In Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016) (discussion by C&M attorneys here), the Supreme Court held that an implied false certification can be a basis for False Claims Act (FCA) liability, “at least where two conditions are satisfied:” (1) the claim makes specific representations about the goods or services provided and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. (Emphasis added).
This week’s episode covers debarment, defense spending, and FCA news, and is hosted by partners Peter Eyre and David Robbins. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.
In this episode, hosts Mana Lombardo and Jason Crawford are joined by Tully McLaughlin, co-chair of the firm’s False Claims Act Practice, to discuss some of the unique considerations for trying False Claims Act cases. “Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act.
“Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act. In this episode, hosts Mana Lombardo and Jason Crawford interview Will Chang, a partner in the firm’s Health Care and White Collar & Regulatory Enforcement groups and a former trial attorney at the DOJ Criminal Division, Fraud Section, on health care fraud and FCA issues.
Are we experiencing a shift towards a higher bar for pursuing False Claims Act Cases? Department of Justice guidelines may signal a new direction from the last two decades of DOJ FCA enforcement history through policies that reign in relators and articulate some boundaries for cases pursued by DOJ. Meanwhile, Escobar progeny continues to develop and refine the materiality requirement under the FCA. Join us on May 17, 2018, at 8:30 AM Eastern, as Crowell & Moring attorneys Brian Tully McLaughlin, Mana Lombardo, Jason Crawford, and Nkechi Kanu lead a discussion highlighting recent developments impacting FCA investigation, enforcement, and litigation under the False Claims Act. Specific topics include:
- DOJ Enforcement Trends and Developments: What They Mean for Investigation and Litigation Strategy
- The Continuing Emphasis on Materiality in the Wake of Escobar
- Case developments and impacts
On March 22, 2018, an Indiana state trial court judge granted a motion to dismiss in State of Indiana ex. rel Harmeyer v. The Kroger Co. et al. Relator Harmeyer—an attorney and Kroger patron—alleged that the grocery chain knowingly failed to collect and remit state sales tax on hundreds of goods throughout the state. Under Indiana law, the state’s gross retail tax does not apply to “food and food ingredients” but it does apply to candy, soft drinks, dietary supplements, and prepared foods. Relator’s sixth amended complaint identified more than 1,400 food items that relator alleged were mischaracterized as tax-exempt based on the ingredients and food preparation. For example, relator alleged that a protein bar should be classified as taxable candy rather than nontaxable food. By classifying items as tax-exempt, relator alleged that the grocery chain cost the state millions of dollars in tax revenue each year.
The superior court judge dismissed relator’s complaint with prejudice holding that the complaint failed to meet the heightened pleading requirement of 9(b) because Harmeyer failed to allege the time, place, and method by which misrepresentations were made to the state. The court also noted that Harmeyer, whose similar case against a grocer in another state had been dismissed, was not an employee of Kroger, had no inside knowledge of what took place within the company, and merely presumed, as he had in his other case, that the defendant’s characterization of the items as tax-exempt was false and done with reckless disregard of the truth. While Harmeyer argued that the allegation of 1400 mischaracterizations was sufficient to plead recklessness, the court could not determine from the complaint whether this was a substantial percentage of the products sold by defendant and therefore could not presume recklessness from that number. The judge dismissed the case with prejudice, and the relator filed a notice of appeal on April 13.
On May 16, 2017, the Fourth Circuit issued a decision in United States ex rel. Omar Badr v. Triple Canopy, holding that the Government had properly alleged an implied certification claim under the standard articulated by the Supreme Court in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). In the eleven months following the Supreme Court’s landmark ruling on the implied certification theory of liability, Escobar has been cited in nearly 100 court opinions. (Our recent Feature Comment in the Government Contractor highlights some of the key cases and developing trends).
In Badr, the relator alleges that a security contractor responsible for ensuring the safety of an air base in a combat zone employed Ugandan guards who were unable to meet the required marksmanship scores on a U.S. Army qualification course. According to the relator, Triple Canopy knowingly falsified marksmanship scorecards and presented claims to the government for payment for those guards.
Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. This latest edition is hosted by partners Peter Eyre and David Robbins and includes updates on the budget, an FCA case in D.C. federal district court, and an important OCI decision.
Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without. This latest edition is hosted by partner David Robbins and includes updates on GAO’s Whistleblower Protections Pilot Program, the latest from the House of Representatives, and a DOJ FCA matter.
Effective August 1, the penalty range for violations under the civil False Claims Act nearly doubled, pursuant to a Department of Justice interim final rule published on June 30th. In a “Feature Comment” published in The Government Contractor, C&M attorneys analyze how the dramatic increase in FCA penalties impacts the landscape of litigation. The article first explains the background of the recent law and DOJ’s new rule. Next, it assesses how the increased penalties are likely to lead to an increase in FCA suits, including in cases where actual damages may be low or even nonexistent. It then discusses how the increased penalties range provides leverage to the Government (and potentially relators, too) in FCA settlement negotiations where contractors find themselves daunted by potentially gargantuan fines. Finally, it provides an analysis on constitutional challenges to exorbitant FCA penalties under the Eighth Amendment’s Excessive Fines Clause, and assesses how litigation may be prolonged by post-judgment challenges to the heightened penalty amounts.