What must a successful FCA defendant show to collect attorney’s fees under the Equal Access to Justic Act?

Can an error by the government create an FCA violation by a defendant relying upon the government’s acts?

Does Vermont Agency of Natural Resources v. US ex rel. Stevens apply to FCA retaliation cases?

Can a service have some value and still be the basis for an FCA case under the “worthless services” theory?

Can a pro se Relator bring a case under the FCA?

Federal Courts around the country decided these issues in December, 2011.

US v. Pecore, ___ F.3d ___, 2011 WL 6880632 (7^th Cir. Dec. 30, 2011)

Defendants, who prevailed at trial on a civil FCA case after almost nine years of investigation and discovery, moved for attorney’s fees under the Equal Access to Justice Act or, alternatively, sanctions under the Rules of Civil Procedure. The trial court denied the motions. The Seventh Circuit Court of Appeals affirmed.

Under the Equal Access to Justice Act, a prevailing defendant must show four elements, that (a) the defendant prevailed against the government, (b) the government was not substantially justified in its position, (c) no special circumstances make an award unjust, and (d) the fee application is timely and supported. Further, the government bears the burden to show its position substantially justiifed.

The Court, in analyzing  the factual dispute, noted the government’s case survived a motion to dismiss and a motion for summary judgment, creating “a rebuttable presumption that a government case … is substantially justified” according to US v. Thouvenot, Wade & Moerschen, Inc., 596 F.3d 378, 382 (7^th Cir. 2010).  The Defendant argued that such a test shifts the statutorily defined burden from the government. The Court disagreed, finding first that it reviewed the individual facts and the Thouvenot rule was merely a secondary consideration, and second noting that Thouvenot was not ironclad, as it “left the door open” for a case in which something emerges at trial to show that the government never had a case or the trial court erred in failing to grant summary judgment.

US ex rel. Wright v. Comstock Resources, Inc., 2011 WL 6259893 (5^th Cir. Dec. 15, 2011)

Relators in a case involving mineral leases argued that the governemnt’s failure to fully comply with statutes relate to consent rendered leases ineffective, and therefore any claims under the leases in violation of the FCA. The trial court found, and the appellate court agreed, that failure to perfectly comply with the statute designed to secure government consent, could not render such consent invalid contrary to the government’s intent. Even more important, such a statutory violation could not form the basis to determine that the lessee knowingly defrauded the government.

Weihua Huang v. Rector and Visitors of University of Virginia, 2011 WL 6329755 (W.D.Va. Dec. 19, 2011)

Plaintiff brought suit alleging retaliation contrary to the FCA. The Court first considered an individual plaintff could bring an FCA retaliation suit against inidivual defendants acting in their individual capacities with the state university. Plaintiff argued the decision in Vermont Agency of Natural Resources v. US ex rel. Stevens, 529 U.S. 765, 781082 (2000), was not binding for two reasons. First, it addressed the false claims portion of the FCA, which includes the word “person,” not the retaliation provision, which does not contain the word “person,” and therefore the ruling, which concluded that a State was not a person, was not relevant. Second, he argued the 2009 amendment to the FCA retaliation provision rendered all prior cases the contrary unpersuasive.

The Court found otherwise based upon the tenet that a federal statute should only be read to allow suits against states where they clearly express such intent.

US v. Villaspring Health Care Center, Inc. 2011 WL 6337455 (E.D.Ky. Dec. 19, 2011)

The government brought an FCA suit against nursing homes under the “worthless services” theory of recovery. Defendants moved to dismiss, arguing that, as residents received room, board, and at least some of the care they needed, the government could not prevail on a “worthless services” claim. In effect, they argued that a “worthless services” claim required a showing that the services were truly worthless, of no value whatsoever. The Court rejected the argument, finding that it would be sufficient for the government to show that the services did not meet the statutory standard of care, an “admittedly grey area,” but one subject to a factual dispute and therefore not ripe for dismisal.

Fox v. Select Medical Corp., 2011 WL 6152863 (E.D.Mo. Dec. 9, 2011)

The Court, finding that the United States is the “real party in interest” in an FCA case, ruled that action under the FCA must be brought by licensed attorneys, rather than pro se relators.

For more information, please contact David B. Honig at dhonig@hallrender.com or (317) 977-1447.