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LITIGATION/CONTROVERSY
January 9, 2018
False Claims Act: 2017 Year-in-Review
TABLE OF CONTENTS
INTRODUCTION: HIGHLIGHTS AND TRENDS ............................................................ 3
I. FEDERAL LEGISLATIVE AND REGULATORY DEVELOPMENTS ................... 7
A. Congress ........................................................................................................ 7
B. Department of Justice .................................................................................. 9
C. Department of Health and Human Services ................................................ 9
D. Department of Veterans Affairs ................................................................. 10
E. Securities and Exchange Commission ..................................................... 10
F. Commodity Futures Trading Commission ................................................ 10
II. FEDERAL CASE LAW DEVELOPMENTS ........................................................ 11
A. Supreme Court Pending Case: Materiality ................................................ 11
B. D.C. Circuit: (1) Materiality; (2) First-to-File Bar; (3) Public-Disclosure
Bar; (4) Rule 9(b) Pleading Standard ......................................................... 12
C. First Circuit: (1) Rule 9(b) Pleading Standard; (2) Causation;
(3) Retaliation; (4) Reverse False Claims .................................................. 14
D. Second Circuit: (1) First-to-File Bar; (2) Rule 9(b) Pleading Standard ... 17
E. Third Circuit: (1) Falsity; (2) Materiality; (3) Reverse False Claim .......... 18
F. Fourth Circuit: (1) Government’s Unreviewable Veto; (2) Falsity;
(3) Materiality; (4) First-to-File Rule ........................................................... 20
G. Fifth Circuit: (1) Relation Back of Government’s non-FCA Claims;
(2) Materiality; (3) Public-Disclosure Bar; (4) Rule 9(b) Pleading
Standard; (5) Government-Knowledge Defense; (6) Pre-2010 Public-
Disclosure Bar; (7) Causation .................................................................... 23
H. Sixth Circuit: (1) Rule 9(b) Pleading Standard; (2) Government
Liability for Defendants’ Attorney’s Fees .................................................. 28
I. Seventh Circuit: (1) Public-Disclosure Bar; (2) Causation ...................... 32
J. Eighth Circuit: (1) Public-Disclosure Bar; (2) Sovereign Immunity ........ 34
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K. Ninth Circuit: (1) Materiality; (2) Public-Disclosure Bar ........................... 36
L. Tenth Circuit: First-to-File Bar ................................................................... 38
M. Eleventh Circuit: (1) Government Intervention To Settle;
(2) Scienter in the Face of Ambiguous Regulations ................................ 39
III. FEDERAL SETTLEMENTS, INTERVENTIONS, AND COMPLAINTS .............. 41
A. Healthcare and Pharmaceuticals ............................................................... 41
B. Procurement and Grants ............................................................................ 47
C. Financial Institutions .................................................................................. 54
IV. STATE AND LOCAL DEVELOPMENTS ........................................................... 58
ABOUT WILMERHALE’S FALSE CLAIMS ACT PRACTICE ...................................... 62
WILMER CUTLER PICKERING HALE AND DORR LLP
INTRODUCTION: HIGHLIGHTS AND TRENDS
False Claims Act (FCA) recoveries topped $3.7 billion in fiscal year 2017, marking the
eighth straight year of annual recoveries in excess of $3 billion. Healthcare cases,
including ones involving drug and device companies, accounted for most of the total, at
roughly $2.47 billion. Recoveries in Defense Department cases increased to
approximately $220 million, nearly double the 2016 figure, and the number of
government-initiated cases in that sector more than doubled, reflecting in part the
results of investigations from the country’s long-running military engagements in Iraq
and Afghanistan. The value of settlements and judgments in the non-healthcare and
non-defense category dropped by half to roughly $1 billion, of which more than $500
million was from the financial services sector. In 2017, 674 new qui tam cases were
filed—an average of more than 12 a week—down from the year before but still at
historically high levels.1
In 2017, the Department of Justice (DOJ) continued to stress its focus on individual
accountability, noting a number of substantial awards against individuals in cases also
involving corporate entities and more than $60 million in awards against individuals not
involving joint-and-several liability with corporate entities.2
Division in the Lower Courts Over Escobar
The Supreme Court’s 2016 decision in Universal Health Services, Inc. v. United States
ex rel. Escobar, 136 S. Ct. 1989 (2016), continued to generate debate among the lower
courts. In Escobar, the Court held that implied certification claims were viable under the
FCA but only in certain circumstances. In the year and a half since the Court handed
down Escobar, dozens of lower courts have addressed issues left uncertain by Escobar,
above all (i) when does a claim for payment constitute an implied certification of
compliance with a regulatory or contractual obligation, and (ii) what establishes or
disproves the materiality of an allegedly false representation. As to the first issue, a
number of courts have held that the circumstances identified by the Supreme Court as
giving rise to an implied certification—“the defendant submits a claim for payment that
makes specific representations about the goods or services provided, but knowingly
fails to disclose the defendant’s noncompliance with a statutory, regulatory, or
contractual requirement . . . if the omission renders those representations misleading”—
are exclusive, see, e.g., United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d
890, 901 (9th Cir. 2017); United States ex rel. Forcier v. Computer Sciences Corp., 12
Civ. 1750 (DAB), 2017 WL 3616665, at *12 (S.D.N.Y. Aug. 10, 2017), while others have
ruled that those circumstances are sufficient but not necessary to establish an implied
false certification, see, e.g., United States ex rel. Badr v. Triple Canopy, Inc., 857 F.3d
174, 178 (4th Cir. 2017); United States ex rel. Landis v. Tailwind Sports Corp., 234 F.
Supp. 3d 180, 198 (D.D.C. 2017). As to the second issue, a number of courts of
appeals have held that if the government continues to pay claims while knowing of the
defendant’s alleged non-compliance, that suffices to show the non-compliance’s lack of
materiality to payment, see, e.g., United States ex rel. McBride v. Halliburton Co., 848
F.3d 1027 (D.C. Cir. 2017); Abbott v. BP Exploration & Production, Inc., 851 F.3d 384
(5th Cir. 2017), whereas others have refused, at least at the motion to dismiss stage, to
find that such government conduct necessarily undercuts the materiality of the alleged
