Supreme Court Ruling on Whistle-blowers Complicates Rules

June 2016

IN THIS ISSUE

— High Court Limits Reach of Whistle-Blower Law
— The Impact of the Ruling For Companies

GREETINGS!

Welcome to the June edition of our newsletter! In this issue, we’ll examine the potential impact of the U.S. Supreme Court’s recent ruling in whistle-blower suits.

HIGH COURT LIMITS REACH OF WHISTLE-BLOWER LAW

In a unanimous ruling earlier this month, the U.S. Supreme Court ordered a lower court to revisit its ruling concerning a civil suit brought by the parents of a patient who died at a nursing care facility in Massachusetts. The family of the patient argued that the contractor, Universal Health Services — which sought reimbursement under Medicaid — used unlicensed or unsupervised staff at the facility, which would make it non-compliant with state regulations.

The family argued that it had a right to sue under the False Claims Act even though the violations were of state law, not of specific provisions of the heath care company’s contract with Medicaid. In the instance of the plaintiffs, they said their daughter had been dispensed prescription medications at the facility by persons not authorized to dispense them, without supervision, under Massachusetts law.

THE IMPACT OF THE RULING FOR COMPANIES

The court remanded the case on the basis that an omission or misrepresentation must reach a standard of materiality, with Justice Clarence Thomas commenting in part, in writing for the unanimous court, that the U.S. False Claims Act must not be seen as an “all-purpose fraud statute,” although he also said that “Half-truths — representations that state the truth only so far as it goes, while omitting critical qualifying information — can be actionable misrepresentations.” This nuance allowed each side to claim some measure of victory.

What does it mean for civil fraud actions under the False Claims Act? That has yet to be determined, but it may suggest that the “high bar” of materiality Thomas referred to in the opinion would create a standard of proof that exceeds anonymous tips and questioned documents provided by interested parties. This may make the researcher’s role, to round out the picture using litigation and other public records, even more critical in future false claim allegations.