Music to Our Ears—US District Court in Mississippi Raises “Grave Concerns” about “Absurdity” of Potential Recovery in Deciding Whether to Toss False Claims Act Case
With refreshing candor, a federal district court in Mississippi recently railed against the inherent unfairness in allowing a False Claims Act (FCA) case to go to a jury where a relator sought more than $30 million in damages and penalties over a minor licensing foot fault. In U.S. ex rel. Cameron Jehl v. GGNSC Southaven, LLC, No. 3:19-CV-00091, 2021 WL 2815974 (D. Miss.), on its own motion, the court raised “grave concerns” that applying the FCA “would create a lucrative new cause of action which would, in cases where liability is found, likely result in crippling financial penalties against [defendants] which are far out of proportion to any alleged wrongdoing.” Being the judge’s first FCA trial, the court remarked “[t]his may be an instance of the court’s broad naivete, rather than a comment on the state of the law, but it appears that calculating damages unrelated to actual harm or injury may present a potential unfairness, or even absurdity[.]” In holding that the relators should have to show cause why the case should proceed, the court presumed that “Congress did not intend absurd results when it enacted the FCA” and found that the FCA’s mandatory damages and penalties scheme would not allow a jury the “discretion to implement a fair result in this case, both as to liability and damages.”
Clearly, the court’s “grave concerns” sprang from the facts. In this nursing home case, there were no allegations of poor or deficient care or that patients were placed at risk. Rather, the relator attempted the ultimate “gotcha”—the defendant’s nursing director was permitted to practice in Mississippi through a “multi-state” license obtained through Virginia. The catch? Her Virginia license required her to maintain legal residence there, and relators contend she had moved to Tennessee. This meant that, regardless of the director’s abilities and qualifications, she was not legally allowed to practice in Mississippi and this kerfuffle allegedly rendered false more than 1,000 claims with a “staggering” sum of more than $30 million of damages and penalties in play. In short, Escobar run amok.
The court’s terse order recognized that the relators’ evidence on knowledge and materiality was weak, particularly as to the latter. Reminiscent of Chief Justice Roberts' question at argument in Escobar about the materiality of a US-only stapler requirement in a health care case, the court “not[ed] that the [nursing director] did not forget anything she previously knew about nursing when [she moved to Tennessee], and it doubt[ed] whether a single [nursing home] patient cared in the slightest whether her permanent residence was in Virginia, Tennessee, or Alaska for that matter.” It noted too that there was no evidence that any regulator had taken any “final adverse action” against the nursing home based on the putative non-compliance.
At bottom, however, the court’s ruling appears actuated by fundamental fairness. Absent “clear precedent” requiring otherwise, the court found “the mandatory FCA penalties, as applied to this case, to be fundamentally unjust, and it does not wish to permit what it believes to be an unjust result to occur in its courtroom.” The court concluded the FCA’s requirements are “stringent” for good reason, because the “mandatory penalties, treble damages and other remedies are so crippling.” And, even absent trial, the threat is very real that “FCA plaintiffs with even factually weak claims” can threaten defendants with “staggering sums” to “give them great leverage to compel settlements on unjust terms.” For all of these reasons, the court balked at applying this draconian statute to what was innocent and innocuous alleged conduct.
Our reaction? Violent agreement. We can only hope that other jurists will join this chorus in recognizing the absurd results and gross inequities that flow from unthinking, heavy-handed application of the FCA.
© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.