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False Claims Act Statistics, News & Analysis

False Claims Act Cert. Monitor: Relator Asks Supreme Court to Decide If Halo's Glow Shines New Light on FCA's Knowledge Standard

The Supreme Court's decision in the patent case Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), which we wrote about previously, has now inspired a new FCA cert. petition by the relator in an 18-year-old case, U.S. ex rel. Purcell v. MWI Corp., No. 16-361, in which the relator seeks review of the D.C. Circuit ’s 2015 decision, 807 F.3d 281 (D.C. Cir. 2015). The relator in Purcell asks the Supreme Court to decide whether the D.C. Circuit erred in its interpretation of the FCA knowledge requirement:

1. "by holding that evidence of subjective intent, including bad faith, is irrelevant to establish knowledge where the defendant violated an ambiguous [law], so long as the defendant can muster a reasonable interpretation of the ambiguous term that justifies its conduct after-the-fact," and

2. "in holding that a finding of scienter is foreclosed where the defendant violated an ambiguous [law] unless the defendant was 'warned . . . away' by a formal agency guidance from the interpretation."

Echoing arguments made by the government and relator that did not win the day in United States ex rel. Donegan v. Anesthesia Assoc. of Kansas City, PC, No. 15-2420, 2016 WL 4254939 (8th Cir. Aug. 12, 2016), the MWI relator argues that the D.C. Circuit’s pre-Halo holding is contrary to the Supreme Court’s holding in Halo that evidence of subjective bad faith by a patent infringer is sufficient to show willfulness and merit treble damages. The MWI relator contends that on the first question presented, the patent law willfulness standard is analogous to the FCA knowledge element, and that Halo shows that the D.C. Circuit should have considered the defendant’s subjective intent—that the defendant acted contrary to its actual interpretation of the law at the time of the alleged FCA violation.

The relator also asserts that the D.C. Circuit’s MWI decision creates an unresolved intra-circuit split with its decision in United States v. Science Applications Int’l Corp., where the court left to the jury the question of whether the defendant actually knew it was acting contrary to the applicable governing rules at the time of the alleged FCA violation. 626 F.3d 1257, 1272-73 (D.C. Cir. 2010). Further, the relator claims that the D.C. Circuit split from decisions in the Eighth and Ninth Circuits that ambiguous regulations can result in FCA liability if defendants knew at the time that their interpretations of the regulations were different than the government’s interpretations. Minnesota Ass’n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032, 1053 (8th Cir. 2002); United States ex rel. Oliver v. Parsons Co., 195 F.3d 457 (9th Cir. 1999).

The defendant’s opposition to the cert. petition is due October 21. We will continue to monitor this case closely.

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Carla Jordan-Detamore

Carla Jordan-Detamore Senior Associate