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WBK Industry News - Litigation Developments

Court Vacates $350 Million FCA Jury Verdict under Escobar

In an action brought by a relator under the False Claims Act, the U.S. District Court for the Middle District of Florida vacated a $350 million jury verdict, finding that the relator failed to provide proof that either the federal or state government would have found the allegedly fraudulent practices to be material to their decisions to pay the defendants.  The ruling emphasized the heavy burden placed on relators to prove materiality and scienter, recognized by the Supreme Court in Universal Health Services, Inc. v. Escobar.

The defendants are owners and operators of specialized nursing facilities.  The relator alleged that the defendants billed the government for unnecessary or inadequate services by failing to maintain a “comprehensive care plan,” as was allegedly required by a Medicaid regulation.  The relator contended that the failure to maintain the care plan rendered the defendants’ Medicaid claims fraudulent, under a theory of implied false certification.

Relying on the Supreme Court’s ruling in Escobar, the district court held that the relator failed to offer evidence of materiality, which the Supreme Court “defined unambiguously and required emphatically.”  The relator offered no evidence that the care plan requirement was material to the governments’ decisions to pay the claims.  According to the district court, in fact, the evidence presented showed the contrary:  that both the federal and state governments tolerated the practices, or were, at the least, indifferent to them.  Importantly, the district court found no evidence of either government threatening nonpayment; no evidence of any complaint or demand; and no evidence of the governments pursuing administrative remedies or sanctions for the conduct at issue.

Moreover, the district court found that the relator failed to offer evidence that the defendants knew that the practices were material to the governments’ decisions to pay the defendants, and that the defendants requested the payment anyway.  The court found that establishing this element would be impractical or impossible given the lack of materiality, and noted that the governments consistently paid these claims despite routine audits.

The case is United States ex rel. Ruckh v. Salus Rehab., LLC, No. 8:11-cv-1303, 2018 U.S. Dist. LEXIS 5148, 2018 WL 375720 (M.D. Fla. Jan. 11, 2018).