On June 10, 2015, the Department of Justice moved for reconsideration of the U.S. District Court for the Northern District of Alabama’s May 20 decision in U.S. ex rel. Paradies v. AseraCare, Inc., a False Claims Act (FCA) case in which the court ordered bifurcation of the element of falsity from the element of scienter at trial, with the issue of falsity to be tried first.  Despite the government’s arguments, the bifurcation order was both within the court’s discretion and well-reasoned.

A primary feature of the government’s motion for reconsideration is its contention that bifurcation of this type has never before been done in an FCA case.  However, bifurcation lies squarely within a district court’s discretion: the applicable rule (F.R.C.P. 42) expressly provides for bifurcation of “one or more separate issues,” and there is no exception to this rule under the FCA.

The government’s position nonetheless suggests that there is something that categorically distinguishes bifurcation considerations in an FCA case from bifurcation considerations in other types of cases.  But this categorical argument is not particularly compelling; indeed, the government’s contention that bifurcation requires it “to jump over an arbitrary hurdle that is without precedent” does not resonate, given that falsity is a distinct element of an FCA claim and has always been a hurdle the government must surmount.  It is hardly arbitrary—a false claim is the central feature of an FCA case, without which there is no case.  In any event, whether or not bifurcation has ever before been ordered in an FCA case, the court found that the specific circumstances in this case warranted bifurcation.

An important consideration underlying the bifurcation order was the court’s prior decision authorizing the use of sampling and extrapolation to prove falsity, a ruling on which we previously reported.  Given that decision, it is entirely proper for the court to take the precaution of bifurcation to prevent evidence that is not relevant to falsity from improperly infecting the jury’s determination of whether the claims within the sample were false.  This is particularly true given that the government indicated it would seek to present evidence of general corporate practices at trial.  The court properly held that “[a]llowing such general ‘pattern or practice’ evidence before the jury decides whether any claim is false would be unduly prejudicial to Aseracare.  Further, this type of evidence would be confusing to the falsity analysis as the jury must view each claim separately to determine whether it is objectively false.”  The court went on:

Essentially, the Government argues that the existence of the scheme proves the falsity of the claims.  The court disagrees.  The Government must show that each separate claim within the 233 patient sample is objectively false.  Falsity cannot be inferred by reference to AseraCare’s general corporate practices unrelated to specific patients.  A claim is either false or not without evidence of corporate practices unrelated to that claim.

The government presented several other arguments in its motion for reconsideration, including that some of the same evidence and witnesses will need to be presented in both phases of the trial.  But, even assuming there is some duplication or overlap, that is a circumstance that is frequently in play—and managed—in cases that are bifurcated.  Here, the court held that notwithstanding concerns about overlapping evidence, the risk of prejudice to the defendant outweighed them.

The court’s reasoning with respect to bifurcation was sound, suggesting that despite its authorization of sampling and extrapolation, the court is focused on ensuring that the government is not indirectly relieved of its burden of proving falsity, at least with respect to the claims in the sample.  We will continue to watch developments in this case.