Ninth Circuit
Subscribe to Ninth Circuit's Posts

Sky-Diving Without a Parachute? Ninth Circuit Reluctantly Holds Escobar’s Two-Part Test Mandatory, For Now

In the aftermath of the Supreme Court’s 2016 Escobar decision, the majority of litigation regarding that decision’s impact has concerned the issue of materiality. While the materiality predicate to False Claims Act (FCA) liability announced in Escobar has certainly assumed top billing, another aspect of the Supreme Court’s decision is increasingly getting attention: that is, whether the two-part test for applicability of the implied certification theory of FCA liability is mandatory.

In Escobar, the Supreme Court held that the implied certification theory “can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory or contractual provisions makes those representations misleading half-truths.”

Since this pronouncement, lower courts have grappled with whether all implied certification FCA cases must satisfy this two-part test, or whether the Supreme Court simply intended to describe a non-exhaustive set of factors that could give rise to an implied certification claim.  This is important, in part, because not all claims for payment submitted to government payors actually describe or make representations about the goods or services provided, thus failing part one of the test.

In prior cases, such as the one we reported on here, panels of the Ninth Circuit Court of Appeals have held that the two-part test is mandatory. A Ninth Circuit panel reaffirmed this holding on August 24, 2018, albeit with a total lack of enthusiasm. In United States ex rel. Rose v. Stephens Institute, the court stated that “while the [Supreme] Court did not state that its two conditions were the only way to establish liability under an implied false certification theory,” the panel was “bound by [prior] three-judge panels of this court” interpreting Escobar. The Rose court went on to suggest that the Ninth Circuit hearing the case en banc might decide the issue differently. (No petition for rehearing en banc has yet been filed in Rose; any such petition is not due until October 9, because of an extension of time for filing).

The skepticism about the mandatory nature of the Escobar two-part test expressed by the Ninth Circuit panel in Rose is unwarranted. First, the Supreme Court granted certiorari in Escobar for the very purpose of resolving whether the implied certification theory of FCA liability is viable and if so, to what extent. The notion that the Supreme Court would then have laid out two “conditions” for implied certification liability, labeled them “conditions,” but not have actually meant them to be “conditions,” makes little sense.

While some advocates for the contrary view (including the government) have grasped onto the phrase “at least” in the Supreme Court’s opinion to suggest that the “conditions” are instead non-exhaustive “examples” of situations where implied certification claims may proceed, such reasoning is flawed: the use of the term “at least” conveys that the two conditions are the minimum necessary [...]

Continue Reading




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…)




Cert Petition Denied in Gonzalez v. Planned Parenthood

In a previous post, we discussed the petition for certiorari in Gonzalez v. Planned Parenthood of Los Angeles (S. Ct. No. 14-4080), a False Claims Act (FCA) case in which the relator alleged that Planned Parenthood knowingly overcharged the government for contraceptives it provided to low-income individuals in California.

In Gonzalez, the Ninth Circuit held that the district court properly dismissed the relator’s claims because documents attached to the complaint showed that the government knew about Planned Parenthood’s allegedly improper billing practices; thus, the relator could not demonstrate the requisite scienter under the FCA. The relator argued that the issue of government knowledge was worthy of Supreme Court consideration due to a split between the Ninth Circuit and other circuits on this issue.

We opined that Relator’s cert petition did not raise an issue worthy of consideration by the Supreme Court. Consistent with our expectation, the Supreme Court denied the cert petition on May 18, 2015.




BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES