• CIVIL FALSE CLAIMS ACT:  Sixth Circuit Rejects DOJ Efforts to Equate Regulatory Non Compliance with False Claims Act Liability
  • April 11, 2013 | Authors: Douglas W. Baruch; John T. Boese; Kayla Stachniak Kaplan; Jennifer M. Wollenberg
  • Law Firm: Fried, Frank, Harris, Shriver & Jacobson LLP - Washington Office
  • For the second time in two weeks, an appellate court has injected a dose of reality into False Claims Act (“FCA”) jurisprudence. Following closely on the heels of the Seventh Circuit’s blanket rejection of the Justice Department’s preferred “gross trebling” methodology, which led to inflated recoveries in FCA cases (see FraudMail Alert No. 13-03-25), the Sixth Circuit issued a forceful decision greatly limiting the application of the FCA in so-called “false certification” cases based on alleged regulatory non-compliance. See United States ex rel. Hobbs v. MedQuest Assocs., No. 11-6520, 2013 WL 1285590 (6th Cir. Apr. 1, 2013). In MedQuest, the Sixth Circuit reversed the district court’s entry of summary judgment and vacated the $11 million judgment that went along with it because the liability was based on regulatory non-compliance that was a “condition of participation” in Medicare, but not a “condition of payment” of Medicare claims made by MedQuest. As a result, while expressing no tolerance for the defendant’s Medicare program violations—characterizing them as “clearly . . . at odds with the goals and aims of the Medicare program in several respects”—the Sixth Circuit ruled that the government cannot use the FCA to enforce or punish that type of conduct and instead should use available administrative remedies. The Sixth Circuit made clear that regulatory violations that are violations of “conditions of participation”—even if serious and intentional—are not enough to establish an FCA violation and do not “mandate the extraordinary remedies of the FCA.”