On April 11, 2018, the Eleventh Circuit split from several other circuits on the question whether False Claims Act (FCA) relators can rely on the three-year statute of limitations extension in 31 U.S.C. § 3731(b)(2) in cases where the United States declines to intervene.

Under § 3731(b), an FCA case must be filed within the later of:

  1. 6 years after the date on which the violation…is committed, or
  2. 3 years after 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, but in no event more than 10 years after the date on which the violation is committed.

In United States of America, ex rel. Billy Joe Hunt v. Cochise Consultancy Inc. et al., No. 16-12836, the relator filed his claim more than six years after the alleged violations, but within three years of when he first informed the government of the facts giving rise to the claim. (He may have been delayed in filing his claim owing to the fact he was in federal prison for his role in a separate kickback scheme involving the same company.) Thus, the case turned on whether the three-year extension in § 3731(b)(2) applies to cases where the government has declined to intervene.

The district court’s answer was ‘no.’ It dismissed the case based on the statute of limitations. This approach was consistent with published decisions from the Fourth Circuit and Tenth Circuit—both of which emphasized that applying § 3731(b)(2) to cases where the Government did not intervene could lead to “bizarre scenarios” in which the statute of limitations period for a relator’s claim is dependent on a nonparty to the action. See United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F. 3d 288, 293 (4th Cir. 2008) and United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 726 (10th Cir. 2006) (“Surely, Congress could not have intended to base a statute of limitations on the knowledge of a non-party.”).

But, reviewing the district court’s decision on appeal, the Eleventh Circuit split from its sister circuits and reversed the decision below, resurrecting the relator’s claims. The court asserted that the Fourth Circuit and Tenth Circuit erred because they “reflexively applied the general rule that a limitations period is triggered by knowledge of a party. They failed to consider the unique role that the United States plays even in a non-intervened qui tam case.”

Instead, the court adopted a textual analysis, concluding that nothing in § 3731(b) suggests that the three-year extension applies only to intervened cases. Likewise, it rejected the defendants’ arguments that applying § 3731(b)(2) to non-intervened cases would render § 3731(b)(1) superfluous, and would encourage relators to wait to bring a secreted fraud to the government’s attention. The court emphasized that under its reading, § 3731(b)(1) would not be redundant in all circumstances, and that despite the three-year extension in paragraph (2), relators nonetheless face considerable structural pressure to bring their claims as soon as possible, at risk of losing the right to recover.

The defendants in Hunt also argued that § 3731(b) is ambiguous and asked the court to consult legislative history for guidance. The court disagreed that the statute is ambiguous, and added that even if it were appropriate to consult the legislative history of § 3731(b), the court would conclude that Congress intended § 3731(b)(2) to apply even where the government has not intervened.

After determining that § 3731(b)(2) is available to a relator in a non-intervened case, the Eleventh Circuit turned to the question whether the three-year extension is triggered by knowledge of the relator or knowledge of a government official. The Ninth Circuit held previously that while § 3731(b)(2) is available in a non-intervened case, the three-year period turns on the relator’s knowledge, not the government’s knowledge. United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996). Here again, the Eleventh Circuit reached the opposite conclusion, splitting from the decision in Hyatt:

Because the text unambiguously identifies a particular official of the United States as the relevant person whose knowledge causes the limitations period to begin to run, we must reject the Ninth Circuit’s interpretation as inconsistent with that text.

The Bottom Line: The Eleventh Circuit’s decision that the three-year tolling provision is available to qui tam relators is an outlier, and it creates a significant split among the circuits with regard to a key application of the statute of limitations in non-intervened FCA cases. Practitioners in the Eleventh Circuit (and elsewhere) should be careful to preserve arguments on this issue for further review, as this issue appears ripe for resolution in the Supreme Court.

The table below summarizes the current law on this question:

State of the Law on § 3731(b)(2)
Jurisdiction Position
First Circuit No circuit decisions, but some district courts have held that Section 3731(b)(2) is available to a relator in a non-intervened case, and that an official of the United States is the relevant person whose knowledge triggers the limitations period. See e.g., U.S. ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, 659 F. Supp. 2d 262 (1st Cir. 2009) )
Second Circuit No circuit decisions, and caselaw in the district courts is split. Compare United States ex rel. Wood v. Allergan, Inc., 246 F.Supp.3d 772 (S.D.N.Y. 2017) (relators may avail themselves of Section 3731(b)(2)) with United States ex rel. Finney v. Nextwave Telecom, Inc., 337 B.R. 479 (S.D.N.Y. 2006) (Section 3731(b)(2) applies only in cases in which the government intervenes).
Third Circuit Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge. United States ex rel. Malloy v. Telephonics Corp., 68 F. App’x 270, 272-73 (3d Cir. 2003) (unpublished).
Fourth Circuit Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F. 3d 288 (4th Cir. 2008).
Fifth Circuit No circuit decisions, but caselaw in the district courts has held that tolling is available to relators, but relators’ knowledge is trigger.. See e.g., U.S. ex rel. Gonzalez v. Fresenius Medical Care N. Am., 2008 WL 4277150 (W.D. Tex. 2008) (Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge).
Sixth Circuit No circuit decisions, but caselaw in the district courts has held that Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party . See e.g., United States ex rel. Griffith v. Conn, 117 F. Supp. 3d 961 (E.D. Ky. 2015).
Seventh Circuit No circuit decisions, but district courts have found tolling available to relators, but relators’ knowledge is trigger.. See e.g., See United States ex rel. Bidani v. Lewis, No. 97-CV-6502, 1999 WL 163053 (N.D. Ill. 1999) (Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge).
Eighth Circuit No circuit decisions, but caselaw in the district courts has held that Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. See e.g., United States ex rel. Dicken v. N.W. Eye Ctr., 2017 WL 2345579 (D. Minn., 2017) ().
Ninth Circuit Section 3731(b)(2) applies when the government is not a party, but the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge. United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996).
Tenth Circuit

Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. United States ex rel. Sikkenga v. Regence

BlueCross BlueShield of Utah, 472 F.3d 702 (10th Cir. 2006).

Eleventh Circuit Section 3731(b)(2) is available to a relator in a non-intervened case. An official of the United States is the relevant person whose knowledge triggers the limitations period. See discussion above.
D.C. Circuit No circuit decisions, but caselaw in the district courts has held Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. See e.g., United States ex rel. Landis v. Tailwind Sports Corp., No. 1:10CV00976 (CRC), 2016 WL 3197550 (D.D.C. June 8, 2016).

 

A key area of dispute in False Claims Act (FCA) cases based on Anti-Kickback Statute (AKS) violations is what degree of connection plaintiffs must allege between alleged kickbacks and “false claims.” The AKS states that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].”

The government and relators typically argue that the mere fact that claims were submitted during the period of alleged kickbacks is sufficient. Defendants argue that the law requires plaintiffs to specifically identify claims “resulting from” an alleged kickback – i.e., that there is proof that the alleged kickback caused the referral or recommendation of the item or service contained in the claim. The Third Circuit’s recent decision in United States ex rel. Greenfield v. Medco Health Systems, Inc. articulated a middle of the road approach.  In affirming summary judgment for the defendants, the Court held that to prevail, plaintiffs must establish that a claim submitted to a federal health care program was “exposed to a referral or recommendation” in violation of the AKS.

The relator, a former area vice president for Accredo, a specialty pharmacy that sells blood clotting drugs and provides nursing assistants to hemophiliacs in their homes, filed a qui tam suit alleging that Accredo violated the AKS and FCA in connection with donations to two charitable organizations that assist the hemophiliac community: Hemophilia Services, Inc. (HSI) and Hemophilia Association of New Jersey (HANJ).  During the time Accredo made monetary donations to HSI and HANJ, the HANJ website allegedly listed Accredo as one of four “approved providers” or “approved vendors” and directed users to “remember to work with our HSI [approved] providers.” In 2010, Accredo notified both charities that it was decreasing its donation the following year. In response, HSI allegedly engaged in activities to persuade Accredo to restore its donation level to previous years, including encouraging its members to contact Accredo to protest the funding cut. The relator was involved in purportedly analyzing the return on investment for returning to previous donation levels. After the relator’s report allegedly projected a significant decline in business in New Jersey if donation levels were not restored, Accredo restored the donation level and relator filed his suit.

The government declined to intervene in this case, but the relator continued the litigation. He argued the expansive view: that the donations amounted to kickbacks, and since Accredo certified compliance with the AKS when submitting Medicare claims, the FCA was violated and, therefore, every claim submitted by Accredo was false. The district court granted summary judgment to Accredo.  The district court declined to decide whether the relator had established an AKS violation, but instead held that the relator did not show sufficient evidence of causation of an FCA violation. The district court held that the relator’s evidence that Accredo submitted claims for 24 federal beneficiaries during the relevant time period, by itself, “did not provide the link between defendants’ 24 federally insured customers and the donations.” The court held that “[a]bsent some evidence….that those patients chose Accredo because of its donations to HANJ/HSI,” the relator could not carry his burden.

On appeal, the government argued that the district court erred to the extent it required proof that patients chose Accredo because of the referrals and recommendations. In the government’s view, all the relator needed to establish was the existence of “a claim that sought reimbursement for medical care that was provided in violation” of the AKS.

The Third Circuit affirmed the district court’s ruling, but for different reasons than those offered by the parties, the government, and the district court. The Third Circuit rejected the relator’s and government’s position that the alleged kickbacks tainted all claims as false by virtue of the kickback.  However, the Court declined to read the “resulting from” language in the AKS to require, as advocated by Accredo and found by the district court, that the relator needed to prove the patients purchased prescriptions from Accredo because of Accredo’s donations to HSI and HANJ. Instead, the Court held that the relator “must show, at minimum, that at least one of the 24 federally insured patients for whom Accredo provided services and submitted reimbursement claims was exposed to a referral or recommendation of Accredo by HSI/HANJ in violation of the AKS.” As explained by the Court, “[a] kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.”

This decision is helpful confirmation that relators and the government cannot simply rely on an alleged kickback to demonstrate that a defendant who submits claims to Medicare, violated the FCA.  Defending this type of allegation should include examination of the evidence relied upon to show the connection between the alleged kickback and the purported false claim.  Whether other courts will follow the Third Circuit’s reasoning or follow the “resulting from” language in the AKS and require a stronger connection between a kickback and claim remains to be seen.  This issue will be a continued subject of litigation in these cases.

On April 6, 2018, the U.S. District Court for the Eastern District of Pennsylvania granted a motion for summary judgment filed by a waste company in an implied certification case under the False Claims Act (FCA), holding that the relator failed to satisfy the Supreme Court’s materiality standard announced in the landmark Escobar case.

The claims in U.S. ex rel. Cressman v. Solid Waste Services, Inc. arose from waste company employees discharging leachate, a liquid that passes through or is generated by trash, onto a grassy area at a transfer station, rather than sending the leachate to a treatment plant.  The relator reported the leachate discharge to the Pennsylvania Department of Environmental Protection (DEP), which conducted an investigation.  The waste company cooperated in the investigation, conducted its own investigation, and took corrective steps in response to the allegations.  The company also entered into a consent decree in connection with which it paid a civil penalty.

The relator then filed his qui tam action under the FCA, in which the government declined to intervene.  The relator asserted that the defendant waste company was liable under the FCA because it submitted claims for payment to federal agencies without disclosing its violation of environmental regulations arising from the leachate discharge incident. Continue Reading Another Court Grants Summary Judgment to FCA Defendant Based on Escobar’s Materiality Standard

On March 13, 2018, the United States District Court for the Eastern District of Oklahoma dismissed U.S. ex rel. Montalvo v. Native American Servs. Corp. In this case, the relators alleged that the defendants performed substandard work at a US Army ammunition plant. Specifically, the relators alleged that the defendant oversaw a construction project in which a subcontractor was ordered to pour concrete into areas that contained tree roots and stems, which allegedly damaged the quality of the concrete.

At summary judgment, the only evidence offered by the relator was an affidavit setting forth the facts above. The only disputed fact was whether the defendant knew about the tree roots and stems when ordering the subcontractor to pour the concrete. Regardless of that factual dispute, the court concluded that the plaintiff had failed to offer sufficient evidence that the defendant had knowingly caused the submission of false claims and granted summary judgment in the defendant’s favor. Continue Reading District Court Rejects FCA Claim Based on “Substandard” Product

Earlier this week, the US Department of Justice (DOJ) launched a new front in its effort to combat the opioid crisis and explicitly stated that it will deploy the False Claims Act (FCA) as part of its offensive. In a press release and parallel speech delivered by Attorney General Jeff Sessions on February 28, 2018, DOJ announced the creation of the Prescription Interdiction & Litigation (PIL) Task Force.

According to DOJ, the PIL Task Force will combat the opioid crisis at every level of the distribution system, from manufacturers to distributors (including pharmacies, pain management clinics, drug testing facilities and individual physicians). DOJ will use all available civil and criminal remedies to hold manufacturers accountable, building on its existing coordination with the US Food and Drug Administration (FDA) to ensure proper labeling and marketing.  Likewise, DOJ will use civil and criminal actions to ensure that distributors and pharmacies are following US Drug Enforcement Administration (DEA) rules implemented to prevent diversion and improper prescribing. Finally, DOJ will use the FCA and other enforcement tools to pursue pain-management clinics, drug testing facilities and physicians that make opioid prescriptions. Continue Reading New DOJ Task Force to Take on Opioid Crisis Using the FCA and Other Enforcement Tools

On February 6, 2018, the US District Court for the Middle District of Florida granted a motion to dismiss a non-intervened False Claims Act (FCA) suit concerning electronic billing practices for anesthesiology services. As with another recent dismissal, the court found that Relator had failed to present sufficient allegations to meet the particularity requirement of Federal Rule of Civil Procedure 9(b).

The operative complaint alleged that Relator was a compliance review specialist and supervisor of physician coding at a health care provider, and that she utilized the defendant, Epic System’s Corp.’s, medical e-billing software. Relator alleged that she was trained for a week on the software, and then allegedly identified a software issue that resulted in double-billing for the time of anesthesiologists. Specifically, Relator referenced a January 1, 2012, change in Medicare practices which adjusted “units to be billed” for anesthesia services to be measured in actual minutes rather than 15-minute increments. Relator asserted that the e-billing software allowed hospitals to “double-charge” 15-minute increments plus the precise number of minutes of service. Relator alleged that she raised this issue with the defendant repeatedly and that Defendant implemented a very narrow adjustment which would only fix the issue at Relator’s employer’s office, allegedly leaving the “double-charge” error in effect at other users’ offices. Continue Reading FCA Whistleblower’s Deficient Anesthesia E-Billing Suit Dismissed with Prejudice by Florida District Court

In a two-page memorandum, the US Department of Justice (DOJ) announced a broad policy statement prohibiting the use of agency guidance documents as the basis for proving legal violations in civil enforcement actions, including actions brought under the False Claims Act (FCA). The extent to which these policy changes ultimately create relief for health care defendants in FCA actions is unclear at this time. That said, the memo provides defendants with a valuable tool in defending FCA actions, either brought by DOJ or relator’s counsel, that attempt to use alleged noncompliance with agency sub-regulatory guidance as support for an FCA theory.

Continue reading

The government’s focus on the US opioid crisis has been consistently expanding over the past year beyond manufacturers to reach prescribers and health care providers who submit claims to federal health care programs for opioid prescriptions. These efforts increasingly include investigations under the False Claims Act and administrative actions, in addition to the more traditional criminal approach to these issues.

With the Trump administration’s public health emergency orders, it is expected for the government’s enforcement activities, including those instigated by relators and their counsel, to grow in this area.

Continue Reading.

On January 23, 2018, the same judge who two weeks ago set aside a $350 million jury verdict against a nursing home operator denied a new emergency motion by relator to freeze the defendant’s assets pending the relator’s appeal of the court’s order granting judgment as a matter of law.

The relator argued that the defendant should be enjoined from engaging in transactions outside the ordinary course of business during the pendency of the appeal to protect “Relator’s, the United States’, and the State of Florida’s interests during the time the appeal is pending.”  Relator asserted that she has a “strong likelihood of success” on appeal and that the defendant could attempt to “thwart judgment” by transferring assets to related parties while the appeal is pending. Continue Reading Update: Judge Denies Relator’s Attempt to Freeze Nursing Home’s Assets Pending Appeal

As first reported in the National Law Journal, the US Department of Justice (DOJ), Civil Division, recently issued an important memorandum to its lawyers handling qui tam cases filed under the False Claims Act (FCA) outlining circumstances under which the United States should seek to dismiss a case where it has declined intervention and, therefore, is not participating actively in the continued litigation of the case against the defendant by the qui tam relator. Continue Reading DOJ Issues Memorandum Outlining Factors for Evaluating Dismissal of Qui Tam FCA Cases in Which the Government Has Declined to Intervene