Florida Federal Judge Vacates $347 million False Claims Act Judgment against Nursing Home Operator

By: Timothy S. Wombles

On January 11, 2018, a federal judge in Tampa, Florida vacated a $347 million False Claims Act judgment against a skilled nursing facility operator and its related entities.

In United States ex. rel. Ruckh v. CMC II LLC et al., relator Angela Ruckh convinced a jury that CMC II LLC and its affiliated entities (collectively, the “Defendants”) committed certain paperwork violations, such as the failure to maintain comprehensive care plans, amounting to a material and knowing misrepresentation in the claims submitted to the government. After the jury found the Defendants liable for approximately $115 million in false claims, U.S. District Judge Steven D. Merryday trebled the damages to $347,864,285 pursuant to the False Claims Act. The Defendants moved to stay execution on the judgment, requested a new trial, and requested the court vacate the verdict.

Just under a year later, on January 11, 2018, Judge Merryday, relying on the U.S. Supreme Court’s decision in Universal Health Services v. Escobar, granted the Defendants’ renewed motion for judgment as a matter of law and conditionally granted their motion for a new trial, vacating the $347,864,285 judgment against the Defendants.

Judge Merryday recognized that “the False Claims Act requires the relator to prove both that the non-compliance was material to the government’s payment decision and that the defendant [knew] at the moment the defendant sought payment that the non-compliance was material to the government’s payment decision.” Further, Judge Merryday stated that “[a]t an irreducible and necessary minimum, the ‘essentially punitive’ False Claims Act requires proof that a vendor committed some non-compliance that resulted in a material deviation in the value received and requires proof that the deviation would materially and adversely affect the buyer’s willingness to pay.”

Judge Merryday acknowledged that Ms. Ruckh’s burden was to show that the government did not know about the recordkeeping violations and would have refused to pay the defendants’ claims if it was aware of the violations. Judge Merryday found that the government continued to pay the Defendants’ claims, despite its knowledge of their recordkeeping deficiencies. Judge Merryday relied on Escobar for the proposition that a government’s reimbursement of a facility’s claims after fraud allegations emerge is “very strong evidence” that the allegations were not material to the government. Since the record failed to include evidence that the recordkeeping deficiencies were material to the government, Judge Merryday found that the judgment could not stand and vacated the judgment.

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