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Eleventh Circuit affirms summary judgment for qui tam defendant, finding insufficient evidence that defendant knew it failed to comply with ambiguous Medicare regulations

On May 26, 2017, in United States v. Lincare Holdings, LLC, No. 16-10532, the Eleventh Circuit Court of Appeals affirmed the trial court’s summary judgment for a qui tam defendant in a case involving a medical supply telemarketer which allegedly had improperly contacted Medicare beneficiaries through unsolicited sales calls and then submitted claims to Medicare without adequate authorization from the beneficiaries. Pertinent to the latter issue, the defendant had submitted claims to Medicare using generic authorizations, or assignment of benefits (AOBs), that had previously been obtained for other products sold to the beneficiaries rather than obtaining new AOBs. The government argued that this practice violated Medicare regulations. The trial court granted summary judgment for the defendant, inter alia, on the basis that a defendant’s reasonable interpretation of an ambiguity inherent in the Medicare regulations belied the scienter necessary to establish a claim of fraud under the False Claims Act (FCA). The Court of Appeals disapproved of this reasoning, noting that an ambiguity in the governing regulations does not preclude a finding of scienter. Citing United States v. R&F Props. of Lake Cty., Inc., 433 F.3d 1349, 1358 (11th Cir. 2005). The Court of Appeals stated that “[i]nstead a court must determine whether the defendant actually knew or should have known that its conduct violated a regulation in light of any ambiguity at the time of the alleged violation.” Otherwise, under the trial court’s formulation, a defendant could manufacture a reasonable interpretation post hoc despite acting with the requisite scienter at the time of the violation. It is important to note in this context, however, that the Eleventh Circuit was not suggesting that a defendant can be found liable for intentionally disregarding an administrative agency’s wrong interpretation of a statute. The Eleventh Circuit clarified that scienter is only established if a defendant knowingly disregards the properinterpretation of an ambiguous regulation. Citing United States ex rel. Minn. Ass’n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032, 1053-54 (8th Cir. 2002). Notwithstanding the trial court’s improper formulation of the standard, the Eleventh Circuit concluded that insufficient evidence of scienter existed.
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