The Department of Justice (DOJ) announced on January 14, 2021 that it had recovered $2.2 billion in False Claims Act (FCA) settlements and judgments in its 2020 fiscal year.1 While that figure is down considerably from prior years, the decline may be explained in part by the disruption caused by the coronavirus pandemic. The government’s total recovery since the 1986 amendments has now reached a staggering $64 billion.2
The federal courts remained active in developing the law on a number of important topics for FCA practitioners, including on issues subject to entrenched—and expanding—circuit splits. The split among the circuits is especially stark with respect to the government’s statutory right to seek dismissal of qui tam actions under 31 U.S.C. § 3730(c)(2)(A), with the Seventh Circuit in 2020 becoming the first to hold that the government must formally intervene in qui tam actions before seeking their dismissal. This holding added a new dimension to the split that had previously divided the D.C. and Ninth Circuits. A circuit split is also emerging between the Third, Ninth, and Eleventh Circuits on the critical question of whether an “objective falsehood” is required for FCA liability, which affects whether matters of judgment (such as physicians’ clinical opinions on medical necessity) can form the basis of an FCA claim. A petition for certiorari is pending on the question.
More generally, courts continue to wrestle with the implications of the Supreme Court’s watershed decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), which continues to reverberate more than four years after it was decided—affecting decisions at the pleading stage, at summary judgment, and even post-trial.
This year was especially tough on plaintiffs alleging retaliation under the FCA, as multiple circuits rejected the more lenient “substantial motivating factor” test in favor of a more stringent “but-for causation” test, requiring plaintiffs to establish that they would not have suffered adverse employment consequences but for their FCA-protected activities. The Eighth Circuit went a step further, holding that plaintiffs must establish that any adverse employment actions were motivated “solely” by their FCA-protected activity.
Before turning to the case law developments, however, we have devoted a substantial portion of our Year in Review to the FCA implications of the coronavirus pandemic—and the federal response to it. As with the housing and financial crisis in 2007-2008, which triggered not only substantial federal government spending but also engendered significant oversight and enforcement actions for many years, including under the FCA, the pandemic has resulted in the injection of billions of federal dollars into the U.S. economy across multiple sectors, including small business, financial services, and healthcare. Congress also created a number of oversight bodies that are charged with ensuring that the pandemic relief programs are not abused. For its part, DOJ has already begun prosecuting individuals alleged to have fraudulently represented their eligibility for small business loans to offset the financial disruptions of the pandemic. But in addition to criminal inquiries, the civil FCA promises to be a potent tool—both for federal regulators and qui tam plaintiffs—to address potential fraud on the federal government in connection with the range of programs created in response to the pandemic.
