Last week, the U.S. Supreme Court denied certiorari in two Fourth Circuit FCA cases—United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., 741 F.3d 390 (4th Cir. 2013), cert. denied, No. 13-1399 (U.S. Oct. 6, 2014), and United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694 (4th Cir. 2013), cert. denied, No. 13-1411 (U.S. Oct. 6, 2014).

In Bunk v. Gosselin, the U.S. joined a qui tam action against a Belgian shipping company accused of submitting thousands of false invoices under its U.S. Department of Defense contract.  The district court refused to impose the statutory minimum of $5,500 per claim, which would have resulted in a penalty in excess of $50 million, holding that this amount was  “grossly out of proportion to [defendant’s] misconduct, and thus in contravention of the constitutional proscription against excessive fines.”  The district court also rejected the relator’s requested award of $24 million, holding that, because “the FCA does not give the Court any discretion to award any other civil penalty, it is not authorized to impose a lesser civil penalty than would be within constitutional limits.”  Reversing this decision, the Fourth Circuit held that “the court must permit the government or its assignee the freedom to navigate its FCA claims through the uncertain waters of the Eighth Amendment.”  Accordingly, the Court remanded the decision for entry of the requested award. 

The Gosselin Court also rejected the defendant’s argument that the relator lacked standing under the FCA because he sought civil penalties alone, and not actual damages.  Quoting the Supreme Court in Vermont Agency, 529 U.S. 765, 765 (2000), the Fourth Circuit noted that an “adequate basis for the relator’s . . . suit is to be found in the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assigner,” i.e., the United States.  The Fourth Circuit joined the Fifth and Tenth Circuits in holding that this doctrine applies equally to civil penalties as it does to damages. 

In Rostholder v. Omnicare, the Fourth Circuit affirmed the dismissal of a relator’s complaint for failure to state a claim upon which relief can be granted.  The relator alleged that his former employer violated a series of Food and Drug Administration (FDA) safety regulations pertaining to the packaging of penicillin.  The relator further argued that, because the drugs were thereby ineligible for Medicare and Medicaid reimbursement, any reimbursement claims presented to the government for those drugs violated the FCA.   The district court dismissed the complaint, finding that the relator failed to allege that the defendant actually made a false statement to the government or engaged in fraudulent conduct.  In affirming this decision, the Fourth Circuit stated:

Were we to accept relator’s theory of liability based merely on a regulatory violation, we would sanction use of the FCA as a sweeping mechanism to promote regulatory compliance, rather than a set of statutes aimed at protecting the financial resources of the government from the consequences of fraudulent conduct.  When an agency has broad powers to enforce its own regulations, as the FDA does in this case, allowing FCA liability based on regulatory non-compliance could “short-circuit the very remedial process the government has established to address non-compliance with those regulations.”  

The Supreme Court’s refusal to hear these cases leaves only one FCA decision on the Court’s docket this term, Kellogg Brown & Root Services Inc., et al. v. United States ex. rel. Carter, 710 F.3d 171 (4th Cir. 2013), cert. granted, 134 S. Ct. 2899 (U.S. July 1, 2014).  As noted in an earlier blog post, this case raises issues involving the FCA’s first-to-file bar and the Wartime Suspension of Limitations Act.