Top False Claims Act Developments
Ethan P. Davis, Amy B. Boring, and Kassi N. Conley, King & Spalding LLP
This week’s top False Claims Act (FCA) developments include: the Supreme Court’s call for the views of the Solicitor General on a certiorari petition related to FCA pleading requirements; the reversal of an attorneys’ fee award against a relator; continued FCA enforcement against companies that allegedly defrauded American servicemembers; and FCA settlements involving allegations of improper billing codes and unnecessary genetic testing.
1. Supreme Court invites Solicitor General to express views on certiorari petition in FCA case raising Rule 9(b) issues
Overview: On January 18, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States on the pending petition for a writ of certiorari in Johnson v. Bethany Hospice and Palliative Care LLC.
The Case: In September 2021, the relators sought certiorari in the Supreme Court from an opinion of the Eleventh Circuit. The petition asks the Court to answer “whether [Federal Rule of Civil Procedure] 9(b) requires plaintiffs in False Claims Act cases who plead a fraudulent scheme with particularity to also plead specific details of false claims.”
In the underlying case, the relators alleged a kickback scheme involving the defendant’s paying doctors remuneration in exchange for patient referrals. The Eleventh Circuit upheld the district court’s dismissal of the relators’ complaint because the relators failed to allege any details about specific claims submitted by the defendant to the government. The relators’ petition argues that the circuits are divided on whether a relator must plead specific details of allegedly false claims. Some circuits say Yes; others are willing to infer the submission of allegedly false claims based on other well-pleaded allegations.
Our Take: The Court’s call for the views of the Solicitor General suggests that it may be seriously considering granting this petition. When asked by the Court for the views of the United States on a 2013 petition presenting the same question, the Solicitor General recommended denying the petition and the Court did so. It will be interesting to see what the Solicitor General recommends now. The Solicitor General’s brief will likely be filed in May, which means that the Court will likely act on the petition before its Term ends in late June.
2. Ninth Circuit overturns attorneys’ fee award against relator
Overview: On January 7, in an unpublished opinion, the United States Court of Appeals for the Ninth Circuit – for the second time – decided that a relator who filed an unsuccessful qui tam action against Clark County, Nevada and a Las Vegas airport is not required to pay the attorneys’ fees awarded against her by the district court.
The Opinion: The FCA allows a court to award attorneys’ fees against relators if an “action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.” 31 U.S.C. § 3730(d)(4). The Ninth Circuit’s stringent standard for “clearly frivolous” under the FCA is met where the result of an action is “obvious,” or the relator’s arguments are “wholly without merit.”
This was the second time the Ninth Circuit reviewed an award of attorneys’ fees against the relator in this case. In its first review, the Ninth Circuit reversed the district court’s award of fees against the relator and instructed the district court to make detailed findings in support of any award on remand.
On remand, the district court granted the defendants’ second motion for an award of attorneys’ fees on the ground that the plaintiff was unable to prove knowledge or materiality. The Ninth Circuit determined that the relator’s allegations were not “clearly frivolous” with regard to these elements and reversed the award for the second time.
Our Take: This case illustrates the longstanding challenges that defendants face in obtaining fee awards against relators who bring meritless cases. As the Ninth Circuit noted, fee awards are appropriate only in “rare and special circumstances” where the relator’s claims meet the stringent “clearly frivolous” standard.
3. DOJ settles another FCA case focused on combatting fraud against servicemembers
Overview: On January 6, the United States Attorney’s Office for the District of Delaware announced a $500,000 settlement with Hunt Companies, Inc., a large provider of privatized military housing. According to the government, Hunt submitted false information to the U.S. Air Force in order to inflate performance incentive payments in connection with its provision of housing at Dover Air Force Base.
Details of the Settlement and Allegations: Hunt provides privatized military housing at Dover Air Force Base in Delaware. By meeting certain performance objectives such as maintaining the residences and preparing for new tenants, Hunt is eligible to receive quarterly performance incentive payments.
In a January 2020 complaint, the relator – a former Hunt employee – accused company employees of falsifying service tickets. According to the relator, company employees would claim that they had resolved problems like mold, fire safety issues, ventilation issues, and water leaks, when in fact those problems had not been fixed. The relator alleged that the tickets would then be submitted to the Department of Defense in order for Hunt to receive higher performance incentive payouts.
Our Take: As we noted in our January 6 blog post, DOJ has long focused its enforcement resources on combatting alleged fraud related to servicemembers. This case is another example of the attention that DOJ continues to pay to this area.
In the News:
DOJ announces settlement with UC San Diego Health to resolve allegations of ordering medically unnecessary genetic testing – On January 11, DOJ announced a $2.98 million settlement with UC San Diego Health, the academic health system of the University of California, San Diego. The settlement resolves allegations that UC San Diego Health violated the FCA by ordering and submitting referrals for medically unnecessary genetic testing reimbursed by Medicare from December 2015 to October 2019.
Settlement with New York and New Jersey surgery centers resolves allegations of improperly billing the government for non-reimbursable acupuncture procedures – On January 12, the United States Attorney’s Office for the Eastern District of New York announced a $7.4 million settlement with six medical practices, as well as a physician-owner, affiliated with Interventional Pain Management Center P.C. The settlement resolves allegations that the providers submitted claims to Medicare and the Federal Employees Health Benefit Program for the surgical implementation of a neurostimulator (a reimbursable procedure) when in fact they were performing electro-acupuncture (a non-reimbursable procedure).
Ethan P. Davis is a partner in the Special Matters and Government Investigations Practice Group in the firm’s San Francisco office, Amy B. Boring is a Partner in the Special Matters and Government Investigations Practice Group in the firm’s Atlanta office, and Kassi N. Conley is an Associate in the Special Matters and Government Investigations Practice Group in the firm’s Atlanta office.