Source: https://www.velaw.com/Blogs/FCA-Blog/?q=&page=5&count=15&tab=all
Timestamp: 2019-04-22 15:01:58+00:00

Document:
Last week we wrote about the opinion in United States v. Quicken Loans Inc., specifically discussing its ruling on causation of damages under the FCA. No. 16-CV-14050, 2017 WL 930039 (E.D. Mich. Mar. 9, 2017). As we noted, Quicken touches on other important FCA issues, including knowledge and materiality. But since liability necessarily precedes damages, let’s go back now to discuss certain of the court’s rulings on knowing violations of ambiguous rules under Safeco and on materiality after Escobar.
The Fifth Circuit recently issued a helpful materiality decision for defendants in Abbott v. BP Exploration & Production, finding that the Department of the Interior’s (“DOI”) decision to allow an oil production facility to continue operating after an investigation into the relators’ allegations is “strong evidence” that a regulation’s alleged stamping requirement is not material. No. 16-20028, 2017 WL 992506 (5th Cir. Mar. 14, 2017).
In the recent decision in United States v. Quicken Loans Inc., the district court found the government adequately pleaded that Quicken Loan Inc. (“Quicken”) submitted false claims and made false statements material to false claims for insurance payouts from the Federal Housing Administration (“FHA”) for defaulted FHA-insured loans that Quicken had not properly underwritten. No. 16-CV-14050, 2017 WL 930039 (E.D. Mich. Mar. 9, 2017). As a result, the Court denied most of Quicken’s motion to dismiss except for one theory of liability and certain untimely claims.
As FCA aficionados know, the FCA’s statute of limitations provides that claims are timely only if they are brought either (1) within 6 years of the FCA violation, or (2) within 3 years of “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,” up to 10 years after the FCA violation. A new FCA cert. petition raises the question whether relators in non-intervened qui tam cases can take advantage of the latter provision to toll the limitations period.
We last reported on United States and Florida ex rel. Ruckh v. CMC II, LLC, et al., 8:11-cv-1303 (M.D. Fl.) earlier this month, when a federal jury returned a verdict for $115 million against the defendant nursing homes, finding that defendants had submitted false claims to Medicare and Medicaid for unnecessary patient care or patient care that was never supplied. After trebling and additional penalties, CMC II and the other corporate defendants now face over $347 million in damages. In an unusual turn of events, the defendants filed an emergency motion on March 13 in which they asked the court to stay the execution of judgments pending the Court’s consideration of one or more post-trial motions to be filed by the end of March. The emergency motion went unopposed, and the court granted the motion.
On the heels of the D.C. Circuit’s favorable materiality decision in U.S. ex rel. McBride v. Halliburton, which we wrote about previously, the Southern District of New York on March 2 issued another helpful materiality decision for defendants. In U.S. ex rel. Kolchinsky v. Moody’s Corp., the district court found that congressional investigations and news reports about a relator’s allegations put federal agencies on notice of the relator’s allegations. No. 12-cv-1399, 2017 WL 825478 (S.D.N.Y. Mar. 2, 2017). Because the government paid the defendant’s claims after those public investigations and reports, the court concluded the relator’s allegations failed Escobar’s materiality test.
After betting it all on a federal jury in Florida, four defendants in a non-intervened qui tam FCA action now face more than $347 million in damages. The jury returned a verdict for $115 million, which the court then trebled and tacked on more than $2.4 million in penalties. In United States and Florida ex rel. Ruckh v. CMC II, LLC, et al., 8:11-cv-1303 (M.D. Fl.), the four corporate defendants—CMC II LLC, Salus Rehabilitation LLC, 207 Marshall Drive Operations LLC, and 803 Oak Street Operations LLC—were found to have submitted, or caused to be submitted, false claims to Medicare and Medicaid for patient care that was unneeded, or not supplied at all, at 53 skilled nursing facilities (“SNFs”) in Florida. In rare jury verdicts like this and the verdict we covered last year, the jury’s verdict is only the first bad draw for defendants: trebling, penalties, attorney’s fees, reasonable expenses, and costs are all part of the second wave of misfortune when an FCA defendant loses at trial.
On Tuesday, the Supreme Court granted the relators’ petition for certiorari, vacated the judgment below, and remanded (“GVR’d”) in Bishop v. Wells Fargo & Co., No. 16-578, with instructions for the Second Circuit to reconsider its decision in light of the Supreme Court’s decision in Escobar. As we explained last November, the Second Circuit, following its precedent in Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), had concluded that a general certification of compliance with banking regulations was not an express certification of compliance with a specific statute, and that because the relevant regulations did not state that compliance was a precondition of payment they could not form the basis of an implied certification FCA claim.
On Friday, the D.C. Circuit issued its first decision applying Universal Health Services, Inc. v. United States ex rel. Escobar. The D.C. Circuit’s decision, United States ex rel. McBride v. Halliburton Co., provides important guidance regarding the False Claims Act’s materiality standard and applies that standard to an implied certification theory.
Last month a federal judge in Tennessee approved a $60 million settlement in a shareholder derivative action brought on behalf of Community Health Systems, Inc., officially resolving five years of litigation. A qui tam FCA action based on the same underlying conduct settled for $98 million in 2014, not including the attorneys’ fees and expenses also owed. Both actions arose from allegations that the company shirked the traditional evidence-based and objective admissions criteria used by most hospitals in favor of more lenient criteria designed to steer patients toward medically unnecessary inpatient admissions. Allowing patients to be treated inpatient rather than outpatient allegedly allowed Community Health Systems to receive hundreds of millions of unwarranted Medicare and Medicaid reimbursements for the inpatient services. The derivative suit plaintiffs claimed that the actions of the officers and directors left the company open to legal liability, including the FCA claims, resulting in substantial harm to the company’s reputation and financial health. This settlement is a cautionary tale for all public companies facing potential FCA claims: liability and fees may not end with a settlement with the DOJ.
Just last December, the Supreme Court settled the argument over whether a violation of the FCA’s seal requirement unequivocally mandates dismissal in State Farm & Casualty Company v. United States ex rel. Rigsby (No. 15-513).

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.