Amgen Seeks Supreme Court Review of Implied Certification Theory of Liability Under the False Claims Act

Posted on October 6, 2011 by Cliff Katz

The U.S. Courts of Appeals have been wrestling with the reach of the False Claims Act when the actual claim submitted to the government is not “factually false.”  Some courts have adopted a framework in which a claim that is true on its face can be considered “legally false” where a party somehow involved in the goods and services provided failed to comply with certain statutory, regulatory or contractual obligations, despite never expressly certifying that it did comply with these obligations.  This is called the “implied certification” theory of liability.  In its Petition for a Writ of Certiorari to the U.S. Supreme Court, Amgen contends that “[t]he Circuits have applied a dizzying array of different tests in deciding whether claims like this qualify as ‘false or fraudulent’ within the meaning of the FCA.”

 In its Writ, Amgen describes some of the varying positions taken by the Circuits regarding the implied certification theory of liability:

1st Circuit:  dispensing with the “certification” framework, and holding that liability can be premised on failure to comply with a contractual, regulatory or statutory obligation whenever the government could theoretically reject a claim for non-compliance.  See New York ex rel. Westmoreland et al. v. Amgen, Inc. et al., 2011 WL 2937420 (1st Cir. July 22, 2011); United States ex rel. Hutcheson et al. v. Blackstone Medical, Inc., 2011 WL 2150191 (1st Cir. June 1, 2011).  For further details on the First Circuit decisions, click here, here, and here.

7th, 4th, and 5th Circuits:  have taken positions that are incompatible with an implied certification theory.  See United States ex rel. Yannacopoulos v. General Dynamics, 2011 WL 3084932, at *3 n.4. (7th Cir. July 26, 2011); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 786-87 n.8 (4th Cir. 1999); United States ex rel. Marcy v. Rowan Cos., 520 F.3d 384, 389 (5th Cir. 2008).

2nd, 3rd, and 8th Circuits:  implied certification theory limited to where there is a statute or regulation that is a condition of payment.  See Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001); United States ex rel. Wilkins v. United Health Group, Inc., 2011 WL 2573380, at *9 (3d Cir. June 30, 2011); United States ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791, 795–96 (8th Cir. 2011).

11th Circuit:  implied certification theory can be based on either a condition of payment or a condition of participation in the federal program.  See McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005).

D.C. Circuit:  holding that a violation of a contractual obligation that was “material” to the government’s obligation to pay a claim can form the basis for FCA liability.  See United States v. Science Applications Int’l Corp., 626 F.3d 1257, 1261 (D.C. Cir. 2010).

Amgen posed the following two questions to the U.S. Supreme Court:

  1. Whether a claim can be deemed “false or fraudulent” within the meaning of the FCA because the claimant violated a statutory, regulatory or contractual obligation and, at the time the claim was submitted, the government payor could have but was not required to deny the claim on that ground.

  2. Whether the draconian provisions of the FCA can be used to enforce compliance with statutes, regulations, contractual obligations, or other program requirements, even though no statute, regulation or contractual provision expressly conditions payment on compliance with those obligations.

In particular, at issue in the Amgen case is whether a violation of the Anti-Kickback Statute (AKS) can form the basis for liability under the FCA prior to the amendments to the FCA made by the 2010 Patient Protection and Affordable Care Act.  The First Circuit has held that compliance with the AKS is a precondition of payment of Medicare claims, and a violation of the AKS can cause factually true claims to be false and form the basis for liability under the FCA – whether or not the providers expressly certified compliance with the AKS.  The First Circuit has further held that liability can also be based on “a precondition of being entitled to payment,” i.e., violations of statutory, regulatory or contractual obligations which would give the government agency discretion to decline payment on the basis of the violation.

The 2010 Patient Protection and Affordable Care Act amended the FCA to specifically provide that a violation of the AKS causes the claim to be false under the FCA.  These amendments, however, are not retroactive, and so, the issue before the Supreme Court will be relevant to hundreds of FCA cases.
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False Claims Act Developments

Posted on September 22, 2011 by Antonia F. Giuliana

To learn more about recent developments in False Claims Act litigation and the measures companies may take to reduce FCA exposure, please see the two publications below:

Compliance Programs:  An Answer to the Risks Posed by the False Claims Act, originally published in the August 2011 issue of Metropolitan Corporate Counsel.

Litigating False Claims Act Cases in the First Circuit Post-Blackstone and Amgen, originally  published in the August 29, 2011 issue of Bloomberg Law Reports.

 

 

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E.D.N.Y. Court Allows Government to Contact Amgen Employees Outside the Presence of Amgen's Counsel

Posted on July 20, 2011 by Cliff Katz

Amgen alleged that government lawyers violated Rule 4.2 of the New York Code of Professional Responsibility by communicating with present and former Amgen employees in connection with a grand jury proceeding and False Claims Act qui tam litigation.  Amgen sought a protective order to require the government to comply with Rule 4.2, referred to as the “no-contact rule,” which provides that a lawyer may not communicate with the opposing party when it knows it is represented by counsel.  The District Court denied the motion, holding that the court did not have jurisdiction to grant Amgen relief, but even if it did, Amgen’s motion failed on the merits because Amgen and the United States cannot be considered “parties” in the same “matter” as required by Rule 4.2 and the government was “authorized by law” to contact Amgen’s employees.  See In re Amgen Inc., Case No. 10-MC-0249 (E.D.N.Y. April 6, 2011) (Magistrate Judge’s Report & Recommendation), 2011 WL 2418815 (E.D.N.Y. June 14, 2011) (District Court’s order adopting Magistrate Judge’s Report & Recommendation in its entirety).

Rule 4.2(a) of the New York Code of Professional Responsibility provides:

In representing a client, a lawyer shall not communicate or cause another to communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the prior consent of the other lawyer or is authorized to do so by law.

N.Y. Rules of Prof'l Conduct 4.2(a), 22 N.Y.C. R.R. § 1200.

The key terms in this rule upon which the District Court’s opinion on the merits hinged are “party” and “matter.”  The District Court held that the Government was not a “party” in the qui tam “matters” because it had not intervened, stating: “Notwithstanding the fact that in such cases the United States is the real party in interest as a result of the private relator's unilateral decision to file a complaint, the Supreme Court has explicitly held that the United States is not a "party" to a private relator's qui tam action unless and until it decides to intervene. U.S. ex rel. Eisenstein v. City of New York, New York, 129 S. Ct. 2230, 2233 (2009).”  The District Court further held that Amgen was not a party to the grand jury “matter”, stating that “there are no ‘parties’ to a grand jury investigation because it is an inquisition, not an adversarial proceeding.”  The court further reasoned:

The subject or target of a grand jury proceeding is not in any meaningful sense a "party" to that proceeding: he has no right to be heard, see United States v. Ciambrone, 601 F.2d 616, 622-23 (2d Cir. 1979); he has no right to be present (except as a witness while testifying), see Fed. R. Crim. P. 6(d); and he has no right to obtain access to evidence provided by others or learn of the results of the investigation, see Fed. R. Crim. P. 6(e)-(f). Even more fundamentally, the target of a grand jury investigation has no right to know of its existence; to the contrary, the investigation is meant to proceed entirely in secret.  See, e.g., Williams, 504 U.S. at 48; R. Enterprises, Inc., 498 U.S. at 299.

In re Amgen Inc., at p. 27.

Additionally, the District Court held that the Government was “authorized by law” to interview Amgen present and former employees as part of its criminal investigation irrespective of the limitations placed on attorneys in Rule 4.2:  

Simply stated, the government, as a sovereign institution, is entitled to solicit information from Amgen's employees about crimes Amgen may have committed, regardless of any professional constraints on the attorneys who comprise part – but only part – of the government's investigative team. Neither Rule 4.2 nor any other rule of professional conduct can alter that fact; only Congress, or the judiciary interpreting the federal law, has the authority to so constrain the government's power to investigate crime.

In re Amgen, Inc., at p. 42.
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