In a January 10, 2019 decision, the US District Court for the District of Arizona granted summary judgment to Defendants because Relators failed to raise a genuine issue of material fact on the issue of “knowledge” under the False Claims Act (FCA) which, as everyone knows by now, includes deliberate ignorance or reckless disregard. The decision is significant for the simple fact that courts can be reluctant to address scienter on summary judgment, and in many cases prefer to simply let the issue go to trial. Moreover, the court’s opinion makes clear that corrections to claiming issues and improvements to systems that result in better claims submission do not function as evidence of knowledge or recklessness under the FCA. In tort law parlance, “remedial measures” are not evidence of fraud.

In Vassallo v. Rural/Metro Corp., a qui tam lawsuit in which the government declined to intervene (but filed a statement of interest attempting to support the Relator’s opposition to summary judgment), the allegations primarily concerned Defendants’ transition from using internal coders to an outside coding vendor to code claims for ambulance transports. There were some alleged issues with the coding performed by the outside coding company, which Defendants worked to improve and correct during and after the transition. Notably, Defendants had been operating under a Corporate Integrity Agreement (CIA) during the time period at issue, and consistently received positive results from the Internal Review Organization (IRO) with respect to coding, billing and claims submission.

The district court held that no reasonable jury could have found that Defendants acted with deliberate indifference or reckless disregard. Relators contended, among other things, that Defendants’ transition to the outside coding vendor was reckless, and that they completed the transition despite knowing about the vendor’s coding and billing errors and issues. In response, Defendants pointed to evidence regarding their training and oversight efforts, their instructions that the vendor’s coders should undercode if they had any doubt about the correct code to be used, their positive results under the CIA, and their retention of Deloitte to address any continued issues with the vendor’s coding.
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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.
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On October 23, 2017, the US Court of Appeals for the Seventh Circuit reversed itself by determining that proximate cause—and not the “but-for” causation test that the court adopted 25 years ago—is the appropriate standard to determine causation in a claim under the False Claims Act (FCA). United States v. Luce, No. 16-4093 (7th Cir. Oct. 23, 2017).

The United States brought suit against defendant Robert S. Luce under the FCA and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) in 2011 based upon Fair Housing Act (FHA) certifications included in annual verification reports that Luce and his subordinates signed on behalf of the mortgage company he owned and operated. Although Luce had been indicted in 2005 for an unrelated matter, the mortgage company continued to submit certifications stating that no officers of the company were then subject to criminal proceedings. Only in February 2008, after almost three years had passed since the defendant’s indictment, did the company notify an inspector with the US Department of Housing and Urban Development (HUD) of the indictment. HUD issued a Referral for Suspension/Disbarment of the company shortly thereafter.
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We reported back in March on the US District Court for the District of Columbia’s summary judgment decision in the Lance Armstrong/Floyd Landis/US Postal Service (USPS) False Claims Act (FCA) litigation, centered on Lance Armstrong’s use of performance enhancing drugs (PEDs) while he was leading a professional cycling team sponsored by the USPS. A pack of motions in limine (MILs) filed by the parties over the past few weeks suggest that the case may well be headed to trial this fall, and raise some notable legal issues to watch as it continues to unfold, including:
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In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position.
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On July 7, 2016, the US Court of Appeals for the Seventh Circuit affirmed the US District Court for the Southern District of Indiana’s grant of summary judgment in favor of a federal subcontractor defendant facing False Claims Act (FCA) allegations. Notably, the Seventh Circuit rejected the district court’s original grounds for summary judgment, an

As we previously reported, in the FCA case against hospice-provider AseraCare, U.S. ex rel. Paradies v. AseraCare, Inc., the U.S. District Court for the Northern District of Alabama granted AseraCare’s motion for a new trial based on error in instructing the jury during the falsity phase of the trial (The trial was bifurcated into