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Government Backs Down in Landmark Agape Case

In US ex rel. Michaels v. Agape Senior Community, the Department of Justice has assented to a $275,000 settlement after having rejected a $2.5 million settlement two years ago (despite declining to intervene in the case). This case garnered substantial attention because the relators sought to employ statistical sampling to establish liability on hundreds of millions of dollars of allegedly false claims to Medicare and Medicaid.

Previously, the Fourth Circuit heard–on interlocutory appeal–argument as to (1) whether statistical sampling could be used to establish liability in a False Claims Act case; and (2) whether the government could veto a False Claims Act settlement in a case in which the government declines to intervene. The Fourth Circuit ruled that the government did possess the authority to veto a settlement in a non-intervened case, and refused to address whether sampling could be used to establish liability. We discussed the Fourth Circuit’s decision here.

Although the Fourth Circuit declined to reach the question of whether False Claims Act plaintiffs can establish liability by using statistical sampling, the presiding district court judge had already concluded that plaintiffs could not do so. Having represented to the court that they could not marshal the resources to establish liability on a claim-by-claim basis, the court granted partial summary judgment on the vast majority of claims at issue. The relators subsequently settled for the value of the claims originally at issue: approximately one percent of the claims at issue in this case and 11 percent of what the relators and defendants previously agreed to.

The Fourth Circuit was to be the first appellate court to address the sampling issue, and this case demonstrates the importance of this issue. Where plaintiffs in this arena may lack sufficient resources to prove their cases on a claim-by-claim basis, the use of statistical sampling makes it far more cost-effective to prosecute their cases. If appellate courts rule on this issue in the future, and in favor of defendants, such rulings will deprive plaintiffs of this potential shortcut. This would appropriately limit plaintiffs’ recovery to claims plaintiffs actually prove are false by a preponderance of the evidence.




Does Violation of the Seal Requirement Require Dismissal? Supreme Court Will Decide

On May 31, 2016, the Supreme Court of the United States granted certiorari in the False Claims Act (FCA) case of State Farm Fire and Casualty Co. v. United States ex rel. Cori Rigsby and Kerri Rigsby.  At issue is whether a qui tam relator’s violation of the seal requirement, 31 U.S.C. § 3730(b)(2), requires a court to dismiss the suit.

Section 3730(b)(2) requires qui tam complaints to be filed under seal for at least 60 days and provides that they shall not be served on the defendants until the court so orders.  The purpose of the seal is to give the government time to investigate.  In practice, the government often seeks numerous extensions while it investigates the conduct alleged in the relator’s complaint.  This investigatory period can, on occasion, extend for years.

According to State Farm’s petition for certiorari, the relators in this case intentionally violated the seal by alerting the media to the FCA allegations in their complaint.  State Farm argued that relators did so in order to “to fuel a media campaign designed to demonize and put pressure on State Farm to settle,” hiring “one of the nation’s most prominent public relations firms to assist them with this all-out campaign, which featured the Rigsbys in media interviews, filming, and photo shoots.”  The US District Court for the Southern District of Mississippi declined to dismiss relators’ complaint on the basis of the seal violations, and the US Court of Appeals for the Fifth Circuit affirmed that decision, holding that the seal violations did not warrant dismissal.  The Fifth Circuit, however, acknowledged a three-way circuit split on this issue. (more…)




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