Below are some of the articles that you will find in the latest guide:
Executive Summary
2021 ushered in a new administration, new U.S. Department of Justice (DOJ) officials, and, of course, new DOJ policies and initiatives – many of which implicate the False Claims Act (FCA). But one thing that remained constant was DOJ’s use of the FCA as a key enforcement tool. While DOJ renewed its focus on telehealth and cyber-fraud, the courts continued to develop jurisprudence, and sometimes confusion, in the FCA arena. Meanwhile, potentially significant amendments to the FCA are being considered in the Senate, which may impact materiality and government dismissals. We hope this guide provides a useful review of the most noteworthy FCA developments – both on the DOJ enforcement front and the developing case law and legislative landscape – and a preview of potential FCA developments to come in 2022. Read more...
Healthcare digitization creates new FCA risk
In recent years, the implementation of electronic health records (EHR) and rapid expansion of telemedicine has caught the attention of the Department of Justice (DOJ) and the qui tam relators’ bar, prompting rigorous enforcement actions and increasing False Claims Act (FCA) cases. Despite shifts in technology reshaping patient records and care, FCA enforcement remains a constant and growing force. Read more...
DOJ intensifies scrutiny of cybersecurity practices
On October 6, 2021, Deputy Attorney General Lisa O. Monaco of the Department of Justice (DOJ) announced a Civil Cyber-Fraud Initiative through which DOJ will use the False Claims Act (FCA) to target cybersecurity-related fraud by government contractors and grant recipients. This initiative is part of a Department-wide comprehensive cyber review ordered by Monaco in May. Although it does not impose new regulatory or legal requirements, it signals a new focus and prioritization of resources by DOJ to improve cybersecurity across the government, the public sector, and at key “industry partners.” The initiative also expressly aims to secure FCA recoveries to reimburse the government and taxpayers for losses incurred “when companies fail to satisfy their cybersecurity obligations.” Government contractors and grantees should expect increased scrutiny of their compliance with cybersecurity requirements and a corresponding increase in FCA complaints based on alleged failures to meet those obligations. In rolling out this initiative, DOJ has emphasized that civil enforcement will not wait for a cybersecurity breach – cases can be brought for failure to comply with contractual or regulatory requirements even in the absence of such a breach. Read more...
Fact-intensive materiality inquiries protract litigation
This past year marks the fifth anniversary of the Supreme Court’s 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar, in which the Court articulated the False Claims Act’s (FCA) materiality requirement – that is, whether an alleged misrepresentation was capable of influencing the government’s payment decision – requires a “demanding” and “rigorous” review that can consider government action in the face of the alleged or similar misrepresentations. At first, the Escobar decision, and its heightened materiality standard, appeared to transform the landscape of FCA enforcement. Case law developed rapidly in its wake, as lower courts grappling with its meaning and application treated similar scenarios differently. More recently, however, the case law has begun to approach an equilibrium – courts will take a “holistic” view of the circumstances of each case, including government (in)action despite knowledge of alleged misconduct, and under which no single fact is dispositive. Because materiality thus is such a fact-intensive inquiry, it has proven to be an issue unlikely to be decided on a motion to dismiss or even, at least in some circumstances, at summary judgment. This is often true despite the Supreme Court’s stated view that “materiality is [not] too fact intensive for courts to dismiss [FCA] cases on a motion to dismiss or at summary judgment.” Read more...
Standard for government dismissals remains uncertain
In our 2020 and 2021 editions of our False Claims Act (FCA) guide, we noted recent developments relating to the United States Department of Justice’s (DOJ) authority under 31 U.S.C. §3730(c)(2)(A) to seek dismissal of suits filed under the qui tam provisions of the FCA. Beginning with the Granston Memo in 2018, which DOJ later incorporated into the Justice Manual, increased attention on the legal standard governing such motions to dismiss gave rise to a circuit split. That split widened in 2020 with the emergence of yet a third standard, and more so over the last year with additional case law interpreting the existing standards, and legislation introduced in the U.S. Senate that could limit DOJ’s control over qui tam litigation in significant ways. Read more...
Safeco, Supervalu, and objectively reasonable interpretations of ambiguous regulations
The Supreme Court’s decision in Safeco has been widely applied by circuit courts to hold that a defendant does not “recklessly disregard the truth or falsity” of its claims for the purposes of False Claims Act (FCA) scienter when that defendant operates under an “objectively reasonable” interpretation of the prevailing regulatory scheme. But Safeco’s application to the other portions of the FCA’s scienter definition are still being debated by the lower courts. Two decisions handed down in 2021, the Seventh Circuit decision in Supervalu and the D.C. District Court decision in Norton, highlight the diverging approach to how far Safeco’s analysis extends. Indeed, the hotly debated decision in Supervalu may give the Supreme Court an opportunity to answer the underlying question itself. Read more...
Re-evaluating the benefits of DOJ cooperation
Self-disclosure, cooperation, and remediation: these are three buzz words that have been driving much of U.S. Department of Justice’s (DOJ) white-collar enforcement efforts for the last half-decade. While there is no obligation to take any of those steps, the DOJ has offered a variety of incentives with the goal of convincing companies there may be strategic advantages to doing so. Because the False Claims Act (FCA) offers a powerful financial incentive for qui tam relators to file suit on behalf of the government rather than raise their concerns with a company internally, companies facing FCA claims frequently do not have an opportunity to self-disclose. Cooperation is therefore even more important as a means for companies to lessen the size of any potential FCA resolution. The DOJ recently restored prior guidance requiring that, to be eligible for cooperation credit, companies must provide the DOJ with all non-privileged information about individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority. With this change in policy, it is important to outline what actions corporations must take to receive cooperation credit from the DOJ, what reductions the DOJ may implement in return, and whether self-disclosure and cooperation are really worth it. Read more...
Looking ahead
The Biden Administration has made it clear that deterring corruption and fraud through aggressive enforcement – including the use of the False Claims Act – is a priority. With its leadership team beginning to take form, the Department of Justice (DOJ) is ready to take action. Although the pandemic may again slow some investigations and trials in 2022, we expect the pace of enforcement to pick-up on the whole. Specific FCA enforcement priorities continue to include pandemic-related fraud, fraud related to opioids, and conduct targeting seniors. In addition, DOJ’s Civil Cyber Fraud Initiative underscores DOJ’s commitment to using the FCA in new ways to reinforce cyber security obligations of government contractors and subcontractors and root out fraud. And, as in years past, businesses operating in the health care industry sector are under intense FCA scrutiny from the government and from would be FCA whistleblowers. DOJ has indicated it is particularly focused on fraud related to telehealth and to the acquisition and implementation of electronic health records systems. Read more...
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Authored by Gejaa Gobena, Michele Sartori, Allison Caplis, Hunter Davis, Michael Theis, Michael Mason, Stacy Hadeka, Jonathan Diesenhaus, Matthew Sullivan, Claudia Pare, David Sharfstein, Jennifer Hill, Robert Beecher, Emily Lyons, and Anthony Fuller.
