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False Claims Act Statistics, News & Analysis

It Doesn’t Take an Eisenstein to See the Eleventh Circuit Missed the Mark: New Decision Allowing Relators to Extend Statute of Limitations Is Contrary to Supreme Court Precedent and Creates Circuit Split

While not rocket science, or even particle physics, the FCA was complicated enough without introducing yet a new circuit split. Yet, in United States ex rel. Hunt v. Cochise Consultancy, Inc., the Eleventh Circuit has disagreed with at least two other circuits (the Fourth and the Tenth) in holding that relators in non-intervened qui tam actions can rely on a statutory exception to the otherwise-applicable six-year statute of limitations that allows suit to be brought within three years of when the government learns of the potential fraud. The court parted ways with the majority view that only the government can rely on this alternative provision, a rule grounded in the sensible position that the government itself is only a party when it decides to intervene. The Supreme Court in U.S. ex rel. Eisenstein v. City of New York, 556 U.S. 928 (2009), recognized as much when it held that a relator in a non-intervened case could not take advantage of the government’s sixty-day appeal period and instead had only the usual thirty days available to an ordinary party. This was because, as the Court recognized, the United States itself is not a party to the appeal in a non-intervened case. Id. at 937. Without much analysis, the Eleventh Circuit simply found Eisenstein’s reasoning inapplicable and held there was no textual basis in the FCA to prevent relators from taking advantage of the three-year alternative found in 31 U.S.C. § 3731(b)(2). Again, without much reasoning or discussion, it simply found the Fourth and Tenth Circuits unpersuasive (never mind the multiple district courts that have sided with the majority rule). 

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Three's A Crowd: Potential Third Party Liability in FCA Suits

So often more is merrier, but when it comes to FCA liability, three can be a crowd. The government rarely pursues third-party liability in FCA cases despite the routine involvement of consultants, auditors, and investors with companies alleged to have defrauded the government. In what appears to be an effort to expand the scope of FCA liability to a new class of defendants, the government in February pursued FCA claims against two third parties. On February 16, the government intervened in United States ex. rel. Medrano v. Diabetic Care RX, LLC, No. 15-cv-62617 (S.D. Fla. Feb. 16, 2018) alleging that Riordan, Lewis & Harden, Inc. (“RLH”), the private equity sponsor of the pharmacy now known as Patient Care America (“PCA”), through two RLH partners who oversaw the investment, was responsible in part for an illegal kickback scheme designed to obtain increased prescriptions for compounded creams and vitamins, and thus greater reimbursement from TRICARE. A week later, on February 28, the government announced a $149.5 million settlement with Deloitte & Touche LLP (“Deloitte”) for knowingly deviating from traditional auditing standards which the government argued allowed the mortgage originator Taylor Bean & Whitaker Mortgage Corporation to defraud the government. Though these cases are not directly related, the timing suggests that third-party FCA liability may be a focus of the DOJ moving forward.

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Trap! Zap! Zing! — And Poof! A Florida Court Applies Escobar and Makes a $347 Million FCA Jury Verdict Disappear

On January 11, 2018, a Florida district court vacated a $350 million FCA jury verdict against defendants in U.S. ex rel. Angela Ruckh v. Salus Rehabilitation, LLC, No. 8:11-cv-1303 (M.D. Fla. Jan. 11, 2018). At trial in February 2017, relator claimed that the defendants, owners and operators of 53 specialized nursing facilities fraudulently inflated the amount of resources needed by their patients by upcoding Resource Utilization Group (“RUG”) levels to increase the amount they were able to bill Medicare and Medicaid. The jury agreed and found the defendants liable for $109.8 million in damages, which the judge then trebled to $347 million. The government had declined to intervene, but stood to reap the benefits of relator’s perseverance, but the court had other ideas.

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The More Things Change, the More They Stay the Same: Analyzing Recoveries by Circuit for FY 2017

We’re back with the third installment of our series analyzing FCA statistics for DOJ FY 2017, this time taking a closer look at recoveries by circuit. After our prior posts describing the steep drop in recoveries overall from last year, it may not come as a surprise to LLB readers that the geographic analysis has changed a fair bit in the last year. Only one of the leaders from DOJ FY 2016 is still at the top in DOJ FY 2017: the Eleventh Circuit. Indeed, the Eleventh Circuit, which ranked third last year with $808 million across 100 recoveries, came out in front in DOJ FY 2017 with the DOJ raking in just over $1 billion across 26 recoveries. This means that the number of cases brought to conclusion in 2017 dropped 74% from the previous year, but DOJ’s payout increased by just over 24%. Does this signal a smarter, more targeted civil fraud bar in the Eleventh Circuit, or is this mathematical windfall simply a fluke? Impossible to say definitively, but it is worth noting that over a third of this year’s Eleventh Circuit total was recovered from just one matter (the Shire Pharmaceuticals LLC medical device case we blogged about last week) and another third is derived from a CMC II Judgment (though that judgment is currently stayed pending appeal).

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