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False Claims Act Statistics, News & Analysis

Will Defendants Be Left With the Tab, Even When Government Pays the Bill?: Courts Continue to Wrestle With Post-Escobar Materiality Standard

Potentially adding to continued confusion regarding what to make of materiality in Escobar's wake, two more recent cases — one stemming from the Eastern District of Pennsylvania and the other from the Court of Federal Claims — have addressed when FCA claims fail because the government paid the bill with knowledge of the alleged noncompliance with underlying rules or requirements. In both cases, defendants urged the courts to strike down FCA claims by relying on Escobar’s holding that “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 2003-04 (2016). The Court of Federal Claims, after a trial, agreed with defendants, while the Eastern District of Pennsylvania, on a motion to dismiss, did not.

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The Second Circuit Protests Too Much We Think — Disguising Deepening Split on Rule 9(b)

Injecting additional uncertainty into the already-muddled case law regarding what precisely must be pleaded with particularity under Rule 9(b), the Second Circuit in U.S. ex rel. Chorches v. American Medical Response, Inc., No. 15-3930, 2017 WL 3180616 (July 27, 2017), held that a relator need not identify a specific invoice in order to adequately plead that a false claim was presented to the government. While Chorches would seem to deepen a circuit split on Rule 9(b) — one the Supreme Court has repeatedly declined to take up — the Second Circuit goes to great lengths to downplay its existence. According to the Second Circuit, “the reports of a circuit split are, like those prematurely reporting Mark Twain’s death, greatly exaggerated.”

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Nursing Homes Save Payment for Another Day as Court Grants Emergency Motion to Stay $347 Million in Judgments Against Them

We last reported on United States and Florida ex rel. Ruckh v. CMC II, LLC, et al., 8:11-cv-1303 (M.D. Fl.) earlier this month, when a federal jury returned a verdict for $115 million against the defendant nursing homes, finding that defendants had submitted false claims to Medicare and Medicaid for unnecessary patient care or patient care that was never supplied.  After trebling and additional penalties, CMC II and the other corporate defendants now face over $347 million in damages.  In an unusual turn of events, the defendants filed an emergency motion on March 13 in which they asked the court to stay the execution of judgments pending the Court’s consideration of one or more post-trial motions to be filed by the end of March.  The emergency motion went unopposed, and the court granted the motion.

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A Roll of the Dice: FCA Jury Verdict Finds Over $115 Million in Damages

After betting it all on a federal jury in Florida, four defendants in a non-intervened qui tam FCA action now face more than $347 million in damages. The jury returned a verdict for $115 million, which the court then trebled and tacked on more than $2.4 million in penalties. In United States and Florida ex rel. Ruckh v. CMC II, LLC, et al., 8:11-cv-1303 (M.D. Fl.), the four corporate defendants—CMC II LLC, Salus Rehabilitation LLC, 207 Marshall Drive Operations LLC, and 803 Oak Street Operations LLC—were found to have submitted, or caused to be submitted, false claims to Medicare and Medicaid for patient care that was unneeded, or not supplied at all, at 53 skilled nursing facilities (“SNFs”) in Florida. In rare jury verdicts like this and the verdict we covered last year, the jury’s verdict is only the first bad draw for defendants: trebling, penalties, attorney’s fees, reasonable expenses, and costs are all part of the second wave of misfortune when an FCA defendant loses at trial.

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  • 21
  • February
  • 2017

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Double Dipping: Liability for FCA Violations Doesn't Necessarily End with the DOJ

Last month a federal judge in Tennessee approved a $60 million settlement in a shareholder derivative action brought on behalf of Community Health Systems, Inc., officially resolving five years of litigation. A qui tam FCA action based on the same underlying conduct settled for $98 million in 2014, not including the attorneys’ fees and expenses also owed. Both actions arose from allegations that the company shirked the traditional evidence-based and objective admissions criteria used by most hospitals in favor of more lenient criteria designed to steer patients toward medically unnecessary inpatient admissions. Allowing patients to be treated inpatient rather than outpatient allegedly allowed Community Health Systems to receive hundreds of millions of unwarranted Medicare and Medicaid reimbursements for the inpatient services. The derivative suit plaintiffs claimed that the actions of the officers and directors left the company open to legal liability, including the FCA claims, resulting in substantial harm to the company’s reputation and financial health. This settlement is a cautionary tale for all public companies facing potential FCA claims: liability and fees may not end with a settlement with the DOJ.

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Supreme Court Nominee Judge Gorsuch on the False Claims Act

President Trump recently announced that he was nominating Judge Neil M. Gorsuch to fill the Supreme Court seat vacated one year ago by the death of Justice Antonin Scalia. We at LLB went to work researching what a Justice Gorsuch might mean for future case law construing our favorite statute, the False Claims Act. Here is what we found.

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