July 15, 2019

July 15, 2019

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Fifth Circuit Limits FCA Liability Due to Lack of “Materiality” in Highway Guardrails Case

Earlier this week we released a Health Care Enforcement Advisory about a recent decision from the U.S. Court of Appeals for the Fifth Circuit that may have a significant impact on the element of “materiality” in False Claims Act (FCA) cases.  A panel of judges on the Fifth Circuit overturned a district court decision after a jury found the defendant, Trinity Industries, Inc. (Trinity), liable under the FCA for changing its highway guardrail design without disclosing such changes to the Federal Highway Administration (“FHWA”).  The Fifth Circuit decided as a matter of law that the case lacked the element of “materiality” required in FCA cases.

Joshua Harmon, a Trinity competitor, filed suit in the U.S. District Court for the Eastern District of Texas against Trinity under the qui tam provision of the FCA.  The government declined to intervene in the case. At trial, the jury concluded that Trinity’s failure to disclose to FHWA changes to its guardrails caused Trinity to become ineligible for federal reimbursement, thereby resulting in false claims being submitted to the government. A final judgment was entered against Trinity for a staggering $663.4 million. The district court then denied Trinity’s request for a new trial, which Trinity appealed to the Court of Appeals.

Following a hearing, the Fifth Circuit issued a 40-page ruling on September 29, 2017, in Trinity’s favor.  In its decision, the Fifth Circuit cited a memorandum submitted by FHWA during discovery for trial in which the agency stated that there was “an unbroken chain of eligibility for Federal-aid reimbursement [for Trinity’s guardrails] [that] has existed since September 2, 2005, and the [guardrail system] continues to be eligible today.”  The Fifth Circuit relied heavily on the government’s repeated conclusions that it had never been defrauded by Trinity and stated that the plaintiff failed to rebut the “very strong evidence” of FHWA’s continued payment for Trinity’s product. As a result, the court ruled that the alleged facts did not satisfy the element of materiality required in FCA cases.

The decision provides a useful tool in defending FCA cases involving the government’s continued payment for the items and services at issue.  

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About this Author

Laurence J. Freedman, Litigation Attorney, Mintz Levin, Enforcement Defense Law

Larry’s health care and life sciences litigation practice focuses on defending clients against allegations and investigations of fraud and abuse involving governmental programs.  He is highly experienced in representing clients against actions brought by federal and state agencies including the US Department of Justice (DOJ), the Department of Health and Human Services Office of the Inspector General (HHS OIG), the United States Attorneys’ Offices, and state OIGs and Medicaid Fraud Control Units (MFCUs).

Larry’s practice is based on his 22-years...

Samantha Kingsbury, Health Care, Attorney, Mintz Levin, Law firm

Samantha’s practice focuses on health care enforcement defense matters. These matters often involve criminal and administrative actions brought against health care providers and companies by state and federal governmental and regulatory agencies. She also has experience in assisting clients with internal investigations of potential violations of the federal anti-kickback statute, the Stark law, and the False Claims Act, among other statutes and regulations. Samantha also has experience preparing self-disclosures and other reports relating to such enforcement matters, as well as developing internal compliance programs. 

Sarah Beth S. Kuyers, Mintz Levin, nonprofit affiliation lawyer, health care systems attorney

Sarah Beth’s practice focuses on advising health care providers, PBMs, and laboratories on a variety of regulatory issues.

Prior to joining Mintz Levin, Sarah Beth worked as a law clerk with the health staff of the US Senate Committee on Finance, where she researched policy, regulations, and legislation regarding commercial insurance reform, health IT, Medicare, Medicaid, and the Affordable Care Act. She also drafted legislation.

In addition, Sarah Beth worked as a law clerk for a legal practice in Washington, DC. Her...