.

The relators brought a qui tam suit against two companies that ship household goods and belongings under a government contract with the Department of Defense (“DOD”), alleging that the defendants conspired to implement a bid-rigging scheme that would allow them to substantially increase the prices that the DOD paid for shipping, in violation of the False Claims Act.  The U.S. District Court for the Eastern District of Virginia entered a verdict in favor of the government and the relators, but denied the relators a recovery of civil penalties against one of the defendants’ purported corporate successors.  On appeal, the U.S. Court of Appeals for the Fourth Circuit remanded to determine whether the relator could recover from the successor corporation of a defendant.  The district court dismissed the relators’ claims against the successor corporation and awarded the defendant summary judgment, finding that the relators’ claims were inadequately pled, and in the alternative, rejected them on the merits, finding that there was insufficient evidence of successor liability to justify a trial.  The relator appealed to the Fourth Circuit.

The circuit court vacated and remanded the district court’s decision.  The circuit court explained that the relator satisfied Rule 9(b), as it sufficiently outlined the relationship between the two companies and solidly alleged a theory of fraudulent transaction resulting in successor liability.  The circuit court confirmed that the district court could exercise supplemental jurisdiction over the successor corporation, reasoning that the relators’ claims were not part of a new lawsuit.  Next, the circuit court examined the viability of relators’ two theories—the substantial continuity theory and the fraudulent transaction theory of successor liability.  The circuit court concluded that the district court was correct in not applying the substantial continuity test, as the FCA does not reference successor corporation liability and therefore did not impact the common law principles regarding successor corporation liability.  However, the circuit court determined that the district court erred in concluding that the relators did not form a solid foundation for their fraudulent transaction theory, explaining that the two companies’ service agreements, employment methods, and business interest purchases all sufficiently outlined a relationship between the two corporations that satisfied fraudulent transaction theory.  Moreover, the complaint detailed that the successor corporation viewed itself as a continuation of the initial corporation and the initial corporation continued to gain profit from previous contracts.  Additionally, the circuit court determined that the district also erred in awarding summary judgment to the defendant, explaining that the crux of fraudulent transaction theory rested on the intention underlying the transfer of assets, and “the issue of fraudulent intention is generally not amendable to resolution on summary judgment.”  In this case, the court concluded that the evidence could not only “dispel the requisite fraudulent intention,” but also could “establish it,” and then identified several “badges of fraud” in the complaint that could lead a reasonable juror to conclude fraudulent intent, these included inadequacy of consideration, unusual transactions, transactions anticipating suit or execution, or transactions in which the debtor benefits.


U.S. ex rel. Scollick v. Narula, 2016 WL 6078246 (D.D.C. Oct. 17, 2016)

Holding: The U.S. District Court for the District of Columbia granted the defendant’s motion to dismiss the relator’s allegations that the defendant made false statements to the government to obtain government contracts for failure to state a claim upon under Rule 12(b)(6) and failure to plead fraud with particularity pursuant to Rule 9(b) in part and denied it in part.

The relator brought a qui tam suit against the several construction companies and individual defendants alleging that the defendants conspired to violate the False Claims Act and its reverse false claims provision by fraudulently obtaining and then failing to return government funds awarded through construction contracts specifically set aside for businesses with statuses that the defendants did not possess.  The relator alleged that individual defendants Neil Parekh, Vijay Narula, and Ajay Madan created Centurion Solutions Group (“CSG”) as a front company to gain service-disabled veteran-owned small business (“SDVOSB”) status by falsely using defendant Amar Gogia—a service-disabled veteran—as chief owner and controller, falsely certifying details about CSG’s past performance, and falsifying employee information.  Furthermore, the relator alleged that Parekh falsely certified defendant Citibuilders as an SDVOSB and executed a similar conspiracy with defendant KCGI, Inc. Finally, the relator alleged that the defendant insurance companies also violated the FCA by issuing bonds for the defendants’ contracts despite awareness of the details within the defendants’ bid proposal.  The defendants moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity pursuant to Rule 9(b).

The court granted the defendants’ motion to dismiss in part.  First, the court found that the relator’s application of the alter ego doctrine to allege vicarious liability between the defendants only amounted to a legal conclusion because the relator failed to identify any facts that demonstrated “comingling, manipulation, and diversion,” a lack of formalities in individual relationships, how two individuals could be alter egos of one another, or most importantly, how an inequitable result followed by failing to pierce the corporate veil.  Second, the court explained that CSG, Citibuilders, and KCGI were the only defendants liable for making false claims, presenting false claims, or conspiring because the relator failed to sufficiently allege the alter ego doctrine and failed to allege that the remaining defendants played a substantial role in the submission of false claims.  Additionally, the court noted that the relator failed to demonstrate that the insurance defendants caused the submission of false claims merely by issuing bonds because the relator did not allege any facts indicating that the insurance defendants agreed to issue bonds in furtherance of fraud or continued to do business with the other defendants once aware of false claims.  Third, the court determined that the relator failed to allege his reverse false claims allegations with sufficient particularity against all defendants, explaining that the relator failed to identify an obligation to return payment to the government.  Fourth, the court explained that because the relator alleged “time, place, content, and recipients” of false claims in conjunction with nine specific allegedly fraudulent contracts, the relator plead with sufficient particularity that  defendants Parekh and Citibuilders, conspired to make and present false claims to the government.   The court rejected Citibuilders use of the intracorporate conspiracy doctrine to argue that the conspiracy claim should be dismissed because the alleged conspiracy was executed “through its own directors, officers, and employees,” finding that because the relator alleged conspiracy between all defendants, reliance on the intracorporate conspiracy doctrine was unavailing.  Finally, the court determined that the relator sufficiently stated his claim that individual defendants Narula and Madan played a substantial role in the submission of false claims, as they established CSG as a front company in order to obtain SDVOSB status, were directly responsible in preparation of CSG bid proposals, and identified Gogia as the owner to obtain fraudulent funding.

I. Failure to Prove Falsity


U.S. ex rel. Zeman v. Univ. of S. Cal., 2016 WL 6407409 (9th Cir. Oct. 31, 2016)

Holding: The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s decision to grant the defendant’s motion for summary judgment on the relator’s Medicare overbilling allegations with prejudice.

The relator brought a qui tam suit against a university hospital alleging that it violated the False Claims Act by double billing Medicare for its overhead costs and improperly coding services.    The U.S. District Court for the Central District of California granted the defendant’s summary judgment and the realtor appealed to the Ninth Circuit.

The circuit court affirmed the district court’s dismissal, finding that there was no evidence that the relator’s allegations constituted violations of Medicare requirements.  Specifically, the court noted that the defendant’s billed facility fees fell within Medicare’s guidelines and the relator did not provide sufficient support for her remaining claims.

J. Statute of Limitations


U.S. ex rel. Brooks v. Trillium Cmty. Health Plan, Inc., 2017 WL 2805863 (D. Or. June 28, 2017)

Holding: The U.S. District Court for the District of Oregon granted the defendants’ motion to dismiss the relator’s overbilling and kickback allegations, finding that these claims were time-barred.

The relator brought a qui tam action against the health care provider where he was formerly employed and its parent company and affiliates, alleging that the defendants overbilled Medicare and Medicaid in violation of the False Claims Act.  The relator also alleged that the defendants violated the Anti-Kickback Statute by providing shares of stock to physicians in exchange for referrals and then caused claims tainted by those kickbacks to be submitted to the government in violation of the FCA.  He also alleged that the defendants terminated him in retaliation for his internal and external complaints regarding these fraudulent practices.  The defendants moved to dismiss, arguing that the claims were barred by the statute of limitations.

The court granted the defendants’ motion to dismiss.  The court noted that all of the relator’s representative examples occurred prior to the limitations period and that he did not allege any specifics about the who, what, where, when, and how of the fraud within the limitations period.  The court observed that the relator simply stated that he knew where to find that information if he received it in discovery, which was insufficient to meet the requirements of Rule 9(b) with respect to any claims within the limitations period.


U.S. ex rel. Kolchinsky v. Moody’s Corp. 238 F.Supp.3d 550 (S.D.N.Y. Mar. 2, 2017)

Holding: The United States District Court for the Southern District of New York granted the defendants’ motion to dismiss the relator’s financial fraud claims, finding that a portion of the claims were time-barred, and that the relator failed to meet the requirements of Rule 12(b)(6) and Rule 9(b) with respect to the remaining claims.

The relator brought a qui tam action against the credit-ratings agency where he was formerly employed and several affiliates and individual John Doe defendants, alleging that the defendants provided inaccurate credit ratings to subscribers, which included government agencies, in violation of the False Claims Act.  The defendants moved to dismiss the relator’s complaint, arguing that he failed to state a claim pursuant to Rule 12(b)(6) and failed to plead fraud with particularity under Rule 9(b).  The defendant further argued that the relator’s claims were time-barred.

The court granted the defendant’s motion, finding that claims relating to action taken before May 27, 2009 were time-barred due to the statute of limitations.  For the surviving claims, the court noted that the relator argued that the claims were legally false, and that he did not plead that the credit ratings were either worthless or unprovided.  The court found that the government’s payment for the defendant’s services after “credible public reports of inaccuracies in Moody’s ratings spawned inquiries by the federal government” weighed heavily against materiality. The court noted that the relator provided no evidence to show that the government was “unaware of the alleged fraud during the proscribed time period. The court also found that the relator failed to meet the particularity requirements of Rule 9(b), explaining that he did not plead allegations sufficient to “establish a reliable indica” that said claims were false, and that the allegations were so overly broad that the defendant “[had] no means of conducting any focused discovery.”  The court also held that the relator failed to plead the continuing falsity of the defendant’s credit ratings after the relator ceased employment with the defendant.


U.S. ex rel. Walker v. Loving Care Agency, Inc. 2016 WL 7408848 (D.N.J. Dec. 22, 2016)

Holding: The U.S. District Court for the District of New Jersey denied the defendant’s motion to dismiss the relators’ Medicaid fraud claims for failure to plead fraud with particularity under Rule 9(b).  The court granted the defendant’s motion to dismiss some claims as time barred.

The relators brought a qui tam suit against the for-profit homecare agency where they were formerly employed as registered nurses, alleging that the defendant defrauded Medicaid in violation of the False Claims Act.  Specifically, the relators alleged that they witnessed the defendant submitting claims to Medicaid for services that were never performed, not properly supervised, medically unnecessary, administered to family members, provided to ineligible beneficiaries, and performed by unqualified individuals as a result of defendant’s fraudulent training program.  The defendant moved to dismiss the relators’ claims for failure to plead fraud with sufficient particularity pursuant to Rule 9(b) and argued that some of the relators’ claims were barred by the FCA’s statute of limitations.

The court denied the defendant’s motion in large part and granted the motion to dismiss some claims pursuant to the statute of limitations.  The court found that the relators satisfied the particularity requirements of Rule 9(b), explaining that they provided either representative examples that sufficiently supported an inference that false claims were submitted, or listed multiple specific examples of false requests for reimbursement that identified patients, individual employees, and exact dates of the allegedly fraudulent services.  The court also found that the relators properly alleged scienter by alleging that they informed their supervisors of the fraud.  Furthermore, the court concluded that the relators sufficiently alleged that the defendant’s fraudulent certifications were material, explaining that it would be “hard to fathom” that the alleged systematic, widespread scheme would be immaterial to the government’s payment decision.  Lastly, the court rejected the defendant’s argument that all claims outside of the time period of the relators’ employment should be dismissed, finding that the complaint alleged fraud with sufficient particularity as to the claims prior to their employment, and the relators maintained relationships with current employees who informed them that the fraudulent conduct is on-going.  However, the court dismissed claims occurring six years prior to the complaint’s filing date pursuant to the statute of limitations.


U.S. ex rel. Jackson v. Univ. of N. Tex., 2016 WL 720915 (5th Cir. Dec. 12, 2016)

Holding: The U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision to dismiss the relator’s false certification claims on statute of limitations grounds. 

 

The relator brought a qui tam suit against his former university and student loan issuers and processers, alleging that the defendants submitted false claims to the government for the relator’s loan eligibility and disbursement.   The government declined to intervene.  The U.S. District Court for the Eastern District of Texas dismissed the relator’s claims, finding that they were barred by the FCA’s six year statute of limitations. The relator appealed to the Fifth Circuit.

The circuit court affirmed the district court’s decision.  The court explained that because the government declined to intervene, the six year statute of limitations applied to the relator’s claims.  The court rejected the relator’s argument that he could take advantage of the ten year statute of limitations because he was acting as a government official when bringing his qui tam suit.

See U.S. v. Quicken Loans Inc., 239 F.Supp.3d 1014 (E.D. Mich. Mar. 9, 2017)

See U.S. ex rel. Taul v. Nagel Enters., Inc., 2017 WL 432460 (N.D. Ala. Feb. 1, 2017)

See U.S. ex rel. Gohil v. Aventis, 2017 WL 85375 (E.D. Penn. Jan. 10, 2017)

V. FEDERAL RULES OF CIVIL PROCEDURE

A. Rule 9(b) Failure to Plead Fraud with Particularity

 

U.S. ex rel. Gacek v. Premier Medical Mgmt., 2017 WL 2838179 (S.D. Ala. June 30, 2017)

Holding: The U.S. District Court for the Southern District of Alabama granted the defendant’s motion to dismiss the relator’s medical necessity and upcoding allegations for failure to plead fraud with particularity under Rule 9(b), but denied its motion to dismiss the relator’s AKS reverse false claims, conspiracy, and retaliation allegations. 

The relator brought a qui tam action against the physician group where he was formerly employed alleging that the defendant overbilled the government for medically unnecessary testing and submitted upcoded bills in violation of the False Claims Act.  He also alleged that the physicians working for the defendant paid kickbacks to front desk personnel to induce them to schedule additional patient appointments to their respective calendars in violation of the Anti-Kickback Statute and submitted claims tainted by these AKS violations to the government.  He alleged that the defendant knew that it should not have been paid for these tainted claims, but retained the payments anyway, in violation of the reverse false claims provision of the FCA.  He also alleged a conspiracy to defraud the government on the part of the physicians and other defendant employees.  Finally, he alleged that he was terminated as a result of his internal complaints about the improper billing, in violation of the FCA’s retaliation provision.  The defendant moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).  The defendant also moved to dismiss the retaliation claims as time-barred.

The court granted the defendant’s motion to dismiss in part and denied it in part.  First, the court denied the defendant’s motion to dismiss the retaliation claims as time-barred, explaining that the original complaint (though not the amended complaint) was filed within the statute of limitations period and contained the relevant retaliation allegations.  Second, the court granted the defendant’s motion to dismiss the medical necessity and upcoding claims for failure to satisfy the particularity requirements of Rule 9(b), determining that while the relator pled the details of the scheme with particularity, he failed to identify the who, what, where, when, and how of the actual submission of false claims.  The court observed that the relator failed to show a reliable basis of knowledge that the defendant actually submitted claims to the government.  Third, the court denied the defendant’s motion to dismiss the relator’s retaliation claims, finding that it was plausible to infer that the defendant feared being reported to the government or otherwise sued based on the relator’s numerous complaints about potentially fraudulent billing.  Fourth, the court denied the defendant’s motion to dismiss the relator’s conspiracy claims, finding that the criminal-conspiracy exception to the intracorporate conspiracy doctrine applied to the relator’s allegations.  Finally, the court denied the defendant’s motion to dismiss the relator’s AKS reverse false claims allegations, explaining that the complaint contained specific allegations of the fraudulent conduct, including names and dates.


U.S. ex rel. Fla. Soc’y of Anesthesiologists v. Choudhry, 2017 WL 2591399 (M.D. Fla. June 13, 2017); U.S. Fla. Society of Anesthesiologists v. Choudhry, 2017 WL 2604930 (M.D. Fla. June 13, 2017)

Holding: The U.S. District Court for the Middle District of Florida granted the defendants’ motions to dismiss the relator’s kickback allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The relator, a professional organization, brought a qui tam suit against two doctors, Jack Groover and Umesh Choudhry, and their related practices, alleging that the defendants paid kickbacks to surgeons in exchange for referrals in violation of the Anti-Kickback Statute and caused claims tainted by the kickbacks to be submitted to the government in violation of the False Claims Act.  The Choudhry and Groover defendants moved to dismiss the relator’s claims pursuant to the public disclosure bar.  The Groover defendants also moved to dismiss for failure to plead fraud with particularity under Rule 9(b).

The court granted both defendants’ motions to dismiss, concluding that the relator’s kickback allegations were too speculative.  Further, the court found that the relator failed to meet the requirements of Rule 9(b) because it pleaded its claims against the defendants collectively despite the defendants’ having different roles in the alleged fraud.  Additionally, the court observed that the relator failed to allege the “who, what, when, or how” of the kickbacks.

 

U.S. ex rel. Groat v. Boston Heart Diagnostics Corp., 2017 WL 2533341 (D.D.C. June 9, 2017)

Holding: The U.S. District Court for the District of Columbia denied in part the defendant’s motion to dismiss the relator’s medical necessity claims for failure to state a claim under Rule 12(b)(6) and for failure to plead fraud with particularity under Rule 9(b).

The relator, a medical doctor employed at a health insurance company, brought a qui tam action against a clinical laboratory alleging that the defendant knowingly performed and billed the government for medically unnecessary diagnostic tests in violation of the False Claims Act.  The relator alleged that the defendant engaged in a systematic scheme to bill Medicare for medically unnecessary tests and falsely certify that the tests were necessary, despite knowing that the tests were not covered by Medicare. Additionally, the relator alleged that the defendant violated the reverse false claims provision of the False Claims Act by failing to return the overpayments it received as a result of its alleged fraudulent conduct.  The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court denied in part the defendant’s motion to dismiss.   The court found that the relator satisfied Rule 9(b) by supporting her allegations with representative claims for payment that the defendant submitted to her employer, explaining that the relator was not required to provide claims actually submitted to the government and did not need to identify specific individuals involved because she alleged a top-down, company-wide scheme. Next, the court determined that the relator properly pled materiality by demonstrating that Medicare’s regulatory scheme placed an independent burden on the defendant to determine medical necessity before submitting claims.  Additionally, the court found that the relator established scienter by alleging that the defendant provided materials to targeted physicians in order to encourage unnecessary testing.   The court concluded that the relator properly pleaded her false certification claims, explaining that the defendant caused physicians to submit claims to the government that stated that the services billed for were medically necessary when it knew they were not.  However, the court concluded that the relator’s reverse false claims allegations failed to satisfy the pleading standard, explaining that she did not establish that the defendant was under an obligation to repay the government.

 

U.S. ex rel. Dicken v. Northwest Eye Ctr., 2017 WL 2345579 (D. Minn. May 30, 2017)

Holding: The U.S. District Court for the District of Minnesota granted the relator’s motion to vacate the court’s previous dismissal of his Medicare fraud claims and granted his motion for leave to file a Second Amended Complaint.

The relator brought a qui tam suit against the healthcare provider where he was formerly employed, alleging that the defendant billed Medicare for unnecessary procedures in violation of the False Claims Act. The court initially granted the defendant’s motion to dismiss, finding that the relator failed to plead fraud with particularity under Rule 9(b).  The relator moved to vacate the court’s prior dismissal and moved for leave to file a Second Amended Complaint.

The court granted the relator’s motion, finding that the relator’s proposed Second Amended Complaint satisfied Rule 9(b) because it included additional details about the fraud including the relevant time periods and information about how the fraud scheme worked.   The court also found that the relator’s complaint alleged sufficient indicia of reliability by providing patient charts, details of conversations with other employees, and enough facts to create a strong inference that claims were submitted.

 

U.S. ex rel. Miller v. Cmty. Recovery Res., Inc., 2017 WL 2257175 (E.D. Cal. May 23, 2017)

Holding: The U.S. District Court for the Eastern District of California denied in part the defendants’ motion to dismiss the relators’ false certification allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b). 

The relators brought a qui tam suit against the non-profit alcohol and drug treatment center where they were formerly employed, together with its affiliates and certain individual employees, alleging that the defendants conspired to violate the False Claims Act by submitting claims for reimbursement despite knowingly violating material Medicaid, Medicare, and federal loan regulations.  The relators alleged that the defendants routinely directed staff to falsify patient records, submit false billing statements, bill based on false records, bill for referrals that were not actually provided, fail to give referrals when legally required, bill for discharge services that did not comport with guidelines, and provide unauthorized services.  Additionally, the relators alleged that individual defendant Kevin Cassidy assisted in submitting claims for services not rendered or that performed without proper licensing; that individual defendant Jonel Laudry directed employees to falsify patient progress reports; and that individual defendant Aaron Cleveland failed to adequately assess the medical necessity of the services he provided.  The defendants moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity pursuant to Rule 9(b).

The court denied in part the defendants’ motion to dismiss.  First, the court addressed the allegations against the individual defendants.    The court denied the motions to dismiss of defendants Cassidy and Laundry, finding that the relators properly pled their allegations against them with sufficient particularity under Rule 9(b) by adequately stating the “who, what, where, and when” of the alleged conduct.  However, the court granted defendant Cleveland’s motion to dismiss, finding that the relators failed to allege any facts connecting him to a specific fraudulent claim.  Additionally, the court granted the defendants’ motion to dismiss the conspiracy claims, observing that the defendants were the non-profit corporation and its affiliates and employees, and that under the Intracorporate Conspiracy Doctrine, “a corporation cannot conspire with its own employees.”  Next, the court concluded that the relators were entitled to a relaxed 9(b) pleading standard and that they met this standard with respect to their fraudulent billing allegations by pleading dates, participants, and details of the nature of the alleged fraud.  Further, the court noted that the relators provided reliable indicia that actual false claims were submitted by providing evidence of the defendants’ financial success.

 

U.S. v. Dyncorp Int’l, LLC, 2017 WL 2222911 (D.D.C. May 19, 2017)

Holding: The U.S. District Court for the District of Columbia denied the defendant’s motion to dismiss the government’s allegations that the defendant overbilled under its government contract, finding that the government had properly pled fraud with particularity under Rule 9(b).

The government brought an action under the False Claims Act against the company that it contracted with to provide training services for the new Iraqi civilian police force, alleging that the defendant knowingly hired a subcontractor that charged unreasonable lodging and labor rates and passed those charges on to the government.  The government also alleged that the defendant made false statements regarding the justification for the high rates during contract negotiations in order to induce the government to award the contract.  The defendant moved to dismiss the government’s allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court denied the defendant’s motions to dismiss.  The court rejected the defendant’s argument that government failed to allege falsity because the charges were actually reasonable, explaining that the government properly pled that the rates were far above those charged by other vendors.  The court concluded that the government properly stated an implied false certification claim by alleging that the defendant withheld information about its noncompliance with contractual requirements and that the noncompliance was material.  The court rejected the defendant’s argument that the government’s practice of paying similar claims and then later clawing back the unreasonable charges belied materiality, explaining that the correct inquiry was whether the information would influence the government’s decision to pay.  The court also found that the government properly alleged scienter, noting that the government asserted that high-level employees of the defendant made statements about the rates being significantly higher than reasonable. Further, the court determined that the government sufficiently alleged that the defendant knew that the noncompliance would be material to the government’s payment decision.  The court also found that the government sufficiently stated a claim for fraudulent inducement relating to the defendant’s claims about the reasonableness of the rates during the contract negotiations.  Additionally, the court found that the government properly alleged scienter with respect to the false certification and fraudulent inducement claims.  Finally, the court found that the government met the requirements of Rule 9(b) by alleging that the rates were unreasonable and supporting those allegations with evidence of statements from the defendant’s executives about the “outrageousness” of the rates, as well as listing each claim that was allegedly false.  The court rejected the defendant’s argument that the government was required to plead the exact amount of damages in order to meet the requirements of Rule 9(b).


U.S. ex rel. Flexon v. Meadows Reg’l Med. Ctr., 2017 WL 2126324 (S.D. Ga. May 16, 2017)

Holding: The U.S. District Court for the Southern District of Georgia denied the defendants’ motions to dismiss the relator’s retaliation and medical necessity claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the medical center where he was formerly employed and against an individual employee, alleging that the defendants violated the False Claims Act by billing the government for incomplete and medically unnecessary surgeries.  Additionally, the relator alleged that the defendant terminated him in retaliation for raising concerns about the alleged conduct in violation of the FCA’s retaliation provisions.  The defendants moved to dismiss the relator’s allegations for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court denied the defendants’ motions to dismiss.  The court concluded that the relator met the particularity requirements of Rule 9(b) by specifying the “who, what, where, when, and how” of the alleged fraud and identifying specific claims for Medicare patients.  The court also found that the relator alleged a plausible casual connection between his complaints to his employer and his termination.


U.S. ex rel. Young v. Suburban Home Physicians, 2017 WL 2080350 (N.D. Ill. May 15, 2017)

Holding: The U.S. District Court for the Northern District of Illinois granted the defendants’ motion to dismiss the relators’ backdating, upcoding, and kickback allegations for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The relators brought a qui tam suit against the medical practice where they were formerly employed, as well as dozens of related corporate entities and individuals, alleging that the defendants conspired to violate the False Claims Act by submitting claims tainted by Anti-Kickback Statute violations.  Specifically, the relators alleged that the defendants coordinated to falsify Medicare forms, through backdating and upcoding, in exchange for reciprocal patient referrals.  Additionally, the relators allege that two individual defendants, Naimish Patel and Prashant Patel (“Patel defendants”), provided funds to the other defendants to support the scheme and received part of the defendants’ fraudulent profits.  A portion of the dozens of defendants moved to dismiss the relators’ claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted the defendants’ motion to dismiss.  The court found that the relators conflated all defendants, and thus failed to specify which defendants were responsible for each aspect of the alleged fraud.  Further, the court concluded that the relators’ allegations against the Patel defendants failed because the relators did not allege that the Patel defendants made specific misrepresentations or possessed requisite scienter to be held liable under the FCA, explaining that “mere ownership . . . cannot establish culpability.”  Lastly, the court determined that that relators failed to allege why the remunerations were impermissible, which patients were referred, who submitted claims to Medicare, and whether the defendants requested payment from Medicare based on the same referred patients.


U.S. ex rel. Kustom Products, Inc. v. Hupp & Assocs., Inc., 2017 WL 2021512 (S.D. Ohio May 12, 2017)

Holding: The U.S. District Court for the Southern District of Ohio dismissed the relator’s false certification claims for failure to plead fraud with particularity under Rule 9(b).

The relator, a vehicle parts supplier, brought a qui tam action against a rival maintenance kit supplier, alleging that the defendant violated the False Claims Act by falsely certifying that it purchased parts for its kits from vendors authorized by its government contract.  The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss.  The court found that the relator failed to meet the particularity requirements of Rule 9(b) because it based its claims only “upon information and belief” and failed to identify any details regarding its knowledge of the defendant’s billing.  Further, the court concluded that the relator failed to sufficiently specify the “who, what, when, where, and how” of its false certification allegations.  The court indicated that it would not apply a relaxed 9(b) pleading standard because the relator failed to demonstrate how its business relationships or government contracting experience allowed it to gain direct and independent knowledge of the defendant’s business practices or alleged fraudulent conduct.


U.S. ex rel. Hockenberry v. Ohiohealth Co., 2017 WL 4315016 (6th Cir. Apr. 14, 2017)

Holding: The United States Court of Appeals for the Sixth Circuit upheld the ruling of the district court granting the defendant’s motion to dismiss the relator’s complaint for failure to plead fraud with particularity requirements of Rule 9(b).

The relator brought a qui tam action against the hospital where he was formerly employed as a trauma and general surgeon and its parent company alleging that the defendants violated the False Claims Act by overcharging Medicare for unperformed critical-care services, medically unnecessary services, or duplicative procedures.  He alleged that he witnessed doctors upcoding services and that “an audit procedure” he outlined could verify his claims.  However, he claimed that he could not provide details about specific false claims in his complaint because of patient privacy laws.  The defendants moved to dismiss for a failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity as required by Rule 9(b).  The United States District Court for the Southern District of Ohio granted the defendants’ motion, and the relator appealed to the Sixth Circuit.

The circuit court affirmed the district court’s decision to grant the defendants’ motion to dismiss.  The court explained that the relator failed to plead fraud with particularity because “he failed to identify at least one actual claim that was submitted to the government.”  The circuit court noted “[the relator’s] concession that he [could not] identify an actual false claim that the defendants submitted for payment or approval [was] fatal to his FCA claims.”  The court rejected the relator’s argument that the court should adopt a relaxed pleading standard for Rule 9(b) because he alleged the fraud scheme in detail, finding that the relator’s complaint “[did] not have detailed first-hand knowledge that the defendants actually submitted false claims to Medicare for payment during the period of the allegedly fraudulent billing scheme.”  The court observed that though a relator may establish personal knowledge through conversations with other employees, the relator’s complaint failed because it did not include specific details about these employees, his discussions with these employees, or the information he received from them.


U.S. ex rel. Tommasino v. Guida, 2017 WL 878587 (E.D.N.Y. Mar. 6, 2017)

Holding: The United States District Court for the Eastern District of New York granted the relator’s motion for attorneys’ fees but adjusted the hourly rate down to match the amount generally awarded in the district.

The relator brought a qui tam suit against several doctors and an associated medical limited liability partnership alleging that the defendants submitted false claims to Medicare in violation of the False Claims Act.  The government intervened and reached a civil settlement agreement with the defendants in the amount of $106,393.30, and the relator was awarded an 18% share of the proceeds.  The relator then filed a motion for attorneys’ fees, seeking $115,807 from the defendants as well as costs of $1,127.68 associated with the underlying qui tam action.  The relator also sought $51,132.50 in attorneys’ fees and $4,017.67 in costs associated with the fee application.  The defendants opposed, arguing that the amount for attorney’s fees was excessive due to the low settlement amount and comparatively small relator recovery.

The court granted the relator’s motion for attorneys’ fees and awarded the relator $79.952.30 in fees and $1,127.68 in costs for the qui tam action, as well as $14,422 and $1,312 in fees and costs for the fee application.  The court rejected the defendants’ contention attorneys’ fees in FCA cases ought to be proportional to the amount of the recovery, explaining that courts have “repeatedly rejected the notion that a fee may be reduced merely because the fee would be disproportionate due to the financial interest at stake in the litigation.”  The court also noted that courts have held that large fee awards in qui tam cases “advance the purpose of the FCA to encourage employees to report suspected violations by their employers.”  However, the court reduced the relator’s requested billing rates for his counsel, finding that the rates “[exceeded] the rates normally awarded in the Eastern District for attorneys of similar experience.” The court observed that it was not clear that FCA cases “[were] so complex and specialized that they merit higher rates than other commercial cases.”  The court also reduced the number of billable hours that the relator requested be recompensed for legal work performed, citing unreasonable billing for tasks which ought to have been simple given counsel’s “extensive experience.”


U.S ex rel. Pitman v. LXE Consulting, LLC, 2017 WL 486947 (W.D. Okla. Feb 6, 2017)

Holding: The United States District Court for the Western District of Oklahoma granted the relators’ motion for attorneys’ fees but rejected their counsel’s proposed hourly rate and number of billable hours, finding that their attorney failed to establish the reasonableness of each.

The relators brought a qui tam suit against the defendant alleging violations of the False Claims Act.  The suit was eventually resolved in favor of the relators and they moved for attorneys’ fees.  The relators’ counsel requested an hourly rate of $600 for 307.7 hours of work performed on the case.

The court granted in part the relators’ motion for attorneys’ fees. The court found that relators’ counsel failed to submit an affidavit showing the rate he typically charged, failed to establish the reasonableness of his billable hour total, and thus failed to establish entitlement to his requested award.  The court then exercised its discretion to determine an appropriate hourly rate ($200) and number of hours (200, a reduction of 35%), and awarded relators’ counsel a total of $40,002 in fees.

 


In re: Natural Gas Royalties Qui Tam Litig., 845 F.3d 1010 (10th Cir. Jan. 4 2017)

Holding: The U.S. Court of Appeals for the Tenth Circuit affirmed in part the district court’s decision to grant the defendant’s motion for attorney’s fees.

The relator brought a qui tam suit against 70 natural gas companies, alleging that the defendants violated the False Claims Act by submitting false royalty statements to the government.  The relator alleged that the defendants engaged in multiple strategies to under-measure gas extracted from federal and Native American-owned land in order to underpay royalties to the federal government.  The U.S. District Court for the District of Wyoming granted the defendant’s motion to dismiss the relator’s claims under Rule 9(b), describing the relator’s complaint as a “shotgun” pleading.  Following the dismissal, the relator filed 73 separate qui tam suits against 300 defendants, relying on data garnered from the Minerals Management Service (“MMS”) through FOIA requests that included the lease numbers where gas was extracted, payor numbers, and buyer numbers.  The relator submitted the MMS data to the court, but purposely mislabeled the data in the exhibit so that it inaccurately appeared to support his claims. The district court again dismissed the relator’s allegations, finding that his claims were precluded by the public disclosure bar, and the U.S. Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal.  Following the appeal, the district court awarded the defendants attorney’s fees under the FCA’s fee-shifting provision as well as fees relating to the first appeal on the public disclosure issue.  The court explained that the relator lacked a factual basis to support his allegations and fabricated data to mislead the court, and that the vexatious and frivolous nature of the relator’s claims warranted an award of attorney’s fees.  The relator appealed to the Tenth Circuit.

The circuit court affirmed the district court’s award of attorney’s fees under the FCA’s shifting provision and reversed the district court’s fee award relating to the first appeal.  The circuit court indicated that  the relator’s claims were frivolous, explaining that the relator could not form an evidentiary foundation for his claims because the exhibit he submitted containing the MMS data was “fundamentally flawed” and he failed to identify any other evidence.  However, the circuit court reversed the district court’s award of fees related to the relator’s first appeal, finding that the district court did not possess authority to award appellate attorney fees.

 

U.S. ex rel. Hagerty v. Cyberonics, 844 F.3d 26 (1st Cir. Dec. 16, 2016)

Holding: The U.S. Court of Appeals for the First Circuit affirmed the district court’s decision to dismiss the relator’s off-label marketing claims for failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam suit against the medical device manufacturer where he was formerly employed, alleging that the defendant caused patients and medical providers to submit false claims to the government for unnecessary replacement of medical device batteries in violation of the False Claims Act.  The relator further alleged that the defendant incentivized sales staff to use fraudulent sales tactics by rewarding achievement of aggressive sales quotas and punishing staff for failure to meet those goals.  The U.S. District Court for the District of Massachusetts granted the defendant’s motion to dismiss the relator’s allegations for failure to plead fraud with particularity under Rule 9(b) and denied the relator’s motion for leave to amend his complaint.  The relator appealed to the First Circuit.

The circuit court upheld the district court’s decision to dismiss the relator’s complaint and deny the relator leave to amend his complaint.  The court held that the relator’s complaint failed to allege with requisite particularity that medical providers actually submitted claims to the government for unnecessary battery replacements or that any patients that received the replacements were covered by government healthcare programs.  Moreover, the court explained that the relator’s use of statistical sampling to support his allegation that 10,000 false claims were submitted to the government could not satisfy the particularity requirements of Rule 9(b), as his statements did not link the defendant’s revenue to the alleged fraudulent procedures and were “too broad” to provide any basis for his claims.  Additionally, the court concluded that the court did not abuse its discretion in denying the relator leave to amend his complaint, explaining that the relator did not provide justification for the significant delay in moving to amend.


U.S. ex rel. Driscoll v. Spencer, 2016 WL 7229135 (E.D. Cal. Dec. 14, 2016)

Holding: The U.S. District Court for the Eastern District of California granted the defendants’ motion to dismiss the relator’s inflated medical bill claims for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the medical group and community hospital where he was formerly employed as a diagnostic radiologist, alleging that the defendants submitted fraudulent claims for unnecessary or unperformed radiology scans and procedures in violation of the False Claims Act.   The relator alleged that the defendants falsely certified compliance with government healthcare regulations and submitted the false bills to the government.  The defendants moved to dismiss the relator’s complaint for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss the relator’s claims.  The court concluded that the relator failed to allege sufficient facts to demonstrate that the defendants expressly certified compliance with any law or regulation, who certified compliance, how it was certified, the relationship between compliance and funding, and whether and to what extent the false certifications caused defendants to receive payment that they otherwise would not have received.


U.S. ex rel. Lawton v. Takeda Pharm. Co., Ltd., 842 F.3d 125 (1st Cir. Nov. 22, 2016)

Holding: The U.S. Court of Appeals for the First Circuit affirmed the district court’s decision to dismiss the relator’s off-label marketing and kickback allegations for failure to plead fraud with particularity under Rule 9(b).

The relator brought a qui tam suit against a competitor of  the drug manufacturer where he was formerly employed, alleging that the defendant engaged in an illegal off-label marketing scheme and paid kickbacks to researchers to produce studies supporting the off-label uses for its drugs in violation of the Anti-Kickback Statute.  The relator alleged that the defendant submitted claims tainted by the AKS violations to the government in violation of the False Claims Act.   The U.S. District Court for the District of Massachusetts granted the defendant’s motion to dismiss the relator’s claims for failure to plead fraud with particularity pursuant to Rule 9(b).   The relator appealed to the First Circuit.

The circuit court affirmed the district court’s decision to dismiss the relator’s claims for failure to meet the particularity requirements of Rule 9(b).  The court concluded that the realtor failed to allege with specificity who submitted the false claims, the number of false claims submitted, and how the defendant’s conduct resulted in false claims.  Instead, the relator’s complaint required the court to infer that government funds were used to pay unlawful claims merely from the relator’s postulation that 30% of the drug’s annual sales were for off-label prescriptions and the amount of government funds spent on the drug.


U.S. ex rel. Fisher v. IASIS Healthcare LLC, 2016 WL 6610675, (D. Ariz. Nov. 9, 2016)

Holding: The U.S. District Court for the District of Arizona denied the defendants’ motion to dismiss the relators’ allegations that the defendants submitted claims that purposefully bypassed medical necessity and cost-effectiveness review, and granted the defendants’ motion to dismiss the relators’ kickback and conspiracy allegations.  

The relators brought a qui tam suit against a hospital management company and its wholly owned subsidiary that provided insurance to Medicaid beneficiaries, alleging that the defendants created a preferential program that violated the Anti-Kickback Statute (“AKS”) and False Claims Act and caused claims to be submitted that were not medically necessary or cost effective.  The relators also alleged that the defendants provided the government with data reports that were not complete or accurate, in violation of the defendants’ contract with the government, but falsely certified that they had provided accurate reports.  The relators alleged that the defendants gave preferential treatment to certain providers in exchange for keeping the providers in the defendants’ network. Additionally, the relators alleged that the defendants did not properly credential providers, violated the government’s performance standards through understaffing, and created a “place-holder” billing code that improperly allowed approval of blocks of claims at once.  The defendants moved to dismiss the relators’ claims for failure to state a claim upon which relief can be granted under Rule 12(b)(6) and for failure to plead fraud with particularity under Rule 9(b).

The court denied the defendants’ motion to dismiss and granted it in part.  The court determined that the relators failed to demonstrate how the defendants’ preferential program resulted in financial gain for defendants, caused federal insurance programs to sustain financial loss, or could have an actual—not speculative—impact on the defendants’ or government’s financial results.  Furthermore, the court explained that the relators’ complaint failed to allege that the defendants’ conduct fell outside the AKS safe harbor.  However, the court found that the relators properly alleged their claims that the defendants improperly waived authorization, used block approvals, and failed to verify medical necessity or cost effectiveness.  The court explained that the relators identified specific breaches in defendants’ obligations to the government relating to medical necessity and cost-effectiveness, prior authorization, and credentialing.  The court noted that the relators gave specific examples of claims approved with insufficient documentation, emails regarding compliance concerns, non-credentialed physicians, backdating of credentialing, and statistics.  The court also concluded that the relators met the Supreme Court’s materiality standard set out in U.S. ex rel. Escobar v. Universal Health Services, explaining that the relators alleged not only that the defendants breached their contract, but also that the contract’s language indicated that the government would not have paid if it was aware of the defendants’ practices.


U.S. ex rel. Schaefer v. Family Med. Ctrs. of South Carolina, 2016 WL 6601017 (D.S.C. Nov. 8, 2016)

Holding: The U.S. District Court for the District of South Carolina denied the defendants’ motion to dismiss relator’s Stark Law and improper billing allegations, finding that the plaintiffs sufficiently pled scienter and materiality and met the particularity requirements of Rule 9(b).  

In this intervened case, the plaintiffs alleged that a medical center violated the False Claims Act and Stark Law by engaging in employment arrangements that directly linked physician pay to volume or value of physician referrals and devised multiple improper billing schemes.  Specifically, the plaintiffs alleged that the defendants programmed billing software to misrepresent services, used systematic billing practices that caused the submission of tens of thousands of medically unnecessary claims, and issued standing orders for non-routine tests regardless of medical need.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and for failure to plead fraud with sufficient particularity pursuant to Rule 9(b).

The court denied the defendants’ motion to dismiss.  The court found that the plaintiffs properly pled both scienter and materiality to establish the “who, what, where, when, and how” of the alleged FCA and Stark Law violations.  Additionally, the court rejected the defendants’ argument that the government’s continued payment of the allegedly false claims showed that the false statements were not material to the government’s payment decision, and concluded that “that the proper focus with respect to materiality is the influence of the false statement at the time of presentment.”


U.S. ex rel. Whatley v. Eastwick College, 2016 WL 6311614 (3rd Cir. Oct. 28, 2016)

Holding: The U.S. Court of Appeals for the Third Circuit affirmed the district court’s decision to dismiss the relator’s allegations of educational fee and fund misrepresentation with prejudice for failure to meet the particularity requirements of Rule (9) and failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the for-profit college where she was formerly enrolled, alleging that the defendant violated Title IV’s incentive compensation ban by offering cash incentives to its recruiters,  made false promises to students that their credits were transferrable, grossly inflated book and lab fees, manipulated students’ federal aid to frontload fees without providing refunds for students who withdrew or failed, and arbitrarily assigned grades in violation of Title IV, all while falsely certifying compliance with Title IV requirements in violation of the False Claims Act .  The relator also alleged on personal experience that the defendant claimed federal financial aid for her education after she withdrew from the institution by altering her attendance records.  The U.S. District Court for the District of New Jersey granted the defendant’s motion to dismiss for failure to meet the requirements of Rule 9(b) and failure to state a claim under Rule 12(b)(6).  The relator appealed to the Third Circuit.

The circuit court affirmed the district court’s decision.  The court explained that the relator failed to state a claim under Rule 12(b)(6) regarding her allegations related to transferable credits, overcharges, a fees, because she failed to show that the defendant’s actions violated any regulations or resulted in  FCA liability,  rather, the court indicated that the relator only alleged “conclusory assertions.”  The court first explained that the relator did not identify specific regulations that the defendant violated or any particular misrepresentations made with respect to book, lab, or other allegedly improper fees.  Additionally, the court determined that the while the relator properly alleged that the defendant violated the incentive compensation ban, the relator failed to plead with particularity pursuant to Rule 9(b), as she did not provide information regarding who provided payments, to whom the payments were sent, or the criteria for payment.  Moreover, the court explained that the relator’s grade alteration allegations failed because the relator did not identify which individuals altered students’ grades and which grades were altered.  Finally, the court found that allegations based on relator’s personal experience failed to meet the particularity requirements of Rule 9(b) because the relator did not specify who made misrepresentations or altered her attendance after her withdrawal.


U.S. ex rel. Schutte v. Supervalu, Inc., 2016 WL 6139913 (C.D. Ill. Oct. 21, 2016)

Holding: The U.S. District Court for the Central District of Illinois denied the defendants’ motion to dismiss relators’ claims that the defendants failed to report accurate “usual and customary” prices to the government for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The relators, both former pharmacists, brought a qui tam suit against a nationwide retail grocery and pharmacy owner and its affiliates, alleging that through a uniform, nationwide policy in which their centralized pharmacy transaction information system reported inflated “usual and customary prices” to the government instead of the discounted prices that the defendant was actually offering to the general public, they systematically overcharged the government for prescription drugs in violation of the False Claims Act.  The relators included examples of printouts of customer transactions from the information system, which they alleged demonstrated the difference between government-reported prices and actual discounted prices.  The defendants moved to dismiss the relators’ claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court denied the defendants’ motion to dismiss.  The court rejected the defendants’ argument that the relators failed to meet the requirements of Rule 9(b) because they did not allege specific claims against each of the named defendants.  The court explained that because the relators alleged fraud through the defendants’ nationwide information system, their allegations provided all of the defendants with fair notice of the claims against them.  Further, the court found that the relators properly alleged falsity and materiality, citing the defendants’ annual certifications of accuracy and truthfulness of the reported drug prices. Lastly, the court noted that the relators’ representative examples were sufficient to extrapolate a nationwide fraud scheme.


U.S. ex rel. Gregory G. v. Houston Indep. Sch. Dist., 2016 WL 5661701 (S.D. Tex. Sept. 30, 2016) 

Holding: The U.S. District Court for the Southern District of Texas granted the defendant’s motion to dismiss the relators’ complaint for failure to plead fraud with particularity under Rule 9(b). 

The relators brought a qui tam action against their children’s public school district alleging that it tailored its special education programs to fraudulently bill Medicaid for medically unnecessary services and services not provided in violation of the False Claims Act. The relators alleged that defendant’s actions contributed to their children’s lack of progress because they prioritized increasing Medicaid reimbursements over serving educational needs. The relators alleged the defendant’s failure to acquire parental consent purposefully removed a “check” on the services that the defendant billed Medicaid for, and cited publically recorded instances of the school billing for services that they did not provide. The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b).

The court granted the defendant’s motion to dismiss, finding that the relators’ conclusory allegations failed to specify why the services were medically unnecessary, identify any examples of a provided service, allege a specific time frame, or name an individual involved in fraudulent billing. The court explained that the failure to comply with parental consent and lack of educational progress was insufficient to reasonably infer fraud. Further, the court concluded that a relaxed 9(b) pleading standard was not appropriate because information to back up the relators’ claims could have been obtained from Medicaid, and the relators were entitled to participate in meetings and had access to their children’s educational records.


U.S. ex rel. Crockett v. Complete Fitness Rehab., Inc., 2016 WL 5476277 (E.D. Mich. Sept. 29, 2016)

Holding: The U.S. District Court for the Eastern District of Michigan granted the defendant’s motion to dismiss for failure to plead fraud with specificity under Rule 9(b). 

The relator brought a qui tam suit against her former employer, a rehabilitation services provider, alleging that the defendant violated the False Claims Act by requiring employees to treat all incoming patients at the highest level of therapy without requisite medical assessments or doctor’s notes and required increased length of therapy in order to maximize government funding. Additionally, the relator alleged that the defendant stopped or postponed therapy despite medical necessity, promoted falsification of time records, billed for services that were not provided, and violated the reverse false claims provision of the FCA. Finally, the relator alleged that the defendant terminated her in retaliation for her complaints via email indicating that she viewed the defendant’s billing and therapy practices as inappropriate. The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim pursuant to Rule 12(b)(6).

The court granted the defendant’s motion to dismiss, finding that the relator failed to identify an actual fraudulent claim. The court explained that the emails that the relator produced to support her claims contained details about the fraudulent scheme and gave examples of instances wherein patients were treated at an unnecessarily high treatment level, however, they did not show the time, place, or contents of an actual false claim submitted to the government. Additionally, the court granted the defendant’s motion to dismiss the relator’s reverse false claims allegation, explaining that the relator failed to sufficiently allege that the defendant had a concrete obligation to return overpayments. Finally, the court granted the defendant’s motion to dismiss the relator’s retaliation claims, concluding that the relator’s email complaints to her supervisors did not constitute protected activity under the FCA’s retaliation provision because she did not connect her concerns to fraud against the government.


U.S. ex rel. Napoli v. Premier Hospitalists PL, 2016 WL 5476199 (M.D. Fla. Sept. 29, 2016)

Holding: The U.S. District Court for the Middle District of Florida granted the defendant’s motion to dismiss the relator’s complaint for failure to plead fraud with particularity under Rule 9(b). 

The relators brought a qui tam suit against their former employer, an organization that provided patient care and clinical management services to hospitals, and its owner, alleging that the defendants conspired with a medical billing management practice to fraudulently bill the government in violation of the False Claims Act. Specifically, the relators alleged that the defendants billed the government for services provided by nurse practitioners and physician’s assistants as though a physician performed the services in order to bill at the higher physician’s rate, intentionally billed for intensive care services that were not performed, and allowed physicians who did not possess a Medicaid billing number to bill for services using the owner’s number. The defendants moved to dismiss the relators’ allegations for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss, explaining that the relators failed to sufficiently plead the actual submission of a false claim. The court rejected the relators’ arguments that the relators’ employee status – as Vice President, nurse practitioner, and medical administrator – was sufficient to create inference that the defendants submitted fraudulent claims. The court observed that the relators failed to describe instances in which the relators’ firsthand experience involved communications, events, or billing policy and procedures that would allow them to witness of the submission of actual false claims. Additionally, the court found that the relators’ conspiracy claims failed because they did not sufficiently plead that an agreement existed between the defendants.


U.S. ex rel. Hayward v. Sava Senior Care, LLC, 2016 WL 5395949 (M.D. Tenn. Sept. 27, 2016)

Holding: The U.S. District Court for the Middle District of Tennessee denied the defendants’ motions to dismiss for failure to meet the particularity requirements of Rule 9(b).

In this intervened case, the plaintiffs alleged that the defendants, skilled nursing facilities and their parent company and affiliates instituted top-down, systematic pressure to submit claims to Medicare for services that were not medically reasonable, necessary, or skilled. The plaintiffs alleged that the defendants set billing and patient stay targets without regard for patient need, explicitly required therapists to refrain from writing discharge orders, and implemented stated length of stay goals. The plaintiffs provided support for their allegations in the form of emails between various corporate managers and employees detailing the scheme, as well as representative examples of five specific patients. The defendant moved to dismiss the plaintiffs’ allegations for failure to plead fraud with particularity pursuant to Rule 9(b).

The court denied the defendants’ motions to dismiss. The court determined that the plaintiffs sufficiently pled their claims under Rule 9(b) by providing details regarding why the defendants’ practices were false and providing specific examples of false claims which identified the patients, places of service, Medicare Claim numbers, dates of service, and the dates when the claims were received and paid. The court rejected the defendants’ argument that the plaintiffs’ allegations of falsity were improperly based on clinical disagreements, emphasizing that the plaintiffs’ claims were not based on an improper diagnosis, but on the defendants’ failure to provide support for the reasonableness and necessity of services provided to patients. The court also denied the parent company and affiliates’ motions to dismiss based on their argument that the plaintiffs’ did not adequately allege specific claims against them, explaining that the plaintiffs properly alleged that all of the defendants, acting in concert, created and implemented the policies that led to the alleged false claims Additionally, the court denied the defendants’ motion to dismiss the non-intervened claims, finding that the relators alleged details from firsthand accounts of the fraud sufficient to meet the requirements of Rule 9(b).


U.S. ex rel. Presser v. Acacia Mental Health Clinic, LLC, 2016 WL 4555648 (7th Cir. Sept. 1, 2016)

Holding: The U.S. Court of Appeals for the Seventh Circuit reversed and remanded the district court’s decision to grant the defendant’s motion to dismiss the relator’s improper billing claims for failure to plead fraud with particularity under Rule 9(b) and affirmed the district court’s decision to dismiss the relator’s remaining allegations. 

The relator brought a qui tam suit against her former employer, a mental health facility, alleging that the defendants violated the False Claims Act by billing Medicare and Medicaid for medically unnecessary services and upcoding. Specifically, the relator alleged that the defendant billed the government for medically unnecessary assessments and screenings and applied billing codes for “full psychological assessment[s] by a therapist” to assessments administered by receptionists or nurse practitioners. The U.S. District Court for the District for the Eastern District of Wisconsin granted the defendant’s motion to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b). The relator appealed to the Seventh Circuit.

The circuit court affirmed the district court’s decision, with exception to the relator’s allegations related to improper billing codes. The court found that the relator properly pled her allegations regarding the use of improper billing codes, observing that she alleged that her supervisors directed her to use the billing code for a therapist for assessments that she, as a nurse practitioner, provided to patients. The court found that her allegations were sufficient to meet a relaxed Rule 9(b) standard, which was appropriate given her position. However, the court found that the relator’s remaining allegations were insufficient, explaining that she relied only on “personal estimation” that the assessments and screenings were medically unnecessary, and not on concrete “medical, technical, or scientific context” to demonstrate why the defendant’s procedures were medically unnecessary in violation the FCA.


U.S. ex rel. Hockenberry v. OhioHealth Corp., 2016 WL 4480350 (S.D. Ohio Aug. 25, 2016)

Holding: The U.S. District Court for the Southern District of Ohio granted the defendants’ motion to dismiss relator’s claims for failure to plead fraud with particularity pursuant to Rule 9(b). 

The relator brought a qui tam suit against the owner and operator of healthcare facilities and a physician employer group where he was formerly employer as a surgeon, alleging that he observed that the defendants violated the False Claims Act by fraudulently upcoding patients’ bills and submitting the fraudulent bills to the government for reimbursement. Specifically, the relator alleged that the defendants falsely billed for critical care services that were not provided. The defendants moved to dismiss the relator’s allegations for failure to plead fraud with particularity pursuant to Rule 9(b).

The court granted the defendants’ motion to dismiss the relator’s claims for failure to plead fraud with particularity. The court found that although the relator sufficiently pled the time frame and location of the fraud, the relator failed to identify any physicians involved or any patient names. Furthermore, the court found that the relator could not meet even the relaxed pleading requirements of Rule 9(b), as he failed to demonstrate that he was involved in or had firsthand knowledge of the defendants’ billing procedures. The court rejected the relator’s argument that HIPAA barred the relator from presenting specific information, explaining that numerous past relators have pled with sufficient particularity without violating HIPAA using, for example, patient initials as identifiers.


U.S. v. Crumb, 2016 WL 4480690 (S.D. Ala. Aug. 24, 2016) 

Holding: The U.S. District Court for the Southern District of Alabama denied the defendant’s motion to dismiss the government’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state claim under 12(b)(6). 

The government brought an action against a physician, his corporation, and former employer alleging that the defendants violated the False Claims Act through several fraudulent billing schemes. Specifically, the government contends that the defendant knowingly falsified hundreds of rare diagnoses and submitted them to federal healthcare programs solely to receive reimbursements that he would otherwise not have received. Additionally, the defendants allegedly inflated reimbursement amounts with false coding modifiers, routinely billed blood draws with medically unreasonable and unnecessary ultrasound guidance, and failed to return overpayments to the government in violation of the reverse false claims provision of the FCA. The defendants moved to dismiss the government’s allegations for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state claim under Rule 12(b)(6).

The court denied the defendants’ motions to dismiss, finding that the government met the particularity requirements of Rule 9(b) and stated a claim pursuant to Rule 12(b)(6). First, the court rejected the defendants’ argument that the boilerplate language in the government’s complaint constituted a “shotgun pleading.” Second, the court explained that the government was not required to provide expert opinions evidencing medical unreasonableness, articulate which theory of liability was being pursued rather than allege in the alternative, or name particular individuals in order to comply with Rule 9(b). Rather, the court found that the government’s complaint clearly demonstrated a theory of liability and alleged with sufficient specificity for all allegations. Third, the court rejected the defendants’ argument that the government’s claims should be dismissed because it knowingly misrepresented facts, explaining that the argument was inappropriate at the pleadings stage. Furthermore, the court found that the government properly identified particular documents central to the fraudulent scheme and satisfied Escobar’s implied certification requirements for materiality and falsity. Fourth, the court found that the defendants were vicariously liable; explaining that the complaint sufficiently alleged that the fraudulent conduct was executed for the benefit of all of the defendants. Lastly, the court rejected the defendants’ argument that the complaint pled only “honest mistakes,” finding that, the complaint demonstrated that defendants had reason to know of facts that would indicate their conduct could reasonably result in harm and thus acted with the requisite knowledge under the FCA.


U.S. ex rel. Futrell v. eRate Program, LLC., 2016 WL 4206014 (E.D. Mo. Aug. 10, 2016) 

Holding: The U.S. District Court for the Eastern District of Missouri granted the defendant’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b). 

The relators brought a qui tam suit against their former employer, which assisted schools in applying for support under the “E-Rate Program,” a universal service support program that assists schools in obtaining affordable telecommunication services.  The relators alleged that when the defendant assisted school systems in obtaining federal funding, it falsely certified the school’s compliance with federal program requirements, although it did not verify that the school systems actually met the program’s requirements, in violation of the False Claims Act.  The defendant moved to dismiss the relators’ allegations for a failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted defendant’s motion to dismiss, reasoning that the relator did not sufficiently establish the “who, what, where, or when” of the allegations.  The court explained that the complaint lacked information regarding which schools were impacted by the fraudulent conduct, a general time period, or an indication of personal knowledge or first-hand experience.  The court also noted that the relators did not provide any representative examples of false claims.


U.S. ex rel. Driscoll v. Todd Spencer M.D. Med. Grp. Inc., 2016 WL 4191896 (9th Cir. August 9, 2016) 

Holding: The U.S. Court of Appeals for the Ninth Circuit reversed and remanded the district court’s decision, finding that the relator plead with sufficient specificity under Rule 9(b). 

The relator brought a qui tam action against the physician’s office where he was formerly employed alleging that the defendant violated the False Claims Act by administering unnecessary CT-scans and artificially increasing billing through “unbundling” procedures. The U.S. District Court for the Eastern District of California dismissed the relator’s complaint for failure to plead fraud with particularity under Rule 9(b). The relator appealed to the Ninth Circuit.

The circuit court reversed the district court’s decision, finding that the relator’s personal knowledge of defendant’s practices and the detailed and representative examples in the complaint satisfied Rule 9(b).

 

U.S. ex rel. Polanksy v. Executive Health Res., Inc., 2016 WL 4059667 (E.D. Pa. July 26, 2016) 

Holding: The U.S. District Court for the Eastern District of Pennsylvania denied defendant’s motion to dismiss, and granted the defendant’s parent companies’ and the hospital defendants’ motions to dismiss.

The relator brought a qui tam action against his former employer—a physician advisor firm, its parent companies, and two hospitals, alleging that defendants knowingly engaged in a nationwide scheme to defraud Medicare and Medicaid by systematically misconstruing CMS regulations during hospital admissions reviews in order to fraudulently submit outpatient claims as inpatient claims. Additionally, the relator alleges that the parent companies are liable directly and under a veil-piercing theory and that both hospitals are liable given that the results of an audit put one defendant hospital “on notice” of the fraud and the other should have questioned the defendant’s approaches considering the high percentage of inpatient claims. The defendants move to dismiss relators claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court denied the defendant’s motion to dismiss, and granted both the defendant’s parent companies’ and hospital defendants’ motions to dismiss. First, the court rejected the defendant’s argument that the relator disregarded the physician’s decision to admit the patient and therefore failed to allege the causal link between the defendant’s recommendation and the false claim, finding that the relator established the link by demonstrating that the defendant’s review of cases performed a substantial and often determinative role in the process. Furthermore, the court determined that the relator sufficiently stated falsity under a legally false theory, considering the relator sufficiently alleged that the defendant failed to consider several CMS guidelines which plausibly could affect the government’s payment decision. Secondly, the court held that the relator’s claims against the hospital defendants failed to meet the particularity requirements of Rule 9(b), as the relator’s complaint contained allegations that could be applied to any of the defendant’s clients and therefore did not provide enough detail to provide reliable indicia. Lastly, the court found that relator’s claims against the parent companies did not meet the particularity requirements of Rule 9(b), as the relator failed to allege a sufficient link between the false claims and parent companies necessary show direct liability and failed to allege what is required to pierce the corporate veil.


U.S. ex rel. Jallali v. Sun Healthcare Grp., 2016 WL 3564248 (11th Cir. July 1, 2016) 

Holding: The U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s decision to grant the defendant’s motion to dismiss for failure to plead fraud with particularity pursuant to Rule 9(b). 

The relator brought a qui tam suit against her former employer, a healthcare services company, alleging that the defendant billed patients for services not provided in violation of the False Claims Act. The relator, as the Director of Rehab and Therapy Department, alleged personal knowledge of particular patients that were billed for services that were not rendered and asserted that based on that knowledge, she “had a reliable indication that claims were fraudulently submitted to Medicare…” The U.S. District Court for the Southern District of Florida granted the defendant’s motion to dismiss the relator’s claims with prejudice, finding that the relator failed to satisfy the particularity requirements of Rule 9(b). The relator appealed to the Eleventh Circuit.

The circuit court affirmed the district court’s decision granting the defendant’s motion to dismiss. The court observed that personal knowledge of the alleged fraud scheme and the defendant’s billing practices generally was not specific enough to meet the requirements of Rule 9(b). The court reasoned that because the relator failed to support her allegations with information about specific false claims that were submitted to the government, her allegations were merely conjecture.

See U.S. ex rel. Hull v. Restore Mgmt. Co. LLC, 2017 WL 2797141 (N.D. Ala. June 28, 2017)

See U.S. ex rel. Bookwalter v. UPMC, 2017 WL 2672288 (W.D. Pa. June 21, 2017)

See U.S. ex rel. Lord v. Napa Mgmt. Serv. Corp., 2017 WL 2653164 (M.D. Pa. June 20, 2017)

See U.S. ex rel. O’Donnell v. Am. At Home Healthcare and Nursing Serv., Ltd., 2017 WL 2653070 (N.D. Ill. June 20, 2017)

See U.S. ex rel. Penelow v. Johnson & Johnson, 2017 WL 2367050 (D.N.J. May 31, 2017)

See U.S. ex rel. Colquitt v. Abbott Lab., 2017 WL 2347091 (5th Cir. May 31, 2017)

See U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 2017 WL 1902159 (D. Nev. May 9, 2017)

See U.S. ex rel. Jacobs v. Bank of Am. Corp., 2017 WL 2361943, 2361944 (S.D. Fla. Apr. 27, 2017)

See U.S. ex rel. Rahimi v. Zydus Pharm., 2017 WL 1503986 (D.N.J. Apr. 26, 2018)

 

See U.S. ex rel. Aquino v. Univ. of Miami, 250 F.Supp3d 1319 (S.D. Fla. Apr. 26, 2017)

 

See U.S. ex rel. Al-Sultan v. The Pub. Warehousing Co. K.S.C., 242 F.Supp.3d 1351, 2017 WL 1021745 (N.D. Ga. Mar. 16, 2017)

 

See U.S. ex rel. Complin v. N.C. Baptist Hosp., 2016 WL 7471311 (M.D.N.C. Dec. 28, 2016)

 

See U.S. ex rel. Walker v. Loving Care Agency, Inc., 2016 WL 7408848 (D.N.J. Dec. 22, 2016)

 

See U.S. ex rel. Proctor v. Safeway, Inc., 2016 WL 7017231 (C.D. Ill. Dec. 1, 2016)

 

See Hamilton v. Yavapai Cmty. Coll., 2016 WL 7102973 (D. Ariz. Dec. 6, 2016)

See U.S. ex rel. Scollick v. Narula, 2016 WL 6078246 (D.D.C. Oct. 17, 2016)

 

See U.S. ex rel. Bingham v. HCA, Inc., 2016 WL 6027115 (S.D. Fla. Oct. 14, 2016)

 

See U.S. ex rel. Pospisil v. Syngenta AG, 2016 WL 5851795 (D. Kan. Oct. 6, 2016)

 

See U.S. ex rel. Ramsey-Ledesma v. Censeo Health, LLC, 2016 WL 5661644 (N.D. Tex. Sept. 30, 2016)

 

See U.S. ex rel. Conroy v. Select Med. Corp., 2016 WL 5661566 (S.D. Ind. Sept. 30, 2016)

 

See U.S. ex rel. Crockett v. Complete Fitness Rehab., Inc., 2016 WL 5476277 (E.D. Mich. Sept. 29, 2016)

 

See U.S. ex rel. Frawley v. McMahon, 2016 WL 5404598 (N.D. Ill. Sept. 28, 2016)

See U.S. ex rel. Chase v. LifePath Hospice, Inc., 2016 WL5239863 (M.D. Fla. Sept. 22, 2016)

See U.S. ex rel. Lee v. N. Adult Daily Health Care Ctr., 2016 WL 4703653 (E.D.N.Y. Sept. 7, 2016)

See U.S. ex rel. Herman v. Coloplast Corp., 2016 WL 4483869 (D. Mass. Aug. 24, 2016)

 

See U.S. ex rel. Voss v. Monaco Enter. Inc., 2016 WL 3647872 (E.D. Wash. July 1, 2016)

B. Rule 12(b)(6) Failure to State a Claim upon which Relief can be Granted


U.S. ex rel. Dickson v. Bristol-Myers Squibb Co., 2017 WL 2780744 (D.N.J. June 27, 2017)

Holding:  The U.S. District Court for the District of New Jersey granted the defendants’ motion to dismiss the relator’s false marketing and “fraud on the formulary” claims for failure to state a claim under Rule 12(b)(6).

The relator was a plaintiff in multi-district litigation against Bristol-Myers Squibb Company (“BMS”) involving the prescription blood thinner Plavix manufactured by BMS and marketed by BMS and co-defendant Sanofi Inc.  The relator alleged that the defendants engaged in a false marketing campaign to induce physicians to prescribe Plavix as superior to aspirin even though Plavix was no more effective for the relevant indicated uses and cost one hundred times more.  The relator alleged that those prescriptions were not reimbursable by Medicaid, and that the claims submitted for Plavix violated the False Claims Act.  The relator also alleged that the defendants falsely marketed Plavix to state formulary committees in order to fraudulently induce the committees to include Plavix on the formulary, triggering an automatic government obligation to reimburse Plavix prescriptions.  The defendants moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead with particularity under Rule 9(b).

The court granted the defendants’ motion to dismiss.  The court explained that the relator’s allegations regarding false marketing to induce physicians to prescribe Plavix failed to state a claim under 12(b)(6) because, as relator conceded, Plavix was listed on each state’s formulary, which was sufficient to compel Medicaid to automatically pay claims for the drug.  The court determined that while the allegations may have suggested that the defendants’ fraudulent marketing of Plavix caused legally false claims to be submitted to Medicaid, the allegations also clearly stated that the government’s decision to pay the claims was based solely upon Plavix’s inclusion on the formulary. Further, the court found that the relator failed to establish that cost-effectiveness was material to the government’s decision to pay.  The court also granted the defendants’ motion to dismiss the relator’s “fraud on the formulary” allegations.  The court explained that it did not want to second guess the decisions of state officials and reasoned that the fraud could not have been material because when the officials became aware of the allegations they took no action to remove Plavix from the formularies.

 

U.S. ex rel. Jersey Strong Pediatrics v. Wanaque Convalescent Ctr., LLC, 2017 WL 2577544 (D. N.J. June 14, 2017)

Holding:  The U.S. District Court for the District of New Jersey granted the defendants’ motion to dismiss the relator’s wrongful billing allegations for failure to state a claim under Rule 12(b)(6).

The relator, a corporation owned and operated by a pediatric physician, brought a qui tam action against the skilled nursing and rehabilitation facility where the relator’s owner formerly treated patients and against its parent company, alleging that the defendant manipulated the patient population in the facility to give preferential treatment to out-of-state residents in order to maximize profit in violation of the False Claims Act.  The relator also alleged that the defendants knowingly billed Medicare and Medicaid before ascertaining whether patients had private health insurance, in violation of secondary payment laws.    The defendants moved to dismiss the relator’s allegations for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted the defendants’ motion to dismiss.  The court found that though the realtor met the requirements of Rule 9(b) by alleging representative examples of false claims that created a strong inference that actual claims were submitted to the government, it failed to properly allege materiality.  The court explained that the relator never discussed whether the relevant laws were material to the government’s decision to pay the claims.


U.S. ex rel. Curtin v. Barton Malow Co., 2017 WL 2453032 (W.D. La. June 6, 2017)

Holding: The U.S. District Court for the Western District of Louisiana granted the defendant’s motion to dismiss the relator’s allegations that the defendant fraudulently billed the government under its contract  and retaliated against him after he complained, on the grounds of failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the parent company of his former employer, alleging that the defendant fraudulently billed the government for work performed using improper materials under its government construction contract in violation of the False Claims Act.  The relator alleged that the defendant installed roofing material that was not covered under warranty and failed to conduct the required quality control testing, yet requested payment under the contract anyway.  Additionally, the relator alleged that the defendant terminated him in retaliation for preparing a report on the alleged conduct for government representatives and emailing his concerns to the company’s Vice President.  The defendant moved to dismiss the relator’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted the defendant’s motion to dismiss.  The court concluded that the relator failed to allege that the defendant’s contract breach was a material under Universal Health Services v. U.S. ex rel. Escobar.  The court explained that the relator failed to allege the warranty was a condition of payment, as the relator did not provide any information about the contract’s provisions or the nature of the project governed by the contract.  Furthermore, the court found that without factual allegations indicating that the roofing material’s warranty was of particular importance, “the use of one type of material with an expired warranty . . . is not a ‘misleading half-truth.’”  The court also found that the relator’s allegations regarding quality control failed because they were too speculative.  Additionally, the court granted the defendant’s motion to dismiss the retaliation claims, explaining that the relator failed to allege that he was engaged in protected activity because his complaints only concerned quality control, not fraud.


U.S. ex rel. Petras v. Simparel, Inc., 2017 WL 2174522 (3rd Cir. May 18, 2017)

Holding: The U.S. Court of Appeals for the Third Circuit affirmed the district court’s decision granting the defendants’ motion to dismiss the relator’s reverse false claims and retaliation allegations for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the proprietary software company where he was formerly employed and its executives, alleging the defendants knowingly avoided their obligation to pay the Small Business Administration (“SBA”) accrued dividends in violation the reverse false claims provision of the False Claims Act.  The relator alleged that the defendants’ obligation to pay SBA arose when SBA was appointed the receiver of the majority owner after the defendant company failed to comply with its SBA funding agreement.  The relator alleged that the defendants hid the company’s deteriorating financial condition from the SBA in order to avoid paying dividends to the SBA. The U.S. District Court for the District of New Jersey granted the defendants’ motion to dismiss, finding that the alleged obligation was too speculative to create FCA liability.  The district court also granted the defendants’ motion to dismiss the relator’s retaliation claim.  The relator appealed to the Third Circuit.

The circuit court affirmed the district court’s decision to dismiss the relator’s claims.  The circuit court explained that because SBA was acting as a receiver when it assumed the role of preferred shareholder, it could not retain any federal authority, and thus was not considered the government under the FCA.  Further, the circuit court noted that even if SBA was acting as a government entity, the relator’s claims failed because an actual obligation was not triggered, and the relator did not allege when an obligation would materialize.  The court concluded that, “for a reverse FCA claim, the definition of an ‘obligation’ refers to one existing at the time of the improper conduct to pay the [g]overnment funds, the amount of which may not be fixed at the time of the improper conduct.”   Finally, the circuit court determined that the relator’s retaliation claims failed because the FCA’s whistleblower protections only apply to viable FCA claims.


U.S. ex rel. Badr v. Triple Canopy, Inc., 85 F.3d 174 (4th Cir. May 16, 2017)

Holding: The U.S. Court of Appeals for the Fourth Circuit affirmed its decision to deny the defendant’s motion to dismiss for failure to state a claim under Rule 12(b)(6).

In this intervened case, the relator brought a qui tam suit alleging that the defendant violated the False Claims Act by falsely certifying that guards it provided under its government contract had passed the required marksman qualification course.  The U.S. District Court for the Eastern District of Virginia dismissed the relator’s claims, “declin[ing] recognition of an implied certification theory.”  The U.S. Court of Appeals for the Fourth Circuit reversed the district court’s decision, finding that “the implied certification theory was valid in certain circumstances” and that in this case the government sufficiently alleged that the defendant “made a material falsehood.”  The Supreme Court granted certiorari and vacated the circuit court’s decision, remanding the case for further consideration on whether the government sufficiently alleged falsity and materiality in light of Universal Health Services Inc. v. United States ex rel. Escobar.

The circuit court affirmed its earlier denial of the defendant’s motion to dismiss, holding that Universal Health did not undermine its previous decision.  The court noted that the alleged conduct qualified as a “misleading half-truth” under Universal Health and that the government’s immediate intervention and refusal to renew its contract with the defendant was evidence that the alleged conduct was material to the government’s payment decision.


U.S. ex rel. Hartpence v. Kinetic Concepts, Inc., 2017 WL 2713730 (C.D. Cal. Mar. 6, 2017)

Holding: The United States District Court for the Central District of California granted in part and denied in part the defendant’s motion to dismiss the relator’s Medicare fraud claims for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against the medical device manufacturer where he was formerly employed alleging that the defendant submitted false claims for payment to Medicare in violation of the False Claims Act.  The relator alleged that the defendant submitted claims to Medicare that were not in compliance with the Local Coverage Determinations (LCDs) issued by Durable Medicare Equipment Medicare Administrative Contractors (DMACs).  The relator alleged that the defendant fraudulently used a billing modifier (known as a “KX modifier”) in order to “falsely signal” that the defendant was in compliance with the LCDs and that “Medicare did not need to look for additional data.”  The relator alleged that the defendant’s use of the modifier allowed it to quickly receive payments for noncompliant claims and avoid a more exacting review process by the DMACs. The relator also alleged that the defendant’s retention of the overpayments it received constituted a separate FCA violation under the reverse false claims provision.  The defendant moved to dismiss for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity under Rule 9(b).

The court granted in part and denied in part the defendant’s motion to dismiss.  The court found that the relator failed to adequately plead that the claims related to the misuse of the KX modifier were factually false, reasoning that the defendant’s use of the modifier only “implicitly misrepresented the progress of patients or the ability of a wound to heal,” but found that legal falsity might result from noncompliance with LCDs and give rise to an FCA claim.  The court rejected the defendant’s argument that violations of LCDs could not lead to FCA liability “because LCDs [were] not laws or regulations.”  The court held that the relator sufficiently pled that certain categories of claims violated the LCDs, but that he failed to establish that others violated the LCDs.  The court also rejected the defendant’s argument that compliance with LCD regulations forbidding use of the KX modifier was not material, explaining that “the LCDs at issue…explicitly stat[ed] that the KX modifier should not be used and a claim will be denied,” in circumstances where use of the modifier is unwarranted.  The court also rejected the defendant’s argument that the violations could not have been material because government was aware of its use of the KX modifier and continued to pay claims, noting that the defendant did not indicate that either the DMACs or government had knowledge of the defendant’s practices.  The court granted the defendant’s motion to dismiss with respect to the relator’s claims arising from a reverse false claims provision, finding these claims redundant.


U.S. ex rel. Polukoff v. St. Mark’s Hosp., 2017 WL 237615 (D. Utah Jan. 19, 2017)

Holding: The U.S. District Court for the District of Utah granted the defendants’ motion to dismiss the relator’s claims that the defendants billed the government for medically unnecessary procedures for failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam action against Dr. Sherman Sorensen and two hospitals where Sorensen performed surgery, Intermountain Healthcare, Inc. (“IHC”) and St. Mark’s Hospital (“St. Mark’s”), alleging that Sorensen violated the False Claims Act by performing and billing the government for medically unnecessary patent foramen ovale closures (“PFO closures”), a type of cardiac surgery, and that the hospitals’ managing agents were aware of the unnecessary procedures, yet billed the government anyway.  Furthermore, the relator alleged that Sorensen made false statements in his patients’ medical records regarding medical history in an attempt to justify the need for PFO closures.  Though Medicare had not issued a National Coverage Determination for PFO closures, IHC issued internal guidelines indicating which patients could receive a PFO closure.  After discovering that Sorensen had performed PFO closures that did not conform to those guidelines, his medical privileges were suspended.  The relator alleged that he subsequently witnessed Sorensen performed unnecessary PFO closures at St. Mark’s.  The relator originally filed his complaint in the Middle District of Tennessee and included the hospitals’ parent company, which had a presence in that district.  After that court granted the parent company’s motion to dismiss, it determined that the venue was no longer proper and transferred the case to the District of Utah.  The defendants moved to dismiss the relator’s claims because his decision to file in the Middle District of Tennessee constituted improper forum shopping.  The defendants also moved to dismiss for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss for failure to state a claim under Rule 12(b)(6) and denied the motions to dismiss for forum shopping and failure to comply with Rule 9(b).  First, the court explained that although it did not have the authority to invalidate the Middle District of Tennessee court’s decision to transfer the relator’s case, the relator’s decision to initially file there was not in bad faith, and if it had the requisite authority, the court would accept the transfer rather than dismiss the complaint.  Next, the court concluded that the relator pled his allegations against Sorensen and St. Mark’s with sufficient particularity,  explaining that the relator sufficiently identified the “who, what, where, when, and how” of Sorensen’s unnecessary PFO closure scheme and demonstrated which St. Mark’s agents were aware of the alleged conduct and when they became aware of it.  Moreover, the court noted that the relator also established a reasonable inference that false claims were actually submitted to the government by listing thousands of procedures billed to the government, including their corresponding amounts.  Conversely, the court found that the relator failed to plead scienter against IHC with sufficient particularity because it was undisputed that IHC took action to stop Sorensen by suspending his medical privileges once it became aware that Sorenson was potentially performing unnecessary PFO closures.  Lastly, the court granted the defendants’ motion to dismiss for failure to state a claim, explaining that that the claims at issue could not be proven “objectively false” because “opinions, medical judgments, and ‘conclusions about which reasonable minds could differ’” could not be false for the purposes of the FCA.  The court concluded that without a NCD, the reasonableness and necessity of PFO closures must necessarily rely on subjective standards, which were not sufficient to prove liability.


U.S. ex rel. Worthy v. E. Me. Healthcare Sys., 2017 WL 211609 (D. Me. Jan. 18, 2017)

Holding: The U.S. District Court for the Eastern District of Maine denied the defendant’s motion to dismiss the relator’s unlawful billing claims.

The relator brought a qui tam action against the hospital where she was formerly employed and its related billing service corporations, alleging that the defendants engaged in multiple schemes to overbill Medicare in violation of the False Claims Act.  She alleged that the defendants systematically unbundled claims, deleted or omitted required accident and injury information, resubmitted claims without assessing them, added unwarranted modifiers to claims, falsified patient discharge statuses to obtain higher reimbursements, intentionally failed to conduct required manual compliance reviews, upcoded facility fees, falsely listed diagnoses, created dummy accounts, engaged in mass rebilling, and avoided returning overpayments to Medicare.  Further, she alleged that she reported her concerns about the alleged conduct to hospital managers and officers throughout her employment, refused instructions to falsify discharge statuses, presented documentation to prove the large volume of billing violations and improper claims, and filed an internal complaint, all to no avail.  Additionally, the relator alleged  that after reporting her concerns she was constructively discharged through harassment and creation of an environment in which it was “impossible to perform her job.”  The defendants moved to dismiss for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court denied the defendants’ motion to dismiss.  First, the court found that the relator sufficiently pled that the alleged conduct was material to the government’s  payment decision, determining that the allegations regarding the defendants’ efforts to cover up their conduct made it plausible that the government would not have paid had it known of the fraud.  Further, the court explained that its decision was “supported by the fact that the [g]overnment ha[d] previously taken action to prevent the type of double-billing and unbundling alleged here and ha[d] warned that duplicate billing ‘may generate an investigation for fraud.’”  Second, the court determined that the relator properly pled scienter, indicating that her alleged complaints to her supervisors and the subsequent lack of response was sufficient to allege that the defendants acted with at least reckless disregard for the truth.  Third, the court concluded that the relator provided sufficient detail to meet the particularity requirements of Rule 9(b) as she alleged when the scheme took place, specific staff members who instructed the defendants’ billers, how the defendants committed the fraudulent billing, and defendants’ specific regulatory violations.  Furthermore, the court noted that the relator identified specific transactional details and actual claim numbers, amounts, identification codes, and dates of the fraudulent claims.  The court also explained that the relator was not required to identify specific transactional details for every claim and the conduct that she alleged “on information and belief” was sufficiently pled because she “set forth the facts on which the belief [was] founded.”  Finally, the court determined that relator sufficiently pled her conspiracy claims and retaliation claims.


U.S. ex rel. Keen v. Teva Pharmaceuticals, Inc., 2017 WL 36447 (N.D. Ill. Jan. 4, 2017)

Holding: The U.S. District Court for the Northern District of Illinois granted the defendants’ motion to dismiss the relator’s off-label marketing and reverse false claims allegations for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam action against the pharmaceutical company where she was formally employed and its wholly owned subsidiary, alleging that the defendants violated the False Claims Act by training their sales representatives to engage in off-label marketing, including the use of misleading visual aids and messaging.  The relator also alleged that the defendants failed to properly educate prescribers on the safe and effective use of their drugs.  Additionally, the relator alleged that the defendant violated the reverse false claims provision of the FCA by failing to report violations and pay associated penalties under its Corporate Integrity Agreement (“CIA”).  The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendants’ motion to dismiss, finding that the relator failed to meet the pleading requirements of Rule 9(b) because she did not allege a specific link between an actual false claim and the defendants’ promotional materials and sales tactics.  The court observed that the relator failed to identify particular sales representatives who made misleading statements, when or how sales representatives contacted physicians, or how the defendants’ marketing led to the submission of a false claim.  Additionally, the court found that the relator failed to allege a plausible reverse false claims violation because the defendant did not have an “obligation” under its CIA to pay the government.  The court explained that no obligation existed because the government had not exercised its discretion to impose a penalty under the CIA.


U.S. ex rel. Scharff v. Camelot Counseling, 2016 WL 5416497 (S.D. N.Y. Sept. 28, 2016)

Holding: The U.S. District Court for the Southern District of New York granted defendant’s motion to dismiss the relator’s False Claims Act allegations for failure to state a claim under Rule 12(b)(6) and denied defendant’s motion to dismiss the relator’s retaliation claims. 

The relator brought a qui tam suit against his former employer, the operator of substance-abuse treatment centers primarily funded by Medicaid, alleging that the defendant conspired to violate the False Claims Act by overbilling Medicaid by billing for services which were not provided and falsifying patient records to conceal the scheme. He alleged that the defendant failed to maintain the required qualified staff and improperly billed for services provided by unqualified staff, and that the staff kept incomplete patient notes. Additionally, the relator alleged that the defendants terminated him in retaliation for emailing two supervisors about his concerns. The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss the relator’s FCA claims. The court explained that the misconduct that the relator described did not “plausibly amount to fraud,” rather than merely inattention to detail and poor practice. The court noted that the relator failed to allege why the defendant’s practices did not comply with Medicaid regulations, how the relator discovered the improper billing, that defendant’s practices were part of a company policy, or that the alleged practices were material to Medicaid’s payment decision. Additionally, the court noted that the relator failed to allege an agreement to support his conspiracy allegations. However, the court denied the defendant’s motion to dismiss the relator’s retaliation claims, finding that the relator properly pled that he was engaged in protected activity by reporting his reasonable belief that the defendant was committing fraud to his supervisors, and that he was terminated for these complaints.


U.S. ex rel. Doe v. Gormley, 2016 WL 4400301 (D. Md. Aug. 17, 2016) 

Holding: The U.S. District Court for the District of Maryland denied the defendant’s motion to dismiss for lack of standing and failure to state a claim pursuant to Rule 12(b)(6). 

The relator, a tenant of the defendant’s residential property, brought a qui tam suit against the defendant alleging that the defendant violated his Housing Assistance Payment (“HAP”) contract with the Department of Housing and Urban Development (“HUD”) and other government programs by charging the relator rent over and above the rent subsidies the defendant received from the government. The defendant moved to dismiss the relator’s allegations arguing that the relator did not have standing and that the relator failed to state a claim under Rule 12(b)(6).

The court denied the defendant’s motion to dismiss. The court rejected the defendant’s argument that the relator could not proceed because the relator was not an original source explaining that there was no indication of public disclosure in the case. Next, the court determined that the relator sufficiently pled all four elements of an FCA claim, as the contract’s clear language could plausibly demonstrate that the defendant’s conduct constituted fraud, the defendant was aware of his false certifications, and the government’s decision to pay was contingent on the defendant’s compliance.


U.S. ex rel. Moore & Co. v. Majestic Blue Fisheries, LLC, 2016 WL 4051266 (D. Del. July 26, 2016)

Holding: The U.S. District Court for the District of Delaware granted defendant’s motion to dismiss relators’ claims for failure to state a claim under Rule 12(b)(6). 

The relator, a professional association of attorneys, filed a qui tam action against two fishing vessels and the president of one of the vessels alleging that the defendants violated the False Claims Act by falsely certifying that its vessels were under American control as required by the South Pacific Tuna Treaty. Specifically, the relator contends that the defendants transferred ownership of the vessels to American citizens in order to obtain fishing licenses and avoid penalty fees under the Vessel Documentation Act (“VDA”) and Act to Prevent Pollution from Ships (“APPS”), but granted complete control of the vessel’s crew, maintenance, supply, and captains to a non-U.S. citizen. The defendants moved to dismiss relator’s claims for failure to state a claim under Rule 12(b)(6).

The court granted defendant’s motion to dismiss, finding that the relator failed to state a claim under Rule 12(b)(6). The court agreed with the defendant’s argument that licensing requests do not constitute claims under the FCA because licensing is a purely regulatory function, and therefore a licensure cannot qualify as a “valid property interest.” Furthermore, the court reasoned that the statutory language of the VDA and APPS indicates that liability for penalty fees is contingent on the government’s discretion to impose fines, thus because their fines were unassessed, the relator’s claims are not within the scope of the FCA.

See U.S. ex rel. Jacobs v. Bank of Am. Corp., 2017 WL 2361943 (S.D. Fla. Mar. 21, 2017)

See U.S. ex rel. Lynn v. Delta CareerEduc. Corp., 2017 WL 2455210 (D.Ariz. Mar. 15, 2017)

See U.S. v. Quicken Loans Inc., 239 F.Supp.3d 1014 (E.D. Mich. Mar. 9, 2017)

See U.S. ex rel. Vavra v. Kellogg Brown & Root, Inc., 848 F.3d 366 (5th. Cir. Feb. 3, 2017)

See U.S ex rel. Dittmann v. Quest Diagnostics, Inc., 2017 WL 770176 (N.D. Ind. Feb. 27, 2017)

See U.S. ex rel. Hanlon v. Columbine Mgmt. Servs., 676 Fed.Appx. 787 (10th Cir. Jan. 23, 2017)

See Hamilton v. Yavapai Cmty. Coll., 2016 WL 7102973 (D. Ariz. Dec. 6, 2016)

See U.S. ex rel. Escobar v. Universal Health Servs., 842 F.3d 103 (1st Cir. Nov. 22, 2016)

See U.S. ex rel. Harper v. Muskingum Watershed Conservancy Dist., 842 F.3d 430 (6th Cir. Nov. 21, 2016)

See U.S. ex rel. Schaefer v. Family Med. Ctrs. of South Carolina, 2016 WL 6601017 (D.S.C. Nov. 8, 2016)

See U.S. ex rel. Whatley v. Eastwick College, 2016 WL 6311614 (3rd Cir. Oct. 28, 2016)

See U.S. ex rel. Customs Fraud Investigations, LLC. v. Victaulic Co., 2016 WL 5799660 (3rd Cir. Oct. 5 2016)

See U.S. ex rel. Lee v. N. Adult Daily Health Care Ctr., 2016 WL 4703653 (E.D.N.Y. Sept. 7, 2016)

See U.S. ex rel. Knudsen v. Spring Commc’ns Co., 2016 WL 4548924 (N.D. Cal. Sept. 1, 2016)

See U.S. v. Crumb, 2016 WL 4480690 (S.D. Ala. Aug. 24, 2016)

See U.S. ex rel. Singer v. Progressive Care, 2016 WL 4245503 (N.D. Ill. Aug. 11, 2016)

See U.S. ex rel. Polanksy v. Executive Health Res., Inc., 2016 WL 4059667 (E.D. Pa. July 26, 2016)

See U.S. ex rel. Brown v. Pfizer, Inc., 2017 WL 2691927 (E.D. Pa. June 22, 2017)

See U.S. ex rel. Forney v. Medtronic, Inc., 2017 WL 2653568 (E.D. Pa. June 19, 2017)

See U.S. ex rel. Ameti v. Sikorsky Aircraft Corp., 2017 WL 2636037 (D. Conn. June 19, 2017)

See U.S. ex rel. Groat v. Boston Heart Diagnostics Corp., 2017 WL 2533341 (D.D.C. June 9, 2017)

See U.S. v. Dyncorp Int’l, LLC, 2017 WL 2222911 (D.D.C. May 19, 2017)

See U.S. ex rel. Young v. Suburban Home Physicians, 2017 WL 2080350 (N.D. Ill. May 15, 2017)

See U.S. ex rel. Elliott-Lewis v. Abbott Labs., 2017 WL 1826627 (D. Mass. May 5, 2017)

See U.S. ex rel. Jacobs v. Bank of Am. Corp., 2017 WL 2361943, 2361944 (S.D. Fla. Apr. 27, 2017)

VI. LITIGATION DEVELOPMENTS         

A. Government Statement of Interest


U.S. ex rel. Ruckh v. Salus Rehab., 2017 WL 1495862 (M.D. Fla. Apr. 26, 2017)

Holding: The United States District Court for the Middle District of Florida denied the government’s motion to submit a statement of interest in support of the jury verdict in favor of the relator.

The relator brought a qui tam action alleging the defendant violated the False Claims Act, and the government declined to intervene.  The relator continued to litigate the case and at trial, the jury rendered a verdict in favor of the relator.  The government moved for leave to submit a statement of interest arguing that the verdict should be upheld after the defendants filed a motion for judgment as a matter of law.

The court denied the government’s motion, finding that the government had no right to submit a statement of interest.   The court explained that while the law identifies circumstances in which the government may participate in an action, it did not address whether the government had the right to submit a statement of interest or to “intervene-in-fact” in without formally intervening. The court determined that even in the event that a statement of interest were permitted in order to preserve an inadequately protected interest, the government failed to identify any interest that was, in fact, inadequately protected by the relator. The court determined that the government did not have any greater interest in this case than it did in any other case involving federal law, and thus a statement of interest was neither warranted nor necessary. Further, the court observed that the statement of interest was duplicative of the relator’s arguments and failed to provide unique perspective or advance an interest that was not protected by the relator. Finally, the court determined that even in the event that a statement of interest was authorized, and even if the government had identified an interest that was inadequately protected by the relator, it would still deny the motion because the government’s refusal to intervene limited its participation in the case to receiving a pleading and a transcript of the deposition.

B. Calculating Damages and Civil Penalties


U.S. ex rel. Landis v. Tailwind Sports Corp., 234 F.Supp.3d 180 (D.D.C. Feb. 13, 2017)

Holding: The United States District Court for the District of Columbia granted the plaintiffs’ partial motion for summary judgment on the amount of potential damages, and denied the defendants’ motion for summary judgment on the plaintiffs’ claims that the defendant fraudulently obtained government sponsorships.

In this partially intervened case, the relator, a former member of a professional cycling team, brought a qui tam suit against the team, his teammate Lance Armstrong, and their affiliates, alleging that they violated the False Claims Act by making false statements to the United States Postal Service (USPS) in order to obtain and retain sponsorships.  The relator and the government alleged that the defendants issued invoices to USPS under the sponsorship agreement while actively concealing evidence of the use of performance-enhancing drugs (PEDs) among cycling team members in violation of the sponsorship contract.  The plaintiffs moved for partial summary judgment in order to establish the total value of the invoices defendants submitted to USPS.  The defendants cross-moved for summary judgment on all substantive claims, arguing that the plaintiffs could not prove the falsity of the submitted invoices and that USPS suffered no damages.  The defendants adopted a “benefit-of –the-bargain” approach to calculating damages, asserting that the government “suffered no actual damages” because the benefits from the contract exceeded its costs.  The defendants further argued that USPS received “substantial benefits” as a result of the sponsorship arrangement.

The court granted the plaintiffs’ partial motion for summary judgment, finding that “the record [was] uncontested” as to the amount of the invoices.  The court rejected the defendants’ argument that the court “may not decide facts at summary judgment,” explaining that recent amendments to Rule 56 clarified that courts could issue summary judgment decisions on discrete factual issues when warranted by the record.  The court also denied the defendants’ motion for summary judgment, finding that the plaintiffs had sufficiently established genuine issues of fact as to their claims arising from theories of fraudulent inducement and implied certification, but granted the defendants’ motion for summary judgment as to the plaintiffs’ express certification claims.  The court explained that the plaintiffs had raised genuine issues of disputed fact as to whether the sponsorship contracts were procured by fraud by presenting evidence relating to Armstrong’s conversations with multiple witnesses, as well as the public statements in which he discussed PED use.  The court noted that the plaintiffs presented evidence from multiple government witnessed indicating that if they had known about the PED use, they would not have recommended awarding or continuing the sponsorships.  Additionally, the court found that the plaintiffs offered sufficient evidence that the defendants withheld information about the team’s PED use that was material to the USPS decision to pay the defendants.  Finally, the court denied the defendants’ motion for summary judgment with respect to damages.  The court noted that though it had historically applied a “benefit-of-the-bargain” method of calculating damages in FCA cases, in this circumstance “a reasonable juror” might find that benefits USPS reaped from the sponsorship were surpassed by negative effects on its “revenue and brand value.”  The court concluded that if the plaintiffs were able to prove liability at trial, it would be appropriate for a jury to “weigh the evidence on both sides of the scale and decide whether the [plaintiffs] can prove that [the government] sustained actual damages and, if so, the corresponding amount.”

 

U.S. v. Luce, 2016 WL 6892857 (N.D. Ill. Nov. 23, 2016)

Holding: The U.S. District Court for the Northern District of Illinois granted the government’s motion for summary judgment on damages and penalties for the defendant’s defaulted loans and false certifications.

The government brought a suit under the False Claims Act against an attorney who owned a mortgage company that served as a loan correspondent for the Department of Housing and Urban Development (“HUD”), alleging that the defendant falsely certified compliance with HUD’s annual verification form provision requiring that it had no employees that were  involved in criminal proceedings.  The defendant certified compliance with the provision despite being indicted for various frauds during the relevant time period.  The U.S. District Court for the Northern District of Illinois granted the government’s motion for summary judgment on liability and the government moved for summary judgment on penalties and damages.

The court granted the government’s motion for summary judgment.  First, the court reviewed the defendant’s liability, recognizing that a reasonable person would attach importance to the certifications, and the defendant, having served as an attorney at the SEC, had reason to know that the government attached importance to his certifications.  Additionally, the court explained that the “likely or actual behavior of the recipient” influenced the government’s payment decision, noting that HUD disbarred the defendant upon discovering his false certifications.  Next, the court determined that the government was permitted to recover damages because “but for” the defendant’s false certifications, the government would not need to pay defaulted loans, as the defendant would not have been in the position to originate any loans. The court also noted that the defendant did not present any facts disputing the government’s request for damages.  Therefore, the court determined that the government’s total award was $10,373,997.69 by calculating the collective loss on the refinanced loans and adding the FCA’s minimum statutory penalty for the three verification forms he signed.

 

U.S. v. Speqtrum, Inc., 2016 WL 5349196 (D. D.C. Sept. 23, 2016)

Holding: The U.S. District Court for the District of Columbia entered a judgment for the government for the sum of $6,151,302.51.

The government brought an action under the False Claims Act, alleging that the defendant, a home-healthcare agency that assists the elderly and disabled in daily living activities, billed Medicaid for hours not actually worked and services not actually provided, forged physician signatures, and failed to obtain medical authorization before administering services. The court granted summary judgment in favor of the government but found that the government did not provide sufficient damages evidence. During the following bench trial on damages, the court delivered an oral verdict finding that the government had failed to present sufficient evidence of damages for claims alleging that the defendant submitted invoices for services rendered without an operative plan of care and requested post-trial briefings from the parties.

The court concluded that the government did not provide sufficient proof at trial to establish damages under the FCA for its record-keeping allegations related to invoices submitted for services without a plan of care. The court declined to permit the government another chance to present evidence, as it would unfairly prejudice the defendant. The amount of damages for the remaining claims were undisputed and the court awarded the amount requested by the government and trebled the damages. Additionally, the court awarded a $10,000 penalty per violation for the remaining claims, explaining that the defendant’s conduct was “egregious and willful,” led to substantial loss to the government, and that the number of claims proffered by the government understated the gravity of defendant’s fraud because each invoice comprised numerous false acts.

C. Costs and Attorneys’ Fees


U.S. ex rel. Berg v. Honeywell Int’l., Inc. 2017 WL 1843688 (D. Alaska May 8, 2017)

Holding: The U.S. District Court for the District of Alaska denied the defendant’s motion for attorney’s fees.

The relators brought a qui tam action against the defendant technology corporation, alleging that the defendant defrauded the Department of Energy under its government contract.  The court granted the defendant’s motion for summary judgment and the defendant subsequently moved to recover attorney’s fees.

The court denied the defendant’s motion for fees.  The court determined that the actions of the relators throughout the litigation were “neither frivolous nor vexatious” and that the defendant did not show that the relators made claims “recklessly or with the intent to harass.”  The court also clarified that attorney’s fees were not warranted where government knowledge or legal ambiguity was the point of argumentative contention.

 

U.S. ex rel. Kelschenbach v. M&T Bank Corp., 2017 WL 1046335 (W.D.N.Y. Mar. 20, 2017)

Holding: The United States District Court for the Western District of New York denied the relators’ motion to intervene for the purpose of receiving attorneys’ fees, finding that the FCA prohibited private parties from intervening in FCA suits.

The relators brought a qui tam suit against a mortgage bank in the Western District of New York (WDNY), alleging that the defendant violated the False Claims Act by making false representations in connection with its underwriting and origination of Federal Housing Administration loans.  Eight months later, different relators brought a separate qui tam action in the Southern District of New York (SDNY) alleging substantially similar claims.  The government intervened in the WDNY case and reached a settlement agreement involving the WDNY relators and the defendant.  The SDNY relators claimed the government approached them prior to reaching the settlement agreement for the WDNY action and advised it would also intervene in the SDNY action and include them as parties in the settlement agreement.  However, the final settlement agreement did not include the SDNY relators, and it released the defendant from “any federal claims related to [the defendant’s] conduct in origination, underwriting, property appraisal, and quality control for FHA loans.”  The SDNY relators moved to voluntarily dismiss their claims after all parties reached the civil settlement agreement.  Though none of the parties disputed that the release extinguished the SDNY relators’ claims, the SDNY relators filed a motion to intervene for the limited purpose of seeking attorneys’ fees in the WDNY case.  They argued that Rule 24(a)(2) permitted the motion because they were “the prevailing parties” under the FCA.  In the alternative, relators contended that they were allowed to intervene per the FCA “alternate remedy” provision.

The court denied the relators’ motion to intervene.  The court explained that the statutory language of the FCA stated that “no other person other than the government may intervene” in a FCA action, and that courts had interpreted that language to mean that a private party could not intervene in a FCA suit under any circumstances.  The court also rejected the relators’ argument that they should be allowed to intervene under the alternate remedy provision, explaining that the provision did not create an exception to the first-to-file bar.   The court further observed that the relators had “not met the basic requirements for pursuing claims under the ‘alternate remedy’ clause,” indicating that the relators failed to establish that the recovery garnered by the government constituted an alternate remedy.  The court noted a relator was not entitled to recovery in exchange for supplying information to the government “absent a valid complaint which afford[ed] a relator the possibility of ultimately recovering damages.”


U.S. ex rel. Emery v. Belcon Enter, Inc., 2016 WL 7494855 (D. Me. Dec. 30, 2016)

Holding: The Magistrate Judge for the U.S. District Court for the District of Maine recommended that the court grant in part the relator’s motion for attorney’s fees.

The relator settled a qui tam suit under the False Claims Act and moved for an award of attorney’s fees.  Throughout the qui tam action, the relator was represented by two attorneys, one local and one out-of-state.  The defendant raised multiple objections to relator’s motion.

The Magistrate Judge recommended that the district court grant in part the relator’s motion for attorney’s fees.  The court recommended deducting the total hours billed in response to the defendant’s challenges to the out-of-state attorney’s complaint composition, teleconferences, emailing, and associate work as excessive, duplicative, too vague, or unrecoverable.  Additionally, in response to the defendant’s arguments that the out-of-state attorney’s travel time charges were ambiguous and that his rate should not exceed the local attorney’s rate, the court reduced the out-of-state attorney’s travel rate to half of the attorney’s regular rate and reduced the out-of-state firms’ rates to accord with the range of FCA hourly rates deemed reasonable in recent cases.  Finally, the court rejected the defendant’s argument that the relator’s counsel could not charge for work on claims on which the relator did not prevail, but agreed with the defendant that all claims entitled “office work” were too vague to discern the necessity or reasonableness of the charge, and therefore should be excluded.


U.S. ex rel. Smith v. The Boeing Co., 2016 WL 7035001 (D. Kan. Dec. 2, 2016)

Holding: The U.S. District Court for the District of Kansas denied the defendant’s motion for costs.

The relator brought a qui tam suit against a government contractor alleging that the defendant defrauded the government in violation of the False Claims Act.  The U.S. District Court for the District of Kansas granted the defendant summary judgment and the Tenth Circuit affirmed that decision.  The defendant moved for costs.

The court denied the defendant’s motion for costs. The court concluded that although the defendant was the prevailing party, the relator’s undisputed indigence in conjunction with the difficult nature of the case warranted denial of the defendant’s motion.


U.S. ex rel. Stephens v. Malik, 2016 WL 6818880 (N.D. Ind. Nov. 28, 2016)

Holding: The U.S. District Court for the Northern District of Indiana granted the relator’s petition for attorney fees and expenses.

In this partially intervened case, the relator brought a qui tam suit against the physician defendant alleging that he violated the False Claims Act and Stark Law by referring Medicare patients to the medical care facility solely owned by his brother.  The government settled the case with the defendant the relator petitioned for attorney’s fees and expenses.  The defendant challenged the requested amount, arguing that the fees should be reduced slightly because the amount of hours was unreasonable and the relator did not calculate the fees using his attorney’s actual hourly rate.

The court granted the relator’s petition.  The court determined that, though the relator’s attorney’s rate increased during the litigation, it was permissible to apply the current rate retroactively.  The court also found that the defendant’s challenge to the number of hours was based on conclusory evidence and that the amount of hours was reasonable.


U.S. ex rel. Dhaliwal v. Salix Pharm., Ltd., 2016 WL 4402044 (S.D.N.Y. Aug. 18, 2016) 

Holding: The U.S. District Court for the Southern District of New York granted the originally retained law firms’ motion to intervene for the purpose of obtaining statutory attorney’s fees and a portion of the settlement as a contingency fee. 

In this intervened case, the relator retained several different law firms to pursue a qui tam suit alleging that the defendant paid kickbacks to healthcare providers in exchange for prescribing the defendant’s products. Upon settlement, the first law firms that the relator retained filed a motion to intervene in order to obtain statutory attorney’s fees and enforce a charging lien granted in the course of the relator retaining a different law firm. The original law firms argued that intervention was necessary to ensure their entitlement to attorney’s fees and contingency fees.

The court granted the original law firms’ motion for intervention, finding that intervention is appropriate given the firms’ interest in statutory attorney’s fees and a portion of contingency fees are related to the relator’s action and the relator would not adequately represent these interests. Furthermore, the court noted that intervention would conserve judicial resources, as it would allow all issues to be addressed in a single proceeding.


U.S. ex rel. Wilson v. Graham County Soil & Water Conservation Dist., 2016 WL 3661785 (W.D. N.C. July 8, 2016)

Holding: The U.S. District Court for the Western District of North Carolina granted relator’s motion for attorney’s fees and denied defendant’s motion to set aside a default judgment. 

The relator filed a qui tam suit alleging that multiple contractors and subcontractors violated the False Claims Act by submitting and conspiring to submit false claims for payment under a government contract. After one defendant did not file an answer in response to the relator’s complaint, the court granted the relator’s motion for default judgment. The case was settled with respect to all other defendants. The relator then moved for attorney’s fees and expenses. The defendant moved to set aside the default judgement entered against him.

First, the court denied the defendant’s motion to set aside the default judgment, explaining that he did not show good cause. Next, the court granted the relator’s motion for attorney’s fees in part, finding that the relator was due a pro rata share of the fees that resulted from claims against all of the defendants, as the claims against the defendant represented only a small portion of the overall suit.

See U.S. ex rel. Amphastar Pharm. v. Aventis Pharma SA, 2017 WL 1947890 (9th Cir. May 11, 2017)

See U.S. ex rel. Tommasino v. Guida, 2017 WL 878587 (E.D.N.Y. Mar. 6, 2017)

See U.S ex rel. Pitman v. LXE Consulting, LLC, 2017 WL 486947 (W.D. Okla. Feb 6, 2017)

See In re: Natural Gas Royalties Qui Tam Litig., 845 F.3d 1010 (10th Cir. Jan. 4 2017)

D. FCA Seal/Service Issues

 


U.S. ex rel. Westfall v. Apothetech Specialty Pharm. Corp., 2017 WL 1100818 (S.D. Miss. Mar. 20, 2017)

Holding: The United States District Court for the Southern District of Mississippi denied the relators’ motion to seal the record and ordered all matters in the case occurring after the government’s intervention decision to be unsealed.

The relators brought a qui tam suit against the defendant, alleging violations of the False Claims Act.  After they voluntarily dismissed the case following the government’s decision not to intervene, the relators moved to seal the entire record, or in the alternative, to unseal a redacted version of the record.  The relators argued that their prominent positions and reputations in the healthcare industry would be damaged and their families would be subject to retaliation if the entire record were unsealed.  The federal government responded in opposition, requesting that the court unseal record.

The court denied the relators’ motion and ordered all documents be unsealed.  The court found that the relators’ concerns did not outweigh “the strong presumption of public access to court records.”  The court explained that generalized fears of embarrassment or “unsubstantiated fears of retaliatory action” did not justify keeping a case under seal.


U.S. ex rel. Nash v. UCB, Inc. 2017 WL 838198 (S.D.N.Y. Mar. 3, 2017)

Holding: The United States District Court for the Southern District of New York denied the relator’s motions to maintain a seal on all case documents or, in the alternative, to allow him to file a superseding John Doe complaint.  The court granted his motion to file partially redacted copies of the instant motion.

The relator filed a qui tam suit against the defendant alleging that it committed Medicaid fraud in violation of the False Claims Act. After the federal government and several states declined to intervene, the court ordered that the Amended Complaint be unsealed and served on the defendant.  The relator moved to indefinitely maintain seal on all documents filed in the case.  He alternatively moved for leave to file a superseding “John Doe” complaint and redact any information that could reveal his identity.  The relator further moved for leave to filed partially redacted copies of the instant motion and supporting documents in order to remove all references to his current employer.  The relator’s requests were unopposed.

The court denied both the motion to maintain seal on all documents as well as the motion to file a superseding “John Doe” complaint.  However, the court allowed the relator to file partially redacted copies of his motions.  The court explained that the presumption of judicial access ought to be viewed “in the light of the First Amendment.”  The court found that the risk of employer retaliation did not outweigh the preference for public access to judicial documents.  The court also noted that the relator could use FCA anti-retaliation provisions in order to seek recourse if his employer retaliated against him.  However, the court found that “the weight of presumption of public access to the identity of [the relator’s] current employer [was] low” and that redacting the identity of the employer “would not disturb the public’s ability to monitor this court’s functions.”


U.S. ex rel. Meyn v. Citywide Mortgage Assoc., Inc., 2016 WL 7336415 (D. Kan. Dec. 19, 2016)

Holding: The U.S. District Court for the District of Kansas granted the defendant’s motion to dismiss the relator’s claims for failure to comply with the FCA’s seal requirements.

The relator brought a qui tam suit against a mortgage lending company, alleging that it violated the False Claims Act by ending the relator’s refinancing process under a Veteran’s Administration loan upon discovering that his residence was refinanced at a greater value than it was actually worth.  The defendant moved to dismiss relator’s claims, arguing that the relator’s failure to comply with the FCA’s seal requirement warranted dismissal.

The court granted the defendant’s motion to dismiss.  The court concluded that because the relator did not attempt to comply with the FCA’s seal requirement in filing his complaint, dismissal was appropriate.  Furthermore, the court concluded that regardless of the relator’s noncompliance with the seal requirement, the court would dismiss relator’s complaint for failure to state a claim under Rule 12(b)(6), as the relator failed to allege that the defendant received any payment from the government.


State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby, 137 S. Ct. 436 (Dec. 6, 2016)

Holding: The United States Supreme Court affirmed the Fifth Circuit’s decision to deny the defendant’s motion to dismiss, holding that violating the FCA seal requirement does not mandate dismissal.

The relators, two claims adjusters employed by a contractor that provided disaster claims management services for the defendant, State Farm insurance company, brought a qui tam action alleging that the defendant submitted false claims to the government for payment on flood policies arising out of damage caused by Hurricane Katrina. Before the court lifted the seal, the relators’ attorney disclosed the existence of the qui tam suit to multiple news outlets, which published articles containing the details of the alleged fraud.  The relators also met with a senator to discuss the suit, though the senator did not speak publically about the fraud until after the seal was partially lifted.  The defendant moved to dismiss on the grounds that the relators violated the FCA’s seal requirement.  The U.S. District Court for the Southern District of Mississippi denied the defendant’s motion for dismissal, finding that the Lujan factors—(1) harm to the government, (2) the severity of the violations, and (3) evidence of bad faith—favored the relators.  The defendant appealed to The U.S. Court of Appeals for the Fifth Circuit, which affirmed the district court’s decision to deny dismissal after balancing the Lujan factors.  The U.S. Supreme Court granted the defendants petition for a writ of certiorari.

The Supreme Court unanimously affirmed the Fifth Circuit’s decision to deny the defendants’ motion to dismiss, holding that a violation of the FCA’s seal requirement does not mandate dismissal.  First, the court reasoned that the statute did not include language regarding a remedy for seal violations, and in the absence of remedy guidance, “the sanction for breach is not loss of all later powers to act.”  Second, the court explained that because the statute contained other provisions that required the dismissal of a relator’s action, it could be inferred that if Congress intended to dismiss a qui tam suit in response to seal violation, the statute would have said so.  Lastly, the court rejected the defendant’s argument that a relator’s right to bring a qui tam action was conditioned on compliance with the seal requirement,  explaining that there was no textual indication to support a tie between the seal requirement and relator’s right to bring suit.

U.S. ex rel. Evans v. RehabCare Group, Inc. 2016 WL 82334943 (E.D. Mo. Dec. 2, 2016)

Holding: The U.S. District Court for the Eastern District of Missouri granted the relator’s motion for voluntary dismissal of her fraudulent therapy services billing claims and denied her motion to temporarily maintain the seal.

The relator brought a qui tam suit against the skilled therapy service provider where she was formerly employed and its affiliates, alleging that the defendants submitted claims to the government for services that were medically unnecessary and unreasonable, grossly deficient, not provided at all, and did not meet professional standards of care or the applicable regulations.  The government declined to intervene in the relator’s suit.  The relator then filed a motion to voluntarily dismiss the suit and to maintain the seal on the case filings.  The government consented to voluntary dismissal of the complaint, but argued that the case filings should not remain under seal due to the presumption of access to judicial proceedings.

The court granted the relator’s motion for voluntary dismissal and denied the relator’s motion to maintain the seal on certain case filings.  The court explained that relator’s argument that she would experience retaliation and difficulty in obtaining employment should her name become public did not distinguish her from employees who bring non-qui tam actions against employers, and therefore was not sufficient reason to give special protection to qui tam suits or to overcome the strong presumption in favor of public access to judicial records.


Wolff v. Citigroup, Inc., 2016 WL 6945085 (D. Colo. Nov. 2, 2016)

Holding: The U.S. District Court for the District of Colorado granted the relator’s motion to unseal the government’s motion for extension, finding that it did not contain sensitive information. 

The relator brought a qui tam suit alleging that a failed Illinois bank violated the False Claims Act by causing the FDIC to pay claims to the bank’s creditors that it otherwise would not have paid.  Prior to declining to intervene, the government filed a motion for extension of time to decide whether to intervene.  After the government declined to intervene, the relator voluntarily dismissed his case, but filed a motion to unseal to the government’s motion for an extension. The government opposed the motion, arguing that the motion for an extension contained confidential details regarding investigative strategies.

The court granted the relator’s motion to unseal.  The court explained that the motion did not contain any sensitive information, instead only “cut and paste” legal standards and a summary of the relator’s complaint.  However, the court made clear that sensitive statements should remain restricted, even if the remainder of the document is un-restricted.


U.S. ex rel. Halegoua v. Freed, 2016 WL 4179944 (E.D.N.Y. Aug. 5, 2016) 

Holding: The U.S. District Court for the Eastern District of New York granted the relator’s motion to file an amended complaint under seal in part and denied the defendant’s motion to dismiss. 

The relator filed a qui tam suit alleging that the defendants overbilled federal healthcare programs in violation of the False Claims Act. The government consented to the unsealing of the case without coming to a final intervention decision. The defendants moved to dismiss the relator’s complaint, or alternatively to require the relator to file a Rule 15 motion to amend prior to allowing him to amend his complaint, and the relator moved to re-seal the complaint so that he could present new allegations in a second amended complaint and allow the government time to investigate the new claims.

The U.S. District Court for the Eastern District of New York denied the defendant’s motion to dismiss and granted relator’s motion to file under seal in part. The court found that the FCA’s sealing requirement applied to amended pleadings with substantially new allegations, and that because the government had not yet determined whether to intervene, the relator’s second amended complaint could be filed under seal. However the court agreed with the defendants that the relator still must file a Rule 15 motion for leave to amend so that the court has the opportunity to consider the merits of the amended complaint.

E. False Certifications of Compliance


U.S. ex rel. Prather v. Brookdale Senior Living Cmty., Inc., 2016 WL 5539860 (6th Cir. Sept. 30, 2016)

Holding: The U.S. Court of Appeals for the Sixth Circuit reversed the district court’s dismissal of the relator’s false certification allegations in part and affirmed it in part.

The relator brought a qui tam action against the home health services provider where she was formerly employed and its affiliates alleging that the defendants knowingly submitted claims with fraudulent physician’s certifications signed months after services were administered, in violation of Medicare’s requirement that physicians must certify services “as soon thereafter as possible” in violation of the False Claims Act. The relator alleged that the defendants provided services without physician assistance and then paid doctors to later fraudulently certify the services. Furthermore, the relator alleged that nurses were instructed to ignore problems they noticed when reviewing Medicare billing, and that the relator’s concerns about the false certifications were disregarded. The U.S. District Court for the Middle District of Tennessee granted the defendants’ motion to dismiss the relator’s claims. The district court explained that the relator did not adequately plead presentment, failed to plead with sufficient particularity under Rule 9(b), and failed to demonstrate falsity because Medicare regulations did not require physician certification to be documented until final payment. The relator appealed to the Sixth Circuit.

The circuit court reversed the district court’s dismissal, with the exception of the relator’s allegations of false record submissions. The court determined that based on a reasonable reading and as a safeguard against fraud, the phrase “as soon thereafter as possible” suggested urgency and allowed delay only if accompanied by justified reasoning. Thus, because the defendants failed to explain their delay or interpretation of the phrase, their requests for final payment violated Medicare regulations and were impliedly false. Furthermore, the court found that the relator’s allegations were sufficiently pleaded for final payment requests, and because the provision that required the physician certification as a condition payment did not differentiate between anticipated or final payments, the relator’s anticipated payment allegations were also sufficiently alleged. Finally, the court affirmed the district court’s dismissal of the relator’s false-records claims and reverse false claims allegations, agreeing that the relator failed to demonstrate that false statements arose at the time physicians signed the CMS forms, as well as that claims alleging inconsistent care relied on conclusory judgments about nature of care needed rather than specific false statements.


City of Chicago v. Purdue Pharma L.P., 2016 WL 5477522 (N.D. Ill. Sept. 26, 2016)

Holding: The U.S. District Court for the Northern District of Illinois denied the defendant’s motions to stay or dismiss the plaintiff’s claims under the primary jurisdiction doctrine and granted it in part for failure to state a claim upon which relief can be granted under Rule 12(b)(6) and for failure to plead fraud with particularity under Rule 9(b). 

The plaintiff, the City of Chicago, brought a qui tam action against various drug manufacturers alleging that they violated the False Claims Act by engaging in off-label marketing that caused false claims to be submitted to the City’s health plans for treatment that was not medically necessary or approved by the Food and Drug Administration (“FDA”). The U.S. District Court for the Northern District of Illinois previously denied the defendants’ joint motion to stay or dismiss the plaintiff’s complaint under the primary jurisdiction doctrine and rejected their argument that the allegations concerned regulatory matters that should have been addressed by the FDA. However, the defendants again moved to dismiss or stay based on recent FDA developments and new case law. Additionally, the defendants moved to dismiss the plaintiff’s claims for failure to state a claim under Rule 12(b)(6) and failure to plead fraud with particularity as required by Rule 9(b).

First, the court first denied the defendants’ motion to dismiss on primary jurisdiction grounds, finding that nothing in the plaintiff’s allegations or relevant law had changed to warrant reversal of the defendant’s previously denied motion. Second, the court granted the defendants’ motion to dismiss the plaintiff’s express certification claims, noting that the plaintiff did not properly allege that it received or relied on the forms from the doctors prescribing the defendants’ drugs certifying that the prescriptions were medically necessary. Third, the court granted the defendants’ motion to dismiss the plaintiff’s implied certification claims, explaining that the plaintiff failed to allege materiality as defined by the Supreme Court in U.S. ex rel. Escobar v. Universal Health Services because the plaintiff’s continued payment of allegedly false claims in the face of its FCA suit ran contrary to its argument that it would have withheld payment if it knew of the defendants’ off-label marketing practices. Fourth, the court granted the defendants’ motion to dismiss the plaintiff’s claims on causation grounds, indicating that the plaintiff needed to further clarify its identification of prescribers who allegedly submitted false claims.


U.S. ex rel. Simms v. Am. Intercontinental Univ., 2016 WL 5092513 (N.D. Ga. Sept. 20, 2016)

Holding: The U.S. District Court for the Northern District of Georgia denied the defendants’ motions for summary judgment on the relators’ false certification claims regarding Title IV funding. 

The relators brought a qui tam suit against a for-profit educational provider, Career Education Corp (“CEC”) and its wholly-owned subsidiary educational institution, American Intercontinental University, Inc. (“AIU”) alleging that that defendants falsely certified compliance with certain requirements under Title IV of the Higher Education Act and accreditation requirements in their Program Participation Agreement (“PPA”) in order to receive payment in violation of the False Claims Act. The relators alleged that the defendants violated the incentive compensation ban, failed to verify student graduation, and lied to its accreditor. The relators presented evidence, including a supporting expert opinion, indicating that the defendants misrepresented that they discontinued their sales driven and enrollment-based admissions culture, attempted to conceal their sales tactics from accreditor inspectors, and created an approved evaluation method solely for appearance. Both CEC and AIU separately moved for summary judgment.

The court denied both defendants’ motions for summary judgment. First, the court denied AIU’s motion, explaining that the relators provided sufficient evidence to raise a genuine dispute of fact as to whether AIU was accredited based on fraud, which would mean that AIU’s certification that it was accredited in the PPA would be “fraud integral to the casual chain leading to payment.” Second, the court denied CEC’s motion for summary judgment, rejecting its argument that it was not liable as a parent corporation. The court explained that the CEC CEO’s execution of the PPA, overlap in CEC and AIU officers on both corporations’ board of directors, and CEC’s involvement in AIU’s day-to-day operations raised fact issues regarding the defendants’ separateness. Additionally, the court noted that because the CEC CEO executed AIU’s PPA, granting CEC summary judgment would inequitably burden AIU with any consequences of the alleged false claims.


U.S. ex rel. Rose v. Stephens Inst., 2016 WL 5076214 (N.D. Cal. Sept. 20, 2016)

Holding: The U.S. District Court for the Northern District of California denied the defendant’s motion for reconsideration of the court’s denial of the defendant’s motion for summary judgment on the relators’ false certification claims regarding Title IV funding.

The relator brought a qui tam suit against an educational institution, alleging that the defendant falsely certified compliance with the Department of Education’s (“DOE”) Title IV incentive compensation ban (“ICB”) and submitted false claims for payment to the government in violation of the False Claims Act.  Specifically, the relator alleged that the defendant violated the ICB by improperly providing incentive payments to recruiting and admissions employees based only on enrollment success.  The court denied the defendant’s motion for summary judgment, finding that there were  triable issues of fact as to whether the defendant applied for student loans despite its ICB violations .  However, the court also narrowed the relator’s claims to a singular implied false certification claim.  In light of the Supreme Court’s ruling in U.S. ex rel Escobar v. Universal Health Services, the defendant moved for reconsideration, arguing that the relator’s allegations failed Universal Health’s two-part test for falsity and that the ICB was not material under the test articulated in Universal Health because the government continued to pay the claims that the defendant submitted with knowledge of their falsity.

The court denied the defendant’s motion for reconsideration, rejecting its argument that Universal Health delineated a two-part test and finding that the ICB was material to the DOE’s payment decision.  The court explained that the defendant’s interpretation of Universal Health establishing a two-part test for every implied certification claim, namely, that the relator was required to establish that the defendant made (1) “specific representations” that were (2) “misleading half-truths,” was incorrect and that the Supreme Court did not purport to set out an absolute requirement for every case.  Even if it had, the court explained, the relators’ claims satisfied the two-part test in this case.  Moreover, the court found that the relators properly alleged that the ICB was material to the government’s payment decision, explaining that continued payment of false claims was only one in a number of factors set out by the Supreme Court.  Further, the court noted that the  DOE did not provide a reason for continued payment, thus, its decision may have been based on lack of proof or resource constraints.  The court turned to historical examples of DOE’s corrective actions against ICB violators and its pivotal “change in position” to stricter enforcement of ICB and elimination of ICB safe harbors, and  concluded that the ICB was material to the government’s payment decision.


U.S. ex rel. Hanna v. City of Chicago, 2016 WL 4434559 (7th Cir. Aug. 22, 2016)

Holding: The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision granting the defendant’s motion to dismiss, find that the relator failed to plead fraud with particularity under Rule 9(b). 

The relator, a longtime resident of the defendant city, brought a qui tam suit alleging that the city falsely certificated compliance with the federal government’s civil rights requirements in order to receive funding from the Department of Federal Housing and Urban Development (“HUD”). In particular, the relator contends that despite the city’s knowledge of segregated living patterns and its federal obligation to secure fair housing, the city purposefully administered housing and funding programs and laws that would have the effect of perpetuating and intensifying the city’s racial and ethnic segregation. The U.S. District Court for the Northern District of Illinois granted the defendant’s motion to dismiss the relator’s amended complaint for failure to state a claim under Rule 12(b)(6). The relator appealed to the Seventh Circuit.

The circuit court affirmed the district court’s dismissal of the relator’s claims, finding that the relator failed to plead fraud with particularity, as his complaint did not provide any information regarding the regulatory provisions that the defendant allegedly violated, and further did not connect the statutes he cited to the alleged false certifications. The court also noted that the relator’s claims failed allege a specific time, location, or particular documents of the fraud and failed to demonstrate how the false certifications were communicated to him.


U.S. ex rel. Cohen v. City of Palmer, 2016 WL 4254993 (9th Cir. Aug. 12, 2016) 

Holding: The U.S. Court of Appeals for the Ninth Circuit upheld the district court’s dismissal of the relator’s complaint for failure to state a claim under Rule 12(b)(6), finding that the relator did not plausibly allege falsity. 

The relator brought a qui tam suit alleging that the defendant, a government contractor, falsely certified compliance with relevant laws, regulations, and contractual provisions when applying for and submitting reimbursement requests for government stimulus fund. Specifically, the relator alleges the defendant falsely certified that it utilized competitive bidding, paid its employees Davis-Bacon wages, and created private–sector jobs. The U.S. District Court for the District of Alaska dismissed the relator’s suit. The relator appealed to the Ninth Circuit.

The circuit court upheld the district court’s ruling, finding that the relator failed to plausibly allege that the defendant’s failure to disclose noncompliance constituted a “misleading half-truth.” The court reasoned that the relator did not present an authority that plausibly required the defendant to use competitive bidding, create private sector jobs, or prohibited it from paying Davis-Bacon wages.


U.S. ex rel. Handal v. Ctr. for Emp’t Training, 2016 WL 4210052 (E.D. Cal. Aug. 8, 2016)

Holding: The U.S. District Court for the Eastern District of California denied the defendants’ motion to dismiss for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6) in part and granted it in part.

The relators brought a qui tam suit against the non-profit educational institution where they were formerly enrolled, as well as associated individual defendants, alleging that defendants falsely certified compliance with their Program Participation Agreement (“PPA”) under Title IV in order to receive federal funding in violation of the False Claims Act. The relators alleged that the defendants advertised lifetime job placement assistance, but did not offer any assistance; did not offer the required externships to complete the program; misrepresented the expenses that students’ tuition covered; and provided recruitment materials that did not meet the requirements of the HEA in violation of their PPA. The relators alleged specific instances wherein the individual defendants made material misstatements about the educational program at the school. The defendants moved to dismiss for failure to plead fraud with particularity pursuant to Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court denied defendants’ motion in part, and granted it with respect some of the individual defendants. The court found that the relators properly pled that the misstatements were material to the government’s decision to allow the school to obtain federal funds, and that the defendants acted with the required scienter with respect to the school and two of the individual defendants. However, the court determined that the relators made only conclusory allegations with respect to the remaining individual defendants and dismissed those claims for failure to plead fraud with particularity under Rule 9(b). The court observed that defendants agreed to abide by the PPA’s requirements as a condition of payment, and that the certifications were not only backward-looking, but constituted continued promises not to break the law while engaged in the PPA.


U.S. ex rel. Se. Carpenters Reg’l Council v. Fulton County, 2016 WL 4158392 (N.D. Ga. Aug. 5, 2016) 

Holding: The U.S. District Court for the Northern District of Georgia granted the defendant’s motion to dismiss for failure to plead fraud with particularity under Rule 9(b) and sua sponte dismissed the relators’ claims against related defendants. 

The relators brought a qui tam action against a prime contractor and several subcontractors (one of which was their former employer) working on construction projects for Fulton County, Georgia which received federal funding, as well as the county itself, alleging that the defendants falsely certified their compliance with the Davis-Bacon Act in violation of the False Claims Act. They alleged that the subcontractors underpaid their workers and failed to submit payroll certifications to the government, and that the prime contractor falsely certified that it made an effort to ensure that their subcontractors complied with the Davis-Bacon Act as required by their contract. The prime contractor moved to dismiss for failure to plead fraud with particularity under Rule 9(b).

The court granted the prime contractor’s motion to dismiss, and sua sponte dismissed the relators’ claims against the other defendants although only the prime contractor had moved for dismissal, explaining that all of the relators’ claims against all of the defendants were inter-related. The court found that the relators failed to allege with sufficient particularity that the defendants violated the Davis-Bacon Act, explaining that the relators did not identify any specific employees, amounts of money, particular goods or services, or dates involved in the fraudulent scheme or allege any specific misrepresentations, and alleged several claims only on “information and belief.” Further, the court found that the relators failed to demonstrate that compliance with the Davis-Bacon Act was material to the government’s payment decision. The court noted that pursuant to their employment for a short time with one of the subcontractors, the relators had no direct knowledge of the defendants’ billing practices. Finally, the court determined that the relators failed to show that the defendants possessed the requisite scienter to render their claims false.

See U.S. ex rel. Hamilton v. Yavapai Cmty. Coll. Dist., 2016 WL 5408320 (D. Ariz. Sept. 28, 2016)

See U.S. ex rel. Lee v. N. Adult Daily Health Care Ctr., 2016 WL 4703653 (E.D.N.Y. Sept. 7, 2016)

See U.S. ex rel. Knudsen v. Spring Commc’ns Co., 2016 WL 4548924 (N.D. Cal. Sept. 1, 2016)

See U.S. ex rel. Futrell v. eRate Program, LLC, 2016 WL 4206014 (E.D. Mo. Aug. 10, 2016)

See U.S. ex rel. Dresser v. Qualium Corp., 2016 WL 3880763 (N.D. Cal. July 18, 2016)

F. Relators’ Share


U.S. ex rel. Washington v. Morad, 2017 WL 1250912 (E.D. La. Apr. 5, 2017)

Holding: After entering a default judgment in favor of the relator, the United States District Court for the Eastern District of Louisiana awarded the federal government $42,779,385.84 in damages and awarded the relator a 25% relator’s share.

The relator brought a qui tam suit against several physician groups, home healthcare service providers, and individual doctors alleging that they violated the False Claims Act by submitting false claims to Medicare and using false records or statements to get those claims approved.  The court entered a default judgment in favor of the relator after the defendants failed to respond to the complaint.  In response to the court’s order to submit evidence of damages, the relator submitted the judgments entered against the defendants in the associated criminal cases against them.  The federal government submitted a statement of interest in the case, requesting that judgment be entered in its favor and that the court refrain from considering related criminal proceedings against defendants as “alternate remedies” under the FCA.

The court awarded the federal government damages in the amount of $42,779,385.84 and awarded the relator 25% of that amount.  The court found that the judgment against the defendants in the related criminal action was sufficient to establish damages in the FCA case,   and determined that the defendants were “jointly and severally liable for the total amount of loss suffered by the government and the total amount of civil penalties.”  The court awarded statutory penalties in the amount of $7500 per claim.  Finally, the court determined that the relator would receive 25% of the total reward, the minimum relator’s share for a non-intervened case, because the matter had been pending only two years and the relator spent “minimal time and effort in achieving this judgment.”


U.S. ex rel. Fowler v. Evercare Hospice, Inc., 2017 WL 491168 (D. Colo. Feb. 7, 2017)

Holding: The United States District Court for the District of Colorado granted in part the relators’ motion to determine their share of settlement proceeds.

The relators brought a qui tam suit against several hospice care providers alleging that they submitted claims to Medicare for hospice services provided to ineligible patients in violation of the False Claims Act.  The suit was consolidated with another qui tam action against the defendants and the government intervened.  The defendants eventually settled with the government and agreed to pay $18 million to resolve the claims.  The relators moved for a determination of their share of the settlement proceeds, arguing that they were entitled to 23% of the total award because they had significantly contributed to the resolution of the case and submitted extensive pre-filing disclosures of evidence to the government as well as supplemental documentation during trial.  The government opposed the motion in part, arguing that “[the] relators did not suffer sufficient personal hardship to justify an increased award,” and the relators therefore were only entitled to 18% of the total settlement amount.

The court granted the relators’ motion in part and determined that they were owed 20% of the total settlement amount.  The court consulted Department of Justice and Senate guidelines on factors to consider when increasing the relator’s award, and noted that the relators “provided detailed pre-filing information.”  However, the court explained that the government engaged in “significant fact-gathering” in addition to the relators’ disclosures.  The court determined that the need for further in-depth investigation and expert testimony “undermine[d] relators’ request for a high-range reward.”  Further, although both relators suffered some degree of hardship due to their unstable employment situations after filing the qui tam action, the court found that their hardship “while not insubstantial,” did not match the hardship of relators in other cases, and did not justify a 23% award.


U.S. v. L-3 Commc’ns Eotech Inc., 232 F.Supp.3d 583 (S.D.N.Y. Feb. 3, 2017)

Holding: The United States District Court for the Southern District of New York denied the relator’s motion for a share of the government’s settlement with the defendant, finding that the settlement did not constitute an alternate remedy in his prior qui tam action, which he had dismissed without prejudice.

A relator brought a qui tam suit against the government contractor where he was formerly employed, alleging that the defendant engaged in a scheme to defraud various government agencies in connection with the defendant’s sale of defective holographic weapon sights.  The relator filed his qui tam action in 2014 but voluntarily dismissed his case before the government brought this case in 2015.  The government settled the case with the defendant and the relator moved for a relator’s share, arguing that the settlement constituted an “alternate remedy” arising from his earlier qui tam action.

The district court denied the relator’s motion for a share of the settlement.  The court found that the settlement agreement with the defendant did not constitute an alternate remedy because the relator had voluntarily dismissed his earlier-filed qui tam action.  The court found that the statutory language of the FCA defined “alternate remedy” as alternate to the government’s ability to intervene in or decline a qui tam action.  The court clarified that “where there is no qui tam action for the government to ‘take over,’ the government’s filing of its own action is not an ‘alternate’” to participating in a qui tam suit.  The court concluded that voluntary dismissal of a complaint “wip[ed] the slate clean” and made “any future lawsuit based on the same claim an entirely new lawsuit unrelated to the earlier (dismissed) action.”


U.S. ex rel. Wittenberg v. Pub. Util. Dist. No. 1 of Skamania Cty., 2016 WL 6518438 (D. Or. Nov. 1, 2016)

Holding: The U.S. District Court for the District of Oregon granted the relator’s motion for a relator’s share in part, finding that the information he contributed to the government’s investigation was valuable but not indispensable to the ultimate settlement of the case.  

The relator brought a qui tam action against a municipal electricity corporation where he was formerly employed as general manager, alleging that the defendant reported higher pole line miles in order to obtain a larger rural utility provider discount from the government, in violation of the False Claims Act.  Prior to filing suit and not as part of his employment, the relator mapped the defendant’s pole line miles and discovered that the miles reported were inaccurate, and after filing suit shared his calculations with the government.  Throughout the case, the relator continued to be helpful and engaged.  However, the government contracted a third-party firm to calculate pole line miles, and the firm produced a different number different than the relator’s original calculation.  The third-party’s calculation was used in the settlement, and the relator’s share remained undetermined.  The relator moved to receive an award of 24%, while the government proposed an award of 17%.

The court granted the relator’s motion in part, finding that 20% was an appropriate award.  The court explained that though the government had no prior knowledge of relator’s information, the relator deserved an award closer to the statutory minimum than statutory maximum because he did not develop all relevant facts to complete accuracy, his information was only somewhat significant, and his contribution was not vital. The court noted that an award of 20% captured the relevant contributions of the relator and the third party, as well as the government’s use of both sources of information.

G. Settlement Agreements


U.S. ex rel. Christiansen v. Everglades Coll., Inc. 2017 WL 1658478 (11th Cir.  May 3, 2017)

Holding: The U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s decision denying the relator’s motion for an evidentiary hearing and approving the settlement negotiated by the government and the defendants.

The relators brought a qui tam action against the defendants, a non-profit college where they were formerly employed and the college’s affiliates, alleging that the defendants falsely certified compliance with the Higher Education Act’s ban on incentive compensation.  The relators alleged damages and penalties in the amount of $1.2 billion.   The government declined to intervene and the relators pursued the case to trial, where the U.S. District Court for the Southern District of Florida found that the defendants had submitted false claims, but found no damages and only nominal penalties totaling $11,000.   The relators appealed to the U.S. Court of Appeals for the Eleventh Circuit.  During the pendency of the appeal, the government opted to intervene for the purposes of settlement and agreed to settle the case for $300,000.  The relators moved for an evidentiary hearing to probe the settlement negotiations and the government’s rationale for resolving the case for much less than the relators believed they could recover.  The district court denied the relators’ motion and approved the settlement between the government and the defendants.  The court also decreased the relators’ attorney’s fees award in light of the “paltry outcome” received at trial. The relators appealed to the Eleventh Circuit.

The court upheld the ruling of the district court.  The court found that the good-cause intervention requirement of the FCA did not apply when the government intervened to settle or end a case, rather than to continue with litigation.  The court also indicated that the settlement was “fair, adequate, and reasonable,” and denied the relators’ request for an evidentiary hearing, explaining that relators did not demonstrate a “substantial or particularized need to develop new evidence because there [was] no colorable and non-speculative claim that the United States failed to investigate the allegations or acted with improper motives.” The court also rejected the relators’ argument that the amount of the recovery should not factor into the court’s decision when awarding attorney’s fees.


U.S. ex rel. Shepard v. Grand Junction Reg’l Airport Auth., 2017 WL 749070 (D. Colo. Feb. 27, 2017)

Holding: The United States District Court for the District of Colorado granted the government’s motion for an order to approve its settlement with the defendants, finding that the government’s broad discretion to dismiss a case was extended to settlements.

In this intervened case, the relators brought a qui tam suit against an airport authority at the airport where they owned hangers, alleging that the defendant violated the False Claims Act by submitting false claims to the Federal Aviation Administration for payment for the installation of a fence at the airport.  The federal government intervened and filed a motion requesting that the court approve a civil settlement agreement with the defendant.  The relators objected to the proposed agreement, arguing that the settlement was not “fair, adequate, and reasonable” pursuant to the FCA.  The government moved to approve the settlement notwithstanding the relators’ objections.

The court granted the government’s motion to approve the settlement despite the relators’ objections.  The court ultimately adopted the government’s proposed standard for what constituted a “fair, reasonable, and adequate” settlement as required by the FCA and held that there was “no reason why the government should be given such broad discretion to dismiss a case but not to settle it under circumstances that it deems fair, adequate, and reasonable.”  The court analyzed whether the government presented a valid purpose for the settlement and a “rational relationship between the settlement and accomplishment of that purpose.” The court found the government’s reasons for settling, including its belief that many of the relators’ allegations were not meritorious and that it would be nearly impossible to prove damages, were valid and “rationally related to the ultimate settlement obtained.”   Thus, the court granted the government’s motion to approve the settlement.


U.S. ex rel. Michaels v. Agape Senior Community, Inc., 848 F.3d 330 (4th Cir. Feb. 14, 2017)

Holding: The United States Court of Appeals for the Fourth Circuit upheld the district court’s finding that the United States Attorney General possessed absolute veto power over voluntary settlements between parties in qui tam lawsuits and that use of statistical sampling was improper in this case.

The relators brought a qui tam action against the senior care facility where they were formerly employed and its affiliates, alleging that the defendants fraudulently overbilled government healthcare programs in violation of the False Claims Act.  The relators alleged that the defendants admitted over 10,000 patients and submitted more than 50,000 claims in the relevant time period, and they sought to use statistical sampling to establish liability and damages in order to avoid the cost and burden of reviewing each patient’s chart to identify which contained fraudulent information.  The United States District Court for the District of South Carolina conducted a hearing on whether the use of statistical sampling was appropriate in the case and found that it was not.  Shortly thereafter, the relators, the defendants, and the government engaged in unsuccessful mediation.  This was followed by a second mediation (excluding the government) that resulted in a proposed settlement.  The United States Attorney General objected to the proposed resolution of the case and the defendants filed a motion to enforce the agreement.  The district court found that use of statistical sampling as the main evidentiary backing was improper, and sustained the Attorney General’s objection to the settlement proposed by the relators and defendants, explaining that the government had unreviewable veto power over proposed settlement agreements.  The district court certified the questions of whether the Attorney General had absolute veto power and whether the use of statistical sampling was proper for interlocutory appeal to the Fourth Circuit.

First, the circuit court affirmed the district court’s holding that the Attorney General had absolute veto power over voluntary dismissals and proposed settlement agreements in FCA cases.  The court explained that the statutory language of the FCA could not “reasonably be understood to create an unfettered right to settle on the part of the relator.”  The court also noted that the holding was consistent with the FCA’s statutory scheme.  Next, the court examined whether the question regarding statistical sampling was appropriate for interlocutory appeal and found that it was not, concluding that it was not a “pure question of law.”


U.S. ex rel. Doghramji v. Cmty. Health Sys., Inc., 2016 WL 6872051 (6th Cir. Nov. 22, 2016)

Holding: The U.S. Court of Appeals for the Sixth Circuit reversed and remanded the district court’s adoption of the relator’s interpretation of the settlement agreement.

In this intervened case, seven relators brought seven different qui tam suits against a hospital services provider, all alleging that the defendant violated the False Claims Act by admitting patients for medically-unnecessary emergency room visits.  The government settled all of the cases and the relators entered into a sharing agreement for the purposes of relator’s share and the award of attorney’s fees and costs.  The defendant challenged the ability of some of the relators to collect fees and costs, citing the first-to-file bar.  The U.S. District Court for the Middle District of Tennessee found that the defendant waived the right to make this argument because the contract language only allowed for the defendant to challenge the amount of fees and costs, not the ability to recover them at all. The defendant appealed to the Sixth Circuit.

The circuit court reversed and remanded the district court’s order. The circuit court found that both the relator and defendant argued reasonable interpretations of the settlement agreement’s language.  Because the agreement was subject to two reasonable interpretations, the court concluded that the provision was ambiguous and remanded to the district court to consider extrinsic evidence to determine the parties’ original understanding of the agreement.

H. Counterclaims


U.S. ex rel. McIntosh v. Arrow-Med Ambulance, Inc., 2016 WL 6434479 (E.D. Ky. Oct. 27, 2016)

Holding: The U.S. District Court for the Eastern District of Kentucky denied the defendants’ motion for leave to file a counterclaim seeking relief against the relator for abuse of civil proceedings, abuse of process, and tortious interference.

In this partially intervened case, the relator brought a qui tam action alleging that the defendants submitted false claims for medically unnecessary ambulance transportation in violation of the False Claims Act.  The defendants’ moved for leave to file a counterclaim proposing to seek relief against the relator for abuse of civil proceedings, abuse of process, and tortious interference with prospective business advantage.

The court denied the defendants’ motion for leave to file a counterclaim.  The court explained that because the defendant’s claims did not present a federal question, did not create diversity of the parties because the claim did not involve any individuals outside of the state of Kentucky, and did not “form part of the same case or controversy” as the relator’s action, the counterclaims did not fall within the court’s supplemental jurisdiction.

I. Motion for Leave to Amend Complaint


U.S. v. Safran Grp., 2017 WL 1862508 (N.D. Cal. May 9, 2017)

Holding: The U.S. District Court for the Northern District of California denied the relators’ motion for leave to file a fourth amended complaint on relators’ false certification claims.

The relators brought a qui tam action against their former employer and its related entities, alleging that the defendants violated the False Claims Act by fraudulently representing that they were in compliance with the Trade Agreements Act (“TAA”) and the Sherman Act as required by their government contract.  The relators moved to file a fourth amended complaint, arguing that the court should allow the relators to add two additional defendants.

The court denied the relators’ motion to file a fourth amended complaint.  The court explained that the defendants at issue were high-ranking insiders and the relators’ failure to add them in any of their previous amended complaints demonstrated that the relators failed to act diligently in adding parties.

U.S. ex rel. D’Agostino v. ev3, Inc., 2016 WL 845 F.3d 1 (1st Cir. Dec. 23, 2016)

Holding: The U.S. Court of Appeals for the First Circuit affirmed the district court’s decision to deny the realtor’s motion to amend his complaint, finding that the complaint failed to state a claim under Rule 12(b)(6). 

The relator brought a qui tam action against the medical device manufacturer where he was formerly employed and its subsidiary, alleging that the defendants caused the submission of false reimbursement claims to the government for two of their devices.  The relator alleged that the defendants made misrepresentations to induce FDA approval of their product Onyx, encouraged off-label marketing and medically unnecessary use of the Onyx liquid embolic system, failed to provide required training, and concealed manufacturing and design defects.  On remand, the U.S. District Court for the District of Massachusetts denied the relator’s request to amend his complaint, finding that his claims were precluded by the public disclosure bar, failed to satisfy the particularity requirements of Rule 9(b), and failed to state a claim upon which relief could be granted pursuant to Rule 12(b)(6).  The relator appealed to the First Circuit.

The circuit court upheld the district court’s decision to deny the relator’s motion to amend his complaint.  First, the court concluded that the relator did not properly allege a causal link between the defendants’ false statements to the FDA and Onyx’s approval, or to the subsequent government payment.  Additionally, the court noted that the FDA’s failure to withdrawal approval despite awareness of the relator’s allegations showed that the fraudulent representations were not material to the FDA’s decision to approve the drug.  Second, the court found that the relator failed to adequately allege that the defendants caused doctors to submit false claims because they did not provide required training, explaining that the FDA-approved label did not contain a requirement that training be given by defendants.  Further, the court found that the relator failed to allege with particularity that claims were actually submitted to the government, rejecting the relator’s contention that it could be inferred that claims were submitted to the government because many of the defendants’ patients were government beneficiaries.  Lastly, the court concluded that the relator’s complaint failed to provide facts to support his allegations that the relevant products were defective or that any product malfunctions resulted in false claims.


U.S. ex rel. Swoben v. United Healthcare Ins. Co., 848 F.3d 1161 (9th Cir. Dec. 16, 2016)

Holding: The U.S. Court of Appeals for the Ninth Circuit reversed and remanded the district court’s decision to deny, on grounds of undue delay, the relator’s motion for leave to file a proposed amended complaint, finding that the district court had abused its discretion.

The relator brought a qui tam suit against multiple healthcare groups alleging that the defendants falsely certified that the data they submitted to the Center for Medicare & Medicaid Services (“CMS”) was “accurate, complete, and truthful.”  The relator alleged that the defendants conducted biased retrospective reviews of their medical records in which they only identified under-reported diagnosis codes and allowed over-reported diagnosis codes to be erroneously submitted.  The U.S. District Court for the Central District of California dismissed the relator’s allegations for failure to plead fraud with particularity pursuant to Rule 9(b) and cited undue delay as a basis for denying the relator leave to file a proposed amended complaint.  The relator appealed to the Ninth Circuit.

The circuit court reversed and remanded the district court’s decision, finding that amendment would not be futile because the relator presented a cognizable legal theory.   The court observed that the relator alleged that the defendants took affirmative steps to generate inaccurate data and falsely certified the accuracy of the data reported to CMS in violation of the FCA.  The court rejected the defendants’ argument that the certifications were not false because the defendants were unaware of unsupported diagnosis codes, and held that the defendants could not shield themselves with retrospective reviews that were designed in bad faith.  Furthermore, the court rejected the defendants’ argument that their interpretation of CMS guidelines could be considered objectively reasonable, explaining that CMS provided clear guidance regarding the obligation to exercise “due diligence” and ensure “accuracy, completeness, and truthfulness of encounter data.”  The court further concluded that the relator’s complaint adequately alleged the “who, what, when, where, and how of the alleged fraud” regarding some of the defendants, but failed to show a “factual basis” for allegations against other defendants, alleging only a generalized scheme without linking the defendants to the scheme.  The court noted that the relator did not need to identify a representative example of false claims for every allegation and could refer to defendants as a collective when multiple defendants engaged in the same conduct.  Lastly, the court concluded that the district court abused its discretion in relying on undue delay to justify denying leave to amend, as delay alone could not justify denying leave to amend and the defendants did not demonstrate that they would be prejudiced.

U.S. ex rel. Swoben v. United Healthcare Ins. Co., 2016 WL 4205941 (9th Cir. Aug. 10, 2016) 

Holding: The U.S. Court of Appeals for the Ninth Circuit reversed and remanded the district court’s decision, finding that it abused its discretion in denying the relator leave to amend based on futility and undue delay. 

The relator brought a qui tam suit against multiple healthcare groups alleging that they violated the False Claims Act by falsely certifying that based on their “best knowledge, information, and belief” the data they submitted to CMS was “accurate, complete, and truthful.” The relator alleged that the defendants violated this regulation by conducting retrospective reviews that detected and resubmitted to Medicare only under-reported diagnosis codes (codes with sufficient documentation that were not submitted to CMS), while allowing over-reported diagnosis codes (codes without adequate records) to be erroneously submitted to CMS. The U.S. District Court for the Central District of California denied the relator leave to file a fourth amended complaint, finding that amendment would be futile and cause undue delay. The relator appealed to the Ninth Circuit.

The circuit court held that the district court abused its discretion, explaining that amendment would not be futile as the relator presented a cognizable legal theory and undue delay by itself could not serve as the basis to deny leave to amend. The court explained that the relator’s allegations of one-sided retrospective reviews could result in false claims, and thus represented a cognizable legal theory because the defendant allegedly took affirmative steps to design a system that produced erroneous data, which negated the defendants’ ability certify that they submitted accurate data based on “best knowledge, information and belief.” The court observed that “best knowledge” not only encompassed actual knowledge of falsity, but also reckless disregard and deliberate ignorance. Furthermore, the court explained that the relator did not need to identify representative examples for every false claim in order to meet Rule 9(b) and Rule 12(b)(6) because his theory of liability did not require identifying specific codes, but rather focused on the false certifications—not false diagnostic codes. Finally, the circuit court determined that the district court abused its discretion in denying leave to amend based on undue delay, determining that undue delay was an insufficient basis on its own to deny leave to amend, and the defendants would not be prejudiced by the relator amending his complaint.

J. Discovery Issues


U.S. ex rel. Cairns v. D.S. Med. L.L.C., 2016 WL 7437919 (E.D. Mo. Dec. 22, 2016)

Holding: The U.S. District Court for the Eastern District of Missouri granted in part the defendant’s motion to compel production of the government’s reports of interviews from its FCA investigation.

The relator brought a qui tam action alleging that a doctor and three affiliates violated the Anti-Kickback Statute, resulting in the submission of tainted claims to the government for spinal surgeries and implant devices in violation of the False Claims Act.  Once served with the complaint, the government began parallel civil and criminal investigations and eventually filed its notice of intervention and brought criminal charges against the defendants.  The government later dismissed the criminal charges.  The U.S. District Court for the Eastern District of Maryland granted the defendants’ motion to compel production of the government’s privilege log.  The government produced a log of interviews, but asserted work product protection over the reports of the contents of these interviews, arguing that they were prepared “in anticipation of possible litigation” and constituted opinion work product.  The defendants moved to compel production of the government’s reports of interviews.

The court granted in part the defendants’ motion to compel production.  The court held that though all the reports likely met the “prepared in anticipation of litigation” standard, the government failed to demonstrate that the reports without an attorney’s name were opinion work product.  With respect to the pre-intervention interviews, the court found that the defendants demonstrated substantial need for the reports, explaining that conducting depositions would be unsatisfactory due to the passage of time and consequent memory lapse since the interviews.  However, the court found that the defendants did not demonstrate substantial need for reports of post-intervention interviews, as depositions would produce the same relevant information.   Finally, the court concluded it was unclear whether the remaining reports with associated attorney names were fact or opinion work product, and therefore the court would conduct an in camera review to determine whether or not the reports were protected.


U.S. ex rel. Schutte v. Supervalu, Inc., 2016 WL 3906570 (C.D. Ill. July 14, 2016) and U.S. ex rel. Proctor v. Safeway, Inc., 2016 WL 3906571 (C.D. Ill. July 14, 2016)

Holding: The U.S. District Court for the Central District of Illinois granted the defendants’ motion to stay discovery, finding the burden placed on the relators did not outweigh the benefits of staying discovery.

The relators brought a qui tam suit alleging that the defendants, entities that operate pharmacies, overcharged federal and state programs by overstating their “usual and customary” prices for prescription drugs. The defendants moved to dismiss relators’ claims and in the interim moved to stay discovery until their motions to dismiss are resolved.

The court granted the defendants’ motions to stay discovery, explaining that the stay would reduce the burden of litigation on the court and the parties. The court determined that because venue was a significant issue, staying discovery avoided the risk that a discovery decision would be made in a court that lacks venue. Further, the court found that the resolution of the motions to dismiss would clarify the scope of discovery and reduce the burden on the defendant in a case with a large amount of potentially relevant data.

K. Default Judgment


U.S. ex rel. Washington v. Morad, 2016 WL 7187932 (E.D. La. Dec. 12, 2016)

Holding: The U.S. District Court for the Eastern District of Louisiana granted the relator’s motion for default judgment on relator’s allegations that the defendant billed for services not provided and falsely certified patient statuses. 

The relator brought a qui tam suit against multiple individuals and health care service companies, alleging that the defendants conspired to defraud the government by submitting claims for payment to the government for services that were not provided in violation of the False Claims Act.  All defendants were served with process, but failed to respond to the summons and complaint, and did not request additional time to respond.  The relator moved for default judgment and sought damages.

The court granted the relator’s motion for default judgment, holding that the relator’s well-pleaded factual allegations were deemed admitted due to the defendants’ failure to appear, and that those allegations established a prima facie FCA claim.  The court ordered the relator to submit “summary-judgment type” evidence that would allow the court to calculate the amount of damages.


U.S. v. Pac. Coast Mar. Agency, 2016 WL 5661760 (D. Or. Sept. 29, 2016) 

Holding: The U.S. District Court for the District of Oregon granted the government’s motion for default judgment for damages and civil penalties in part. 

The government brought a suit under the False Claims Act alleging that a shipping agent and its President engaged in a fraudulent billing scheme in which it knowingly overbilled the government under a shipping contract in violation of the False Claims Act. The court entered an order of for default judgment after the defendants failed to respond to the government’s complaint. The government moved for default judgment seeking double damages and civil penalties of $55,000, or $5,000 per claim.

The court granted the government’s motion in part. The court determined that the original and altered invoices in conjunction with an investigator’s sworn declaration confirming that the defendants submitted altered invoices verified overpayment and supported the government’s damage calculation. However, because the government failed to assert any basis for reduced damages, the court observed that it lacked the discretion to award damages below the statutorily required treble damages and $5,500 penalty per false claim. Thus, the court granted default judgment on damages and penalties for more than the amount requested by the government to account for treble, rather than double damages, and the proper measure of penalties.


U.S. v. TXL Mortgage Corp., 2016 WL 518019 (D.D.C. Sept. 20, 2016)

Holding: The U.S. District Court for the District of Columbia granted the government’s motion for default judgement.

The government filed a suit under the False Claims Act alleging that the defendant falsely underwrote residential mortgage loans causing the federal government to make insurance payments they otherwise would not have. After the defendant failed to respond to the complaint and its attorneys withdrew their appearances, the government moved for default judgment.

The court granted the government’s motion for default judgment, finding that the defendant was indisputably unresponsive and that the government’s complaint sufficiently demonstrated a viable FCA claim. The court found that the government sufficiently demonstrated that the defendant provided facially inaccurate information in its insurance claims, violated government underwriting requirements, and failed to comply with mandated quality-control standards.

L. Affirmative Defenses


U.S. ex rel. Feaster v. Dopps Chiropractic Clinic, LLC, 2016 WL 6462041, (D. Kan. Nov. 1, 2016)

Holding: The U.S. District Court for the District of Kansas granted the relator’s motion to strike fourteen of the defendants’ and twenty defenses and affirmative defenses in part.

The relator brought a qui tam suit against the chiropractic clinic where he was formerly employed and its owner, alleging that the defendants billed Medicare for unperformed, uncovered, unnecessary, or undocumented services in violation of the False Claims Act.  The defendant filed an Answer to the relator’s second amended complaint, which contained twenty defenses and affirmative defenses.  The relator moved to strike, or in the alternative order defendant to clarify, fourteen of defendants’ twenty defenses.

The court granted the relator’s motion in part, striking defendants’ second, third, and eighth defenses and allowing defendant to amend its fifth and thirteenth defense.  The court determined that defendants’ second and third defenses, in which they argued that the relator failed to allege an FCA claim, were no longer valid because the court already determined through a motion to dismiss that the realtor sufficiently stated a claim.  Further, the court found that the defendants’ eighth defense, in which they argued that the relator lacked standing, failed as a matter of law.  However, the court refused to strike the defendants’ unclean hands defenses and original source defense.  Further, the court allowed the defendants’ damages defense, as well as their defense arguing that the defendants were not proper parties.  The court also declined to strike the defendants’ defense arguing that the defendants’ made a good faith effort to comply with Title IV.

M. Primary Jurisdiction of Agency


U.S. v. Savannah River Nuclear Sol., LLC, 2016 WL 7104823 (D. S.C. Dec. 6, 2016)

Holding: The U.S. District Court for the District of South Carolina denied the defendants’ motion to dismiss and stayed case proceedings until the Civilian Board of Contract Appeals provided an advisory opinion on relevant contract requirements with which the defendants’ allegedly falsely certified compliance.

The government brought a suit under the False Claims Act alleging that the defendants overbilled the government under their contracts to provide management and operations support for a government facility that processed and stored nuclear material.  The government alleged that the contracts prohibited the defendants from billing for certain costs and expenses, and that the defendants billed for these expenses anyway while falsely certifying that they had complied with the contract terms. The defendants moved to dismiss the government’s claims for failure to plead fraud with particularity under Rule 9(b) and for failure to state a claim upon under Rule 12(b)(6).

The court denied the defendants’ motion to dismiss, but stayed case proceedings until the Civilian Board of Contract Appeals (“CBCA”) issued an advisory opinion.  The court concluded that the government’s claims satisfied Rule 9(b)’s particularity requirements.  The court observed that the complaint specified annual costs included in claims, the amount, invoice numbers, and dates of separate allegedly false invoices.  However, the court indicated that the falsity and reasonableness of the defendants’ interpretation of the contract terms were best decided after obtaining an advisory opinion from the CBCA, a government contract advisory board.     Additionally, the court rejected the defendants’ “government knowledge” argument, noting that the complaint contained no evidence to demonstrate that the government continued to approve claims, “willingly acquiesced,” or that the defendants thought costs were allowable “because the [government] continued to pay.”  Lastly, the court explained that the government sufficiently alleged materiality by demonstrating that a causal relationship existed between defendants’ annual certifications and payment.

 N. Statistical Sampling


U.S. ex rel. Tessler v. City of New York, 2016 WL 7335654 (S.D.N.Y. Dec. 16, 2016)

Holding: The U.S. District Court for the Southern District of New York granted the defendant’s motion to dismiss the relator’s allegations that the defendant submitted false claims under federally-funded aid programs for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The relator brought a qui tam suit against his former employer, the City of New York, alleging that the defendant violated the False Claims Act in its administration of its Supplemental Nutrition Assistance Program (“SNAP”), Temporary Assistance for Needy Families (“TANF”), and Medicare Savings Program.  Specifically, the relator alleged that the defendant failed to attempt to correct overpayments distributed through SNAP and TANF during recipients’ eligibility hearings and failed to meet its obligation to review beneficiaries’ eligibility for the Medicare Savings Program.  The defendant moved to dismiss the relator’s claims for failure to plead fraud with particularity under Rule 9(b) and failure to state a claim under Rule 12(b)(6).

The court granted the defendant’s motion to dismiss.  The court found that the relator’s SNAP and TANF claims failed to meet the requirements of Rule 9(b), explaining that the relator failed to identify a specific false claim submitted to the government as a result of the defendant’s alleged improper conduct.  The court found that relator’s statistical evidence was not sufficient to bolster his claims in order to satisfy Rule 9(b).  Additionally, the court explained that the relator failed to demonstrate an adequate basis for his knowledge because the allegedly fraudulent conduct occurred in connection with activities outside the scope of his employment and during a time period before he was employed with the defendant.  With respect to the relator’s Medicare Savings Program allegations, the court concluded that the relator failed to identify a specific law that the defendants violated.

See U.S. ex rel. Hagerty v. Cyberonics, 844 F.3d 26 (1st Cir. Dec. 16, 2016)

O. Criminal Charges

 


U.S. v. Mahmood, 2016 WL 5369562 (E.D. Tex. Sept. 26, 2016)

Holding: The U.S. District Court for the Eastern District of Texas granted the government’s motion for summary judgment in part, finding that the defendant was collaterally estopped from disputing liability after his criminal conviction for the same conduct, and awarded $935,000 in total damages. 

The government brought an action under the False Claims Act, alleging that the defendant, a licensed physician owning multiple hospitals, caused his employees to fraudulently alter billing codes in order to obtain increased insurance reimbursements. Alongside the FCA case, the defendant was found guilty on criminal fraud charges involving the same allegations in a jury trial and sentenced to imprisonment. The government moved for summary judgment on FCA liability and damages. The government argued that collateral estoppel precluded a finding for the defendant on liability, and that it was entitled to treble damages on the full amount that the defendant fraudulently billed.

The court granted the government’s motion for summary judgment. The court found that the issues determined in the criminal case were the same as those alleged in the government’s FCA case, and therefore the defendant was collaterally estopped from disputing liability. In determining damages, the court observed that the defendant provided legitimate services to patients for which the government received some value, and that the fraud was in the manipulation of the billing codes to increase reimbursements after the services were provided. Thus, the court found that the government was only entitled to damages on its actual loss However, the court determined that the government was entitled to the maximum $11,000 penalty per false claim, explaining that the defendant’s lengthy imprisonment indicated the seriousness of his conduct and noting that the defendant did not cooperate with the government during the investigation.


U.S. ex rel. Griffith v. Conn, 2016 WL 4803970 (E.D. Ky. Sept. 9, 2016) 

Holding: The U.S. District Court for the Eastern District of Kentucky denied the government’s and the defendant’s motions to stay the False Claims Act case until the parallel criminal case concluded. 

The relator filed a qui tam action alleging that a social security attorney and administrative law judge conspired to submit false claims for attorney’s fees to the Social Security Administration (“SSA”). The relator alleged that the defendants executed a scheme in which the attorney brought cases pursuing disability benefits to court and the judge assigned himself to the cases in order to grant the benefits regardless of the cases’ merits. The attorney then fraudulently applied for and received attorney’s fees for the cases from the SSA. Simultaneously, the government brought criminal charges against the defendants based on the same facts as the relator’s FCA claims. Both the government and the defendant moved to stay the FCA case until the criminal case concluded, arguing that litigating the cases simultaneously was harmful. The relators opposed the stay.

The court denied the motions to stay the FCA case. The court rejected the relator’s argument that the FCA abrogated the court’s inherent power to stay a case, however, the court found that the government and the defendant were not entitled to a stay in this case. The court noted that the FCA provided for instances where courts could exercise their inherent stay power, including staying discovery when it would interfere with the government’s prosecution of a criminal matter, however, the FCA provided for a process by which to seek that stay and the court explained that the government “chose not to follow that road” in this case. Rather, the court considered whether the criminal proceedings might interfere with the civil case. The court weighed traditional factors for determining whether or not to stay a case in light of a parallel criminal proceeding and found that the majority of the factors, including harm to the relator and the interests of the court, weighed in favor of not granting a stay.


U.S. ex rel. Doe v. Heart Sol. PC, 2016 WL 3647987 (D.N.J. July 8, 2016)

Holding: The U.S. District Court for the District of New Jersey granted the plaintiffs’ motion for summary judgment.

In this intervened case, the relator brought a qui tam suit alleging that the defendants, owners of a medical services facility, violated the False Claims Act by creating fake medical reports, sending fake reports to physicians, forging specialist physician signatures on medical reports, and falsely representing that tests performed at the facility were supervised by physicians. The defendants pled guilty to the aforementioned conduct in a separate criminal case and additionally admitted that they owned and operated the medical services facility and that Medicare paid at least $1,668,954.95 as the result of their fraudulent conduct. The plaintiffs moved for summary judgment, arguing that the defendants were estopped from denying the allegations after pleading guilty in the criminal case.

The court granted plaintiffs’ motion for summary judgment, finding no genuine issue of material fact existed given the defendants’ previous admissions. The court rejected the defendants’ attempts to deny responsibility in the civil case for offenses that it had previously admitted responsibility for in the criminal case. The court also rejected the defendants’ argument for a reduction in damages, explaining that the defendants had already admitted to damages amounts in the criminal proceeding.

P. Conspiracy

 


U.S. ex rel. Herman v. Coloplast Corp., 2016 WL 4483868 (D. Mass. July 29, 2016) 

Holding: The U.S. District Court for the District of Massachusetts denied defendants’ motion to dismiss the relators’ False Claims Act claims, and granted defendants’ motion to dismiss relators’ Anti-Kickback Statute claims. 

The relators brought a qui tam action against their employer, a manufacturer of ostomy and continence care products, alleging that the defendant conspired to submit false claims through telephone solicitation in violation of Medicare prohibitions and also engaged in a kickback scheme. Specifically, the relators allege that the defendants conspired to commit fraud by transferring patient phone calls and patient information from one defendant to another in violation of Medicare provisions. Additionally, the defendants engaged in a kickback scheme by offering volume-based discounts in exchange for increased sales, which the defendant obtained by lying to patients about availability of other brand’s products or contacting patients directly, as prohibited by Medicare. The defendants moved to dismiss relators’ claims for failure to state a claim.

The court denied defendant’s motion to dismiss relators’ conspiracy claims, and granted defendants’ motion to dismiss relators’ kickback claims. First, the court found that Medicare unambiguously precludes telemarketing on behalf of another company, and therefore determined that relators’ sufficiently alleged that defendants engaged in a conspiracy to circumvent Medicare prohibitions and therefore violate the FCA. Second, the court dismissed relators’ kickback claims, finding that the relators’ claims describe discount negotiations that occurred before sales between defendants, which is permissible under the Anti-Kickback (“AKS”) statute, as it requires discounts to be fixed “at the time of initial sale.”

Q. Alternate Remedy


U.S. ex rel. Guardiola v. Renown Health, 2016 WL 4939110 (D. Nev. Sept. 14, 2016)

Holding: The U.S. District Court for the District of Nevada denied the relator’s motion for a share of the alternate remedy, finding that the government was a non-party.

The relator filed a qui tam suit against the defendant alleging that the defendant improperly billed government-funded health insurance programs in violation of the False Claims Act. The government declined to intervene, but settled the suit through a Recovery Audit Contractor (“RAC”), allegedly based on claims identical to the relator’s. The relator argued that the money the government recovered through the RAC process was an “alternate remedy” under the FCA and that she was entitled to a share of the recovery.

The court denied the relator’s motion for a share of the alternate remedy, explaining that the government, though a party in interest, was not a party in the case and therefore the court could not enter an order against it.


U.S. ex rel. Willette v. Univ. of Mass., 2016 WL 3747532 (D. Mass. July 11, 2016)

Holding: The U.S. District Court for the District of Massachusetts denied the relator’s motion for relator’s share, finding that the defendant and the government did not pursue an alternate remedy.

The relator brought a qui tam suit against the University of Massachusetts, where he was formerly employed, alleging that a deceased employee of the defendant violated the False Claims Act by misappropriating funds through Medicare fraud. Prior to filing his suit, the relator reported the fraudulent conduct to the defendant, who allegedly immediately decided to repay the government after the required investigation. The relator was terminated shortly after filing his qui tam suit, but continued to aid in the investigation. After the investigation concluded, the defendant agreed to a repayment plan with the government and the court dismissed the relator’s allegations. The relator then moved for relator’s share of the money that was repaid to the government, arguing that he was due a share because the repayment agreement was an alternate remedy under the FCA.

The court denied the relator’s motion for relator’s share, finding that the government did not pursue an alternate remedy. The court explained that the defendant reported the issue immediately and voluntarily agreed to repay the government, demonstrating that the relator’s claims did not motivate the defendant’s repayment, and that the agreement to repay was not an alternate remedy.

R. Venue


U.S. ex rel. Fisher v. Bank of Am., 2016 WL 4543879 (S.D. N.Y. Aug. 31, 2016)

Holding: The U.S. District Court for the Southern District of New York denied the relator’s motion to transfer venue to the U.S. District Court for the Eastern District of Texas, finding that the relator did not experience a “changed circumstance.”

The relator brought a qui tam action against the defendant in the U.S. District Court for the Southern District of New York, believing that the Southern District of New York’s reputation and interest in financial litigation would motivate government intervention. The government declined to intervene, and the relator moved to transfer venue to the U.S. District Court for the Eastern District of Texas, arguing that the case could have been brought in the Eastern District of Texas and that the Eastern District of Texas is more convenient for the parties and witnesses.

The court denied the relator’s motion to transfer venue, reasoning that the government’s decision to intervene does not constitute a “changed circumstance” considering the relator should have been aware of the possibility that the government would decline to intervene. Additionally, the court explained that because the relator did not allege a financial burden due to legal expenses or demonstrate severe prejudice as a result of refiling, convenience is not a factor that warrants venue transfer.

S. Sanctions

 


U.S. ex rel. Leysock v. Forest Labs., Inc., 2017 WL 1591833 (D. Mass. Apr. 28, 2017)

Holding: The United States District Court for the District of Massachusetts granted the defendant’s motion to dismiss as a sanction for the relator’s counsel violating the rules of professional conduct.

The relator brought a qui tam action against a pharmaceutical company alleging that it caused fraudulent claims for off-label uses of its drugs to be submitted to the government in violation of the False Claims Act.  The relator’s counsel, The Milberg Law Firm, allegedly violated attorney ethical rules while investigating the defendant’s misconduct by engaging in deceptive conduct in order to obtain information from physicians about their prescribing practices of for the defendant’s drug. The evidence showed that Milberg retained a physician and medical researcher to conduct a survey of physician prescribing practices which was misrepresented as a “medical research study,” and under the guise of performing this “study,” the survey taker induced other physicians to provide patient medical charts and other confidential medical information. Milberg included information collected in this survey in the relator’s second amended complaint, and the district court relied on the information in denying the defendant’s first motion to dismiss. The defendants then moved to dismiss the second amended complaint as a sanction for alleged violations of attorney ethical rules.

The court granted the defendant’s motion to dismiss, finding that the survey contained misrepresentations concerning the confidentiality of the material in the survey.  The court found that the conduct did not fall under any recognized investigative exceptions to the rules of professional conduct.  The court determined that the physicians would not have disclosed the medical information had they known the impetus of the survey, and that the conduct was highly intrusive into the confidential physician-patient relationship. Further, the court explained that Milberg published the confidential information in the relator’s second amended complaint, including enough details about the patients that it might be possible for a reader to identify them.  The court struck all of the information in the complaint that came from the survey results, and finding that most of the information in the second amended complaint was derived from the survey, the court dismissed the complaint on the grounds that it failed to meet the particularity requirements of Rule 9(b).

See U.S. ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 686 Fed.Appx 23 (2nd Cir. Apr. 4, 2017)

JUDGMENTS & SETTLEMENTS


AMI Monitoring Inc. (D.N.J. June 26, 2017)

AMI Monitoring (“Spectocor”), a cardiac monitoring company, and its owner, Joseph Bogdan, will pay $13.45 million to resolve allegations that they violated the False Claims Act by billing the government for more expensive monitoring services than requested by the ordering physicians.  The suit was brought by a former sales manager who will receive approximately $2.4 million as part of the settlement.  Spectocor and Bogdan will pay $10.56 million and $2.86 million respectively.  TAFEF members Suzanne Durrell, Bob Thomas, and David Lieberman of Whistleblower Law Collaborative represented the relator in this matter.


James Crumb, Mobile Based Physician Group, and Coastal Neurological Inst. (S.D. Ala. June 22, 2017)

James Crumb, Mobile Based Physician Group, and Coastal Neurological Institute agreed to pay $1.4 million to resolve allegations that they knowingly billed for medically unnecessary and unreasonable ultrasound guidance with routine blood draws and Botox injections, in violation of the False Claims Act.  Furthermore, Crumb allegedly knowingly falsified patient diagnosis because the government did not cover Botox injections.  Allegedly, as a result of the misconduct, Crumb,  Mobile Based Physician Group, and Coastal Neurological Institute billed the government for 15-30 identical ultrasound guidance claims for one patient.  As part of the settlement, Crumb entered into a Corporate Integrity Agreement.


Infosys Corp. (June 23, 2017)

Infosys Corp., a global outsourcing and consulting company, will pay $1 million to resolve allegations that Infosys Corp. failed pay its H-1B visa workers the prevailing wage, in violation of the New York False Claims Act.  Allegedly, Infosys Corp. improperly obtained B-1visas, a visa intended for temporary visitors, instead of an H-1 visa, intended for workers, allowing Infosys Corp. to pay far less than they otherwise would have under H-1B visas.   The settlement includes damages and penalties from Infosys Corp’s alleged False Claims Act violations and also tax damages from taxes on the wages that Infosys Corp should have paid.


James O’Connor (N.D. Iowa June 19, 2017)

James O’Connor, a durable medical equipment store owner, will pay nearly $900,000 to settle allegations that he submitted claims to Medicare for more expensive models of equipment than he actually provided, in violation of the False Claims Act.  The relator will receive a 25% share of this settlement.  TAFEF members Michael Brady and Mark Kistler at Brady & Associates represented the relator in this settlement.


Genesis Healthcare Inc. (N.D. Cal., N.D. Ga., & D. Nev. June 16, 2017)

Genesis Healthcare Inc. (“Genesis”) agreed to pay $53.6 million to settle allegations that it submitted claims to the government for medically unnecessary therapy and hospice services, in violation of the False Claims Act.  Specifically, the settlement resolves allegations that Genesis billed the government for patients who were not terminally ill, inappropriately billed for physician evaluation services, upcoded, provided therapy for more time than necessary, and provided unnecessary or unskilled outpatient services.  Additionally, the settlement will resolve allegations that Genesis provided “grossly substandard” nursing care.  TAFEF members Matt Piers, Juliet Berger-White, Caryn Lederer, and Charlie Wysong of Hughes Socol Piers Resnick & Dym Ltd.; Tim Terry of the Terry Law Firm; and Steven Cohen of the Cohen Law Group all worked to settle this case.


Health First (M.D. Fla. June 15, 2017)

Health First will pay $3.5 million to resolve allegations that it illegally induced referrals of patients to hospitals by paying kickbacks to physicians, in violation of the Anti-Kickback Statute and the False Claims Act.  The relator was represented by TAFEF member Dan Miller of Berger & Montague.


Jasper Allen, Benjamin Swain, & Julian Rigsby and related entities (S.D. Ga. June 14, 2017)

Farmers Jasper Allen, Benjamin Swain, and Julian Rigsby and related entities owned by Rigsby, will pay $675,000 to resolve allegations under the False Claims Act that Allen, Swain, Rigsby, and entities conspired to misrepresent individuals who had an insured interest in order to obtain better coverage.  Additionally, Allen, Swain, Rigsby, and entities also conspired to submit false claims and documents to the United States Department of Agriculture (“USDA”) to ensure payment.  This settlement arose out of an investigation conducted by the USDA.



Misr Sons Development & SAE (D. Idaho June 13, 2017)

Misr Sons Development & SAE (Hassan Allam Sons, “HAS”), a construction company, agreed to pay $1.1 million to settle allegations that it violated the False Claims Act by funding contracts for water and waste infrastructure that it was not eligible to fund.  Specifically, HAS was awarded a USAID-funded contract as part of a joint venture with two other construction companies, Contrack International Inc. and Washington Group International Inc., however HAS concealed its participation in the joint venture, as it was ineligible to receive the USAID-funded contract.  The government separately settled allegations with the Contrack International Inc. and Washington Group International Inc.

Rhine Drug Company and Andrew “Carter” Clements, Jr. (S.D. Ga. June 13, 2017)

Rhine Drug Company and Andrew “Carter” Clements, Jr. will pay $2.175 million to settle allegations that they submitted claims to the government for drugs that were not actually dispensed, in violation of the False Claims Act.  This settlement comprises the largest False Claims Act settlement against a pharmacy in the Southern District of Georgia.


Atlantic Spine & Joint Institute (D. N.J. June 13, 2017)

The Atlantic Spine & Joint Institute and father and son owners, Robert Claud McGrath and Robert Christopher McGrath, agreed to pay $1.78 million to settle allegations that their practice violated the False Claims Act by submitting bills to Medicare for services performed by physical therapists who were unlicensed, untrained, and improperly supervised.   In addition to the settlement, both McGraths face up to 10 years in prison.  The suit was brought by a former employee who will receive $338,200 as part of the settlement.  TAFEF member Brian McCormick represented the relator in this settlement.


University of Rochester Medical Center (N.D. N.Y. June 13, 2017)

University of Rochester Medical Center will pay $113,722.10 to resolve allegations that it utilized a billing code modifier without sufficient documentation in order to receive payments that it was not entitled to receive, in violation of the federal and New York State False Claims Act.  The allegations were brought by a qui tam relator who will receive $19,332.76 as part of the settlement.


Union Treatment Center (W.D. Tex. June 7, 2017)

Union Treatment Center, medical and physical therapy center, agreed to pay $3 million to settle allegations under the False Claims Act that it billed the government for services that were not actually rendered, overcharged the government for medical examinations, falsely inflated time spent in therapy, and billed the government for unnecessary services and supplies.  Furthermore, the settlement resolves allegations that Union Treatment Center offered, paid, solicited, and received kickbacks in exchange for patient referrals.  In addition to the settlement, Union Treatment Center will waive $1.6 million worth of claims and be permanently excluded from participating in government healthcare programs.


Integrated Medical Solutions, Inc.  (N.D. Tex. June 4, 2017)

Integrated Medical Solutions, Inc. (“IMS”) and former IMS President, Jerry Heftler, will pay $2.475 million to resolve allegations that they violated the Anti-Kickback Statute and False Claims Act under their government contract with the U.S. Bureau of Prisons (“BoP”).  Specifically, IMS and Heftler allegedly paid a BoP contracting official to give IMS favorable treatment during the contracting process, including creating an unfair competitive advantage for IMS by releasing confidential information.  Separately, the BoP contracting official pleaded guilty to a felony charge of submitting a false document to a government agency.


Fredericksburg Hospitalist Group P.C. (E.D. Va. June 2, 2017)

Fredericksburg Hospitalist Group P.C. and fourteen member shareholders will pay $4.2 million to resolve allegations that they knowingly and intentionally upcoded evaluation and management billing codes.  Allegedly, Fredericksburg Hospitalist Group upcoded bills from January 2010 to April 2015.  TAFEF member Zachary Kitts of K&G Law Group represented the relator in this settlement.


eClinical Works (D. Vt. May 31, 2017)

eClinical Works (“ECW”), one of the United States’ largest vendors of electric health record software, will pay $155 million to resolve allegations that it knowingly misrepresented the capabilities of its software and paid kickbacks to particular customers in exchange for promoting its software.  Allegedly, ECW misrepresented its software’s capabilities by programming its software to falsely pass the software certification test.  As part of the settlement, the relator will receive $30 million and ECW will enter into a five year Corporate Integrity Agreement.  TAFEF members Colette Mattzzie and Larry Zoglin of Phillips & Cohen represented the relator in this settlement.


Freedom Health Inc. (M.D. Fla. May 31, 2017)

Freedom Health Inc., a managed health services provider, agreed to pay $31,695,593 to settle allegations that it violated the False Claims Act by engaging in a scheme to submit unsupported diagnosis codes to government healthcare programs in order to obtain inflated reimbursements.  The qui tam relator was a former employee of Freedom Health Inc.  This settlement was pursued jointly by TAFEF member firm Phillips & Cohen and Constantine Cannon, TAFEF member Mary Inman and Tim McCormack of Constantine Canon, and Stephan Hasegawa and Ned Arens of Phillips and Cohen.


CVS Health Corporation’s Omnicare Unit (D. Mass. May 26, 2017)

CVS Health Corporation’s Omnicare unit will pay $23 million to settle allegations that it offered kickbacks to long term care pharmacies in exchange for promoting two of its antidepressant drugs, in violation of the Anti-Kickback Statute and False Claims Act.  Allegedly, from 1999 to 2005 the Omnicare unit sought and received kickbacks in the form of discounts in exchange for the promotion of its drugs.  CVS Health claimed the alleged misconduct occurred prior to its acquisition of Omnicare in 2015.  TAFEF member firm Berg & Antrophy worked to settle this case.


Agility Public Warehouse Co. KSC (N.D. Ga. May 26, 2017)

Agility Public warehouse Co. KSC (“Agility”) agreed to pay $95 million to settle allegations under the False Claims Act that it overcharged the government for the fruit and vegetables that it supplied to US troops, falsely charged the government the full price for suppliedespite agreeing to charge 10% less than the amount billed, and failed to disclose rebates and discounts that it received, as required under its government contract .  In addition to the FCA settlement, Agility pleaded guilty to a criminal misdemeanor of theft of government funds.  The qui tam suit was brought by a former vendor for Agility.  TAFEF member Raymond Moss of  Moss and Gilmore LLC represented the relator in this settlement.


Omnicare Inc. (D.N.J. May 16, 2017)

Omnicare Inc. agreed to pay $8 million to settle allegations that it in order to gain a competitive advantage, it improperly implemented an automated verification system that utilized drug codes less specific than the required national drug  codes, in violation of the False Claims Act.  Allegedly, the automated verification system resulted in claims submitted to Medicaid and Medicare for drugs dispensed that were not actually dispensed.  The relators will receive more than $2 million as a part of the settlement.  TAFEF member Charles Goetsch of Charles Goetsch Law Office LLC represented the relator in this settlement.


Financial Freedom (M.D. Fla. May 16, 2017)

Financial Freedom will pay $89 million to settle allegations that it violated the False Claims Act and Financial Institutions Reform, Recovery, and Enforcement Act by seeking insurance payments for interest from the Federal Housing Administration that they were not entitled to receive.  Allegedly, Financial Freedom was not entitled to receive payments because they failed to properly disclose on insurance forms that the mortgage was ineligible for such interest payments because Financial Freedom failed to meet appraisal deadlines, to timely submit claims to the Department of Housing and Urban development, and to pursue foreclosure proceedings within the deadline.  TAFEF members David Scher and Scott Oswald of the Employment Law Group represented the relator in this settlement.


Carecore National LLC (S.D. N.Y. May 11, 2017)

Carecore National LLC (“CareCore”), a benefits management company, will pay $54 million to resolve allegations that it authorized medical diagnostic procedures without properly assuring medical necessity or reasonableness.  Allegedly, Carecore formed its policy of fraudulent approvals because it was unable to complete a timely authorization review.  As part of the settlement, Carecore admitted and accepted responsibility for improperly approving authorizations for hundreds of thousands of procedures.  TAFEF members Steve Weiss and Terrianne Benedetto of Seeger Weiss LLP and Anna Dover and Rolando Marquez of Milberg LLP represented the relator in this settlement.

Pos-T-Vac (D. Kan. May 8, 2017)

Pos-T-Vac, a medical equipment supplier, will pay $1 million to settle allegations that it improperly charged Medicare for medical supplies, in violation of the False Claims Act.  Allegedly, from January 2009 through July 2012, Pos-T-Vac charged Medicare for equipment that was not medically necessary, supported with proper documentation, nor properly ordered by a physician.  As part of the settlement, the government will retain Medicare payments suspended during investigation.


Piedmont Pathology Associates, Inc. (D. S.C. May 2, 2017)

Piedmont Pathology Associates, Inc.  (“Piedmont”), a diagnostic anatomic pathology group, agreed to pay $500,000 to resolve allegations that it violated the False Claims Act by engaging in a kickback scheme in which it installed free or little cost software licenses in exchange for referrals.  The qui tam suit was brought by a former contract salesperson for Piedmont who allegedly witnessed Piedmont’s kickback scheme.


Joseph W. Griffin, D.M.D. (D. Me. May 2, 2017)

Joseph W. Griffin, D.M.D. entered a settlement agreement with the government in which he will pay $90,000 to resolve allegations that he submitted false claims to Maine’s Medicaid program.  According to the government, Griffin allegedly submitted claims for dental services that were never actually rendered, were medically unnecessary, or were recorded inadequately in the patient’s medical records.  The government contends that Griffin’s conduct occurred from July 2014 through July 2015.


Natural Way Chiropractic Center, P.A. (D. Kan. May 2, 2017)

Natural Way Chiropractic Center, P.A. and its owner, Brian Schnitta, will pay $1,038,903 to resolve allegations that the clinic violated the False Claims Act by submitting false claims to Medicare when treating patients for peripheral neuropathy, a condition that causes loss of sensation in hands and feet.  Allegedly, Natural Way Chiropractic billed Medicare for treatment that was medically unnecessary or not covered by Medicare, such as nerve conduction tests, nerve block injections, and ultrasound needle guidance.  During the investigation, Medicare suspended payments for the alleged improper claims, and as part of the settlement Natural Way Chiropractic and Schnitta agreed to waive the suspended payments.


Poplar Healthcare (D.R.I. May 1, 2017)

Poplar Healthcare Management PLLC (“Poplar”) will pay nearly $900,000 to settle allegations that it violated the False Claims Act by engaging in an extensive, multi-year promotional campaign that neither complied with FDA requirements nor was supported by adequate scientific evidence.  A pathologist formerly employed with Poplar qui tam suit brought the qui tam suit and, who will recieve $205,841 as part of the settlement.   TAFEF members David Scher and R. Scott Oswald of The Employment Law Group and Mark Gagliardi of The Law Office of Mark P. Gagliardi represented the relator in this matter.


Quest Diagnostics, Inc. (D.D.C. and D.S.C. April 28, 2017)

Quest diagnostics, Inc. agreed to pay $6 million to resolve allegations that its subsidiary, Berkeley Heart Lab, Inc. (“Berkeley”) violated the Anti-Kickback Statute by paying kickbacks to physicians and patients and charged for medically unnecessary tests in order to induce the use of Berkeley’s blood testing services over other blood testing services.  According to the government, Berkeley paid kickbacks by disguising payments as “process and handling” fees, or waiving copayments for patients legally required to pay copayments.    The relator will receive a 26% share of the settlement.  TAFEF members Peter Chatfield of Phillips & Cohen and William Coates of Roe Cassidy and Price represented the relator in this matter.


Milton S. Eisenhower Foundation (D.D.C. April 27, 2017)

The Milton S. Eisenhower Foundation (“the foundation”) and its principal, Dr. Alan Curtis, will pay $150,000 to settle allegations that it improperly used grant funds, in violation of the False Claims Act.  The government contends that the foundation violated grant fund requirements and rules by renting office space in Dr. Curtis’ home, making sub-grants to organizations affiliated with the foundation’s trustees, engaging in projects outside the grant’s scope, retaining a lobbyist, and retaining one of the foundation’s trustees in order to provide counselling services.  The foundation focuses on issues of inner-cities and the disadvantaged.


Indiana University Health and HealthNet (S.D. Ind. April 27, 2017)

Indiana University Health and HealthNet will pay $18 million to settle allegations that it violated the False Claims Act and Anti-Kickback Statute by engaging in a kickback scheme in which Indiana University Health provided a line of credit exceeding $10 million to Health Net in order to induce Health Net to refer OB/GYN patients to Indiana University.  Indiana University Health and HealthNet will each pay $5.1 million to the United States and $3.9 million to Indiana.  TAFEF members Jillian Estes and Jim Ross of the James Hoyer Law Firm represented the relator in this matter.


Partners Healthcare and Brigham and Women’s Hospital (D. Mass. April 27, 2017)

Partners Healthcare (“Partners”) and Brigham and Women’s Hospital (“BWH”) will pay $10 million to resolve allegations that it fraudulently obtained National Institute of Health grants for stem cell research intended to research heart damage repair by manipulating their grant application with false information, in violation of the False Claims Act.  The government contends that Partners and BWH fraudulently falsified microscope images and carbon-14 age data on cells.   Furthermore, this settlement resolves allegations that Partners and BWH used improper protocol, supplied invalid and inaccurate cardiac stem cell characterizations, used misleading or reckless record keeping, and submitted applications with fabricated or discrepant data.  After learning of the alleged misconduct, BWH investigated and disclosed its concerns to the government.


Dr. Forrest S. Kuhn, Jr. (W.D. Ky. April 27, 2017)

Dr. Forrest S. Kuhn, Jr., an allergy, asthma, and immunology physician, agreed to pay $751,681.16 to settle allegations that he submitted claims to the government for allergy tests that were never performed, in violation of the False Claims Act.   Allegedly, Dr. Kuhn submitted false claims from January 2006 to July 2015.  The Federal government will receive $416,865.04 of the settlement, while the Commonwealth of Kentucky will receive $334,816.12


Branden Partners LP (N.D. Cal. April 25, 2017)

Branden Partners LP, doing business as Pacific Pulmonary Services, will pay $11.4 million to resolve allegations that it knowingly supplied oxygen related equipment in violation of  Medicare’s and other federal programs rules, yet submitted requested reimbursement to the government.  Additionally, the settlement will resolve allegations that Branden Partners LP submitted claims to the government were tainted by a kickback scheme in which their patient care coordinators referred patients to sleep clinics in exchange for sleep equipment.   The suit was brought by a former sales representative who will receive $1.824 million as part of the settlement.


Crittenton Hosptial (E.D. Mich. April 24, 2017)

Crittenton Hospital agreed to pay $791,000 to settle allegations that it billed for unnecessary tests in connection with the case U.S. v. Farid Fata, in which its doctor was sentenced to 45 years in prison for his role in administering medically unnecessary cancer treatments, infusions, and injections.  Crittenton Hospital voluntarily disclosed violations and cooperated with the government to resolve the alleged False Claims Act violations.  The qui tam case was brought by a former employee of Crittenton’s doctor.  As part of the settlement, the former employee will receive $158,000.  TAFEF members David Harsh and Maro Bush of Haron Law Group represented the relator in this matter.


Energy & Process Corporation (N.D. Ga. April 24, 2017)

Energy & Process Corporation, a nuclear industry supplier contracted to produce nuclear facilities for the Department of Energy (“DOE”), agreed to pay $4.6 million to resolve allegations that it violated the False Claims Act by providing the DOE with faulty steel reinforcing and failing to execute required quality assurance procedures.  TAFEF members Charles Siegel of Water Kraus & Paul, Charles D. Gabriel of Chalmers Pak & Buren LLC, and Dan Hargrove of Hargrove Law Firm represented the relator, a former Energy & Process Corporation employee, in this settlement.


Dr. Norman A. Brooks, M.D. (C.D. Cal. April 21, 2017)

Dr. Norman A. Brooks, M.D., owner of The Skin Cancer Medical Center, agreed to pay $2.7 million dollars to settle allegations that he violated the False Claims Act by falsely diagnose patients with skin cancer in order to bill Medicare and Medicaid for unnecessary skin cancer surgeries.  In addition to the settlement, Dr. Brooks and his practice will enter into a three year Corporate Integrity Agreement.  TAFEF member Shauna Itri of Berger & Montague of Shauna Itri served as lead attorney in this matter.


Walgreens Co.  (E.D. Cal. April 20, 2017)

Walgreens Co. will pay $9.86 million to settle allegations that it failed to confirm and document the medical necessity of the drugs it distributed, yet submitted claims to the government anyway, in violation of the False Claims Act.  The government explained that the suit demonstrates Walgreens’ alleged failure to “perform its ‘critical gatekeeping function.’”    The qui tam suit was brought by two former pharmacists and a former technician, who alleged that Walgreens engaged in the fraudulent conduct occurred as a result of Walgreens’ policy to fill prescriptions as fast as possible.  TAFEF members Michael L. Armitage, Loren Jacobson and Wm. Paul Lawrence of Waters and Kraus LLP; Phillip Richard Atillio Mastagni of Mastagni Holstedt; and Benjamin A. Waters, Daniel Miller, and Joy Clairmont of Berger & Montague PC represented the relator in this matter.


Harbert Management Corporation (April 18, 2017)

Harbert Management Corporation and its executives agreed to pay $40 million to settle tax-related False Claims Act violation allegations with the State of New York.  New York alleges that Harbert Management Corporation failed to pay New York State and city tax on performance income by shifting its income from New York to Alabama.  This settlement constitutes the largest tax-related recovery under the New York False Claims Act.  As part of the settlement the relator will receive a 22% share, or $8.8 million.  TAFEF members Neil Getnick of Getnick and Getnick and Jordan Thomas of Labatron Sucharow represented the relator in this settlement.


HSBC Bank USA, N.A. (S.D.N.Y. April 14, 2017)

HSBC Bank  USA, N.A. (“HSBC”) will pay $2,118,861 to settle allegations that it violated the False Claims Act by knowingly submitting false information to the government through the SBA Express Loan Program.  Allegedly, despite discovering through an internal review that dozens of customers submitted false information when obtaining their loans, HSBC still requested reimbursement from the government without disclosing the fraudulent conduct.  As part of the settlement, HSBC admitted, acknowledged, and accepted responsibility for its conduct.  TAFEF member Tim McInnis of McInnis Law represented the relator in this matter.


P&K Realty (M.D. Pa. April 12, 2017)

Peter Novajosky and Kathy Novajosky, husband and wife, doing business as P&K Realty, agreed to pay $34,495.50 to resolve allegations that they submitted false claims to improperly obtain funds through the Department of Housing and Urban Development (“HUD”).  Specifically, they submitted an application for tenancy approval, but failed to disclose that the tenant was their daughter, in violation of an express provision in HUD’s Housing Assistance Payment Program that precludes renting to relatives.  Allegedly, the Novajoskys received improper funding from   October 2008 through June 2014.


Wisconsin Department of Health Services (W.D. Wis.  April 12, 2017)

The Wisconsin Department of Health Services (“WDHS”) will pay $6,991,905 to resolve allegations that it implemented improper quality control practices in monitoring its Supplemental Nutrition Assistance Program (“SNAP”).  As part of the settlement, WDHS admitted that its former quality control manager instructed quality control staff to reduce errors and dropped cases by selectively applying requirements, ask beneficiaries leading questions, omit information, and to apply additional scrutiny to error cases with the intent of overturning the error or dropping the case.   This settlement arose out of a nationwide audit of SNAP programs and is the second settlement related to the quality control manager’s fraudulent instructions.


Prestige Administrative Services (W.D. Wis. April 10, 2017)

Prestige Administrative Services (“Prestige”) will pay $995,500 to settle allegations that it violated the False Claims Act by participating in the administration of unnecessary genetic testing.  Allegedly, Prestige provided patient insurance information and personal medical information to Genomix, Inc. the company administering the genetic tests, without obtaining prescription orders for the genetic tests so that Genomix could conduct the testing.  Additionally, the settlement will resolve allegations that Prestige Healthcare did not properly inform patients that the tests were being conducted or provide the opportunity for patients to decline testing.


Virginia Department of Social Services (W.D. Wis. April 10, 2017)

Virginia Department of Social Services (“VDSS”) will pay $7,150,436 to resolve allegations that it violated the False Claims Act by instructing its quality control workers to fraudulently correct errors in the administration of the Supplemental Nutrition Assessment Program (“SNAP”), or Food Stamp Program (until 2008), instead of dropping or eliminating the case, as required.  As part of the settlement, VDSS admitted that its former quality control manager pressured and intimidated its employees to follow the alleged fraudulent methods, despite multiple complaints that the manager’s requirements lacked integrity.  Additionally, VDSS and the government took corrective action in 2015 to eliminate the previous manager’s improper methods.


Charles River Laboratories International, Inc. (Mar. 16, 2017)

Charles River Laboratories International, Inc., (“Charles River Labs”) agreed to pay $1.8 million to resolve allegations that improperly billed the National Institute of Health (“NIH”) for labor and services under its contract to develop, maintain, and distribute colonies of animals.  The government contends that Charles River Labs billed NIH for services and associated employee costs that were not actually provided.


CA, Inc. (D.D.C. Mar. 10, 2017)

CA, Inc., an information technology management and software services company, will pay $45 million to settle allegations that it made false statements to the government when negotiating its contract with the General Services Administration (“GSA”).  Specifically, the government contends that CA, Inc. provided GSA with false information about the software license and maintenance discounts it gave to commercial customers, in violation of GSA’s requirement that government contractors negotiate a fair price by disclosing their market practices.    The qui tam suit was brought by a former CA, Inc. who will receive $10.195 million as part of the settlement.  TAFEF members Rob Vogel and Janet Goldstein of Vogel Slade & Goldstein represented the relator in this settlement.


People, Technology, & Process LLC (M.D. Fla. Mar. 1, 2017)

People, Technology, & Process LLC (“PTP”), its President and CEO, Victor Buonamia, and its CFO, Nicole Buonamia will pay $320,000 in order to resolve allegations that it submitted invoices to the government for work performed in support of the U.S. Army in Afghanistan that was not actually performed.  A former employee of PTP brought the qui tam suit and will receive $64,000 as part of the settlement.  TAFEF members Jillian Estes and Elaine Stromgren of James Hoyer PA represented the relator in the matter.


CH2M Hill, Inc. (E.D. Pa. Feb. 28, 2017)

CH2M Hill, Inc. (“CH2M”) agreed to pay $1,500,000 to settle allegations that it engaged in multiple improper billing schemes through a Joint Venture Project Management Oversight Agreement with Amtrak.  Specifically, the government contends that CH2M failed to adjust its overhead rate to match actual costs incurred, billed employees with lower overhead rates as if they were higher overhead employees, and billed the government an improperly high overhead rate on its field employees.  Amtrak and the Department of Transportation investigated CH2M as a result of an audit that billing discrepancies.


S&R Construction Enterprises and A&S Electrical LLC (D. Mass. Feb. 24, 2017)

S&R Construction Enterprises (“S&R Construction”) and A&S Electrical LLC (“A&S Electrical”) will pay $420,000 in order to settle allegations that they submitted false or inflated payment requests to the Massachusetts Bay Transportation Authority (“MBTA”) under their lump-sum contract.  Specifically,  S&R Construction and A&S Electrical falsely represented the quantities and prices of the construction materials they purchased, charging MBTA higher prices than they actually paid.  In addition to the settlement, S&R Construction will be barred from bidding on Massachusetts contracts for five years, and A&S Electric will be barred for one year.


The Oncology Practice of Dr. Kenneth D. Nahum (D. N.J. Feb. 17, 2017)

The Oncology Practice of Dr. Kenneth D. Nahum,  Dr. Nahum himself, and his wife, Ann Walsh will pay $1.17 million to resolve allegations that they violated the False Claims Act by injecting patients with chemotherapy drugs obtained by an unapproved foreign distributer.   Nahum and Walsh allegedly submitted claims to the government for the unapproved injections from April 2010 to January 2011.


FastTrain College (S.D. Fla. Feb. 16, 2017)

FastTrain College (“FastTrain”) and its owner Alejandro Amor was ordered to pay $20 million in damages and civil penalties for submitting fraudulent documents on behalf of students so that FastTrain could obtain greater federal financial aid funding, in violation of the False Claims Act.  Specifically, FastTrain submitted documents  that falsely demonstrated that the students possessed high school diplomas, and coached students to lie on their federal financial aid forms.  FastTrain was ordered to pay the maximum FCA statutory penalty and Amor was sentenced to 97 months in prison, which is presently on appeal.


ICP Medical LLC (E.D. Mo. Feb. 15, 2017)

ICP Medical LLC (“ICP”), a Missouri-based government contractor, will pay $4 million to settle allegations under the False Claims Act that it knowingly submitted claims for medical products sourced from China, in violation of the U.S. Department of Veteran Affairs and the Department of Defense regulations.  The government contends that ICP concealed that its body bags, gowns, and scrubs were produced in China by removing the “made in China” tag and repackaging them into boxes which they falsely labeled with American Flags.  The qui tam suit was filed by a former employee at ICP.


Sierra Nevada Corporation (E.D. Cal. Feb. 15, 2017)

Sierra Nevada Corporation (“SNC”) will pay $14.9 million to settle allegations that it violated the False Claims Act by knowingly misclassifying particular costs in order inflate overhead rates paid by government defense and space contracts.  Specifically, SNC allegedly classified its direct costs and Manufacturing and Production Engineering costs as Independent Research and Development (IR&D) costs and charged the costs in the wrong accounting period.  This settlement covers overcharges made during government fiscal years 2007 through 2011.


Aleem Construction (Feb. 10, 2017)

Aleem Construction (“A. Aleem”), a New York City general contractor and property developer, will pay $255,000 to settle allegations that it violated the New York False Claims Act by failing to enforce the prevailing wage requirements on its government contracted project. A. Aleem’s alleged conduct is related to the New York City Department of Housing Preservation and Development’s Neighborhood Enterprise program, in which A. Aleem and other property developers worked to renovate and resell deteriorating city-owned buildings. This settlement comprises the first time prevailing wage laws were enforced using the FCA.  In addition to the settlement, A. Aleem agreed to extensive compliance, remediation, and training requirements, with the New York Labor Bureau actively monitoring it’s adherence with the requirements.


University of Behavioral Health of El Paso (W.D. Tex. Feb. 10, 2017)

The University of Behavioral Health of El Paso agreed to pay $860,000 to settle allegations that it violated the False Claims Act, Anti-Kickback Statute, and Stark Law by improperly paying a referring physician under a personal services agreement.  The government contends that under the improper agreement, the physician received payments above fair market value, payment for services not performed at all, and made improper referrals for Medicare services.  The settlement covers alleged conduct between February 1, 2010 and December 31, 2013, as the improper agreement was made by a previous owner and terminated once the previous owner left the hospital.


South Florida & Allergy Center (S.D. Fla. Feb. 10, 2017 )

Dr. Paul Tartell and his practice, South Florida & Allergy Center, will pay $750,000 to resolve allegations that he billed federal health benefits programs for surgical procedures that were not provided or were not medically necessary, in violation of the False Claims Act.  Specifically, the relator, a former patient of Dr. Tartell, alleged that Dr. Tartell routinely improperly performed diagnostic procedures as debridements, which are more expensive and more invasive than diagnostic procedures, as they involve the insertion of an endoscope and various instruments.  Additionally, the settlement resolves claims that Dr. Tartell’s billed the government for video and laryngeal stroboscopies that he did not in fact perform or if performed, were medically unnecessary.  TAFEF member Jonathan Kroner of Jonathan Kroner Law Office represented the relator in this case.


Comprehensive Health Services, Inc. (D. Md. Feb. 8, 2017)

Comprehensive Health Services, Inc. (“CHS”), one of the nation’s largest providers of workforce medical services, agreed to pay $3,818,881 to resolve allegations that it knowingly billed the government for medical services that were already included in a bundled-fee in violation of the False Claims Act.  Specifically, CHS allegedly double-billed and mischarged the Internal Revenue Service under its contract to provide medical tests that determined criminal investigation special agent applicants and incumbents eligibility for physical fitness programs and fitness for duty.  The relator who brought this qui tam action will receive $645,391 in award.


Franklin First Financial (E.D.N.Y. Feb. 7, 2017)

Franklin First Financial (“Franklin First”) agreed to pay $1.25 million to resolve liability under the False Claims Act for violating the Department of Housing and Urban Development’s (“HUD”) Federal Housing Administration (“FHA”) program allowing  Franklin First to issue FHA insured loans.  Specifically, Franklin First executives allegedly made “surreptitious” mortgage loan payments on borrower’s mortgages to prevent them from defaulting, so that they could conceal their poor delinquency and default rates.  The government contends that Franklin First made payments on at least 111 FHA-insured loans that would have otherwise become delinquent or defaulted within two years or origination.   HUD stated that Franklin First’s alleged fraudulent conduct deprived HUD of critical information necessary for determining Franklin First’s eligibility to remain in HUD’s FHA loan program.


Dr. Gary Marder (S.D. Fla. Feb. 7, 2017)

Gary Marder, a Florida dermatologist will pay $18,017,382 for violating the False Claims Act by ordering and then billing the government for medically unnecessary biopsies and unnecessary radiation treatment, as well as falsely diagnosing patients with skin cancer.  Additionally, Marder and another local doctor, Dr. Robert Kendall, allegedly devised a kickback scheme in which Marder paid Kendall remuneration to allow Marder to send the unnecessary biopsy specimens to Kendall’s lab and then bill the government as if Marder performed the work.  The relator, a double board certified medical doctor in dermatology and dermapathology, first became aware of Marder’s conduct after examining a significant number of patients seeking a second opinion on Marder’s skin cancer diagnoses.  After the relator brought the qui tam suit, he continued to investigate and further discovered that Marder was charging the government a reimbursement rate on his radiation seven times higher than the actual rate, as he did not have the type of equipment that would allow him to bill the government for radiation services at all.  TAFEF member Daniel Miller of Berger & Montague, PC, and Lawrence Klitzman of Klitzman Law Group represented the relator, Dr. Ted Schiff, in this settlement.


Para-Plus Translations, Inc. (W.D. Penn. Feb. 6, 2017)

Para-Plus Translations, Inc., a New Jersey translation company that contracts with federal and state agencies, will pay $1.5 million to settle allegations that it violated the False Claims Act by purposefully overstating its interpreters’ travel time and mileage incurred on invoices to federal and state governments.  The settlement amount will be distributed between the United States, Delaware, and New Jersey.


TeamHealth Holdings (N.D. Ill. Feb. 6, 2017)

TeamHealth Holdings, as successor in interest to IPC Healthcare Inc. (“IPC”), agreed to pay $60 million to resolve their liability under the False Claims Act for alleged violations of billing Medicare, Medicaid, the Defense Health Agency, and the Federal Employees Health Benefits Program for more expensive levels of medical service than they actually performed.  The government alleged that IPC systematically encouraged the practice of “upcoding” in order to “catch up” to their peer competitors.  IPC will also enter a five-year Corporate Integrity Agreement as part of the settlement.  TAFEF members David Chizewer, Matthew Organ, and Fred Cohen of Goldberg Kohn filed the complaint on behalf of the relator, who was formerly employed as a hospitalist with IPC.


Dr. Robert Windsor (N.D. Ga. Feb. 2, 2017)

Dr. Robert Windsor, owner and operator of multiple pain management clinics under the umbrella National Pain Care, Inc., will pay $20 million to resolve allegations that he billed federal healthcare programs for medically unnecessary diagnostic tests and surgical monitoring services that he did not actually perform.  The government contended that he billed government as if he was monitoring the neurological status of surgery patients, when in fact an unqualified medical assistant performed the monitoring.  In addition to the settlement, Dr. Windsor was sentenced to two months in prison and three years of supervised release.


Meir Daller, M.D. (M.D. Fla. Feb. 1, 2017)

Meir Daller, a Fort Myers, FL urologist working for 21st Oncology, will pay $3.81 million to resolve allegations that he violated the False Claims Act by causing claims to be submitted to federal health care programs for medically unnecessary laboratory tests.  Allegedly, Daller referred over 13,000 tests, which made him the highest referrer in the country and caused the test-making company to pay him bonuses partially based on the number of referrals.  In addition to the settlement, Daller will enter a three year Corporate Integrity Agreement.


Jackson State University (S.D. Miss. Feb. 1, 2017)

Jackson State University (“JSU”) agreed to pay $1.17 million to settle allegations that it mismanaged grant money from the National Science Foundation in violation of the False Claims Act.  The government contends that while JSU submitted claims for grant money, they impliedly certified that every expense was “supportable, allowable, and allocable,” when in fact the expenses were not.  Additionally, JSU allegedly included salary expenditures and fabricated time and effort reports.  As a part of the settlement, JSU agreed to execute specific steps to prevent future grant fraud, such as conducting training and compliance programs on federal grand management approaches over the next five years.


The Abbey of Le Mars (N.D. Iowa Feb. 1, 2017)

The Abbey of Le Mars (“The Abbey”) agreed to pay $100,000 to settle allegations that it violated the False Claims Act by submitting claims to Medicare for grossly substandard and essentially worthless nursing facility care.  Allegedly, The Abbey failed to address its patients’ skin conditions and fractures causing inadequate care and additional costs, and subjected patients to physical restraints, unnecessary medications, and anti-psychotic drugs used to sedate residents in order to decrease their needs.  Furthermore, The Abbey did not provide adequate nourishment, bathing, or toilet care which led to infections, impactions, and emergency room visits. The aforementioned allegations related to sixteen of The Abbey’s residents.


Walgreens Co. (S.D.N.Y. Jan. 23, 2017)

Walgreens Co. (“Walgreens”) reached a settlement with government in which it will pay $50 million to resolve allegations that it knowingly illegally enrolled thousands of government program beneficiaries in its Prescription Savings Program in violation of the False Claims Act and Anti-Kickback Statute.  Among multiple admissions and acknowledgments, Walgreens admitted and acknowledged to paying bonuses to its employees for enrolling customers in the program, despite statements in internal policies and documents that demonstrate its understanding that providing discounts and incentives to government beneficiaries generated illegal kickbacks.  TAFEF members Andrew Beato, Meryl Grenadier, and Jed Wulfekotee of Stein Mitchell Cipollone Beato and Missner LLP represented the relator in this settlement.

University of Pennsylvania Health Systems (E.D. Penn. Jan. 20, 2017)

The University of Pennsylvania Health Systems (“UPHS”) will pay $845,000 to resolve allegations that it violated the False Claims Act by improperly billing Medicare for medically unnecessary claims for stent procedures performed by two cardiologists.  Upon discovering the overpayments, UPHS voluntarily disclosed allegations to state regulators and cooperated with the government to investigate and voluntarily implemented a new quality assurance plan within the UPHS cardiac catheterization lab.  The two cardiologists are no longer employed with UPHS.


BOH Environmental, LLC and Advanced Containment Systems, Inc.  (S.D. Tex. Jan. 19, 2017)

BOH Environmental, LLC and Advanced Containment Systems, Inc. will pay $2.48 million to resolve allegations that they violated the False Claims Act by submitting claims to the government that indicated compliance with their government contract requirement to maintain quality management certifications of containers used in equipment transport, when in fact they had not complied.  A former employee of BOH Environmental, LLC, who refused to submit the alleged false claims to the government, brought the qui tam suit and will receive a 20% award as part of the settlement.  TAFEF member Cory Fein of the Cory Fein Law Firm represented the relator in this matter.


State Street (D. Mass. Jan. 18, 2017)

State Street will pay $64.6 million in civil and criminal penalties to the Department of Justice and SEC to resolve allegations that it engaged in a scheme to defraud six major clients in Europe, the Middle Ease, and Africa through secret commissions on billions of trades.  In response to the conduct, State Street fired the responsible individuals and adopted “firm-wide programs” to address ethical decision making.  Additionally, in connection with their criminal charges of wire fraud and securities fraud, State Street entered a deferred prosecution agreement.


Credit Suisse (Jan. 18, 2017)

Credit Sussie agreed to pay a total of $5.28 billion to resolve its liability under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) for making false and irresponsible representations related to its conduct in packaging, securitizing, issuing, marketing, and selling residential mortgage-back securities between 2005 and 2007.  The total settlement includes a $2.8 billion settlement and a requirement to provide $2.48 billion in relief to homeowners, borrowers, and communities affected by Credit Suisse’s conduct.  As part of the settlement, Credit Suisse admitted to multiple statements of facts regarding its misconduct, including that the loans were virtually unmonitored and that Credit Suisse told investors that the loans were originated according to proper guidelines, despite Credit Suisse’s wealth of evidence that they were not.


SRCTec, LLC (N.D.N.Y. Jan. 17, 2017)

SRCTec, LLC (SRCTec) agreed to pay $6.3 million to settle allegations under the False Claims Act that it sold replacement radar parts and equipment to the government despite knowing that the radar equipment presented a risk of decreased accuracy.  The government contracted SRCTec to provide radar system and parts that give warfighters early warning and information of incoming attacks so that the fighters can counter-attack.  Once aware of the malfunction, SRCTec disclosed the malfunction to the government and took proper action to ensure the risk of decreased accuracy was eliminated.


Moody’s Investor Services Inc. (D.N.J. Jan. 17, 2017)

Moody’s Investor Services Inc. (“Moody’s”) agreed to pay $864 million to settle allegations that Moody’s engaged in misconduct related to providing credit ratings for Residential Mortgage-Backed Securities (“RMBS”) and Collateralized Debt Obligations (“CDO”) that contributed to the financial crisis.  As a part of the settlement, Moody’s acknowledged multiple statements of fact indicating misconduct including that it used a more lenient standard than it had published and misrepresented its objectivity and independence, management of conflicts of interest, compliance with standards, and analytic integrity in rating methodologies to investors and the public.  The settlement consists of a $437.5 million federal civil penalty and a $426.5 million sum that will be distributed among the states involved in the settlement.


Deutsche Bank (Jan. 17, 2017)

Deutsche Bank will pay $7.2 billion to settle allegations that between 2006 and 2007 it misled investors in the packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities (RMBS).  Deutsche Bank will pay $3.1 billion in civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIREEA) and will pay $4.1 billion to provide relief to affected homeowners, borrowers, and communities.  Moreover, as part of the settlement, Deutsche Bank admitted and acknowledged to multiple statements describing how it knowingly misrepresented and mislead investors.  Following the settlement,  Deutsche Bank’s CEO, John Cryan, “apologize[d] unreservedly” for the bank’s conduct.  As part of the settlement, Deutsche Bank will be overseen by an independent monitor who possesses authority to approve any third parties Deutsche Bank uses to provide consumer relief.


BlackRock Inc. (Jan. 17, 2017)

BlackRock Inc. (“BlackRock”) agreed to pay $340,000 in penalties to resolve SEC charges that it improperly required employees to waive their rights to obtain whistleblower awards in separation agreements.  The SEC contended that BlackRock required more than 1,000 employees to sign improper separation agreements between October 2011-2016.  As a result of this action, BlackRock voluntarily revised its agreements and implemented a mandatory annual training to review employee rights under the SEC’s whistleblower program.

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MedStar Ambulance, Inc. (D. Mass Jan. 13, 2017)

MedStar Ambulance, Inc. (“MedStar”) will pay $12.7 million to resolve allegations that it violated the False Claims Act by billing for medically unnecessary transports, billing for more expensive care than patients required, and billing for higher levels of service than Medstar actually provided.  The government contended that MedStar purposely changed its schedule so that routine transports, such as to doctor’s appointments or nursing homes, would be considered emergency trips in order to receive greater reimbursement.  Furthermore, the government alleged that MedStar billed Medicare when it should have billed either the hospital or the municipality.  In addition to the settlement, MedStar will enter a five-year Corporate Integrity Agreement.  The relator, MedStar’s former billing manager, claimed MedStar terminated her employment as a result of her inquiries into their billing practice.  As part of the settlement, the relator will receive a $3.5 million award.  TAFEF member Jeffrey Newman of the Jeffrey Newman Law Firm represented the relator in this settlement.


Family Care Visiting Nurse and Home Care Agency, LLC (D. Conn. Jan. 12, 2017)

Family Care Visiting Nurse and Home Care Agency (“Family Care”) will pay $5.25 million to settle its liability under the False Claims Act for allegedly regularly billing Medicaid for services that were required to be provided by a Registered Nurse (“RN”) when they were not in fact provided by an RN.  Specifically, the government contends that Family Care inappropriately billed Medicaid for 60-day assessments.  In addition to the settlement, Family Care will enter a Corporate Integrity Agreement with the Office of Inspector General for the U.S. Department of Health and Human Services.


Baxter Healthcare Corporation (W.D.N.C. Jan. 12, 2017)

Baxter Healthcare Corporation (“Baxter”) agreed to pay $18.158 million to settle allegations that it violated the False Claims Act by introducing adulterated drugs into the stream of interstate commerce as a result of failing to follow Good Manufacturing Practices when producing sterile drug products.  Allegedly, Baxter continued to manufacture sterile products despite employee reports of mold in the facility.  Baxter resolved its criminal liability through a deferred prosecution agreement.  The terms of the agreement include paying $16 million in penalties, implementation of enhanced compliance provisions, and periodic certifications to the government certifying implementation of compliance provisions.


Shire Pharmaceuticals LLC (M.D. Fla., D.D.C., E.D. Penn., M.D.Tenn. Jan. 11, 2017)

Shire Pharmaceuticals LLC (“Shire”) and its acquired company, Advanced BioHealing (“ABH”) will pay $350 million to resolve allegations that it violated the False Claims Act and Anti-Kickback Statute by inducing clinics and physicians to utilize and overuse its bioengineered human skin substitute, Dermagraft, through kickbacks and other illegal methods.  Allegedly, Shire sales representatives used kickbacks such as lavish dinners, entertainment, equipment and supplies, or unwarranted payments or cash for speeches and false case studies.  The settlement also resolves allegations that Shire engaged in unlawful marketing and brings six different qui tam suits to a close.  Since related FCA allegations were resolved in late 2014, Shire has been operating under a Corporate Integrity Agreement and will continue to do so following the settlement.


MB2 Dental Solutions and 19 Affiliated Pediatric Dentists (N.D. Tex. Jan. 9, 2017)

MB2 Dental Solutions and 19 affiliated pediatric dentists agreed to pay $8.45 million to settle allegations that they violated the False Claims Act by knowingly submitting claims for services that were not performed at all or misrepresenting the identity of the person performing the service.  Additionally, the relator alleged that MB2 Dental Solutions violated the Anti-Kickback Statute through an illegal kickback scheme which paid kickbacks to beneficiaries, families, marketers, and marketing entities.  This qui tam suit was brought by a former employee who will receive a $1.521 million award as part of the settlement.


Rehabilitation Medicine of Oklahoma, PLLC (W.D. Okla. Jan. 4, 2017)

Rehabilitation Medicine of Oklahoma, PLLC (“Rehabilitation Medicine”) agreed to pay $315,000 to settle allegations that it submitted claims to the Office of Workers Compensation Programs of the United States Department of Labor (“DOL-OWCP) requesting a higher rate of reimbursement than allowed or requesting reimbursement for medical services that were not performed at all.  The government contends that Rehabilitation Medicine submitted these false claims for medical services to federal employees from nine different agencies.  Allegedly, the violations occurred between December 8, 2010 and December 31, 2012.


Bay Sleep Clinic and Related Entities (N.D. Cal. Dec. 28, 2016)

Bay Sleep Clinic, and its related businesses, Qualium Corporation and Amerimed Corporation, and their owners and operators Anooshiravan Mostowfipour and Tara Nadar will pay $2.6 million to resolve allegations that they violated the False Claims Act by billing Medicare for diagnostic sleep tests and devices that violated Medicare rules and regulations.  Specifically, the government alleges that Bay Sleep Clinic and the related entities submitted claims for services performed by technicians who lacked necessary certification, falsified documents to appear as if services were performed in Medicare approved locations, and improperly shared a location with a durable medical equipment provider.  In addition to the settlement, Bay Sleep Clinic voluntarily terminated their two existing Medicare enrollments and agreed to refrain from enrolling any providers for three years.  TAFEF members Anne Hayes Hartman and Jessica Moore of Constantine Cannon represented the relator in this case.


United Shore Financial Services LLC (E.D. Mich. And W.D. Wis. Dec. 28, 2016)

United Shore Financial Services LLC (“USFS”) agreed to pay $48 million to settle allegations that it knowingly originated and underwrote mortgage loans insured under the U.S. Department of Housing and Urban Development’s  Federal Housing Administration (“FHA”) that were not qualified under FHA standards.  Additionally, the government contends that USFS failed to comply with required quality control standards and inappropriately pressured underwriters to approve unqualified FHA mortgages.  The settlement resolves allegations of USFS misconduct between January 1, 2006 to December 31, 2011


Advanced C4 Solutions, Inc. (D. Md. Dec. 28, 2016)

Advanced C4 Solutions, Inc., a Florida-based defense contractor, will pay $4.535 million to resolve allegations under the False Claims Act that it submitted inflated invoices to the government for work performed at Joint Base Andrews.  Allegedly, Advanced C4 Solutions certified that it was a certified small business under the Small Business Act when it did not actually qualify as a small business.  Additionally, Advanced C4 Solutions allegedly submitted invoices from its subcontractor, Superior Communication Solutions, Inc. (“SCSI”) despite knowing that SCSI was charging for labor hours not actually performed and job classification rates for personnel without the required credentials.  The settlement also resolves allegations against the project’s manager, Andrew Bennet, who was responsible for submitting the SCSI’s invoices to the government.


Total Call Mobile, LLC (S.D.N.Y. Dec. 22, 2016)

Total Call Mobile, LLC (“Total Call”) agreed to pay $30 million to resolve False Claims Act allegations that it knowingly defrauded the Lifeline Program, a federal government mobile phone subsidy program that offers discounted mobile phone services to low-income customers.  The government alleged that Total Call knowingly submitted reimbursement claims for customers who did not meet the Lifeline Program’s eligibility requirements and that Total Call falsely certified compliance with the FCC that it was abiding by the Lifeline Program’s requirements.  Specifically, Total Call allegedly used in-person sales tactics to gain customers so that Total Call employees could enter customer demographics themselves, and therefore engage in fraudulent enrollment methods including using the same eligibility proof on multiple customers, tamper with identification documentation, purposefully alter customer input for the benefit of Total Call, and submit entirely false information.  Moreover, the government alleged that Total Call did not implement any proper security, procedures, or fraud preventative reviews of enrollments and continued to approve their enrollments despite knowledge of misconduct.   As part of the settlement, Total Call accepted responsibility for the conduct alleged in the complaint and agreed to not participate in the Lifeline Program.  TAFEF member Johnathan Willens of Willens & Scarvalon represented the relator in this settlement.


SandRidge Energy Inc. (Dec. 20, 2016)

SandRidge Energy Inc., an Oklahoma-based oil and gas company, agreed to pay a $1.4 million penalty to settle charges with the SEC that it used employee separation agreements that violated SEC regulations and also terminated an employee in retaliation for raising concerns regarding how the company calculated its reserves.  The SEC contends that SandRidge Energy Inc. violated SEC employee separation agreement regulations by prohibiting outgoing employees from participating in government investigations or disclosing information to the government that could potentially harm the company.


Wallace Construction and Rosciti Construction (D.R.I. Dec. 19, 2016)

Two Rhode Island construction companies, Wallace Construction (“Wallace”) and Rosciti Construction (“Rosciti”), will pay $1 million to resolve allegations under the False Claims Act that they submitted reimbursement requests or caused the submission of reimbursement requests for work completed on a contract designated for “disadvantaged businesses enterprises” (“DBE”) when in fact they did not qualify as a DBE.  Specifically, the government contends that Rosciti subcontracted Wallace on an Environmental Protection Agency (“EPA”), Department of Education, and Department of Transportation funded contract for roadways, water systems, and parking improvements that contained specific requirements that the project’s subcontractors include minority-owned, women-owned, or small businesses, even though Wallace was not a DBE and lacked the capacity to perform the necessary work on the projects.  In addition to the settlement, Rosciti and Wallace entered administrative agreements with the EPA to resolve further potential claims and appointed internal compliance officers and a third-party external monitor to prevent future misconduct.


Forest Laboratories LLC (E.D. Wis Dec. 15, 2016)

Forest Laboratories LLC and its subsidiary Forest Pharmaceuticals, Inc. agreed to pay $38 million to settle allegations that it violated the Anti-Kickback Statute (AKS) by inducing physicians to prescribe Bystolic, Savella, or Namenda by paying kickbacks to physicians in the form of payments and meals in connection with speaker programs about the respective drugs.  The government alleged that Forest Laboratories’ payments and meals violated the AKS because they were provided even if the programs were cancelled, if no licensed health professionals were present, or if meal programs exceeded Forest Laboratories’ internal budget.  The qui tam suit was brought by a former employee who will receive a $7.8 million reward as part of the settlement.


Elite Lab Services LLC (E.D. Tex. Dec. 14, 2016)

Elite Lab Services LLC agreed to pay $3.75 million to resolve allegations that it violated the False Claims Act by inflating mileage claims.  In the settlement, Elite Lab Services LLC and its husband-and-wife owners admitted that they billed Medicare for tens of thousands of miles that were never actually driven.  The qui tam suit was brought by a former employee who contends that before resigning her employment she raised concerns about Elite Lab Services LLC inflated mileage.  The relator will receive a 21% share as a part of the settlement.


Lynn Madsen (D. Vt. Dec. 14, 2016)

Lynn Madsen, a Vermont pain management doctor, agreed to pay $76,000 to resolve allegations that she violated the False Claims Act by knowingly presenting or causing to be presented false claims to Medicare or Medicaid for services that were not medically reasonable or necessary.  Allegedly, Madsen administered trigger point injections devoid of any therapeutic agent, most often containing only saline or saline-based injectates.  According to the complaint, Madsen submitted hundreds of claims that violated Medicare and Medicaid laws regulations, and program limitations.


Atlanta Workforce Development Agency’s (N.D. Ga. Dec. 13, 2016)

The Atlanta Workforce Development Agency’s (“AWDA”) agreed to pay $1.86 million to resolve allegations under the False Claims Act that it falsely certified that it distributed grant money from the Department of Education to employers administering “federal on-the-job training” to unemployed job seekers.  Instead, the AWDA allegedly distributed the grant money to employers who used it to train already existing employees, in violation of grant stipulations and federal regulations.  The government also settled allegations against AWDA in connection with its former budget analyst and nightclub owner, Kevin Edward,  who pleaded guilty to one count of stealing federal funds by submitting forged and fraudulent wage reimbursements for employees who never actually worked for his companies or instead of receiving skills training, completed “odd-jobs” such as cleaning or yard work.  Over three years, Edwards received approximately $649,000 in grant money from the AWDA.


Bristol-Myers Squibb (D. Del. Dec. 8, 2016)

Bristol-Myers Squibb will pay $19.5 million to 42 states in order to settle allegations that it engaged in off-label marketing of the anti-psychotic drug, Abilify.  Allegedly, Bristol-Myers Squibb marketed Abilify to children and elderly patients presenting symptoms of dementia or Alzheimer’s disease even though Abilify was never approved for that use and received a warning against use on elderly patients with dementia or Alzheimer’s.  Furthermore, the government contended that Bristol-Myers Squibb minimized safety risks and overstated findings of scientific studies, mirroring the allegations of Bristol-Myers Squibb’s previous $515 million settlement in 2007.  Delaware’s Consumer Protection Fund will receive $389,677 of the settlement while $19.5 million will be distributed to the remainder of the States and the District of Columbia.


Southeast Orthopedic Specialists (M.D. Fla. Dec. 7, 2016)

Southeast Orthopedic Specialists will pay $4.488 million to settle allegations that they violated the False Claims Act by billing for medically unnecessary and unreasonable services.  The government contends that Southeast Orthopedic Specialists sought reimbursement for services that did not meet required “meaningful use” standards, knowingly billed for services that failed to meet government requirements, upcoded services, and administered services for the sole purpose of obtaining greater funds.  Allegedly, Southeast Orthopedic Specialists fraudulent conduct resulted in millions of dollars of questionable claims.


Summit Medical Group (D. N.J. Dec. 7, 2016)

Summit Medical Group agreed to pay $9 million to resolve allegations under the False Claims Act that it admitted Medicare patients under “inpatient status,” even though the patients actually qualified under the less expensive “observational status,” or should not have been admitted at all.  Additionally, Summit Medical Group allegedly unnecessarily kept patients in hospitals for three day stays or longer in order to receive greater Medicare benefits at Skilled Nursing Facilities when patients were discharged.  TAFEF member Timothy McInnis of McInnis Law represented the relators, two healthcare professionals, in this settlement.


South Miami Hospital (S.D. Fla. Dec. 7, 2016)

South Miami Hospital, a not-for-profit regional hospital, agreed to pay $12 million to settle allegations that it violated the False Claims Act by submitting claims to government insurance programs for medically unnecessary services and studies.  Specifically, South Miami Hospital allegedly requested payment for heart-procedures, cardiac catheterizations, and electrophysiology studies and procedures.  This suit was brought by a board-certified vascular surgeon and a medical doctor practicing at South Miami Hospital.


Lifepoint Dental Group, LLC (N.D. Iowa Dec. 7, 2016)

Lifepoint Dental Group, LLC and its owners Aaron Blass, Angelina Blass, Mindy Richtsmeir, and Brad Richtsmeier will pay more than $300,000 to resolve allegations that they violated the False Claims Act by submitting claims for services that were medically unnecessary or did not occur at all.  The settlement covered alleged misconduct between April 1, 2015 and October 1, 2015.  The suit was brought by two qui tam relators who were both formerly employed with Lifepoint Dental Group, LLC.


Robert S. Luce (E.D. Ill. Dec. 1, 2016)

A federal judge found Robert S. Luce liable for $3,452,499 for certifying loans to the Department of Housing and Urban Development and the Federal Housing Administration under false verification forms.  Luce personally signed 237 defaulted mortgage loans while operating his mortgage company, MDR Mortgage Corporation.  In addition to the settlement, he consented to a five-month suspension of his law license.


Allied Home Mortgage Capital Corporation (S.D. Tex. Nov. 30, 2016)

A jury found Allied Home Mortgage Capital Corporation (“Allied Capital”) liable for $92,982,775 million based on its fraudulent misconduct associated with falsely certifying loans to the Federal Housing Administration (FHA).  Specifically, Allied Capital knowingly certified loans that were ineligible for FHA mortgage insurance and misrepresented to FHA that the loans were certified with due diligence.  The jury found that Allied Capital recklessly underwrote and certified at least 1,192 loans for FHA insurance, resulting in an $85,615,643 loss.  Separately, Allied Capital will be subject to a statutory penalty under FIRREA.


MedNet, Inc. (D.N.J. Nov. 29, 2016)

MedNet, Inc. (“MedNet’), presently a subsidiary of BioTelemetry, Inc., will pay $1.35 million to settle allegations that they violated the Anti-Kickback Statute (AKS) and False Claims Act by creating agreements that improperly induced its healthcare provider customers to use  MedNet’s cardiac monitoring services.  Specifically, MedNet’s improper agreements enabled providers to directly bill Medicare for MedNet’s services which allowed them to retain Medicare payments, in excess of MetNet’s fees.  TAFEF members Suzanne Durrell and Robert Thomas, Jr. of Whistleblower Law Collaborative represented the relator in this settlement.


Leatha Henderson (E.D. Cal. Nov. 28, 2016)

Leatha Henderson, a Sacramento Landlord, will pay $75,000 to resolve allegations that she violated the False Claims Act by submitting false claims to the government while participating in The Housing Choice Voucher Program, a federal housing subsidy program commonly known as “Section 8.”  Specifically, Henderson allegedly falsely certified compliance with the program’s restriction to not charge tenants more than 32-38% of the total rent.  The whistleblower will receive a $13,500 reward as part of the settlement.


Bechtel National and AECOM (E.D. Wash. Nov. 23, 2016)

Bechtel National and its primary subcontractor, AECOM, agreed to pay $125 million to settle allegations under the False Claims Act that it charged the Department of Energy for materials and work that failed to comply with required quality control standards for nuclear facilities.  Furthermore, Bechtel and its subcontractor allegedly violated the Byrd Amendment by misusing federal funds to engage in a political campaign.  The government contends that Bechtel spent federal funds supporting a campaign that intended to lobby Congress for more funds to complete work on Bechtel’s nuclear reservation and also to downplay the significance of nuclear safety regulations.  All whistleblowers in this settlement were key, former managers at Bechtel National.


Dr. Anthony Clavo (N.D. Ga. Nov. 23, 2016)

Dr. Anthony Clavo, a pain management physician will pay $430,000 to the entry of a consent judgment that he violated the False Claims Act by billing Medicare, Medicaid, and TRICARE for services that were either medically unnecessary or were administered without sufficient information to conclude the medical service was necessary. The settlement covers Dr. Clavo’s alleged misconduct between January 1, 2014 and June 22, 2015.  The qui tam suit was brought by two of Dr. Clavo’s former employees.


ManTech International (E.D. Va. Nov. 22, 2016)

A jury found ManTech International (“ManTech”), a defense contractor, liable for a total of $800,000 in compensatory damages plus respective back pay due to ManTech’s retaliatory termination of two relator executives.  The relator executives, Kevin Cody and his wife Muge Cody, were terminated after reporting billing fraud on a US government contract.  The jury returned a verdict of $500,000 plus $857,846 in back pay and $300,000 plus $496,370 in backpay to Kevin Cody and Muge Cody, respectively.  TAFEF members Scott Oswald and Tom Harrington of The Employment Law Group represented the relators in this matter.


Mousetrap Pediatrics PC (D. Vt. Nov. 18, 2016)

Mousetrap Pediatrics PC will pay $6,706,918.65 to settle allegations that it violated the False Claims Act by improperly coding for medical services.  Specifically, Mousetrap Pediatrics allegedly billed the government for services provided during regular service hours as services provided during extended office hours.  It was determined that the improper billing resulted from a change in practices and was not intentional.  Mousetrap Pediatrics will reimburse Medicaid $51,553.65 in addition to a $15,000 fine and will pay the State of Vermont $6,655,365.


Zwanger & Pesiri Radiology Group LLP (E.D.N.Y. Nov. 16, 2016)

Zwanger & Pesiri Radiology Group LLP (“Zwanger & Pesiri”), a Long Island radiology company, pleaded guilty to two counts of health care fraud and agreed to pay over $8.1 million to resolve its civil liability under the False Claims Act.  Zwanger & Pesiri was guilty of illegally performing and billing for medical services that were never actually ordered and automatically bundling medical tests. Zwanger & Pesiri’s civil settlement also addresses allegations that Zwanger & Pesiri billed Medicare and Medicaid for procedures that were performed without the required supervision of credentialed physicians or were performed at locations not authorized by the federal insurance programs.  As a part of the settlement, Zwanger & Pesiri agreed to enter a Corporate Integrity Agreement.


Niurka Fernandez and Robert Alverez (S.D. Fla. Nov. 8, 2016)

Niurka Fernandez and Robert Alverez, mother and son, will pay $9.5 million and $1.5 million in restitution and serve 120 and 30 months in prison respectively for pleading guilty to co-owning and operating pharmacies for the sole purpose of submitting false and fraudulent claims to Medicare Part D, in violation of the False Claims Act.  Specifically, Fernandez organized and led the scheme to pay Medicare beneficiaries and patient recruiters for medically unnecessary prescriptions, and further paid kickbacks to pharmacies to conceal her fraudulent scheme.  Alverez pleaded guilty to participating in the conspiracy by, among other actions, writing checks to money launderers to obtain kickbacks.  In total, Medicare paid at least $9.5 million in overpayments as a result of Fernandez and Alverez misconduct.


Network Services Solutions (Nov. 8, 2016)

Network Services Solutions and its CEO, will pay the FCC a $21 million dollar fine for defrauding and bribing a Rural Health Care Program in order to influence contract awards.  The FCC charged Network Services Solutions with violating competitive bidding rules, using forged and false documents to obtain funding, and violating the federal wire fraud statute.  In addition to the penalty payments, the FCC required the company to refund the $3.5 million improper payments Network Services Solutions received.


Dan Horsky (E.D. Va. Nov. 7, 2016)

Dan Horksy, a former professor of business administration in New York pleaded guilty to conspiring to defraud the government and submitted false expatriation statements to the IRS, paying a $100 million penalty fee.  Specifically, Horsky invested in many offshore banks and created a nominee entity entitled “Horsky Holdings” in order to conceal his offshore financial transitions and accounts from the government.  Horsky will face a statutory maximum of five years in prison in addition to a period of supervised release.


Biocompatibles (W.D.Tex. Nov. 7, 2016)

Biocompatibles, a medical device manufacturer and subsidiary of BTG PLC pleaded guilty to charges of falsely marketing an embolic device and will pay $36 million to resolve both civil and criminal liability.  Specifically, Biocompatibles told the FDA that “under no circumstance” could it market its approved medical device for drug delivery purposes because clinical studies did not demonstrate adequate evidence of therapeutic benefit.  However, Biocompatibles later marketed the device for drug delivery.  Biocompatibles specifically marketed within the chemoembolization market by advising healthcare providers that the device was “better” for certain types of cancer.  A high ranking marketing professional brought the qui tam suit was brought and significantly aided the investigation by wearing a wire to record conversations.  The relator will receive a 21.5% share in the settlement.  The relator was represented by TAFEF members Paul Lawrence of Water & Kraus.


Air Industries Corporation (C.D. Cal. Nov. 4, 2016)

Air Industries Corporation (“AIC”), an aerospace company, will pay $2.7 million to resolve allegations that it violated the False Claims Act by falsely certifying that it performed required inspections on aerospace parts for military aircrafts, space crafts, and missiles.  The qui tam suit was brought by an employee of AIC who will receive a $621,000 award as part of the settlement.  The relator was represented by TAFEF members David Caputo and David William of Kline & Specter, PC and Joseph Trautwein of Joseph Trautwein & Associates.


Ormat Technologies, Inc. (D. Nev. Nov. 1, 2016)

Ormat Technologies, Inc. agreed to pay $5.5 million to resolve allegations under the False Claims Act that they received millions of dollars in clean energy grants that they were not entitled to by misleading the government on the dates projects were in service, the amount of power produced, their long term viability, and the purpose of site expansion projects.  Allegedly, Ormat Technologies fraudulently reported the amount of energy the plant only generated in order to delay termination of their project.  Additionally, the relators alleged that Ormat Technologies began operated a geothermal plant before regulators approved their qualifications or ability to sell power. TAFEF members John Yanchunis, James D. Young, and Patrik Barthle, II, of Morgan & Morgan, P.A.; Laura S. Dunning, Peter Mougey, and Christopher Gus Paulos, of Levin Papantonio, Thomas, Mitchell, Rafferty and Proctor; and Don Springmeyer, of Wolf, Rifkin, Shapiro, Schulman and Rabkin, LLP all contributed to the settlement.


Life Care Centers (E.D. Tenn. Oct. 24, 2016)

Life Care Centers agreed to pay $145 million to settle allegations that its corporate-wide policies caused the submission of claims to government programs that were not reasonable or necessary, in violation of the False Claims Act.  Allegedly, Life Care Centers employed internal policies that ensured the largest number of patients would qualify for the most expensive category of skilled therapy and nursing services, regardless of whether the patients actually needed the highest level of services.  The settlement also addresses allegations that Life Care Centers kept rehabilitation patients longer than medically necessary in order to obtain larger reimbursements from government insurance programs.  As a part of the settlement, Life Care Centers will enter into a Corporate Integrity Agreement to ensure accurate assessment of medical necessity and appropriateness.  TAFEF members Mark Simpson and Michael Sullivan represented the relator in this settlement.


Hudson Valley Associates, RLLP (S.D.N.Y. Oct. 21, 2016)

Hudson Valley Associates, RLLP (“HVA”) agreed to pay $5.31 million to resolve allegations that it violated the False Claims Act by fraudulently billing Medicare for payments that resulted from unlawfully waived co-payments.  HVA also allegedly systematically submitted false claims for services that it did not actual provide or were not permitted.  HVA admitted, acknowledged, and accepted responsibility for its fraudulent conduct as a part of the settlement.


K3 Learning, Inc. (Oct. 21, 2016)

K3 Learning, Inc. and its President Michael Koffler will pay over $4.3 million to resolve allegations that its special education preschool, Sunshine Development School, over charged the State of New York for services and engaged in a scheme to underreport millions in personal and corporate income tax, in violation of the False Claims Act.  Additionally, K3 Learning, Inc. created a leasing arrangement in which Koffler’s contractor rented the building and also rented a pass-through building in order to lease the preschool at substantial markup.  Moreover, Koffler allegedly engaged in kickback schemes from 2006 to 2010.


Omnicare, Inc. (W.D. Va. Oct., 17 2016)

Omnicare, Inc., the largest nursing home pharmacy in the United States, agreed to pay $28.125 million to settle allegations that violated the False Claims Act and Anti-Kickback Statute by soliciting and receiving kickbacks from Abbott Labs, a healthcare manufacturer, in exchange for promoting and prescribing an anti-epileptic drug for nursing home residents.  Specifically, the relator contends that Omnicare disguised the kickbacks by describing them as “grant” or “educational” funds.  Abbott Labs’ liability was settled in a previous settlement.  TAFEF member-firm Simmer Law Group represented the relator in this settlement.


Five Rochester-area Contractors (October 14, 2016)

Five Rochester, New York contractors will pay a $825,000 fine to settle allegations that they violated the False Claims Act while working on a $1.2 billion dollar government contract, the largest public contract in the city’s history. Allegedly, the companies falsely claimed to meet the minority-and-women-owned business standards required to win the government contract.  The companies also allegedly engaged in “labor pass-through” in which they created the appearance of hiring a minority businesses to perform labor, but only ran paperwork through it.  The five companies are Concord Electric Company, Michael Ferraulio Plumbing & Heating, Manning Squires Henning Co. Inc., Hewit Young Electric LLC, Mark Cerrone, Inc. and will pay $350,000; $200,000; $160,000; $90,000; and $25,000 respectively.


Whittier Health Network, Inc. (D. Mass. Oct. 13, 2016)

Whittier Health Network, a Massachusetts-based nursing home operator, agreed to pay $2.5 million to settle False Claims Act allegations  that it submitted claims to Medicare for therapy, when in fact therapists were only providing initial evaluations.  Allegedly, Whittier Health Network, Inc. therapists also violated Medicare rules by rounding up the actual minutes of provided therapy.  The relator who brought the qui tam suit will receive a 30% relator share, or $750,000, as part of the settlement.  The relator was represented by TAFEF member Louise Herman of the Law Offices of Louise Herman.


Mylan (D. Mass. Oct. 7, 2016)

Mylan will pay $456 million to settle allegations that it violated the False Claims Act by overcharging Medicaid and Medicare by knowingly misclassifying the Epipen as a generic drug, causing government programs to pay more in rebates than they otherwise would have paid.  Allegedly, Mylan and previous drug makers had been misclassifying the Epipen since at least 1997, allegedly totaling nearly $1.3 billion in payments. As a part of the settlement, Mylan will enter a Corporate Integrity Agreement.


Gateway, Inc. (Oct. 11, 2016)

After 13 years of litigation, Gateway, Inc. and its subsidiary Cowabunga Enterprises, will settle allegations that it violated the False Claims Act by failing to collect and remit Illinois use tax on its internet sales in a settlement of $6.27 million. Allegedly, Gateway and Cowabunga sold untaxed merchandise over the internet to Illinois customers despite having representatives or agents in Illinois.  TAFEF members Stephen Diamond and Matthew Burns of Stephen Diamond, PC represented the relator in this settlement.


Burlington Labs Inc. and Burlington Labs LLC (D. Vt. Oct. 11, 2016)

Burlington Labs Inc. and Burlington Labs LLC (“Burlington Labs”) agreed to pay $6.75 million to settle allegations that it submitted false claims or received overpayments from the Vermont Medicaid Program, in violation of the False Claims Act.  Specifically, Burlington Labs allegedly varied how they charged Medicare for specific-drug screening and confirmatory tests based on the number of drugs tested, in violation of Medicare program rules. In conjunction with their settlement, Burlington Labs entered into a Corporate Integrity Agreement which includes independent review of sample claims for up to five years.


Novartis Pharmaceuticals Corporation (E.D. Penn. Oct. 6, 2016)

Novartis Pharmaceuticals Corporation (“Novartis”) agreed to pay $35 million to settle allegations under the False Claims Act that it engaged in off-label marketing of its eczema cream, Elidel.  The relator alleges that the FDA explicitly did not approve using the cream on infants, as it could cause skin cancer and non-hodgkin’s lymphoma, yet Novartis instructed its sales representatives to tell doctors it was safe for infants, capitalizing on the concept of “steroid-phobia,” a Novartis term used to boost prescribers. The relator also alleged that Novartis engaged in a kickback scheme in which it paid doctors to attend expensive dinners and conferences where off-label uses of Elidel were promoted.  TAFEF members Jennifer Verkamp, Frederick Morgan, and Maxwell Smith of Morgan Verkamp represented the relator in this settlement.


Armor Correctional Health Services (Oct. 5, 2016)

Armor Correctional Health Services (“Armor”), a jail health services company responsible for inmate medical services in Nassau County of New York, will pay $350,000 to resolve allegations that it violated the False Claims Act by failing to properly perform or seriously underperforming its contractual obligations.  Specifically, Armor allegedly failed to provide timely reports of key health statistics.  As part of the settlement, Armor agreed not to bid on any contracts in Nassau County and New York State for three years.  The New York Office of the Attorney General will retain $100,000 of the settlement, while the affected New York County will receive $250,000.


Yavapai Regional Medical Center (D. Ariz. Oct. 4, 2016)

Yavapai Regional Medical Center, a non-for-profit community health system, will pay $5.85 million to resolve claims that it violated the False Claims Act by misreporting the amount of hours its employees worked in its annual cost reports.  Yavapai Regional Medical Center’s improper reporting caused Yavapai Regional Medical Center to receive more money from Medicare than they otherwise would have received, as their improper reporting raised Medicare’s wage index, thus skewing Medicare’s calculations.  The settlement resolves alleged conduct between 2006 and 2009.  The relator will receive a $1.17 million share of the settlement


Primary Residential Mortgage Inc. and Security National Mortgage Company (D. Colo. Oct. 4, 2016)

Primary Residential Mortgage Inc. (PRMI) and Security National Mortgage Company (SNMC), both headquartered in Utah, agreed to pay $5 million and $4.25 million respectively to settle allegations under the False Claims Act that they knowingly originated and underwrote loans insured by the Department of Housing and Urban Development (HUD) that did not meet the HUD’s loan requirements.  Among multiple statements of fact, both companies admitted in the settlement that they endorsed loans that did not meet HUD’s requirements.


Three Orthopedic Clinics (E.D. Cal. Oct. 3, 2016)

Orthopedic Associates of Northern California, San Bernardino, Medical Orthopedic Group, and Reno Orthopedic Group agreed to pay $2.39 million ($815, 794, $971,903, and $ 602, 335 respectively) to settle allegations under the False Claims Act that they bought deeply discounted, re-imported foreign osteoarthritis medication and claimed reimbursement from federal and state health care programs, even though the re-imported medications were non-reimbursable.  Allegedly, the government contended that because the medications were re-imported, their labels allowed for unapproved uses, and there was no manufacturer assurance that the product had not been tampered with or stored inappropriately. The qui tam suit was brought by a Senior Musculoskeletal Specialty Manager employed with a manufacturer of one of the allegedly re-imported mediates.  The relator will receive $430,000 of the settlement.


Tenet Health Care (N.D. Ga. Oct. 3, 2016)

Tenet Healthcare (“Tenet”) and its two Atlanta-based subsidiaries, Atlanta Medical Center and North Fulton Medical Center, will pay over $513 million to settle allegations that it they violated the Anti-Kickback Statute and False Claims Act by paying kickbacks to Hispanic Medical Management so that Hispanic Medical Management would send its pregnant Medicaid beneficiaries to Tenet facilities for their deliveries.  Additionally, the government alleged that Tenet told expecting mothers that Medicaid would cover all costs of childbirth if they delivered at a Tenet hospital, leaving them with the false belief that they were unable to select the hospital of their choice.  The two subsidiaries were also charged criminally for conspiracy to defraud the U.S. by obstructing the government functions of HHS.  Tenet avoided prosecution by engaging in a non-prosecution agreement which required it to cooperate with the government investigation, enhance internal controls and compliance and ethical practices, and further to hire an independent compliance monitor to reduce risk of future violations.  TAFEF members Marlan Wilbanks and Susan Gouinlock represented the relator in this case.


Branch Banking & Trust Company (N.D. Ga. Sept. 29, 2016)

Branch Banking & Trust Company will pay $83 million to settle allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development (“HUD”) Federal Housing Administration (“FHA”) that did not meet the FHA’s requirements.  Specifically, as a part of the settlement Branch Banking & Trust Company admitted that it failed to comply with FHA’s loan volume requirements,  almost doubling the stated limit.  Additionally, it admitted that it failed to comply with the government’s quality control and self-reporting requirements. As a result the FHA insured hundreds of loans that it otherwise would not have, and incurred “substantial losses.”


International Game Technology (C.D. Cal. Sept. 29, 2016)

International Game Technology, a casino gaming company, agreed to pay $500,000 to resolve allegations that it terminated an employee in retaliation for reporting distorted financial statements to the SEC.  Allegedly, the employee possessed several years of positive performance reviews, but was removed from significant assignments only weeks after raising concerns about the company’s accounting practices, and then terminated three months later.  After an internal investigation, ordered by the SEC, International Gaming Technology determined that they made no misstatements in their financial records.


Vibra Healthcare LLC (S.D. Tex. Sept. 28, 2016)

Vibra Healthcare LLC, a national hospital chain headquartered in Pennsylvania, will pay $32.7 million to settle claims that it billed Medicare and Medicaid for unnecessary medical services and extended stays.  Allegedly, Vibra admitted patients that did not demonstrate signs or symptoms necessary for admission, and extended patients’ stays without regard to clinicians’ recommendations for discharge, quality of care administered, or the medical necessity of the extension.  Additionally, as part of the settlement, Vibra will enter into a chain-wide Corporate Integrity Agreement.


Tuomey Healthcare System and Ralph J. Cox III (D. S.C. Sept. 28, 2016)

Tuomey Healthcare System and its former chief executive, Ralph J. Cox III will pay $237.4 million and $1 million respectively to resolve allegations that they illegal billed Medicare and Medicaid for serves referred by physicians who had inappropriate financial relations with the hospital system.  In addition, for four years Cox will be unable to participate in any federal healthcare programs.  Tuomey and Cox’s exclusion from federal programs includes both providing management and administrative services paid to federal programs.


Ernst & Young LLP (Sept. 19, 2016)

Ernst & Young LLP (EY) agreed to pay $9.3 million to resolve allegations that the firm misrepresented that it maintained independence in its audits because its audit partners violated rules that ensure objectivity and impartiality during audits through engaging in inappropriate personal relations.  The government contends that EY’s senior partner maintained an improperly close friendship with the CFO of the company EY was auditing and a different EY partner was romantically involved with the company’s chief accounting officer.  In addition, one of the executives must pay a $45,000 penalty and is suspended from appearing before the SEC as an accountant.


North American Health Care (N.D. Cal. Sept. 20, 2016)

North American Healthcare (NAHC), a California inpatient rehabilitation services provider, and its executives will pay a total of $30 million to resolve allegations that it caused the submission of false claims to government healthcare programs for medically unnecessary services.  Allegedly, NAHC kept its residents, continuing to provide rehabilitation services longer than medically necessary, resulting in false claims submitted to government health insurance programs.  NAHC will pay $28.5 million while its executives will pay an additional $1.5 million.  Additionally, NAHC will enter into a Corporate Integrity Agreement.


Regions Bank (M.D. Fla. Sept. 13, 2016)

Regions Bank agreed to pay $52.4 million to resolve claims that between 2006 and 2011 it knowingly certified mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet HUD’s required specifications, resulting in an understated defect rate.  These certifications resulted in HUD insuring hundreds of loans that it otherwise would not have insured.  Additionally, Regions allegedly did not meet HUD’s self-reporting requirements, maintain the required quality control program, or take the appropriate steps to correct loans they discovered were defective.


Westlake Convalescent Hospital (C.D. Cal. Sept. 9, 2016)

Westlake Convalescent Hospital, a Los Angeles nursing home, and its husband and wife owners Jasvat and Meera Modi will pay $3.5 million to settle allegations that they engaged in a scheme to charge Medicare and Medi-Cal for medically unnecessary services and paid illegal kickbacks to a care consortium on skid row in exchange for patient referrals.  Specifically, the couple illegally recruited homeless patients from skid row and improperly transferred them to a hospital for medically unnecessary services, and then discharged them to nursing homes for unnecessary stays. The relator, a former employee, will receive $535,000 because of this settlement.


U.S. Healthcare Supply LLC & Oxford Diabetic Supply (D. N.J. Sept.r 7, 2016)

U.S. Healthcare Supply LLC and Oxford Diabetic Supply and both its owners and presidents will pay more than $12.2 million to resolve claims that they created a false entity through which they made unlawful phone solicitations to Medicare beneficiaries.  Both U.S. Healthcare Supply and Oxford Diabetic Supply both utilized the fictitious entity to sell durable medical equipment.  U.S. Healthcare Supply will pay more than $5 million and its owner, Jon Letto, will pay more than $1 million while Oxford Diabetic Supply will pay more than $6 million.


Federal Prison Industries (D. N.J. Sept. 6, 2016)

Federal Prison Industries (“FPI”), a wholly-owned government corporation and inmate re-entry program, will pay $3 million to resolve allegations that it violated the False Claims Act through multiple violations of their government contract with the Army and Marine Corps.  Specifically, the Army and Marine Corps contracted the Federal Prison Industries to make military helmets, and upon investigation the government discovered that FPI performed improper inspections, lacked correct training procedures, and submitted false inspection records.  Furthermore, their use of makeshift tools produced damaged helmets, which put soldiers at risk.  The whistleblowers, both FPI employees, will receive $450,000 as a part of this settlement.


Clear Vue Eye Center, Inc. (S.D. Fla. Sept. 1, 2016)

Clear Vue Eye Center, Inc. (“Clear Vue”) agreed to pay $1 million to resolve allegations that it engaged in fraudulent billing by unbundling procedures performed on the same day, using improper billing codes to bill for more expensive procedures, and billing for unnecessary procedures.  Additionally, the owner of Clear Vue allegedly engaged in a kickback scheme for referrals.  The relator, an employee of Clear Vue, will receive $200,000 as a result of this settlement.


John Balko & Associates (W.D. Pa. August 31, 2016)

John Balko & Associates, doing business, as Senior Healthcare Associates (SHA) will pay $1 million to settle claims that they submitted claims to Medicare for unnecessary services and procedures.  Allegedly, SHA performed earwax removal procedures, podiatry services, and evaluation and management services on patients that did not authorize or request the procedures.  These procedures were also not supported by patient medical records or and provided based on improper standing orders.


Monsanto Co. (August 30, 2016)

Monsanto Co. agreed to pay $80 million to settle claims that from 2009-2011 they did not properly account for retailers’ and distributors’ rebates on their top selling product, Roundup, causing Monsanto to materially misstate its earnings.  Specifically, Monsanto shifted the costs of the rebates to the following fiscal year, 2010, but kept the sales in fiscal year 2009.  This prevented their stock from plummeting and caused their financial reports to be overstated by $31 million over the two years.  These accounting violations caused materially misstatements over a three year period.  The relator, a former co-executive will receive $22.5 million, a 28% share, as a part of this settlement.


Fairfield Pediatric Dentistry & New Haven Pediatric Dentistry (D. Conn. August 30, 2016)

Jesus Villegas, DDS and his two clinics, Fairfield Pediatric Dentistry and New Haven Pediatric Dentistry, will pay $1,367,466 to settle allegations that a majority of the dental x-rays taken at their offices and submitted for Medicare reimbursement were performed by uncertified dental assistants in violation of the Medicare program requirements. As a part of the settlement, Jesus Villegas, Fairfield Pediatric Dentistry, and New Haven Pediatric agreed to enter into a three year billing Integrity Agreement to ensure continued compliance with federal healthcare programs.


Continuum Health Partners Inc. (S.D.N.Y. August 24, 2016)

Continuum Health Partners Inc. (“Continuum”) and related hospitals will pay $2.95 million to resolve allegations that it knowingly retained overpayments by Medicare in violation of the False Claims Act.  Continuum was only entitled to receive payments for services provided to Medicaid managed-care patients, however the government alleges that after discovering a software error that billed Medicaid as a second payer, Continuum intentionally did not correct the mistake in order to retain the additional payments within 60 days.  A Continuum employee reported the error to management and was subsequently fired, prompting them to bring Continuum’s activity to the attention of government regulators and initiate a qui tam suit.


Tata Consultancy Services (TCS) (C.D. Cal. August 24, 2016)

TaTa Consultancy Services (“TCS”), India’s largest information technology service provider, agreed to pay $26 million to settle allegations that TCS violated the California False Claims Act by failing to deliver the replacement of the government’s automated property tax system (“ATS”).  The government alleged that TCS fraudulently induced the government to choose TCS to replace its ATS, and then turned a 2 year, $6.4 million project into a 6 year, $17 million project through presentation of false invoices, reports, and unachievable milestones and purposely understaffed to achieve maximum profit.   As a result of this settlement, TCS will also dismiss Its cross-complaint.


My Pillow, Inc. (August 17, 2016)

My Pillow, Inc., a Minnesota company that sells pillows and other sleep-related products, will pay $1.1 million to settle allegations that it knowingly failed to collect and remit taxes on its sales conducted over internet and phone sales to New York customers.  This settlement is the first to cover unpaid internet allegations since the 2010 FCA amendments.  TAFEF members Stephen Diamond of Stephen B. Diamond, P.C. and Timothy McInnis of McInnis Law worked to settle this case.


Scappa Urology (M.D. Fla. August 17, 2016)

Robert A. Scappa, D.O. of Scappa Urology  agreed to pay $250,000 to resolve allegations that he caused claims to be submitted to the government for tests that not medically necessary according to Medicare guidelines.  Additionally, Scappa earned bonuses from the company as a result of referring patients to take these tests. The relator was a former medical assistant with Scappa Urology and will receive $35,500 of the settlement.


JP Morgan (August 16, 2016)

JP Morgan reached a $950,000 settlement with Indiana, resolving claims that JP Morgan violated SEC securities laws by not properly informing its clients that invested in discretionary funds of additional options outside of JP Morgan. This settlement comprises Indiana’s first whistleblower award.  The relator will be awarded the maximum percentage given their significant effort to aid the investigation.


Health Net, Inc. (August 16, 2016)

Health Net, Inc., a California-based insurance provider, agreed to pay the SEC a $340,000 penalty for illegally including language in their employee’ severance agreements that barred departing employees from receiving awards from the SEC whistleblower program.  Allegedly, Health Net added the prohibition after the SEC implemented the prohibition on taking action to prevent communications with the SEC about securities law violations.


Marinello Schools of Beauty (C.D. Cal. August 16, 2016)

Marinello Schools of Beauty agreed to pay $11 million to resolve allegations that the school falsified high school diplomas and attendance in order to receive the maximum amount of federal student aid.  The Department of Education also alleged that Marinello did not provide students with the equipment they needed to become properly trained. The $11 million settlement will be divided between the government and six whistleblowers.  TAFEF member Justin Berger of Cotchett, Pitre, & McCarthy represented the relator In this matter.


UMC Physicians (N.D. Tex. August 9, 2016)

UMC Physicians (UMCP) and the Estate of Kenneth Michael Rice will pay $3,280,000 to settle allegations that Dr. Rice and UMCP billed Medicare and Medicaid for in-person evaluations, when in fact the services were provided by non-physician providers.  Allegedly, Dr. Rice and UMCP submitted these improper claims from January 2008 to February 2015.  UMPC and the Estate of Kenneth Michael Rice will pay $1,280,000 and $2,000,000 respectively.


Sherman Hills Realty LLC and Park Management LLC (M.D. Penn. August 8, 2016)

Sherman Hills Realty LLC and Park Management LLC (“Sherman Hills”) agreed to pay $125,00 in a settlement resolving allegations that Sherman Hills failed to provide its tenants with their utility reimbursement funds. Sherman Hills obtained funds from the Department of Housing and Urban Development (HUD) that were intended for low and no Income tenants as a part of a Housing Payment Contract.


Sweet Dreams Nurse Anesthesia (M.D. Ga.  August 5, 2016)

Sweet Dreams Nurse Anesthesia (“Sweet Dreams”) will pay $1,034,416 to settle allegations that engaged in two kickback schemes in order to induce patient referrals.  The first scheme involves allegations that Sweet Dreams provided free anesthesia drugs to ambulatory surgery centers (ASC) in exchange for an exclusive contract to provide those centers with anesthesia.  The second scheme alleges that an affiliate of Sweet Dreams agreed to fund the construction of an ASC in exchange for an exclusive contract at the center and other podiatry-based ASCs.  Sweet Dreams cooperated completely with the government’s investigation of these claims.


Jacintoport International LLC and Seaboard Marine Ltd. (D.D.C August 2, 2016)

Jacintoport International, a cargo handling firm, and Seaboard Marine Ltd., a stevedoring firm and affiliate of an ocean transportation company, agreed to pay $1.075 million to resolve allegations that they charged the United States more than permitted in their contract to store and deliver humanitarian aid.  Specifically, Jacintoport charged Seaboard more than the explicit rate cap dictated in its contract and concealed these charges by lumping it with other charges in the contract.  This case was brought in a qui tam suit by a relator who previously worked for Jacintoport and discovered a suspicious invoice.


Tenet Healthcare (N.D. Ga. August 2, 2016)

Tenent Healthcare (“Tenent”) will pay $513 million to settle allegations that it violated the False Claims Act (FCA) by paying kickbacks to Hispanic Medical Management so that Hispanic Medical Management would send its pregnant patients on Medicaid to Tenent facilities for their deliveries.  Furthermore, the relator contends that Tenent disguised these kickbacks as payments for a variety of services allegedly provided by Tenet’s clinics.  Tenent will pay $368 million in civil monetary payments, pay $146 in criminal payments, and plead guilty to 1 count of conspiracy to violate the Anti-Kickback statute.  TAFEF members Marlan Wilbanks and Susan Gouinlock represented the relator in this case.


St. Joseph’s Hospital Health Center (N.D. N.Y. August 1, 2016)

St. Joseph’s Hospital Health Center (“St. Joseph’s Hospital”) agreed to pay $3.2 million to settle claims that it violated the Federal and New York False Claims Act (FCA) when submitting claims to Medicaid for services provided by unqualified staff.  The government alleges that from January 2007 to February 2016 St. Joseph’s Hospital misrepresented its compliance with Medicaid’s basic mental health staffing requirements by submitting these false claims, and therefore violated the FCA.  In the settlement, St. Joseph’s Hospital admitted that conducting and then billing Medicaid for mobile crisis outreach, which provides initial evaluations, assessments, and crisis intervention, without professional staff present was improper.


SRA International & Galaxy Scientific Corp (D. N.J. July 20, 2016)

To resolve allegations that SRA International & Galaxy Scientific Corp (“SRA”) used shell affiliates to unlawfully gain profit on military contracts, SRA agreed to pay $1.1 million in settlement.  The government contends that from 2004-2005 SRA used GalaxyTechnologies LLC (GTech) as a shell affiliate to induce the government to award funds and task orders that it otherwise would not have granted.  Furthermore, SRA also used GTech to disguise actual costs and misrepresent what work was performed .  This suit was brought by a contracting officer who will earn a 22.5% share in the settlement.  The relator was represented by TAFEF members Eric Jasso and Bill Hardy.


Gagosian Gallery (July 20, 2016)

Gagosian Gallery, a leading international dealer of contemporary art, agreed to pay $4.28 million to settle allegations that it violated the False Claims Act (FCA) by failing to collect State and Local New York taxes on art it shipped to New York.  The government contends that between 2005 and 2015 Gagosian Gallery and Pre-War Art, an affiliate of Gagosian, sold and shipped $40 million in art to New York and did not collect required taxes.  Furthermore, they engaged in substantial economic activity to promote Pre-War Art within the New York area.  In addition to the settlement, Pre-War Art will provide its sales information to the NY Tax Department for the next six years and will establish a separate division for shipments out-of-state.


Motives Group (S.D.N.Y. July 20, 2016)

The United States Department of Justice has fined Motives Group, a China-based clothing manufacturer and importer, for engaging in a double-invoice scheme in order to evade customs duties.  From 2009-2013, Motives Group conspired with clothing wholesalers to make false representations regarding the value of their merchandise on entry documents, which caused them to pay less than the required amount for their imports.  Motives Group used two sets of invoices to disguise their fraudulent conduct.  The federal government was first made aware of Motives’ scheme through a qui tam action under the False Claims Act.


Columbia University (S.D.N.Y. July 14, 2016)

Columbia University (“Columbia”) will pay $9.5 million to settle allegations that they improperly sought and received cost recoveries for research grants funded by the National Institute of Health (NIH).  Allegedly, Columbia applied an on-campus direct cost rate when the facilities they used were actually off-campus, as they were not owned, operated, or paid for by Columbia.  The on-campus rate was much more expensive than the off-campus rate, thus costing the government more money than it otherwise would have spent.  In the settlement, Columbia admitted that it applied the incorrect code and that it submitted NIH certified reports using the on-campus rate to calculate indirect costs. The relator in this case was represented by TAFEF member, Timothy McInnis of McInnis Law.


Vesta Blue, 70, and Life Techniques & Care Team Solutions (E.D. Ky. July 13, 2016)

As a part of a settlement with Vesta Blue, 70, and Life Techniques & Care Team Solutions, the court ordered a Lexington woman, Brue, and her medical device companies were ordered to pay $4.5 million for making false statements to the National Institute of Health (NIH).  The settlement resolves allegations that Brue and her company included false statements in grant applications for Small Business Innovation Research grants, which caused her to receive millions in grant money that she was not entitled to receive.  Brue is ordered to sell all of her real property within one year and pay 80% of net sale to the government as well as pay 70% of her companies’ profit to the government for the next four years.



Evercare Hospice and Palliative Care (D. Colo. July 13, 2016)

Evercare Hospice and Palliative Care (“Evercare”), now named Optum Palliative & Hospice Care, agreed to pay $18 million to settle alleged False Claims Act violations.  Evercare  is a Minnesota-based hospice provider that serves patients across the United States.  Former employees of Evercare filed a qui tam action alleging that from January 2007-December 2013 Evercare claimed reimbursement for patients that were not terminally ill, and therefore ineligible for Evercare’s services.  Moreover, the relators alleged that their business practices discouraged doctors from recommending discharge when appropriate and failed to confirm that nurses kept complete and accurate patient records.  TAFEF members James Barger, of Frohsin & Barger, Katherine Marie Holiday, of Cross Law Firm, Michael Porter of The Law Firm, of Michael S. Porter, Paul Stephen Enockson, of Enockson Law LLC, and Richard LaFond, of Richard C. LaFond P.C. all worked to bring this successful settlement.



Brighter Concepts, Inc. (D. Conn. July 12, 2016)

Co-owners of Brighter Concepts, Inc., Dr. Ashwini Sabnis and Saurav “Sam” Mohanty agreed to pay $400,000 to resolve claims that they engaged in a scheme to submit false claims for services not actually provided and submit claims that were knowingly coded incorrectly to receive greater reimbursement than warranted.  Specifically, the state alleges that from January 2010 to July 2012 Sabnis, a psychiatrist, double, triple, and even quadruple booked Medicaid patients, as well as used coding that indicated 75 to 80 minute visits, when actually she saw the patient for 5 to 10 minutes.  This settlement is part of the State of Connecticut’s Interagency Fraud Task Force’s larger effort prosecute healthcare fraud.


Martin E. Cutler, M.D., P.C. (D. Mass. July 5, 2016)

Martin E. Cutler, an ophthalmologist who owns the company Martin E. Cutler, M.D., P.C. will pay $55,000 to settle allegations that his company submitted false claims for payment to Medicare.  From January 2010 to December 2014, Dr. Cutler and his practice were allegedly billing Medicare for diagnostic images when an underlying diagnosis to justify the imaging did not exist.  Moreover, the government contends that Dr. Cutler and his practice submitted claims to Medicare that were previously denied then  showed no supported documentation for submitting it again as a new claim.  This settlement was brought by a relator under the qui tam provision of the False Claims Act.


Biosound Medical Services and Heart Solution PC (D.N.J. July 12, 2016)

Nita Patel and Kirtish Patel and their two New Jersey-based companies, Biosound Medical Services Inc. and Heart Solution PC were ordered to pay $7.75 million for falsifying thousands of medical reports and tests, as well as knowingly submitting false claims to Medicare.  The government alleged that the Patels created fraudulent diagnostic test reports, forged physician’s signatures on reports, and billed Medicare for tests and reports required to create the aforementioned falsified reports.  Furthermore, the government alleged that the Patels billed Medicare for neurological tests conducted without the required physician supervision.  Both Patels pleaded guilty to the healthcare fraud charged related to these allegations and are scheduled for sentencing in August 2016.  The relator was represented by TAFEF member, Timothy McInnis of McInnis Law.


Drayer (D.S.C. July 9, 2016)

Drayer Physical Therapy Institute, LLC (“Drayer”) agreed to pay $7 million in a settlement agreement.  The settlement resolves allegations brought by two former employees under the False Claims Act, relators alleged that Drayer submitted false claims to Federal Employee Health Benefit Programs, Medicare, and TRICARE by performing group therapy sessions, but charging the government as if each member of the group therapy session received individual treatment. The court awarded relators 24% of the settlement, or $1,680,000.


MD2U Holding Company (W.D. Ky. July 7, 2016)

MD2U Holding Company (“MD2U”), a Louisville-based provider of home-based care, admitted to violating the False Claims Act in a settlement agreement.  As a part of the settlement agreement, MD2U will pay millions and enter into a five year Corporate Integrity Agreement with HHS-OIG to resolve allegations.  The government alleged that between July 2007 and November 2014, MD2U  required non-physician providers (NPPs) to record that patients were homebound regardless of whether they actually were homebound, required NPPS to perform medically unnecessary visits, engaged in upcoding, and unlawfully copied and pasted notes between visits to misrepresent the services NPPs provided.  MD2U not only admitted that it violated the False Claims Act, but also that its submissions of claims for payment, misrepresentations, and deceptive conduct was executed with reckless disregard of the falsity of claims and cost the United States $21,511, 756.


MV Transportation (D.D.C. July 6, 2016)

MV Transportation, a paratransit contractor, will pay a total of $184,00 to settle allegations that it billed MetroAccess for services that it did not provide.  Specifically, the government alleges that MV Transportation  transported customers that it knew or should have known were deceased, and charged MetroAccess for their transportation.  Furthermore, MV Transportation documented that it used wheelchair transportation for customers who did not need wheelchairs, resulting in charges that cost MetroAccess nearly twice what it should have cost. While MV Transportation does not admit wrongdoing, it will pay D.C., Virginia, and Maryland $36,000, $22,500, and $ 92,000 respectively.


En Pointe (July 6, 2016)

Five information technology companies who serve as government service contractors will pay $5.8 million dollars to resolve allegations that it falsely represented a company as a small business in order to receive money specifically set aside for small businesses.  Allegedly, En Pointe Inc., En Pointe Technologies Inc., En Pointe Technologies Sales Inc., Dominguez East Holdings LLC, and Din Global Corp. collaborated to depict En Pointe, Inc. as a small business.  This misrepresentation caused En Pointe to receive small business that should have been awarded to actual small businesses.  Moreover, the government contends that these companies also underreported their sales to the General Services Administration to evade fees.  This suit was brought by a managing member of Minburn Technology Group under the qui tam provision of the False Claims Act.