conviction because the evidence did not show the defendant knew these practices were fraudulent or unlawful, thus preventing a finding that the defendant “willfully” violated the AKS, as required to sustain a criminal conviction. REVERSE FALSE CLAIMS Under the FCA’s “reverse false claim” provision, 31 U.S.C. § 3729(a)(1)(G), liability may arise when a defendant: (1) “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government;” or (2) “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” Under either prong, there must exist an “obligation” to pay money to the government, which includes the retention of an overpayment from the government. Analysis of the FCA’s reverse false claim provision often focuses on that provision’s relationship to traditional FCA violations. Courts typically continue to require that some additional allegations or evidence be presented to support reverse false claim liability beyond a defendant’s alleged “direct” violations of § 3729(a)(1)(A) or (a)(1)(B) of the FCA. In U.S. ex rel. Foreman v. AECOM , the Second Circuit affirmed dismissal of the relator’s reverse false claims because they were based on the same factual allegations as the relator’s claims under § 3729(a)(1)(A) and 3729(a)(1)(B). 132 The Second Circuit determined that § 3729(a)(1)(G) does not create a cause of action for reverse false claims that are duplicative of traditional false claims; instead, § 3729(a)(1)(G) applies only where a defendant makes an additional false statement in order to avoid paying money to the government. As a result, the Second Circuit held that the false statement underlying a traditional false claim cannot serve as the false statement supporting a reverse false claim. Numerous district courts adopted reasoning similar to the Second Circuit’s, dismissing reverse false claims that were found to be duplicative or redundant of traditional, “direct” false claims allegations under § 3729(a)(1)(A) and (a)(1)(B). 133 Courts also dismissed reverse false claims allegations where the relator failed to plead a specific payment obligation with the specificity required by Federal Rule of Civil Procedure 9(b). In U.S. ex rel. Paul v. Biotronik, Inc. , the district court held that the relator did not sufficiently plead that the defendant owed a payment obligation to the government. 134 The district court stated that alleging a general belief that a government-funded healthcare program paid for the identified patients’ procedures failed to plead a specific payment obligation with sufficient particularity. Similarly, in U.S. ex rel. SW Challenger, LLC v. eviCore Healthcare MSI, LLC , the district court dismissed a reverse false claim based
only on allegations that the defendant “retain[ed] Government funds to which they were not entitled” because the relators did not identify a specific, independent obligation to pay the government. 135 In United States v. Cockerell Dermatopathology, P.A. , on the other hand, the district court held that the government adequately pleaded an actionable reverse false claim. 136 The government alleged that the defendant was obligated to repay funds to the government based on a Memorandum of Understanding (MOU) that it executed regarding the repayment of certain claims, as well as two retraction letters that the defendant sent to the government acknowledging that it received certain claims in error. The district court held that the government pleaded with sufficient particularity under Rule 9(b) that the MOU and retraction letters constituted an obligation to repay funds to the government for purposes of pleading a reverse false claim. The district court further held that the government’s direct false claims were based on a separate course of conduct – the submission of thousands of false claims to the government for payment – and, therefore, the alleged reverse false claims were not redundant or duplicative of the direct false claims because the reverse false claims were based on executing the MOU and submitting the retraction letters. PUBLIC DISCLOSURE BAR The public disclosure bar is meant to deter opportunistic relators from filing parasitic lawsuits by preventing a relator from maintaining a qui tam complaint that alleges substantially the same information as has been previously disclosed to the public, unless the relator is an “original source” of the FCA allegations. 137
Although no longer jurisdictional, the public discourse bar is still a strong affirmative defense for defendants facing allegations of fraud that are duplicative of publicly-disclosed information. Once a defendant has asserted the public disclosure bar, the district court must determine: (1) whether a public disclosure has previously occurred; (2) whether that disclosure was substantially similar to the relator’s allegations; and, if so, (3) whether the relator is nevertheless an “original source” of the FCA allegations.
The public disclosure bar is meant to deter opportunistic relators from filing parasitic lawsuits by preventing a relator from maintaining a qui tam complaint that alleges substantially the same information as has been previously disclosed to the public, unless the relator is an “original source” of the FCA allegations.
132 2021 WL 5406437 (2d Cir. Nov. 19, 2021). 133
See U.S. ex rel. Harbit v. Consultants in Gastroenterology, P.A. , 2021 WL 1197124 (D.S.C. Mar. 30, 2021); U.S. ex rel. McClinton v. Southerncare, Inc. , 2021 WL 2587162 (S.D. Miss. June 23, 2021); U.S. ex rel. Mbabazi v. Walgreen Co. , 2021 WL 4453600 (E.D. Pa. Sept. 28, 2021). Although one district court allowed the government to plead theories in the alternative and to allege that the same conduct supported both direct and reverse false claims, that ruling likely is no longer good law after the Second Circuit’s opinion in Foreman . See United States v. Omnicare, Inc. , 2021 WL 1063784 (S.D.N.Y. Mar. 19, 2021). 134 2021 WL 211474 (M.D. Fla. Jan. 21, 2021).
135 2021 WL 3620427 (S.D.N.Y. Aug. 13, 2021); see also United States v. Walgreen Co. , 2021 WL 5760307 (W.D. Va. Dec. 3, 2021) (dismissing reverse false claim allegations for failure to plead an obligation to repay funds). 136 2021 WL 4894173 (N.D. Tex. Oct. 20, 2021). 137 31 U.S.C. § 3730(e)(4).
FALSE CLAIMS ACT UPDATE BASS, BERRY & SIMS | 22
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