In latest edition of The Wright Toolbox:
- Government Knowledge Defense to False Claims Act Suits – read now
- U.S. Census Bureau Releases New Data on Minority and Women-Owned Businesses – read now
Government Knowledge Defense to False Claims Act Suits
The United States Court of Appeals for the Third Circuit is one of the more recent Court of Appeals to adopt the government knowledge inference defense to False Claims Act (“FCA”) suits. In U.S. ex rel. Spay v. CVS Caremark Corp., the Third Circuit stated that it was joining its sister circuits in holding that the government’s knowledge of the facts underlying an allegedly false record or statement can negate the scienter required for an FCA violation as long as the defendant knows the government knows. Spay, involved coding “dummy” prescriber IDs in the submission of Medicare claims to the government. The government knew that pharmacies and insurance companies were having trouble obtaining the unique physician identifier number necessary to populate the associated field and allowed the practice to continue.
The Third Circuit held that the government knowledge inference may arise when the government knows and approves of the facts underlying an allegedly false claim prior to presentment and the defendant knows that the government is aware of the false information in a claim. In other words, there is a two-prong test that must be met before the government knowledge inference can preclude liability. Essentially, the test helps distinguish, in FCA cases, between the submission of a false claim and the knowing submission of a false claim, by negating scienter.
The Spay Court also noted that the use of dummy IDs was not “material” for purposes of the FCA because the government regularly paid the claims in full despite knowledge of the alleged false statements. The Supreme Court in Universal Health Systems v. Escobar, 136 S.Ct. 1989 (2016) explained that “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.” The Spay Court also considered the context of the alleged falsity and noted that the dummy ID’s were a technical “workaround” to ensure payment of legitimate claims for reimbursement. Accordingly, in light of the technical nature of the violations and the government’s knowledge of the use of dummy ID’ s, the court affirmed dismissal of the FCA claim.
FCA claims are on the rise and it is important to know and understand the available defenses to such claims.
U.S. Census Bureau Releases New Data on Minority and Women-Owned Businesses
On May 19, 2020, the U.S. Census Bureau released new statistics from the 2018 Annual Business Survey (ABS). According to the data, covering year 2017, 1.1 employer firms were owned by women and 1.0 million by minorities. The industries with the most women-owned businesses include: the healthcare and social assistance industry (16.9%); professional, scientific and technical services industries (16.4%); and the retail trade industry (11.7%).
The top sectors for Hispanic-owned firms were construction (15.6%), accommodation and food services (13.0%), and professional, scientific and technical services (10.6%). Hispanic firms in these top three industries employed approximately 1.2 million workers with an annual payroll of approximately $35.8 billion. There were 555,638 Asian-owned businesses, with 23.9% in the accommodation and food sector. Black or African Americans owned 124,004 firms in 2017 with 32.0% of these firms in the healthcare and social services industry.
At Wright, Constable & Skeen we are proud to recognize our female business leaders at the firm, including our attorneys: Renee Bronfein Ades, Mollie Caplis, Cynthia Rodgers-Waire, and Mary Alice Smolarek. We are also proud to support women and minority-owned businesses through our Rosie the Lawyer Program for female CollegeBound Foundation students.