A Busy Week for the Supreme Court in FCA Matters

Last week United States ex rel. Campie v. Gilead Sciences Inc. took one step closer to being the first FCA materiality case to be taken up by the Supreme Court since the Court’s seminal decision in Universal Health Services, Inc. v. United States ex rel. Escobar – or one step further away, if you read the tea leaves a different way. On April 16, the Supreme Court invited the U.S. Solicitor general to “file a brief. . . expressing the views of the United States” on Gilead’s petition for writ of certiorari.   It is not unusual for the Court to call for the views of the Solicitor General in a case where the United States is not a party (the United States declined to intervene in Gilead), but the government has a significant interest in the case. When the Supreme Court does call for the Solicitor General’s views on a petition for cert, it often acts in accordance with the Solicitor General’s recommendations (with respect to whether to grant certiorari, not necessarily with respect to the merits of the case).

We previously blogged about the Gilead case here, here, and here. Importantly, the Ninth Circuit’s decision Gilead is an outlier among the Circuits’ various interpretations of Escobar.  In its Gilead decision, the Ninth Circuit arguably seeks to either reverse or ignore Escobar’s emphasis on a rigorous standard for FCA materiality. For readers of this blog, in particular, Gilead is significant; the Ninth Circuit’s reasoning would allow FCA cases to proceed based on FDA regulatory infractions, because the government would have the option not to pay a claim based on the noncompliance—and even if FDA’s response to the infractions indicated that it did not view the regulatory issue as material. Gilead and several amici have urged the Supreme Court to take up the case, in part to avoid undermining FDA’s regulatory authority.

The Supreme Court may be inclined to grant certiorari in Gilead to address the Ninth Circuit’s misreading of Escobar and the FCA materiality standard. Escobar was decided by a unanimous Court in June 2016, and since then the Court’s composition has remained the same except for the addition of Justice Neil Gorsuch. The Court’s request for the Solicitor General’s views also suggests that the Court is willing to take up the Gilead case. But it seems too much to hope that the Solicitor General would recommend a course of action that could make it more difficult for the federal government to recover monies under the FCA, even if the government would welcome a case that revisits Escobar to clarify and/or limit that case’s materiality language. In fact, the government has previously expressed views on FCA materiality under Escobar that are similar to those expressed by the Ninth Circuit in Gilead. See, e.g., Statement of Interest of the United States, United States ex rel. Kolchinsky v. Moody’s Corp., 12-cv-1399 (S.D.N.Y May 8, 2017). The Solicitor General often takes months to file its brief in response a Supreme Court request, so we may have to wait some time to find out exactly what the government has to say.

Separately, on the same day that the Supreme Court made its request in Gilead, it announced the decision to deny certiorari in another significant FCA case, United States ex rel. Nargol v. DePuy Orthopeadics, Inc., relating to the pleading standards for an FCA case under Fed. R. Civ. P. 9(b). Justice Alito did not participate in the decision to deny cert. The Supreme Court’s denial in DePuy leaves in place a First Circuit ruling we blogged about here and here, which applied a relaxed pleading standard to a False Claims Act complaint that alleged indirect submission of false claims. The First Circuit took the position that it was possible for a plaintiff to adequately plead against defendant based on a statistical certainty that false claims were submitted as a result of the defendant’s alleged actions, rather than alleging the specifics of any actual false claims. This decision leaves defendants guessing about the courts’ application of 9(b) to indirect false claim cases, because the Circuits apply divergent pleading standards with respect to the use of statistics to establish the existence of false claims.