Here are some of the key False Claims Act rulings and concepts. This page may only be updated periodically, so to provide some legal disclaimers – do not rely on this page to cite and do not rely on this page for legal advice. If you are seeking legal advice you should consult with a whistleblower law firm. Brown, LLC offers free, confidential consultations for potential whistleblowers and can walk you through some of the concepts below and how they may apply to your case, if applicable. In addition to descriptions, at times we have provided commentary on the qui tam cases – please remember the commentary is opinion and in the prism of a plaintiffs’ side whistleblower law firm.
Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016): This landmark Supreme Court ruling clarified the “implied certification” theory of liability under the FCA, which holds that a defendant may be liable for submitting a false claim if it impliedly certifies compliance with statutory, regulatory, or contractual requirements. The case addressed the concept of “materiality” which is often overextended by the defense bar. The materiality requirement refers to that a false statement or omission is material only if it has a natural tendency to influence, or be capable of influencing, the government’s payment decision.
The Court emphasized that materiality is a fact-specific inquiry and may be established by a variety of evidence, including evidence that the government consistently refuses to pay claims that are tainted by the specific conduct at issue, evidence that the government has expressly identified the specific conduct as a condition of payment, or evidence that the defendant knew that the specific conduct was material to the government’s payment decision. The overextension by defense tries to adopt the opposite at times, asserting that the government’s continuance to pay indicates the violation is non-material – however, that fails to incorporate conceptually the False Claims Act investigatory process in which the complaint is filed under seal while the government investigates the whistleblower’s concerns and the abrupt stopping of payment may compromise the investigation. I
Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008): This Supreme Court ruling clarified the FCA’s “first-to-file” rule, which prohibits individuals from recovering from a qui tam action based on allegations that completely overlap a previously filed action. Since the cases are filed under seal, and disclosure of the first to file to the later filers may compromise the existing investigation, it may not be years until the latter filers are told they were not first.
United States v. AseraCare Inc., 938 F.3d 1278 (11th Cir. 2019): This Eleventh Circuit ruling addressed the level of proof required to establish that a defendant acted with the requisite scienter (intent) under the FCA. In AseraCare, the defendant was a hospice provider that was accused of submitting false claims for Medicare reimbursement by falsely certifying that its patients were terminally ill and therefore eligible for hospice care. The government relied on the testimony of medical experts who reviewed the patients’ medical records and opined that many of the patients were not actually terminally ill. The district court granted summary judgment in favor of AseraCare, finding that the government’s evidence of falsity was based on a difference of medical opinion and not fraud.
On appeal, the Eleventh Circuit held that a mere difference of medical opinion, without more, is not sufficient to prove that a defendant submitted a false claim with the requisite scienter under the FCA. The court explained that a difference of medical opinion, even if unreasonable, is not the same as an objective falsehood, and that the FCA requires proof of an objective falsehood, not just an opinion that is incorrect. In the 2023 Supreme Court term, there are a few cases in front of the Court which may impact this opinion.
United States ex rel. v. Bank of America Corp., 865 F.3d 135 (2d Cir. 2017): This Second Circuit ruling held that the FCA’s “public disclosure bar” does not apply to allegations based on information obtained through state freedom of information laws. The public disclosure bar is a provision of the False Claims Act (FCA) that limits the ability of whistleblowers to bring qui tam actions based on information that has already been publicly disclosed. The purpose of the provision is to prevent individuals from filing lawsuits that simply repeat information that has already been disclosed to the public, but as seen by this case, some investigative steps may overcome the public disclosure bar. he 2010 amendments to the FCA narrowed the scope of the public disclosure bar and expanded the definition of an “original source” who is exempt from the bar.
The amended provision requires that the information disclosed publicly must be based on specific allegations or transactions, and not just general suspicions or concerns. Additionally, an original source is defined as an individual who has direct and independent knowledge of the information on which the allegations are based and who voluntarily provided that information to the government before filing the qui tam action. Overall, the public disclosure bar is a complex and fact-specific provision of the False Claims Act, and its application can have significant consequences for whistleblowers seeking to bring qui tam actions.
United States ex rel. v. Bollinger Shipyards, Inc., 775 F.3d 255 (5th Cir. 2014): This Fifth Circuit ruling clarified the FCA’s “reverse false claims” provision, which prohibits the knowing avoidance or reduction of an obligation to pay the government. The reverse false claims provision imposes liability on individuals or entities that “knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the government.” In HealthSouth, the government alleged that the defendant had knowingly avoided an obligation to repay Medicare overpayments by failing to identify and return overpayments received from the program.
The district court initially dismissed the reverse false claims count, holding that the FCA requires an affirmative false statement or fraudulent conduct, not just a failure to pay an obligation. The government appealed, and the Fifth Circuit reversed, holding that the FCA’s reverse false claims provision does not require an affirmative false statement or fraudulent conduct, and that a mere failure to pay an obligation can be sufficient to establish liability under the provision.
The Fifth Circuit explained that the FCA’s reverse false claims provision is designed to prevent individuals and entities from retaining funds that belong to the government, and that liability can attach even if there is no evidence of affirmative wrongdoing. The court emphasized that the provision requires a “knowing” failure to pay an obligation, meaning that the defendant must have had actual knowledge of the obligation and intentionally failed to fulfill it. Defendants will be hard pressed to retain funds that they receive as overpayments without triggering False Claims Act liability, as there is an affirmative obligation to keep accurate records and an overpayment of suspense funds should trigger scrutiny and knowledge (scienter) that the funds are not rightfully theirs, especially if the funds are not returned in a reasonable period of time, or if they are held for an inordinate length of time.
United States ex rel. Harman v. Trinity Indus. Inc., 872 F.3d 645 (5th Cir. 2017): This Fifth Circuit ruling addressed the FCA’s “implied false certification” theory of liability and the materiality requirement, which holds that the false statement or omission must be material to the government’s payment decision. This opinion dovetails off of Escobar and goes to the heart about whether certifications about ancillary terms are critical to the actual payment. The government depending on the administration may alter what they perceive is material or not and while this is meant to filter out tic tac violations, the government may assert that something seemingly trivial was material to its payment, even if its an implied term. For example, in Defense Contract Fraud, the present administration may deem ESG issues core to its determination to pay, where they prior administration may not.
United States v. KBR, Inc., 796 F.3d 559 (4th Cir. 2015): This Fourth Circuit ruling addressed the FCA’s “presentment” requirement, which requires a defendant to present a false claim to the government for payment. KBR involved alleged Defense Contractor Fraud. In KBR, the relator alleged that KBR had submitted false claims to the government for payment under a military logistics contract in Iraq. The district court had dismissed the relator’s claims on the ground that the allegations did not satisfy the FCA’s presentment requirement. On appeal, the D.C. Circuit Court of Appeals reversed. The court explained that the presentment requirement is not limited to actual claims for payment, but also encompasses conduct that is intended to induce the government to make payments.
The court found that the relator’s allegations, if proven, could show that KBR had engaged in a scheme to inflate costs and overcharge the government for services provided under the logistics contract, and that the scheme was intended to induce the government to make payments. The court emphasized that the presentment requirement is intended to ensure that the government has notice of potential fraud and an opportunity to investigate and recover any improperly paid funds.
United States ex rel. Lisitza v. Abbott Labs, 2016 WL 6569233 (7th Cir. Nov. 4, 2016): The relator alleged that Abbott Labs had engaged in a scheme to promote the off-label use of its drug Depakote. The relator also alleged that Abbott had paid kickbacks to healthcare providers to induce them to prescribe Depakote for off-label uses.
The case proceeded to trial, and a jury found that Abbott had violated the FCA by promoting Depakote for off-label uses and paying kickbacks to healthcare providers. The district court entered a judgment in favor of the government and the relator, and awarded damages and penalties totaling over $1.4 billion. United States ex rel. Lisitza v. Abbott Labs., No. 1:07-cv-00081-JMS-DML, 2012 WL 1801334 (S.D. Ind. May 16, 2012).
On appeal, Abbott challenged the district court’s ruling on several grounds, including the sufficiency of the evidence and the jury instructions on off-label promotion and kickbacks. The Seventh Circuit Court of Appeals affirmed the district court’s ruling, and upheld the damages and penalties awarded against Abbott. United States ex rel. Lisitza v. Abbott Labs., 2016 WL 6569233.
The appellate court held that the evidence presented at trial was sufficient to support the jury’s findings that Abbott had engaged in off-label promotion and paid kickbacks to healthcare providers. The court also rejected Abbott’s challenges to the jury instructions, finding that the instructions accurately reflected the legal standards for off-label promotion and kickbacks under the FCA. Id.
The Abbott Labs appellate ruling was significant because it demonstrated the government’s willingness to pursue FCA cases involving off-label marketing of prescription drugs, and underscored the importance of compliance with healthcare regulations. The ruling also highlighted the potential for significant damages and penalties in FCA cases, particularly in cases involving violations of federal healthcare laws and kickbacks. Some the largest settlements and verdicts stem from False Claims Act kickback cases, and off label marketing implicating pharmaceutical fraud.