False Claims Act fallout continues with $350 million reversal in Florida01.26.18
The U.S. Supreme Court’sEscobar decision continues to send shockwaves through the False Claims Act landscape.
Earlier this week, a federal district court in Florida relied on it heavily to undo a $350 million verdict against a chain of Florida nursing homes.
READ MORE: Ruckh order.pdf
A bit of background: Escobar upended the bright line “condition of payment” versus “condition of participation” distinction, and held that in order to support liability, the misrepresentation about compliance with statutory, regulatory, or contractual requirements must be “material” to the government’s payment decision.
Numerous defendants have relied on Escobar since the 2016 SCOTUS ruling, arguing, as Justice Clarence Thomas observed in the Escobar opinion, that “where the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, [it] is very strong evidence that those requirements are not material."
The Ruckh case in Florida is perhaps yet the starkest example of this principle put into practice.
As the judge in the Ruckh case observed, both federal state authorities “were — and are — aware of the defendants’ disputed practices, aware of this action, aware of the allegations, aware of the evidence, and aware of the judgments for the relator.”
Based on that, the court wryly concluded that the “defendants delivered the services for which the governments were billed; the governments paid and continue to pay to this day despite the disputed practices, long ago known to all who cared to know.”
Assuming it withstands appellate challenge, Ruckh (and/or the resulting appellate opinion) is sure to become an oft-cited case.
Defendants who rely on Ruckh in situations where the government is continuing to pay challenged claims would be wise to be mindful of the fact that Ruckh was a non-intervened case, meaning the government declined to take control of the case.
Courts often take a jaundiced view of nonintervened actions, assuming that the governments lack of interest is a tacit admission that the case lacks merit. The Ruckh court certainly took this approach.
Second, if the government had intervened, it would have had far more power to stop paying the disputed claims; undercutting the Ruckh defendant’s strongest argument against materiality.
In the end, in any False Claims Act case, the facts and circumstances matter. This is even more true post-Escobar where the determination of whether or not a particular claimed violation is material hinges on the specific facts present.
Ruckh is one of the more dramatic examples, but there are, and will be others.