United States: Recent Significant Case Law Developments Regarding What Constitutes A Reckless Interpretation Of A Law And When Retention Of An Overpayment Violates The False Claims Act

Key Points

• Learn the latest case law developments regarding what evidence the government or the relator must establish to prove that the defendant "recklessly" interpreted a statute or regulation in violation of the FCA.
• Understand the circumstances under which the defendant's reasonable interpretation of an ambiguous statute or regulation can provide the defendant with a dispositive defense under the FCA.
• Learn the latest case law developments regarding when a health care business is required to remit an overpayment to the government or incur potential liability under the FCA.

Among the most important False Claims Act (FCA) issues to understand in discharging one's obligations to comply with the law is what, if anything, one must do when the underlying regulatory scheme governing payment from the government is ambiguous. For example, if the company simply adopts a reasonable interpretation of the law and seeks payment, will courts, under FCA precedent, find the company liable under the FCA if, upon review, the company's reasonable interpretation is wrong? Under these circumstances, will the company be deemed to have acted with "reckless disregard" in violation of the FCA if there is no official governmental guidance that would have warned the company away from its reasonable interpretation of law?

Another vexing issue is determining when a company has a duty to return an overpayment to the government under the FCA's recently amended reverse false claim provision. For example, does the provision reach merely negligent conduct such that, if a company unreasonably interprets an ambiguous law, but does not act fraudulently or recklessly, is the company liable under the FCA for "knowingly and improperly" "avoiding" or "concealing" an obligation to pay if it does not timely investigate and remit an overpayment?  

Two recent 8th Circuit FCA decisions—United States ex rel. Estate of Donegan v. Anesthesia Assocs. of Kan. City, PC¹ and United States ex rel. Olson v. Fairview Health Servs., of Minn.²—expressly address these questions, finding that a defendant does not act with reckless disregard when it adopts a reasonable interpretation of an ambiguous law and there is no official governmental guidance that would warn the company away from its reasonable interpretation and that the FCA's reverse false claims provision requires that the defendant act fraudulently and not simply negligently when it makes a mistaken, erroneous construction of law to be held liable under the FCA's overpayment rule.   

These decisions validate important principles addressed in two prior Salcido Report Public Disclosure Alerts ("Report") regarding the scope and proper application of the FCA. See Understanding When an Overpayment Can Result in False Claims Act Liability and Why Current Precedent and Regulatory Guidance is Mistaken ("Understanding When an Overpayment Can Result in FCA Liability") and What Must the Government Prove to Establish that a Defendant Recklessly Interpreted a Statute or Regulation in Violation of the False Claims Act? ("What Must the Government Prove to Establish that a Defendant Recklessly Interpreted a Statute").

Download - The Salcido Report: False Claims Act Public Disclosure Alert , September 26, 2016 

Footnotes

1 No. 15-2420, 2016 U.S. App. LEXIS 14830 (8th Cir. Aug. 12, 2016).

2 No. 15-1780, 2016 U.S. App. LEXIS 14491 (8th Cir. Aug. 8, 2016).

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