The False Claims Act Guide: 2022 and the road ahead

Below are the articles in our latest guide:

Executive summary

In 2022, False Claims Act (FCA) settlements and judgments totaled US$2.2 billion. Although this was one of the lowest annual recovery totals in years, there is no indication that the Department of Justice (DOJ) is slowing its FCA enforcement activity – quite the contrary. Read more...

Supreme Court to review knowledge standard

Scienter in False Claims Act cases: U.S. Supreme Court to review SuperValu and Safeway.

In recent years, federal courts have been grappling with the scienter element of the False Claims Act (FCA), including how to assess scienter when a statutory, contractual, or regulatory obligation could be interpreted in multiple reasonable ways. The FCA imposes civil liability on persons who knowingly submit false claims for payment to the government. The statute defines knowingly to mean “actual knowledge,” “deliberate ignorance of the truth or falsity of the information,” or “reckless disregard of the truth or falsity of the information,” and “requires no proof of specific intent to defraud.” In cases where the plaintiff (government or relator) argues that the defendant defrauded the government by relying on an interpretation of an ambiguous term of a statute, contract, regulation, or guidance document, courts struggle to apply the statutory definition of “knowingly” when the defendant points to an objectively reasonable alternative interpretation of that term under which its claim or statement would be true. Read more...

Supreme Court to weigh in on DOJ’s dismissal authority

The Supreme Court will resolve Circuit split in standard, but DOJ seems unlikely to pick more fights with relators.

For nearly two decades, when the Department of Justice (DOJ) invoked its authority under 31 U.S.C. § 3730(c)(2)(A) to move for dismissal qui tams over the objections of the relator who filed it, the Department’s briefs included argument under at least two different standards of review, thanks to an unresolved circuit split. A case argued to the Supreme Court this term could bring clarity. In June 2022, the Supreme Court granted writ of certiorari; and in December, oral arguments were heard in Polansky v. Executive Health Resources to resolve the three-way circuit split. The question at issue is whether the government must intervene in a case in order to seek dismissal and what standard governs the government’s dismissal authority. But since most False Claims Act (FCA) cases that reach the Supreme Court end up answering, or giving rise to, more questions than they answer, practitioners across the country are looking forward to learning how the Court analyzes this relatively parochial dispute. Read more...

Supreme Court disappoints: circuits remain split in pleading requirements

Because qui tam claims sound in fraud, under precedent and Rule 9(b) of the Federal Rules of Civil Procedure, relators are required to plead their claims with a heightened degree of specificity that many, having limited access to inside information, struggle to meet.

Defendants confronting a relator who chooses to proceed on their own in a declined qui tam frequently take advantage of this information deficit and seek dismissal for failure to plead in a manner consistent with Rule 9(b). The result over the years has been variability in the application of Rule 9(b) between circuits, and among panels within the same circuits. But in 2022, the Supreme Court again denied several petitions seeking clarity as to exactly what that specificity must include. Although every federal court of appeals has held that Rule 9(b) applies to claims under the FCA, the circuit courts have articulated different standards for applying the rule to the sine qua non of an FCA claim: the submission of a false claim to the government for payment. The Supreme Court’s denial of certiorari in Jolie Johnson, et al. v. Bethany Hospice and Palliative Care LLC, 20-11624; United States, et al., ex rel. Cathy Owsley v. Fazzi Associates, Inc., et al., 19-4240; and Molina Healthcare of Illinois, Inc., et al. v. Thomas Prose, 20-2243, preserves the current fractured landscape, which leaves a moving defendant subject to the standard set by whichever circuit in which the relator chooses to file their complaint. Read more...

Anti-kickback causation in FCA suits: text or purpose?

The emerging circuit split on the causation standard used to identify claims “resulting from” violations of the Anti-Kickback Statute (AKS) for purposes of the False Claims Act (FCA) raises proof problems for relators and the government in litigation. Last summer, the Eighth Circuit Court of Appeals held that a plaintiff relying solely on the “resulting from” language in the AKS to establish FCA liability must show “but for” causation – that but for the kickbacks, the claims at issue would not have included the item or service that was the subject of the kickback. 

This stands in contrast to a Third Circuit opinion on the same issue that rejected the but-for causation standard, holding instead that a plaintiff need only show causal link between the kickback and the submission of claims for payment to the government. The Sixth Circuit is scheduled to take up the issue this spring when it hears argument in a declined qui tam that drew the attention of the government and the American Hospital Association, both appearing as amicus. Read more...

Escobar in practice: surveying materiality across circuits

The Supreme Court’s 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar resolved a Circuit split regarding the implied certification theory as a basis for False Claims Act (FCA) liability. While the Court held that the implied certification theory can form the basis for liability, it defined the FCA’s materiality requirement as a “rigorous” and “demanding” one, opening the door to a range of new issues for litigation intended to distinguish mere non-compliance from fraud or reckless submission of false claims.

Courts have since grappled with Escobar’s emphasis that a misrepresentation about compliance with statutory, regulatory, or contractual requirements must be material to the government’s payment decision in order for an implied certification theory of liability to lie. While the Court in Escobar suggested that district courts could apply the “rigorous” standard at the pleading stage on motions to dismiss, and several district courts have attempted to do so, few appellant panels have agreed. A few recent cases, discussed in this article, show how most courts view materiality to be a fact-intensive, case-by-case inquiry not well suited to resolution on motion to dismiss. Read more...

Looking ahead

2022 was an interesting year in False Claims Act (FCA) enforcement and case law developments – from uncertainty emanating from escalating circuit splits to low recoveries for the Department of Justice (DOJ). Looking ahead, 2022 may prove to be the calm before the storm.

With Supreme Court decisions due in two FCA cases this summer, the government litigating intervened cases involving complex FCA theories involving the Medicare Advantage program, FCA amendments pending again in Congress, and a likely backlog of pending settlements, 2023 already looks like a year to watch. In this article are some predictions, expectations, and developments related to FCA enforcement that we will be closely watching in 2023. Read more...

Click here to view the full guide.

Authored by Jonathan Diesenhaus, Michele Sartori, Mitchell Lazris, Gejaa Gobena, Jessica Ellsworth, Virginia (Ginny) Gibson, Robert Toll, Clara Troyer, Rachel Stuckey, Jennifer Hill, Robert Beecher, Kate Mancuso, Kayla Ghantous, and Koko Zhang.