HLD, v. 31, n. 3 (March 2003)
U.S. Court In District Of Columbia Holds "Implied
Certification" Of Claims Sufficient To Create False Claims Act Liability
In a case that was part of a multi-district litigation of qui
tam actions under the False Claims Act (FCA), the relator claimed that a number
of defendants, including Diabetes Treatment Centers of America, Inc. (DTCA) and
West Paces Medical Center (West Paces), were allegedly involved in a kickback
scheme for physicians to refer patients to diabetes treatment centers. Allegedly,
the physicians were paid a fee for the referrals, which violated the
anti-kickback and Stark laws. The U.S. District Court for the Middle District
of Tennessee granted defendants' motion to dismiss for failure to state a claim
upon which relief could be granted on the grounds that the relator had failed
to allege that any claims submitted by West Paces were false or that the
government had suffered any damages. However, on reconsideration, the court
reversed itself based on the relator's "implied certification" argument that,
when defendants submitted claims to the government for payment, they were
implicitly stating that they had complied with all underlying laws and
regulations, and any noncompliance with those laws and regulations rendered the
claim "false" for purposes of the FCA. The case was transferred to federal
district court in the District of Columbia to consolidate the pretrial
proceedings. DTCA moved for judgment on the pleadings on the issue of the
implied certification creating FCA liability, and also argued that the relator
failed to plead fraud with sufficient particularity.
The U.S. District Court for the District of Columbia denied the
motion on the grounds that the law of the case was correct. DTCA argued that
the decision in United States ex rel. Siewick v. Jamieson Science and Eng'g,
Inc., 214 F.2d 1372 (D.C. Cir. 2000), rejected the implied certification
basis for liability under the FCA. Disagreeing with DTCA's contention, the
court explained that the Siewick court had "merely conducted the proper
implied certification analysis and found the relator's allegations wanting."
Applying the implied certification analysis in this case, the court concluded
that compliance with the Stark and anti-kickback laws would affect the
government's decision whether to pay the claims. In United States ex rel.
Pogue v. American Healthcorp., Inc., 914 F.Supp. 1507 (M.D. Tenn. 1996),
the court held that compliance with the Stark and anti-kickback laws were
material to the contract with the government, and an allegation of violations
of those laws was sufficient to state a claim under the FCA. The court rejected
DTCA's argument that after Pogue there was a nationwide rejection of the
implied certification theory by the courts, and found that there was a lengthy
list of cases and courts that support the theory. Finding no support for DTCA's
argument, the court reaffirmed the holding in Pogue.
DTCA also argued that, even if implied certification was a
legitimate basis for relator's claims, West Paces had submitted the allegedly
false claims. Rejecting this argument, the court noted that under the FCA
liability attaches to the one who engages in a "fraudulent course of conduct"
and causes the false claim to be presented to the government for payment.
Likewise, DTCA's claim that it was not an entity subject to the Stark laws is
not relevant, said the court, if DTCA caused the claim to be presented by an
entity that is covered by Stark, such as the defendant physicians.
Finally, DTCA argued that the relator had failed to plead the
fraud with sufficient particularity. Analyzing the complaint under Fed. R. Civ. P. 9(b), the court held
that the complaint was sufficient to allow DTCA to prepare a defense, which is
the purpose of Rule 9(b). Accordingly, the court upheld the decision of the
Middle District of Tennessee as the law of the case.
United States ex rel. Pogue v. Diabetes Treatment
Ctrs. of Am., Inc., No. 99CV3298, 2002 WL 31856364 (D.D.C. Dec. 18, 2002)