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Latham & Watkins Healthcare & Life Sc iences Practice
February 23, 2017 | Number 20
81
Fourth Circuit Declines to Address Use of Statistical
Sampling in False Claims Act Cases
Court of Appeals panel rules use of statistical sampling is inappropriate for interlocutory
appeal, leaving FCA litigants without any direct appellate court guidance.
In the closely watched case United Stat es ex rel. Michaels v. Agape Senior Cm ty., Inc., the U.S. Court of
Appeals for the Fourth Circuit decl ined to address a key issue for False Claim s Act (FCA) litigants —
whether plaintiffs ma y use statistical sampling and extrapolation t o establish the extent of liabilit y and/or
damages in FCA cases. The use of extrapolation is hotly contested among FCA defendants and plaintiffs
(which can either be the Departm ent of Justice or private individuals k nown as relators) in cases involving
a large number of claims or transactio ns. This controversial method allows FCA plaintiffs to “prove”
liability or damages only for those cl aims in a sample, thus avoiding the bur den of establishing liability for
what could be thousands of other sim ilar claims on a claim-by-claim basis . While beneficial for plaintiffs,
this approach strips defendants of the power to contest allegations concer ning claims outside the sample.
FCA defendants had hoped that the Four th Circuit in Agape would affirm the district court’s rul ing that
statistical sampling was inappropriat e under the facts of that case, and per haps hold more generally that
the use of this methodology is incons istent with the FCA. See Latham’s Client Alert, Fourth Circuit May
Address Use of Statistical Sampling in False Claims Act Cases. The Fourth C ircuit’s refusal to rule means
that FCA defendants, plaintiffs and d istrict court judges alike must c ontinue to navigate this issue without
any bright-line rules.
Fourth Circuit Ruling in Agape
In Agape, the Relators alleged that a network of nursing home f acilities submitted claims for medicall y
unnecessary services as part of a sc heme to defraud the Government. 1 The Relators wanted to use
statistical sampling t o establish that more than 50,000 claims submitted to federal healthcare pr ograms
were false.2 The Relators claimed revi ewing patient charts related to ever y claim to identify which claim s
included medically unnecessary services would be t ime-consuming and cost-prohibitive.3 The Rel ators
told the district court their experts would r equire four to nine hours to review e ach chart. With experts
charging US$400 per hour, the Relators estim ated this effort would cost more tha n US$36 million.4
The U.S. District Court for the District of South Carolina ruled that while statis tical sampling may be
appropriate in certain circumstanc es, it was improper under the facts of this case.5 The district court
reasoned that each alleged false claim required a highly fact-intensive inquir y regarding whether the claim
was medically necessary and relevant evidence for each claim had not diss ipated or been destroyed.6
The court recognized, however, that th is ruling meant the Relators faced a “s taggering” outlay of time and
money and a trial of “monumental” propor tions.7
Acting on its own, or “sua sponte,” the district court decided that pre-trial app ellate review of this ruling
was needed.8 Accordingl y, the district court certified its decision for interlocutory appeal and th e Fourth
