Monthly Archives: October 2014

District of New Mexico: Let’s Get Retro: FERA’s Retroactive Provision Applies to Cases, Not Claims, And Doesn’t Violate the Constitution

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It is always refreshing to see a district court judge admit to making a mistake and take prompt action to correct it. In United States ex rel. Baker v. Community Health Systems, a case we’ve covered before, the District of New Mexico reversed course on a hot legal topic in FCA litigation–the proper interpretation of the retroactivity language in the Fraud Enforcement Recovery Act of 2009 (FERA).

As a refresher, recall that Congress expressly made portions of FERA retroactive, though not in the clearest possible way:

Section 4(f)(1) of FERA indicated that the changes to § 3729(a)(2), now codified at §3729(a)(1)(B), “shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act ["FCA"] . . . that are pending on or after that date.”

Id. (citing FERA, Pub.L. No. 111-21, § 4(f)(1), 123 Stat. 1617, 1625). The problem is that Congress failed to define the term “claims,” which is problematic when the underlying statute–the FCA–itself creates liability for “false claims.” In other words, the question is whether the reference to “claims” in FERA is to the alleged false claims the FCA creates liability for or to claims brought under the FCA.

In Baker, the district court originally found the word “claims” to refer to the former–the actual false claims allegedly submitted by the defendant. However, after reviewing the Sixth Circuit’s ruling in Sanders v. Allison Engine Co., Inc., 703 F.3d 930 (6th Cir. 2012), the district court reversed itself and found that the term “claims” actually refers to the “claims” brought under the FCA and therefore “applies to this civil action, which was pending during the expressly stated effective date of June 7, 2008.”

The district court had also previously ruled that application of the retroactivity provision would violate the Constitution’s Ex Post Facto Clause. In light of its changed position on the meaning of the provision, the district court also ruled “that retroactive application of this provision to the entire case… would not violate the Ex Post Facto Clause.”

Condition of Payment vs. Condition of Participation in the Tenth Circuit

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Courts confronting implied false certification claims under the False Claims Act have long applied the distinction between “conditions of payment,” which can support an FCA claim, and “conditions of participation,” which cannot. This distinction first arose in the healthcare field where Medicare/Medicaid regulations often distinguish strict prerequisites to payment from more general minimum health and safety standards. (This article contains a good discussion of the issue.) Outside of the healthcare context, however, some courts have rejected the distinction as “grammatical haggling [that] is unmoored in the law.” United States ex rel. Hendow v. University of Phoenix, 461 F. 3d 1166.

Recently, the Western District of Oklahoma denied summary judgment in United States ex rel. Fortenberry v. The Holloway Group, Inc., No. CV-11-247 (Sept. 2, 2014), a case involving allegedly false claims for Medicare/Medicaid payments in which the government did not intervene. The defendant admitted that it violated certain regulations relating to the delivery of mental health services, but contended that the regulations were merely conditions of participation, not conditions of payment. (The court determined that the defendant never expressly certified compliance with the applicable regulations and granted summary judgment on that issue.) The court determined that the regulations at issue were conditions of payment because they specified that failure to comply would result in “disallowance of services,” “indicat[ing] that the eligible provider’s ability to be reimbursed for specific services will be disallowed for a violation.” The court also found that the plaintiff had provided enough evidence of the defendants’ knowledge of the violation to survive summary judgment.

It appears this case is headed to trial if a settlement cannot be reached.

False Claims Act in the Popular Press

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National Public Radio recently ran a story about the False Claims Act, describing its history and modern application. In light of the growing use of the law, it is important for the public to understand its origin, history, and modern development and use. While those with the most at stake have been debating possible amendments to the law, the general public has largely been left out the discussion. Perhaps coverage of the False Claims Act in the popular press will lead to a more informed public, which, it seems, can only help as elected officials debate the merits of various proposals for amending the law.

You can listen to NPR’s story here.