The U.S. Court of Appeals for the Fourth Circuit recently declined to rule on the validity of statistical sampling as a method to establish liability and damages in a False Claims Act (FCA) whistleblower case that was closely watched within the FCA bar, U.S. ex rel. Michaels v. Agape Senior Community, Inc. et al. (Nos. 15-2145, 15-2147). In a victory for the government, however, the Court did hold that the FCA grants the Department of Justice (DOJ) an “unreviewable veto” over proposed settlements of FCA cases – even cases in which the DOJ declines to intervene.

The case was brought in 2012 by former employees of Agape Senior Community Inc. and its affiliated entities (collectively, Agape), who own and/or operate elder care facilities throughout South Carolina. The plaintiffs, who were qui tam relators, alleged violations of the federal Anti-Kickback Statute (42 U.S.C. 1320a-7b), the FCA (31 U.S.C. 3729-3733), and Health Care Fraud law (18 U.S.C. 1347) related to claims filed by Agape for services provided to ineligible individuals or for services not actually provided. Because the allegations implicated up to 50,000 claims involving over 10,000 patients, the relators (plaintiffs in FCA cases are known as “relators”) sought to establish damages via the use of statistical sampling in lieu of having to review every claim. The relators argued that a comprehensive review of each patient’s chart for evidence of fraud could cost over $30 million, potentially exceeding the actual damages in the case. In 2015, a federal district court in South Carolina rejected the relators’ argument and sided with Agape, finding that the use of statistical sampling in this case would be improper because the relevant patient medical records were available for the relators to review.Continue Reading Fourth Circuit Upholds DOJ’s Absolute Veto Power but Declines to Address Validity of Statistical Sampling in FCA Case