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False Claims Act Statistics, News & Analysis

Armor Manufacturers (Mostly) Deflect FCA Claims Again Post-Escobar: District Court Finds Implied, Extra-Contractual Duties Not Bargained For and Thus Not Material

In related cases U.S. ex. rel. Westrick v. Second Chance Body Armor, Inc. and U.S. v. Toyobo Company, Ltd., the D.C. district court recently determined on a motion to reconsider post-Escobar that implied “extra-contractual” requirements, not included in the language of the contract with the government, may nevertheless form the basis of an implied certification claim. No. 1:07-cv-01144 (D.D.C. Mar. 31, 2017). But, the court found that since the government in Westrick and Toyobo presented no evidence that it in fact contracted or bargained for the alleged extra-contractual obligations, the obligations were not material to payment and affirmed its previous grant of summary judgment for defendants on their FCA claims based on a violation of those obligations.

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  • 11
  • April
  • 2017

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The Quicken Origin Story:  Michigan Federal Court Addresses False Claims Act

Last week we wrote about the opinion in United States v. Quicken Loans Inc., specifically discussing its ruling on causation of damages under the FCA. No. 16-CV-14050, 2017 WL 930039 (E.D. Mich. Mar. 9, 2017). As we noted, Quicken touches on other important FCA issues, including knowledge and materiality. But since liability necessarily precedes damages, let’s go back now to discuss certain of the court’s rulings on knowing violations of ambiguous rules under Safeco and on materiality after Escobar.

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  • 04
  • April
  • 2017

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Fifth Circuit Holds Relators’ Rubber Stamp Anxiety Insufficient to Clear Escobar’s Materiality Hurdle Given Government Inaction after Investigation

The Fifth Circuit recently issued a helpful materiality decision for defendants in Abbott v. BP Exploration & Production, finding that the Department of the Interior’s (“DOI”) decision to allow an oil production facility to continue operating after an investigation into the relators’ allegations is “strong evidence” that a regulation’s alleged stamping requirement is not material. No. 16-20028, 2017 WL 992506 (5th Cir. Mar. 14, 2017).

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A Rebel Claim Without a Cause? Michigan Federal Court Analyzes False Claims Act Causation of Damages Standard

In the recent decision in United States v. Quicken Loans Inc., the district court found the government adequately pleaded that Quicken Loan Inc. (“Quicken”) submitted false claims and made false statements material to false claims for insurance payouts from the Federal Housing Administration (“FHA”) for defaulted FHA-insured loans that Quicken had not properly underwritten. No. 16-CV-14050, 2017 WL 930039 (E.D. Mich. Mar. 9, 2017). As a result, the Court denied most of Quicken’s motion to dismiss except for one theory of liability and certain untimely claims.

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False Claims Act Cert. Monitor: Relator Asks Court to Extend Benefit of FCA Statute of Limitations Tolling Provision to Relators

As FCA aficionados know, the FCA’s statute of limitations provides that claims are timely only if they are brought either (1) within 6 years of the FCA violation, or (2) within 3 years of “the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances,” up to 10 years after the FCA violation. A new FCA cert. petition raises the question whether relators in non-intervened qui tam cases can take advantage of the latter provision to toll the limitations period.

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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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Ding, Dong, the Case is Dead – Which Old Case, the Barko Case

This spring’s winter blast may dampen this year’s cherry blossoms but didn’t dim the spirits of your friends at LLB, especially those who represented KBR in the long-running Barko qui tam case. Huddled indoors on Tuesday, we received an unexpected, but welcome glimmer of sunshine. Over three years after the motion was filed, the district court issued a more than 60-page decision granting summary judgment for KBR. United States ex rel. Barko v. Halliburton Co., et al., No. 05-cv-1276. Judge Royce Lamberth, who penned the decision, is the third district judge to sit on this case since its inception a dozen years ago, having inherited the case (and then-pending summary judgment motion) from Judge James Gwin, who had in turn taken over the case from Judge Emmet Sullivan at the motion to dismiss stage. This non-intervened case, filed under seal in 2005, alleged that KBR violated the FCA in a number of ways, including by accepting kickbacks, rigging subcontractor bids, and billing the government for duplicative or poorly performed work under the LOGCAP cost reimbursement contract under which KBR provided logistical support to the U.S. military during the conflicts in Iraq and Afghanistan.

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  • 10
  • March
  • 2017

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Moody’s Manhandles Materiality: Court Finds Materiality Defeated by Government’s Continued Payment after News Reports and Congressional Hearings

On the heels of the D.C. Circuit’s favorable materiality decision in U.S. ex rel. McBride v. Halliburton, which we wrote about previously, the Southern District of New York on March 2 issued another helpful materiality decision for defendants. In U.S. ex rel. Kolchinsky v. Moody’s Corp., the district court found that congressional investigations and news reports about a relator’s allegations put federal agencies on notice of the relator’s allegations. No. 12-cv-1399, 2017 WL 825478 (S.D.N.Y. Mar. 2, 2017). Because the government paid the defendant’s claims after those public investigations and reports, the court concluded the relator’s allegations failed Escobar’s materiality test.

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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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False Claims Act Cert. Monitor: Second Circuit Case Remanded for Escobar, Three Other FCA Cert. Petitions Denied

On Tuesday, the Supreme Court granted the relators’ petition for certiorari, vacated the judgment below, and remanded (“GVR’d”) in Bishop v. Wells Fargo & Co., No. 16-578, with instructions for the Second Circuit to reconsider its decision in light of the Supreme Court’s decision in Escobar.  As we explained last November, the Second Circuit, following its precedent in Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), had concluded that a general certification of compliance with banking regulations was not an express certification  of compliance with a specific statute, and that because the relevant regulations did not state that compliance was a precondition of payment they could not form the basis of an implied certification  FCA claim.

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"The Benefit of Hindsight": The D.C. Circuit Holds That the Government's Failure to Seek Repayments After Investigating a Relator’s Allegations Is "Very Strong Evidence" of Immateriality

On Friday, the D.C. Circuit issued its first decision applying Universal Health Services, Inc. v. United States ex rel. Escobar. The D.C. Circuit’s decision, United States ex rel. McBride v. Halliburton Co., provides important guidance regarding the False Claims Act’s materiality standard and applies that standard to an implied certification theory.

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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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  • 09
  • February
  • 2017

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Baby, It’s Cold Outside – Federal Hiring Freeze and the Government Contractor

We may be experiencing an unusually warm spring, but for government contractors the outlook is becoming icier and more treacherous as the impact of President Trump’s federal hiring freeze takes shape. The hiring freeze, enacted through an executive order issued on the first full working day of the new administration, applies to all federal civilian employees in the executive branch, with certain enumerated exemptions. Those exceptions include military personnel, personnel deemed “necessary to meet national security or public safety responsibilities,” or specific personnel deemed necessary by the Director of the Office of Personnel Management. During the period of the freeze, no vacant civilian position may be filled and no new positions may be created. This winterization of the federal government is indefinite in length, hinging on the implementation of an as-yet-unformed plan from the Office of Management and Budget “to reduce the size of the Federal Government’s workforce through attrition.”

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