Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Articles Posted in Government Contracts
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Accredo delivers clotting medication and provides nursing assistance for hemophilia patients. Accredo makes donations to charities concerned with hemophilia, including HSI and HANJ, which allegedly recommended Accredo as an approved provider for hemophilia patients. Greenfield, a former Accredo area vice president, sued, alleging violations of the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), and the False Claims Act, 31 U.S.C. 3729(a)(1)(A)-(B). If Greenfield prevailed, he would get at least 25% of any civil penalty or damages award. The government did not intervene. The district court, following discovery, granted Accredo summary judgment, finding that Greenfield failed to provide evidence of even a single federal claim for reimbursement that was linked to the alleged kickback scheme. The Third Circuit affirmed. The Anti-Kickback Statute prohibits kickbacks regardless of their effect on patients’ medical decisions. Because any kickback violation is not eligible for reimbursement, to certify otherwise violates the False Claims Act but there must be some connection between a kickback and the reimbursement claim. It is not enough to show temporal proximity. Greenfield was required to show that at least one of the 24 federally-insured patients for whom Accredo provided services and submitted reimbursement claims was exposed to a referral or recommendation by HSI/HANJ in violation of the Anti-Kickback Statute. View "Greenfield v. Medco Health Solutions Inc" on Justia Law

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DiFiore, working for CSL since 2008, became concerned about CSL marketing drugs for off-label uses not approved by the FDA and including off-label use in sales forecasts. DiFiore expressed her concerns to her supervisors and alleges that as a consequence of that protected conduct, she suffered adverse employment actions: a warning letter, after which CSL hired an employment coach to help DiFiore develop her leadership skills; a mid-year performance review with “needing improvement” evaluations in several areas; a second warning letter regarding her nonpayment of her company credit card; her deteriorating relationships with supervisors and management; and her removal from a committee and certain meetings. In May 2012, DiFiore was placed on a Performance Improvement Plan, requiring improvement within 45 days. Within a week, DiFiore resigned. DiFiore sued, claiming unlawful discharge under Pennsylvania law and retaliation in violation of the False Claims Act, 31 U.S.C. 3730(h). The district court granted summary judgment on the wrongful discharge claim and held that DiFiore could not rely upon constructive discharge as an adverse action in her FCA claim. The judge instructed the jury that the FCA retaliation provision required that protected activity be the “but-for” cause of adverse actions. The jury found in favor of CSL. The Third Circuit affirmed. An employee’s protected activity must be the “but for” cause of adverse actions to support a claim of retaliation under the FCA. View "DiFiore v. CSL Behring LLC" on Justia Law

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Caremark is a pharmacy benefit manager. In 2006, Caremark employees identified approximately 4,500 Prescription Drug Events (PPDEs) under Medicare Part D that had been authorized for payment by Caremark, but not yet submitted to the Centers for Medicare and Medicaid Services (CMS), due to the lack of a compatible Prescriber ID. Caremark then used a dummy Prescriber ID for those PDEs and programmed that dummy Prescriber ID into its system. Thereafter, when any claim with a missing or incorrectly formatted Prescriber ID was processed, the system would default to the dummy, which allowed Caremark to submit for payment PDEs without trigging CMS error codes. Spay, a pharmacy auditor, discovered the use of “dummy” Prescriber IDs while auditing a Caremark client. That client dropped all issues identified in the audit, collected no recovery from Caremark, and did not pay Spay. Spay filed a qui tam lawsuit, asserting violations of the False Claims Act because the inaccurate PDEs were used to support reimbursement requests. The government declined to intervene. The court granted Caremark summary judgment, finding that Caremark had established sufficient government knowledge to preclude finding the required element of scienter, noting that several courts have adopted the government knowledge inference doctrine. The Third Circuit affirmed, declining to adopt that doctrine but stating that the misrepresentations were not material to the government’s decision to pay the underlying claims. View "Spay v. CVS Caremark Corp" on Justia Law

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In 1993, Congress amended the Communications Act, 47 U.S.C. 151–622, to allow the Federal Communications Commission (FCC) to grant electromagnetic spectrum licenses through a system of competitive bidding. The Act requires the FCC to pursue objectives required by statute, including promoting economic opportunity and competition and ensuring that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women (designated entities or “DEs”). The FCC’s principal means of fulfilling the statutory objectives for DEs is to confer bidding credits upon small and rural businesses that participate in FCC auctions. Bidding credits operate as a discount on the spectrum DEs purchase, allowing them sometimes to outbid companies that make higher bids. In 2015, the FCC issued a rule indicating that it would cap credits available in future auctions. The Third Circuit concluded the FCC acted legally when it limited the bidding credits available to DEs. The Order: preserved a significant bidding credit program; reviewed data suggesting DE participation would continue despite the proposed caps; and altered other rules to make DEs more competitive. View "Council Tree Investors, Inc. v. Federal Communications Commission" on Justia Law

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Third Circuit rejects "reverse" False Claims Act suit involving Small Business Administration.The SBA, a federal agency, provided $90 million to L Capital, a venture capital group, through the purchase of securities. L Capital invested $4 million in preferred shares of Simparel. The Certificate of Incorporation specified that Simparel must pay preferred shareholders accrued dividends if Simparel’s Board exercised its discretion to pay the dividends or if Simparel underwent liquidation, dissolution, or windup. The SBA was appointed as L Capital’s receiver after Simparel failed to comply with its funding agreement. Petras, Simparel’s Chief Financial Officer, claimed that this failure resulted in the SBA becoming a preferred shareholder, entitled to accrued dividends. The Simparel Board never declared dividends nor did Simparel undergo liquidation, dissolution, or windup. Petras claimed that the Simparel defendants engaged in fraudulent conduct—to which he objected—to avoid paying the contingent dividends: hiding Simparel’s deteriorating financial condition; failing to hold board meetings: and neglecting to send the SBA Simparel’s financial statements. The Third Circuit affirmed dismissal of the “reverse FCA” claim. The Simparel defendants could not have “knowingly and improperly avoid[ed] or decrease[d] an obligation” to pay the accrued dividends at the time of their alleged misconduct because the obligation did not yet exist. View "Petras v. Simparel, Inc." on Justia Law

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Qui tam relator failed to satisfy the False Claims Act’s materiality requirement in alleging that the manufacturer of a widely-prescribed cancer drug, Avastin, suppressed data that caused doctors to certify incorrectly that Avastin was “reasonable and necessary” for certain at-risk Medicare patients. Avastin is FDA-approved and has accounted for $1.13 billion a year in Medicare reimbursements. The relator, formerly the head of healthcare data analytics for the manufacturer, claimed the company ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported and that such analyses would have required the company to file adverse event reports with the FDA, and could have resulted in changes to Avastin’s FDA label. He claimed the company caused physicians to submit Medicare claims that were not “reasonable and necessary.” The Third Circuit affirmed dismissal of the claim, stating the allegations may be true but a False Claims Act suit is not the appropriate way to address them. The manufacturer followed all pertinent statutes and regulations. If those laws and regulations are inadequate to protect patients, it falls to the other branches of government to reform them. View "Petratos v. Genentech Inc" on Justia Law

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In bidding to strip and repaint the Commodore Barry Bridge, the Delaware River Port Authority (DRPA) rejected the lowest bidder, Alpha, as not a “responsible” contractor under its guidelines because Alpha failed to remit accident experience forms (OSHA 300) and insurance data (Experience Modification Factors) in its bid package. DRPA also declared that Corcon was actually the lowest bidder because of a “miscalculation” that DRPA perceived in Corcon’s bid. DRPA awarded the contract to Corcon. After its bid protest was denied, Alpha filed suit, seeking an injunction. The district court held a trial, concluded that DRPA acted arbitrarily and capriciously, and directed DRPA to award the contract to Alpha. The Third Circuit agreed that DRPA acted arbitrarily and capriciously, but concluded that the court abused its discretion by directing that the contract be awarded to Alpha. DRPA did not establish a rational basis under its policies for labeling Alpha “not responsible” and ”the decision to modify Corcon’s bid appeared out of thin air.” DRPA’s Board of Commissioners gave virtually no attention to Alpha’s protest. Alpha should be restored to competition; DRPA should evaluate Alpha’s bid and affirmatively determine, per its guidelines, whether Alpha, the lowest bidder, is a “responsible” contractor. View "Alpha Painting & Construction Co., Inc. v. Delaware River Port Authority" on Justia Law

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Papp alleged that his late wife suffered secondary “take home” asbestos exposure while washing the work clothes of her first husband, Keck. Keck had several jobs that exposed him to asbestos. Papp sued multiple companies in New Jersey. In a deposition, he indicated that the landing gear Keck sandblasted was for a C-47 military cargo plane, built by Boeing’s predecessor. Boeing removed the case, citing the federal officer removal statute, 28 U.S.C. 1442(a)(1). Boeing asserted that it was entitled to government contractor immunity because the C-47 was produced for, and under the specific supervision of, the U.S. military and that the supervision extended to labels and warnings for all parts of the aircraft, including those parts laden with the asbestos to which Keck would later be exposed. The district court remanded, reasoning that Boeing, as a contractor and not a federal officer, had a “special burden” to demonstrate “that a federal officer or agency directly prohibited Boeing from issuing, or otherwise providing, warnings as to the risks associated with exposure to asbestos contained in products on which third-parties … worked or otherwise provided services.” The Third Circuit reversed, holding that the statute extends to contractors who possess a colorable federal defense and that Boeing made a sufficient showing of such a defense. View "Papp v. Fore-Kast Sales Co Inc" on Justia Law

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In 2011, in response to a severe budget crisis, the Government of the Virgin Islands enacted the Virgin Islands Economic Stability Act (VIESA), which reduced most government employees’ salaries by 8%. Many government employees were covered by collective bargaining agreements that set forth detailed salary and benefit schedules. Their unions sued, alleging that the VIESA salary reductions constituted an impermissible impairment of the collective bargaining agreements, in violation of the Contract Clause of the United States Constitution. The district court, after a bench trial, held that VIESA did not violate the Contract Clause. The Third Circuit reversed, first holding that the issue is not moot, although VIESA has expired. The court’s determination will have a preclusive effect in pending arbitration between the unions and the government, concerning wages not paid in the interim. VIESA’s substantial impairment of the collective bargaining agreements was not reasonable in light of the fact that the government knew of its precarious financial condition when it agreed to the contracts. View "United Steel Paper and Forestry Rubber Manufacturing Allied Industrial & Service Workers International Union AFL- CIO- CLC v. Government of the Virgin Islands" on Justia Law

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CFI, comprised of former insiders from the pipe fitting industry, brought a False Claims Act qui tam action against Victaulic, a global manufacturer and distributor of pipe fittings. The complaint alleged that Victaulic, for many years, imported millions of pounds of improperly marked pipe fittings without disclosing that the fittings are improperly marked, thereby avoiding paying marking duties. CFI alleged that Victaulic imported approximately 83 million pounds of fittings from overseas, 2003-2013, and a miniscule fraction of Victaulic’s fittings for sale in the U.S. bear any indication of their foreign origin, with an even smaller percentage bearing country of origin markings required by 19 U.S.C. 1304. The district court dismissed with prejudice, rejecting Victaulic’s jurisdictional argument that CFI’s complaint was based primarily on publicly available information, but finding that it failed to cross the threshold from possible to plausible. The court stated that it believed the FCA’s reverse false claims provision did not cover failure to pay marking duties, but declined to rule on those grounds because the complaint was based on legal conclusions unsupportable by the facts alleged. The Third Circuit vacated. Failure to pay marking duties may give rise to reverse false claims liability. CFI’s complaint contains enough reference to hard facts, combined with other allegations and an expert’s declaration, to allege a plausible course of conduct by Victaulic to which liability would attach. View "Customs Fraud Investigations LLC v. Victaulic Co." on Justia Law