Monday, September 22, 2014

Seventh Circuit Court of Appeals Limits “Worthless Services” Under FCA

Dianne De La Mare

The Seventh Circuit Court of Appeals has overturned a $9 million jury verdict to whistleblowers against an Illinois nursing facility and also weakened the False Claims Act (FCA) “worthless services” theory in instances where the provider furnishes services that clearly have value (US Ex Rel Absher v Momence Meadows Nursing Center).

By way of background, in 2014, two former nurses at Momence Meadows Nursing Center filed a whistleblower (qui tam) complaint alleging that the nursing facility had defrauded the federal government by providing overpriced and substandard care and services to the patients in the facility. The federal government declined to intervene in the case; but the whistleblowers went forward and filed a complaint in District Court with a jury trial. In February, the jury held that the nursing facility had filed 1,729 false claims and determined that it should pay $3 million in damages and $19 million in fines. The judgment for the whistleblowers was over $9 million.

On appeal to the Seventh Circuit Court of Appeals, the Court focused on the District Court jury instructions, where the District Court judge told that jury that “you do not need to find that the patient received no services at all” to be considered worthless services. The Seventh Circuit overturned the District Court $9 million damage award for the whistleblowers stating that for the worthless service theory to apply, “the performance of the service [must be] so deficient that for all practical purposes it is the equivalent of no performance at all…it is not enough to offer evidence that the [nursing facility] provided services that are worth some amount less than the services paid for…That is, a ‘diminished value’ of services theory does not satisfy this standards.”

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