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False Claims Act Statistics, News & Analysis

  • 24
  • January
  • 2018

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"Taint" Theory of Damages Dead in the Seventh Circuit? One District Court Has Not Received the Message

Adopting a view that has been roundly rejected by federal circuit courts (including the Seventh Circuit), the U.S. District Court for the Northern District of Illinois in United States & City of Chicago ex rel. Chicago Regional Council of Carpenters v. Sound Solutions Windows & Doors, Inc. endorsed the “taint” theory of FCA damages, awarding the full value of contracts as damages based on the defendants’ non-compliance with a contractual term, notwithstanding their complete performance of the tangible work under the contracts.

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  • 31
  • October
  • 2017

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Escobar Continues to Bring More Treats Than Tricks For FCA Defendants — Seventh Circuit Overrules Longstanding Causation Precedent, Adopts Proximate Cause Standard

Handing out a pre-Halloween treat to FCA defendants, the Seventh Circuit last week overruled its 1992 decision adopting a “but-for” causation standard to join its sister circuits in holding that FCA plaintiffs must prove that a defendant’s false claim was both the but-for and proximate (i.e., foreseeable) cause of the government’s loss.

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False Claims Act Cert. Monitor: Attorneys’ Fees, Reverse False Claims, Public Disclosure Bar, and Government Employees as Relators Feature in Three New Petitions

Three new FCA relator cert. petitions have landed in the past few weeks, covering the gamut of FCA legal issues.

First, the relator in U.S. ex rel. Harper v. Muskingum Watershed Conservancy District, 16-1278, takes us back to 1L Property, alleging that the Army in 1949 granted the defendant water district a “determinable fee simple estate subject to a possibility of reverter interest retained by the United States.” In other words, the government gave the water district government land to keep so long as the land was used for recreation, conservation, etc. The relator contends that when the defendant entered into oil and gas leases on the land but kept the land and the lease income, it knowingly and improperly avoided an obligation to return the property and income to the government—i.e., a conversion reverse false claim. The question presented to the Court is whether, for a reverse false claim, the relator needed to plead that the defendant subjectively knew that it was violating the terms of the deed and had not committed a mistake of law. A potential difficulty for this petition, however, is that neither Sixth Circuit’s majority nor the dissent focused on the question of subjective knowledge of mistake of law, but rather on whether the relator pleaded sufficient facts from which the court could infer that the defendant “knew or should have known” of the requirement to return the property. The response is currently due June 26, 2017.

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Litigation Update: Rose District Court Recognizes Sanford-Brown Decision and Certifies Post-Escobar Questions for Interlocutory Appeal

We have been monitoring United States ex rel. Rose v. Stephens Institute, a post-Escobar implied false certification case in which the Northern District of California considered whether a university violated the FCA when it obtained funding from the U.S. Department of Education (DOE) by allegedly falsely certifying compliance with Title IV of the Higher Education Act. Relators allege in this non-intervened case that the university was providing incentive payments to student recruiters, which is a violation of Title IV. As we reported here, the court ruled against the university on both falsity and materiality and the university moved to certify the district court’s order for immediate appeal. Over the government’s objections in a statement of interest, the district court on October 28, 2016 certified three of the university’s four proposed questions for interlocutory appeal and stayed the case pending resolution of the university’s appeal.

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Seventh and Eighth Circuits Grade Relators’ Materiality Claims in First Appellate Materiality Decisions Applying Escobar

Last week, the Eighth Circuit issued the first appellate decision to engage in a detailed application of the False Claims Act’s (FCA) materiality standard after Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016). The court, reviewing a summary judgment ruling against the relators below, reversed, concluding that even under the Escobar’s “demanding” materiality rule, there was a genuine issue of material fact about whether the regulatory and contractual violations at issue were material. The Seventh Circuit quickly followed this week, concluding that the relator presented no evidence of misrepresentations connected with claims for payment and no evidence that the government’s decision to pay actually would have been affected by knowledge of the defendant’s alleged violations.

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Recent Decisions Give Teeth to Escobar’s Materiality Standard

As predicted, in the few months since the Supreme Court handed down Escobar, there has been a flurry of litigation and a few early district court decisions attempting to flesh out just what materiality means in a post-Escobar world. Although there is not unanimity among the courts to consider the issue thus far, a series of recent district court decisions signals a growing consensus that Escobar requires heightened scrutiny of materiality at the motion to dismiss stage, and in particular, an increased focus on the government’s actual conduct in paying claims.

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