Blackstone Medical, Inc., v. United States of America Ex Rel. Susan Hutcheson

Case Updates

The U.S. Chamber urged the Supreme Court to decide whether a contractor submitting a claim for payment to the government - or any other party in the supply chain - may be held liable under the False Claims Act for allegedly submitting a “false” claim for payment if the party failed to comply with some federal standard - even if the party did not expressly misrepresent its compliance with that standard, and even if the standard is not expressly set forth as a condition of payment. In this case, the plaintiff claimed that the defendant medical device company should be liable under the False Claims Act because it allegedly “caused” doctors and hospitals to submit false claims by engaging in marketing practices that the plaintiff claims violate federal anti-kickback laws. The Chamber’s amicus brief explained that most circuits have held that a party’s failure to comply with a condition of payment renders a claim false or fraudulent only when (1) the party expressly and falsely certifies its compliance with that condition; or (2) the condition is expressly set forth as a precondition to payment in a statute or regulation. These courts have correctly recognized that not every regulatory infraction or breach of contract redressable through other administrative or legal processes gives rise to treble damages liability for defrauding the government under the FCA. The Chamber argued that in the decision below, the court erroneously rejected these limitations and adopted the most expansive view to date of the “legally false” theory of FCA liability. If the lower court’s decision is left to stand, the Chamber warned, there will be significant confusion among the lower courts about the scope of FCA liability. Given the dizzying array of rules and regulations governing programs like Medicare, measures must be taken to avoid creating an environment where treble damages under the FCA are always looming, and it is simply not rational or workable to do business with the government.