In February 2017, we wrote about how the Fourth Circuit sidestepped the question of whether a relator bringing suit under the False Claims Act (“FCA”) may use statistical sampling and extrapolation to establish FCA liability when it held in United States ex rel. Michaels v. Agape Senior Community, Inc. that an appeal on that point had been improvidently granted. The Fourth Circuit would have been the first appellate court to provide guidance on this hotly contested issue. We noted at the time that the FCA bar would need to continue to await guidance from the appellate courts and contend with inconsistent decisions emanating from federal district courts.
When Agape returned to the district court—which had held that statistical sampling was not appropriate—the relators found themselves unable to afford to continue prosecuting their case and ultimately did not contest the court’s granting of summary judgment on 99 percent of their claims. Unsurprisingly, the parties announced late last month that they had settled the remainder of the claims for $275,000.
What is surprising, however, is that the Department of Justice has approved this settlement, despite rejecting a $2.5 million amount just two years ago, after the district court already had ruled that it would not accept statistical sampling as evidence to establish liability, and after arguing in its brief in the appeal to the Fourth Circuit that the court did not need to rule on that issue (which, as noted above, it did not). The relators thus are left with a considerably smaller sum than what they may have expected in a case where DOJ had previously estimated damages at $25 million.
The amount of the Agape settlement in conjunction with the lack of guidance from appellate courts sends a signal to the relator bar that FCA cases that would require the use of statistical sampling to establish liability simply may not be worth bringing. Given the patchwork of law on this point, healthcare providers nevertheless must continue to be prepared for statistical sampling arguments and monitor for new developments.