The Eighth Circuit released an opinion Tuesday in U.S. ex rel. Cairns v. D.S. Medical LLC that creates a new circuit split on the interpretation of the causation standard for establishing that a claim “resulting from” a violation of the Anti-Kickback Statute (AKS) makes a claim “false or fraudulent” under the False Claims Act (FCA). The Eighth Circuit held that a plaintiff (government or relator) relying solely on the “resulting from” language in the AKS must show “but for” causation -- that but for the kickbacks, the claims at issue would not have included the item or service that was the subject of the kickback. This contrasts to an earlier Third Circuit decision on the same question that rejected the but-for causation standard and instead required a showing that there was some causal link between the kickback and the submission of claims for payment to the government. We will continue to monitor these divergent interpretations of the element of causation for AKS-based FCA cases to see how courts approach the issue in subsequent cases.
The statutory provision addressed in Cairns was enacted in 2010 to simplify what had become a variety of approaches applied by courts to address the intersection of the AKS and the FCA. Through the Affordable Care Act, Congress amended the AKS to specifically provide: “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of” the FCA.1 Thus, if a claim results from an AKS violation it is per se false. The circuit split at issue here arises from differing interpretations of the phrase “resulting from” as used in this provision.
Cairns’ But-For Standard
In Tuesday’s opinion, the Eighth Circuit holds that, at least for cases where the plaintiff relies solely on the theory that an AKS violation resulted in a false claim, the plaintiff must establish that the allegedly false claim would not have included particular ‘items or services’ absent the illegal kickbacks.2
Relators, a collection of midwestern neurosurgeons and pain management professionals, brought suit under the FCA against neurosurgeon Sonjay Fonn, his practice Midwest Neurosurgeons, LLC, and his fiancée Deborah Seeger, the owner of a spinal implant distribution company. The suit alleged that Fonn purchased implants from DS Medical, Seeger’s company, and purchased stock from a manufacturer which supplied DS Medical, in violation of the AKS, resulting in the submission of false claims to Medicare and Medicaid. The government intervened, and the case went to trial.
On the element of causation, the Court instructed the jury that “it is enough for the United States to show that the [Medicare and Medicaid] claim[s] failed to disclose the [AKS] violation.”3 The jury returned a verdict for the government on two of three FCA claims, and the district court then awarded treble damages and statutory penalties in the amount of $5,495,931.22. On appeal, the Eighth Circuit found that the district court erred in not instructing the jury on the question whether the defendant would not have included particular items or services but for the illegal kickbacks. The court remanded for a new trial.
In considering the appropriate interpretation of what it means for a claim to “result from” a kickback violation, the Eighth Circuit concluded that the phrase “resulting from” is unambiguous and requires a but-for casual relationship. The United States had argued (1) that the 2010 FCA amendments codified prior holdings that called for a more expansive interpretation of causation in AKS-based claims and (2) the legislative history supported that view. The court acknowledged but ultimately disregarded those arguments on the grounds that they are both contrary to the plain language of the statute and would not adequately prove causation. Of particular note, the Court discarded the argument that the “taint” of a kickback violation necessarily means that all associated claims are false.
The Eighth Circuit referred to its ruling as “narrow.” The court did not go so far as to say every case arising under the FCA requires a showing of but-for causation. However, where a plaintiff seeks to establish that a claim is false or fraudulent under the FCA solely because of an underlying violation of the AKS, Cairns holds that there must be a showing of but-for causation.
Cairns acknowledged that the Third Circuit, when faced with the same question in 2018, endorsed a different standard. In Medco, the Third Circuit held that to show that a false claim resulted from an AKS violation, the relator did need not prove that “federal beneficiaries would not have used the relevant services absent the alleged kickback scheme.” 4 Instead, in the Third Circuit’s view, a plaintiff must show, at a minimum, that at least one of the items or services for which the defendant sought reimbursement for medical care was provided in violation of the AKS. Cairns disagreed with that approach, relying in significant part on two Supreme Court decisions. In Comcast Corp. v. Nat’l Ass’n of Afr. Am.-Owned Media,5 the Supreme Court held that causation standards are presumed to be “but for” unless specified otherwise in a statute, and in Burrage v. United States,6 the Supreme Court held that the phrase “resulting from” in the Controlled Substances Act required the government to prove “but for” causation. In light of the clear and unambiguous language of the AKS provision and this Supreme Court precedent, the Eighth Circuit – unlike the Third Circuit – declined to accept the government’s legislative-history based arguments as a reason to deviate from the statute’s plain language.
What this means going forward
The Third and Eighth Circuits each have concluded that proving the false or fraudulent nature of a claim based on an alleged AKS violation requires more than showing simply a temporal relation between the claim and an alleged kickback. The question is how much more is required. As Medco posed the question, “[a]t issue, therefore, is what ‘link’ is sufficient to connect an alleged kickback scheme to a subsequent claim for reimbursement: a direct causal link, no link at all, or something in between.”7 The Third Circuit answered that question by adopting the middle ground, and the Eighth Circuit has now held that a direct causal link is required. Both courts agree, however, that there must be some link beyond a temporal one between the kickback violation and the submission of the claim in order for the kickback to render the claim false.
This burgeoning circuit split will have implications both within the Third and Eighth Circuits and in the other circuits. It will be particularly interesting to see how the divergent approaches to causation impact other active AKS-based FCA cases, including in ongoing litigation.