After granting the relators’ petition for an interlocutory review of the district court’s rejection of the use of statistical sampling to establish FCA liability, the Fourth Circuit ultimately declined to reach that issue in its opinion recently issued in U.S. ex rel. Michaels v. Agape Senior Community, Inc.  This conclusion comes as no surprise based on the comments and questions posed by the panel during the course of oral argument, as we covered here.

Many had hoped that the Fourth Circuit would provide clarity as to the question of whether statistical sampling should be allowed in FCA cases to establish liability over a large universe of potentially false claims.  The district court had concluded that statistical sampling would be inappropriate to use in connection with consideration of whether the defendants improperly billed for hospice services provided to ineligible patients largely as a result of the individualized nature of the determination regarding any particular patient’s eligibility for those services.  The Fourth Circuit, however, defined the issue on appeal “as whether the district court may, in its discretion, allow relators to use statistical sampling to prove their case.”  Defined as such and not as a pure question of law, the Fourth Circuit found itself “constrained to dismiss that aspect of the relators’ appeal as improvidently granted.”

The Fourth Circuit’s refusal to consider the permissibility of statistical sampling to establish FCA liability makes appellate review of this issue most likely in connection with the appeal of the district court’s opinion in U.S. ex rel. Wall v. Vista Hospice Care, Inc., which is pending before the Fifth Circuit and which we covered here.

The Fourth Circuit also considered the scope of DOJ’s authority to review and ultimately veto a settlement reached by relators and the defendants.  The panel had little difficulty affirming the district court’s determination that DOJ’s veto authority in this regard is unreviewable.

After the relators and the defendants had reached a settlement, DOJ objected to the proposed settlement, in part, on the basis that the settlement amount was far less than the government’s estimated $25 million in damages.  When the parties challenged this objection, the district court concluded that the Attorney General’s veto authority was absolute in connection with voluntary settlements reached in FCA actions, even while noting that “a compelling case could be made here that the Government’s position is not, in fact, reasonable.”

After dissecting appellate opinions considering the scope of the government’s settlement-related authority, the Fourth Circuit determined that the “Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.”  The Fourth Circuit looked no further than the plain language of § 3730(b)(1), which provides that a qui tam action “may be dismissed only if the Attorney General gives written consent to the dismissal and their reasons for consenting.”  The reasonableness of the government’s decision to withhold consent with respect to any particular settlement simply does not enter into the equation.

The Fourth Circuit’s opinion – while undoubtedly consistent with the FCA’s plain language – places relators and defendants in FCA actions in the peculiar position of having to continue to litigate FCA cases, even when neither party has an interest in doing so.  While the Fourth Circuit indicated that it was troubled by this possibility during oral argument, its opinion did not address this consequence.