Qui Tam and Whistleblower Specialist
Call 617-582-3875
What are you looking for?

Recent Developments Suggest That The Cairns Decision Does Not Doom False Claims Act Cases Predicated On Violations Of The Anti-Kickback Statute, Even In The Eighth Circuit

In September 2018, the United States Attorney’s Office for the Eastern District of Missouri announced that it had obtained a $5,495,931 judgment against Dr. Sonjay Fonn and Deborah Seeger after a trial in a False Claims Act case involving alleged kickbacks to Dr. Fonn from a spinal implant distributorship that Ms. Seeger owned. The amount of the judgment derived the amount Medicare and Medicaid had paid on claims from 228 spinal surgeries that Dr. Fonn allegedly had performed with spinal implants from Ms. Seeger’s company.

Last Wednesday, the government agreed to settle the case for just $825,000, less than one-sixth of the amount of the judgment. Moreover, the settlement amount includes approximately $410,000 in suspended Medicare reimbursement payments that Dr. Fonn was seeking from the government, and the settlement allows the defendants to pay the remainder over three years.

So, what happened between September 2018 and March 2023 to cause the government to agree to take such a haircut on the judgment it had obtained?  On July 26, 2022, the United States Court of Appeals for the Eighth Circuit reversed the original judgment. See United States ex rel. Cairns v. D.S. Medical, LLC, 42 F.4th 828 (8th Cir. 2022). The appellate court observed that, in order to prove damages at trial, “the government relied exclusively on the 2010 amendment” to the anti-kickback statute, which provides that a claim to the government that “includes items or services resulting from a[n] [anti-kickback] violation” makes a claim “false or fraudulent” under the False Claims Act.  Id. at 833 (citing 42 U.S.C. § 1320a-7b(b)(g)). In a prior case decided by the United States Court of Appeals for the Third Circuit, the court held that the “resulting from” language in the 2010 amendment merely required the government to prove a “link” between the kickback and the false claim. See United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 98 (3d Cir. 2018). The Cairns court rejected Greenfield, and held that the government must show “but-for” causation “between an anti-kickback violation and the ‘items or services’ included in the claim.” Cairns, 42 F.4th at 831.

In other words, the government would have had to show in Cairns that, in each surgery Dr. Fonn performed with an implant obtained from Ms. Seeger’s distributorship, he would not have used that implant “but for” the alleged kickback he allegedly received from the distributorship. The government did not attempt to make that showing at trial, and it would have been a high mountain to climb to make that showing on re-trial, since Dr. Fonn presumably was not willing to testify that kickbacks from Ms. Seeger’s distributorship influenced his medical decision-making. Indeed, in many, but not all, FCA/AKS cases, showing but-for causation would be extremely difficult.

So, does Cairns augur doom for other FCA/AKS cases, especially in the Eighth Circuit? I think the answer is no, for two reasons.

First, at least outside of the Eighth Circuit, courts already had followed Greenfield before the Cairns decision was issued or have since rejected Cairns and continue to follow Greenfield. See, e.g., United States ex rel. Fitzer v. Allergan, Inc., Inc., 2022 WL 9974736 (D. Md. Aug. 23, 2022) (declining to follow Cairns and observing that “the legislative history of the 2010 amendments to the AKS indicates that Congress intended to make it easier, not harder, to bring (and ultimately prove) FCA claims predicated on violations of the AKS”); Guilfoile v. Shields, 913 F.3d 178, 190 (1st Cir. 2019) (citing Greenfield and reasoning that, “drawing on the ‘resulting from’ language of the 2010 amendment, if there is a sufficient causal connection between an AKS violation and a claim submitted to the federal government, that claim is false within the meaning of the FCA”); United States v. Teva Pharmaceuticals USA, Inc., No. 13 Civ. 3702 (CM), 2019 WL 1245656, at *24 (S.D.N.Y. Feb. 27, 2019) (“A link is required, but it is less than showing that the bribe succeeded in producing the prescription.”).

Second, a recent order from a district court in Minnesota, which is within the Eighth Circuit, revived a pre-2010 method of proving damages in an FCA/AKS case without showing but-for causation. In a pre-trial ruling in United States ex rel. Fesenmaier v. The Cameron Ehlen Group Inc. Inc., 2023 WL 36174 (D. Minn. Jan. 4, 2023), the court observed that, “[b]efore 2010, parties regularly brought FCA cases premised on AKS violations under a material-falsity theory, namely that FCA claims premised on AKS violations are false or fraudulent because they seek payment for services that are not payable by Medicare because they violate a material condition of reimbursement [which is compliance with the AKS].” After Cairns, the court noted, the plaintiffs “now seek to prove their case solely under a material-falsity theory,” and the court permitted them to do that. The court reasoned that the Cairns court had found that the 2010 amendment to the AKS did not codify pre-2010 law, and so the 2010 amendment merely provided an alternative means of proving damages.

Shortly after that decision, the Fesenmaier case went to trial, the jury found that the defendants’ kickbacks caused the submission of 64,575 false claims to the Medicare program between 2006 and 2015. The defendants now face a potential judgment of nearly $500 million.

The defendants in Fesenmaier presumably risked a trial – a rarity in the world of AKS/FCA cases – because they are counting on the Eighth Circuit to reverse on appeal and find that the district court should have required but-for causation. As a False Claims Act qui tam lawyer, I’m biased, but I would not be sanguine about the defendants’ chances on appeal. The Eighth Circuit in Cairns took pains to point out that “[o]ur ruling today is narrow. We do not suggest that every case arising under the False Claims Act requires a showing of but-for causation. Rather, when a plaintiff seeks to establish falsity or fraud through the 2010 amendment, it must prove that a defendant would not have included particular ‘items or services’ but for the illegal kickbacks.” 42 F.4th at 836. This statement implies that the court of appeals understands that the pre-2010 material-falsity theory offers an alternative method of proving damages in other AKS/FCA cases.

In short, while the Cairns decision undoubtedly has caused considerable consternation among government and whistleblower lawyers who pursue False Claims Act cases predicated on violations of the False Claims Act, recent developments suggest that Cairns may have little lasting effect.