A Missouri federal judge has issued a summary judgment order that could serve as an important limitation on the U.S. Department of Justice’s expanding use of the False Claims Act and penalties aimed at recovering funds from government contractors. If you provide any services to the United States in a federally regulated field then this ruling could provide critical guidance in your interpretations of any binding ambiguous regulations.

The False Claims Act poses a significant risk of financial penalties to all government contractors even if uncovered violations were not intentional. A single violation can be penalized by as much as $11,000 plus damages and result in potential permanent expulsion from participation in federally funded programs. Most lawsuits are filed and pursued by whistleblowers, known as relators, who receive a significant percentage of any recovery under the False Claims Act’s qui tam provisions.

The recent order by U.S. District Judge Greg Kays of the Western District of Missouri dismisses a qui tam False Claims Act case against Anesthesia Associates of Kansas City (AAKC) accusing AAKC of failing to comply with certain Medicare regulations (U.S. ex rel. Donegan v. Anesthesia Associates of Kansas City PC). The rules at issue require anesthesiologists to document their participation in emergence, the period of time when a patient is recovering from anesthesia. However, the scope of emergence is disputed and it has never been expressly defined by the Medicare regulations. The suit alleged that emergence was limited in time and that the AAKC’s anesthesiologists interpreted the term too broadly and thus never participated in emergence.

While Judge Kays commented that he believed the anesthesiologists’ broader interpretation of emergence to be opportunistic and financially motivated, he concluded that AAKC could not be held liable for taking advantage of a disputed legal question. In granting summary judgment, he ruled that a government contractor’s reasonable interpretation of any ambiguity inherent in the applicable regulations belies the knowledge necessary to establish a claim for fraud under the False Claims Act.