High court ruling on False Claims Act imminent

Delay in decision fuels speculation the Supreme Court may opt to hear rearguments

Health care industry watchers are keeping a sharp eye on the Supreme Court as it decides on whether a private individual who files a qui tam False Claims Act case has the standing to bring such a case. The court’s final decision, which could surface any day, could severely reign in use of the False Claims Act.

Most observers predict the Supreme Court will rule only on the Eleventh Amendment issue regarding state’s rights and not the constitutionality of the act itself. "I would bet that the Court will decide at most that a state can’t be sued under the False Claims Act because there is not a clear definition that would show that a state is a person within the meaning of the law," predicts health care attorney Stuart Gerson of Washington, DC-based Epstein, Becker & Green.

False Claims Act specialist John Boese notes that during argument the court did not appear to be focused on the standing argument. Instead, most of their questions were focused on the issue of whether or not a state is a person.

But Boese, of the law firm Fried, Frank, Harris & Shriver in Washington, DC, warns that anything is possible. "The court could always ask for reargument because it didn’t get the briefs on the standing issue until after the oral argument," he says. Moreover, Boese says most of the cases heard concurrently with this case have already been decided, and that has fueled speculation the court may be seriously considering the constitutionality of the Act itself

If the court does act as expected and issue a more limited ruling, Gerson says the case to watch is the Riley case in the Fifth Circuit that was put on hold pending the Supreme Court’s decision. In that case, the Fifth Circuit panel ruled that when the government declines intervention, qui tam enforcement of the False Claims Act is unconstitutional.

"Once the Supreme Court decides, and assuming it does not ditch the qui tam amendments, that case becomes active and the Fifth Circuit will consider it," says Gerson. "That is the case you really have to keep your eye on."

Meanwhile, the Sixth Circuit recently held that a qui tam relator may not voluntarily dismiss an action under the False Claims Act without the Attorney General’s consent. "The issue in the Sixth Circuit is whether the Justice Department has a veto power over settlement of cases between relators and defendants in a case in which they don’t intervene," says Boese.

According to Boese a split now exists on this issue between the circuit courts. The Sixth Circuit decision is consistent with a Fifth Circuit ruling, which reached the same conclusion. But it rejects the Ninth Circuit’s holding that the government’s "absolute veto right" applies only during the period in which the government initially decides whether to intervene in a qui tam suit, he explains.

"There is now a clear conflict in the circuits, and the Supreme Court should resolve issues where there is a clear conflict," he argues. But he warns the court has been reluctant to do that in False Claims Act cases. "I think there are now so many of these cases that the Supreme Court is going to have to step up to the plate and start answering them," Boese concludes.