United States: The Supreme Court Continues To Punt On False Claims Cases

Last Updated: October 8 2014
Article by Ellyn Sternfield

The first day of the Supreme Court term saw it decline, without comment, certiorari on two cases raising issues of liability and the sufficiency of pleading under the federal False Claims Act (FCA). 

I first wrote about the case of U.S. ex rel. Ge v. Takeda in August 2013, when the U.S. had appealed a federal court's dismissal of the FCA case.  Ge's qui tam Complaint had premised FCA liability on an assertion that the defendant company had violated FDA reporting regulations.  She contended that if the company had complied with FDA regulations, federal health care programs may not have paid for the drugs at issue.  The government did not quarrel with the court's finding that Ge's pleadings lacked the requisite specificity under Rule 9(b), but the U.S. did challenge the court's finding that FCA liability could not be premised on failure to follow FDA requirements because compliance with those requirements was not a material condition to payment of the claims at issue. 

And as I wrote in December 2013, the First Circuit Court of Appeals gave the government the appearance of a victory in the Ge case, ruling that Ge's Complaint in fact lacked the requisite specificity under Rule 9(b), but found that it did not need to reach the issue of whether the lower court was "overly restrictive" in finding FDA violations could not be the basis of FCA violations. The Supreme Court's denial of certiorari left that ruling intact.

In the case of U.S. ex rel. Rostholder v. Omnicare, the  Fourth Circuit's decision went where the First Circuit dared not tread, affirming the dismissal of Rostholder's qui tam complaint on the grounds that allegations that the defendant company violated FDA regulations was not in and of itself sufficient to plead an actionable FCA violation because "(t)he correction of regulatory problems is a worthy goal, but not actionable under the FCA in the absence of actual fraudulent conduct."  The Supreme Court's denial of certiorari also leaves that decision intact.

Besides denial of certiorari and allegations regarding FDA violations, the two cases share another commonality:  the federal government declined to intervene in each qui tam case prior to the lower court's dismissal on 9(b) grounds. 

Whether the government declinations of intervention played a role in the Supreme Court's decision to decline certiorari, we do not know.  But as noted by my colleagues Tom Crane, Brian Dunphy, and Larry Freedman in a recent blog post, we do know that circuit courts around the country remain split on the degree of specificity required to plead FCA violations.  And the Supreme Court's denial of certiorari in the Rostholder and Ge cases does nothing to resolve that split. 

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