The Law Firm of Piacentile, Stefanowski & Malherbe LLP

What Are Splits in the Circuits, and How Do These Splits Affect the False Claims Act?

The United States is divided up into geographic areas, called “circuits,” each with its own federal Court of Appeals. The Supreme Court only decides about 100 cases a year, so the vast majority of disputed legal issues reach their final resolution at the various Courts of Appeals. There is no guarantee that these different Courts of Appeals in the different circuits reach the same conclusion about such disputed issues. Though the decision within each circuit is binding on the lower federal courts in that circuit, it is not binding on courts in other circuits or on other Courts of Appeals. Where different Courts of Appeals have reached different decisions, there are in effect different legal rules in different circuits. This is called a “split in the circuits,” and resolving such splits is a primary reason the Supreme Court chooses to hear a particular case.

There are a few such splits in the circuits over aspects of the False Claims Act. One of those splits may soon be resolved by a case that the Supreme Court has taken for review, United States ex rel. Polansky v. Executive Health Resources, Inc. Under the FCA, when a relator files a complaint, the government can then intervene in the action; it can decline to intervene but allow the relator to litigate the case; or it can not only decline to litigate but it can dismiss the action altogether. The circuits are split over the standard under which courts may review the government’s decision to dismiss. Some Courts of Appeal have held that the government has nearly complete discretion to dismiss the claims. Others, including the Third Circuit in Polansky, have held that the government must make a showing to the court that it has a legitimate reason to dismiss, such as protecting an informant. A relator would much prefer that the government’s decision to dismiss be reviewable, so resolving this circuit split is of great interest. The Supreme Court’s recent decision to take up the Polansky appeal suggests that there may be a resolution soon. Pending the Supreme Court’s decision, however, a relator would much prefer to bring an action in a court where the government must show why it is dismissing the claims.

Unfortunately, other splits in the circuits exist that do not appear likely to be resolved soon. For example, some courts impose a very high standard for how specifically the plaintiff must describe the alleged false claims in the complaint. These courts require the FCA plaintiff to describe specific representative samples of the false claims, which is a much heavier initial burden on the FCA plaintiff than the less burdensome pleading requirements in other circuits. Different circuits also disagree abouts whether the relator bringing suit must actually have first-hand knowledge of the alleged conduct.  Yet another split exists over the “first-to-file” rule, which bars a relator from bringing a claim based on the same facts as a previously filed FCA action. Some circuits have held that the defense that the action was not the first one filed must be brought up early in a motion to dismiss, while others have held that it can be brought up at any time, even near the very end of the litigation.

Of course, whistleblowers are very interested in being protected against retaliation, but the circuits, unfortunately, disagree about how strong the FCA’s protection is. The Eleventh Circuit has held that an employee must prove that the claimed retaliation would not have happened absent the employee’s protected action. Other circuits only require the employee to show that the employee’s protected action was one factor motivating the adverse action against that employee.

There is another split in the circuits that is of particular concern for those who report allegedly false claims based on medical opinions. The sort of claims implicated would be, for example, those based on a physician’s certification that a patient is eligible for certain kinds of treatment. The Eleventh Circuit has held that only medical opinions that are proven to be “objectively” false can support an FCA claim. On the other hand, the Third and the Ninth Circuit have held that the FCA does not require an ‘objective falsehood’, ” explaining that a physician’s certification can be false or fraudulent “if the opinion is not honestly held.” Which standard applies to make a huge difference, of course, in whether a claim can even be called “false” at all.

Given all these differences between various Courts of Appeal, potential whistleblowers need to seek expert and careful legal advice in deciding in which courts claims might be brought. Should the potential whistleblower be in a position to choose which court in which to file, that choice requires thoughtful analysis, because any one court might be on the “pro-plaintiff” side of one split but have adopted a rule more burdensome on the plaintiff in one of the other splits.