Will the Supreme Court Take on the False Claims Act Materiality Standard?

The saga continues in United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890 (9th Cir. 2017), a False Claims Act case alleging that Gilead concealed information from FDA regarding the contamination of certain drugs, leading to false claims being paid by the government. We have been closely following this case because of the implications it could have on the materiality analysis applied in FCA cases post-Escobar. (See prior posts here and here.)

Although the Campie’s case was twice dismissed by the district court, the Ninth Circuit Court of Appeals overturned the dismissal, concluding that whether allegations are material for purposes of an FCA claim raised matters of proof that could not be resolved prior to discovery. Late last year, Gilead filed a petition for a writ of certiorari requesting the U.S. Supreme Court rule on the following question: Whether an FCA allegation fails when the Government continued to approve and pay for products after learning of alleged regulatory infractions and the pleadings offer no basis for overcoming the strong inference of immateriality that arises from the Government’s response. For a discussion of this Writ, see our prior post here.

On March 5, 2018, Respondents filed a response outlining three primary arguments against granting certiorari in this case. First, Respondents argue that Gilead misrepresents the holding of the Ninth Circuit as overly restrictive. Contrary to Petitioner’s characterization, Respondent’s assert that the holding “properly followed Escobar’s holistic approach to materiality.” Respondents rely on the Ninth Circuit’s conclusion that the contested issues, including materiality, “are matters of proof, not legal grounds to dismiss relators’ complaint,” and claim the complaint satisfies the pleading requirements of Rule 12(b)(6). Note, however, that the Ninth Circuit specifically reserved a ruling on whether the relators’ complaint would satisfy the heightened pleading standards under Rule 9(b), a basis that other courts have used to dismiss FCA cases.

It also is significant that Respondents make affirmative use of DOJ’s recently issued Granston memo, discussed here, to support its position that this case does not undermine FDA’s regulatory authority. Respondents suggest that the government’s ability to dismiss FCA cases, and its failure to do so here, means that its suit advances the government’s interest. As Granston noted, however, “a decision not to intervene in a particular case may be based on factors other than merit, particularly in light of the government’s limited resources.”

Respondents also argue that there is no circuit split, and that even if there was, this case is a “poor vehicle” to clarify the materiality standard because it is not clear that the government actually had knowledge of the fraudulent conduct at the time it made the payments. Respondents contend that dismissing the case at this juncture is premature given that Gilead will have another chance to contest materiality at the summary judgment stage.

Per the Rules of the Supreme Court, Gilead can file a reply within 14 days of the Brief in Opposition, which would be no later than March 19, 2018.