US Supreme Court Requests Solicitor General’s Views in FCA Rule 9(b) Context

On May 16, 2022, the US Supreme Court requested a brief from the US Solicitor General on the level particularly required by Federal Rule of Civil Procedure 9(b) in pleading False Claims Act (FCA) cases.

The Court made the request in Owsley v. Fazzi Associates, a case alleging Medicare Fraud. The US Court of Appeals for the Sixth Circuit ruled that the Plaintiff did not sufficiently identify specific claims submitted to the government under the alleged fraud scheme. If the Court grants certiorari, the Court would likely resolve a Circuit split on whether Federal Rule of Civil Procedure 9(b)’s requirement to plead fraud with particularity requires plaintiffs in False Claims Act (FCA) cases to plead specific examples of false claims.

The US Supreme Court made the same request of the US Solicitor General four months ago in Johnson v. Bethany Hospice, a whistleblower case on appeal from the US Court of Appeals for the Eleventh Circuit, and has not yet received the Solicitor General’s brief. Another case posing the same question of the pleading with particularity requirements of Rule 9(b) for plaintiffs in FCA, Molina Healthcare v. Prose, is before the US Supreme Court; Molina filed a reply brief in support of its petition for review shortly after the justices’ request to the Solicitor General on Monday.

Circuits are split in interpreting the requirements of Rule 9(b) in the FCA context—some courts require a plaintiff to plead specific examples of fraudulent billing to survive a motion to dismiss, while others permit a case to get past the pleadings stage without specific examples of fraudulent billing if the complaint pleaded reliable descriptions of potentially fraudulent billing. Given that the Supreme Court has now twice sought the Solicitor General’s opinion on the scope of Rule 9(b) in this context, it is likely that the Court will rule on the issue.

The relevant cases are Johnson et al. v. Bethany Hospice and Palliative Care LLC, No. 21-462; Molina Healthcare of Illinois Inc. et al. v. Thomas Prose, No. 21-1145; and US ex rel. Owsley v. Fazzi Associates Inc. at al., No. 21-936, all before the US Supreme Court.

DOJ Files FCA Complaint Against Manufacturer, Owner for Causing Health Care Providers to Reuse Single-Use Medical Devices

On May 17, 2022, the Department of Justice (DOJ) announced that it filed a complaint in the US District Court for the Western District of Michigan against a New Hampshire medical device manufacturer and its owner, alleging that the defendants violated the False Claims Act (FCA). DOJ alleged that the defendants caused health care providers to bill Medicare for services in which the provider improperly reused disposable rectal sensors and disposable catheters on multiple patients, in violation of the FCA. DOJ alleged that the reuse of these items on multiple patients unnecessarily exposed vulnerable Medicare beneficiaries to the risks of serious bacterial, fungal and viral infections.

The defendant manufactures and sells device systems for use in pelvic muscle rehabilitation, a non-surgical therapy to eliminate or reduce symptoms of pelvic floor disorders. The US Food and Drug Administration (FDA) approved both the defendant’s rectal pressure sensor and the anorectal manometry catheter to be used as single-user, disposable devices. For example, the instructions for use identify the rectal pressure sensor as “a potential bio-hazard” and state: “This sensor is restricted for single person use only. Use by another person is strictly prohibited by Federal Regulations.” The anorectal manometry catheter includes packaging that similarly states: “Do not reuse.”

According to DOJ’s complaint, the defendants were aware of the FDA’s restrictions, but continued to train health care providers to reuse the medical devices on multiple patients to reduce overhead costs. DOJ alleges that this reuse was not reasonable or necessary and was therefore ineligible for Medicare coverage. DOJ further alleged that in addition to the safety risks, defendants did not attempt to determine if the devices worked effectively when reused on multiple patients.

The DOJ press release can be found here.

Seven South Korea-Based Companies Agree to Pay $3.1 Million to Resolve FCA Allegations for Bid Rigging Conspiracy

On May 18, 2022, DOJ announced that seven companies based in South Korea have agreed to pay approximately $3.1 million to settle allegations that they violated the FCA by engaging in a bid rigging conspiracy targeting US Army Corps of Engineers (USACE) construction contracts in South Korea. The companies are engaged in various businesses, including construction and engineering.

The government alleged that the companies conspired to remove competition during the bidding process on fifteen USACE contracts awarded between 2016 and 2019 and that, as a result of the companies’ anticompetitive conduct, the USACE paid substantially more for the services performed under the contracts than it would have otherwise, if there had been competition among the bidders. The settlement agreement is not an admission of guilt on the part of any company, and the companies will each pay an equal share of the settlement amount.

The DOJ press release can be found here, and the settlement agreement can be found here.