On October 26, 2016, the US Court of Appeals for the Fourth Circuit held oral arguments in United States ex rel. Michaels v. Agape Senior Community, Inc. In this case, the relators alleged that the defendants caused the submission of false claims for hospice reimbursement. The Medicare regulations governing the hospice benefit require physicians to certify that the patient seeking the benefit have a terminal illness with a prognosis of six months or fewer. The relators allege that those certifications were false.
At the district court, the relators had sought to use statistical sampling to establish liability. After the district court concluded—in the context of a discovery dispute—that it would not permit the relators to use statistical sampling to prove their case, the parties engaged in mediation efforts. The relators and defendants reached a settlement, but the government objected. The district court then certified for interlocutory appeal two issues: (1) whether the government has an unreviewable power to veto a False Claims Act settlement; and (2) whether statistical sampling can be used to establish liability.
At the oral arguments, the Fourth Circuit panel was somewhat skeptical to the notion that it could even conduct an interlocutory review the district court’s ruling on statistical sampling, noting that the district court made an evidentiary ruling that it could have revisited later in the proceedings, including at trial.
The arguments also addressed the government’s position that it has an unreviewable veto power over an FCA settlement. Counsel for the government pointed to the plain language of 31 U.S.C. § 3730(b)(1), which states that: an “action [brought under the FCA] may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.” Although counsel for the defendants urged the court to adopt a “reasonableness” standard, arguing that such a standard is “read into a lot of statutes,” Judge Robert King posited that Congress “could have written in a reasonableness standard,” implicitly suggesting that Congress declined to do so.
Relators’ counsel took the position that where, as here, the government has declined to intervene, relators should not be forced to bear the cost of trying a highly complex and expensive case where they have agreed to a settlement with the defendants. In response, counsel for the government said that where the settlement binds the government, it should not have to “consent to a breathtaking release of claims.”
If the Fourth Circuit remands the case, the district court has suggested that although it would not permit the use of statistical sampling, it would preside over two trials: first, an “informational bellwether” trial to present evidence regarding a subset of claims, which the district court noted “can often be beneficial for litigants who desire to settle such claims by providing information on the value of the remainder of the case as reflected by the jury verdict in the bellwether trial;” and second, a trial of the remainder of the case to a separate jury. There’s more to come as we await the Fourth Circuit’s decision.