This transcript has been auto generated
00;00;00;29 - 00;00;24;07
Jonathan Porter
Welcome to another episode of Husch Blackwell's False Claims Act Insights podcast. I'm your host, Jonathan Porter. We've covered a lot in our first eight episodes of this podcast. We talked about huge settlements and big trials. We've talked about how investigations start and how they end. We've covered a lot of ground, but what we haven't done is to dig into a core element of the False Claims Act.
00;00;24;17 - 00;00;57;03
Jonathan Porter
And so today we're going to explore an element that on its face seems pretty simple, but in practice is ridiculously hard to pin down. We're talking about materiality in today's episode in order to explain what materiality means in the FCA. We're looking at a handful of interesting cases to show what it means and how it works. And then what we're going to do is at the end of the episode, we're going to think about a big topic on everyone's minds these days, cyber security, and whether that might be the next big frontier of materiality.
00;00;57;03 - 00;01;19;09
Jonathan Porter
Battles in key towns. Personally, I think it'll be fun to explore this concept through something unsettled after we dig into some settled stuff. So stay tuned for that. Joining me to talk about this heady concept is my Hush Blackwell colleague, Kip Randall, before Kip's legal career. Kip went to West Point and later rose to the rank of captain as an Army infantry officer.
00;01;19;20 - 00;01;47;06
Jonathan Porter
And Kip, thank you for your service there. So following honorable discharge, Kip went to law school and is now a valued member of our firm's white collar group practicing out of Kansas City. I also want to give Kip some love for his work as part of our firm's human trafficking legal clinic, through which Kip and many others are firm, volunteer to represent the victims of human trafficking as they navigate various legal situations like needing to sometimes testify in court.
00;01;47;07 - 00;02;07;11
Jonathan Porter
So Kip, I'm proud to know you and proud to work with you, and I'd love to talk to you about your your infantry career or your human trafficking victim advocacy. But I'm asking people tell me that we should probably stick to the topic of this podcast, and that's materiality in the False Claims Act. So Kip, thanks for coming on the podcast and telling our listeners about materiality.
00;02;07;25 - 00;02;14;29
Jonathan Porter
Well, Jonathan, thank you so much for that introduction and thanks for having me. I've been following all the episodes and it's great to get an opportunity to talk with you today.
00;02;15;14 - 00;02;35;22
Jonathan Porter
That's great. It's good to know, Kip, you are the person who listens to this. That's fantastic. So I'm a fan of starting with statutes and then digging into a new concept. So that's actually what the Supreme Court just said we should be doing in local. Bryan So let's start with the statutory text of the False Claims Act itself, which is the start of any good podcast, statutory text.
00;02;36;02 - 00;03;03;22
Jonathan Porter
So listeners don't tune out yet because the text is super short. Here is the text of the main SCA provision. Any person who knowingly presents or causes to be presented a false or fraudulent claim for payment or approval is liable under the FCA. So that's the primary provision that applies to 90 plus percent of false claims actions. But I didn't hear the word material or materiality in there.
00;03;04;02 - 00;03;09;11
Jonathan Porter
And so why are we talking about materiality today and what is material really mean?
00;03;10;00 - 00;03;35;14
Kip Randall
Well, in other parts of the SCA material is defined as a natural tendency to influence or be capable of influencing the government's decision to pay. But in general terms, material means to be a real importance or consequence. And so perhaps the concept is best understood in relation to the word immaterial, which means it doesn't really matter. Let's say you go into the State Department and fill out an application for a passport.
00;03;35;29 - 00;03;58;14
Kip Randall
The application as has a lot of questions and instructions. If you give the State Department a fake name and identity, the State Department is going to care a lot about that. They're not going to give someone a passport if they know it's for a fake identity. Name and identity is material to their decision to issue a passport. But now think about a provision on this form that says the form must be filled out with blue ink.
00;03;59;18 - 00;04;21;25
Kip Randall
If instead you fill out the form in black ink for the people processing the application, don't protest and they issue the passport anyway. And in fact, they routinely issue passports for applicants who use black ink. Then the provision saying you must fill this out with blue is not material. It's not important to the agency. They don't actually care about it, and there's no consequence.
00;04;22;08 - 00;04;44;16
Kip Randall
But the complicated part about materiality is that most government decisions happen with situations that are far less clear. The example I just gave. And they are handled consistently by the people within the government agency. And so the materiality inquiry, as we'll talk about, actually gets really difficult to figure out. But you also pointed out that the word material is not in the primary state provision.
00;04;45;08 - 00;05;02;21
Kip Randall
The reason there is that courts recognize that it would be unfair to hold people liable under an anti-fraud statute for shortcomings that really don't matter to the government. And so courts long ago added the materiality provision. The analysis is designed to ensure that immaterial things can't lead to allegations of fraud.
00;05;03;10 - 00;05;28;21
Jonathan Porter
Thanks, Kip. That's really helpful background information. I appreciate that, Kip. I think from the vantage point of the U.S. Supreme Court, materiality makes a lot of sense. You know, what does the government do when faced with a situation? But in reality, it's not nearly as clean as Supreme Court justices might think. It is. And that's because government agencies are made up of people and people respond differently to a range of issues.
00;05;28;26 - 00;05;51;04
Jonathan Porter
You know, some might care about ink color and some might not. And so that's what I think is messy about this whole situation. But before we get into messy materiality questions, let's talk about a case that I think explains materiality really well. And that's the Triple Canopy case. That's a case that was allegedly about guards who couldn't shoot straight.
00;05;51;17 - 00;05;56;25
Jonathan Porter
So, Kip, tell our listeners about Triple Canopy and what we can learn about materiality from that case.
00;05;57;07 - 00;06;21;23
Kip Randall
Sure. So first here, the facts of the case. The State Department solicited a contract for guards to provide security at a military base in Iraq. The solicitation, as a lot of government solicitations do, had a lot of things that wanted the contractor to do under the agreement. And one of those many things that the State Department wanted the guards to satisfy a particular marksmanship requirement.
00;06;22;17 - 00;06;49;07
Kip Randall
So after the Triple Canopy wins the bid, it hires guards from Uganda to staff the base. But those guards don't have the right marksmanship ratings. So they create false scorecards and placed the guards files from everything we can tell by reading the record. The base was guarded without any incident. Triple Canopy invoices the State Department for services, but never makes any sort of affirmative representation about the marksmanship numbers.
00;06;50;02 - 00;07;19;19
Kip Randall
Now, fast forward a key team gets filed and that says that Triple Canopy presented false claims the government because they didn't satisfy litigated and ultimately goes up to the fourth Circuit. Now interestingly, the Fourth Circuit reached this original decision and then ask the bar, the controlling case materiality was decided by the Supreme Court. At which point the Supreme Court remanded the Triple Canopy case and the Fourth Circuit published a second opinion because of that procedural history.
00;07;19;21 - 00;07;49;16
Kip Randall
I'll take a moment to explain how the Supreme Court characterized materiality and the bar, and I'll just do a brief quote here. The Supreme Court held a misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the government would have the option to decline to pay if it knew of a defendant's noncompliance.
00;07;50;02 - 00;08;15;20
Kip Randall
Materiality, in addition, cannot be found where noncompliance is minor or insubstantial, end quote. So in the end, the Fourth Circuit reached the same conclusion as it did before the bar, because it found that it's actually used a more difficult standard for materiality. It held that the marksmanship provision was a material part of the deal and thus a proper basis for false claims at case.
00;08;16;14 - 00;08;42;06
Kip Randall
The court said essentially that the point of paying the guards to have guards who can actually protect the base and therefore being able to protect the base goes to the essence of what the State Department wanted to pay for. The court said that's just common sense. But there's an interesting wrinkle in the Fourth Circuit's analysis. The court said the materiality was further shown by the fact the State Department did not renew its contract with the Triple Canopy following the lawsuit.
00;08;42;27 - 00;08;49;17
Kip Randall
The Justice Department immediately intervened in the litigation. That's an interesting take on the materiality analysis.
00;08;50;00 - 00;09;11;08
Jonathan Porter
Yeah, I agree. That's an interesting take on material. Now, that's a double edged sword of a test because there are plenty of defense contractors that the government continues to do business with after key jams are filed. Does that point towards a lack of materiality under Triple Canopy? Same thing in health care. You see them as rarely immediately suspends billing privileges when they're named.
00;09;11;09 - 00;09;37;21
Jonathan Porter
You know, when a when a provider's name in a key TAM is that evidence against materiality and as to immediate intervention, I know of plenty of examples where it takes DOJ years and years to make an intervention election. There's the fact that it takes years and years show a lack of materiality. Those arguments haven't really persuaded courts in the past, but the Fourth Circuit seems to entertain it in the opposite context, at least.
00;09;38;06 - 00;09;56;21
Jonathan Porter
But Kip, I like Triple Canopy because it shows that the analysis looks to the essence of what the contract is for. If you're paying for guards, you want guards who can do the job. That's common sense to me and to the court. I think when the shortcoming goes to what it is of the government paying for, that's material.
00;09;56;24 - 00;10;16;28
Jonathan Porter
I think we sort of naturally get that. So let's look at another example where a court found that an alleged shortcoming was not material. There was a recent case in Texas that lays out the flip side of materiality. So tell our listeners about the Vince Harborview Research case and what the court said about materiality there. Sure.
00;10;16;28 - 00;10;41;11
Kip Randall
So here are the relevant facts. To start off in 2020, when Pfizer received the contract from the FDA to produce the COVID 19 vaccine for the DOD. Subcontractor would have been interview and another company to conduct clinical trials. Then Tobias submitted a form to Pfizer and the FDA, certifying that it would, among other things, conduct the trial in accordance with protocol and FDA regulations.
00;10;41;27 - 00;11;12;20
Kip Randall
Now, the interview operated three of 160 testing sites for the clinical trials, and the relator in this case was the regional director of two of those sites. She allegedly observed clinical trials, violations and safety and ethical violations after reporting those issues internally. She called the FDA hotline to report them. Then she filed a key team action, and the case was before the district court on three motions to dismiss by Pfizer and TVA and the other company involved in the clinical trials.
00;11;13;11 - 00;11;38;21
Kip Randall
The District Court started its analysis bar and ultimately found the relator did not meet her burden to plead allegations that the misrepresentations were material. In doing so, it identified two major factors. The first was the FDA knew about the allegations three months before the DOD paid the first invoice and continued to approve the vaccine and then to it all and relatedly, the FDA continued to allow the DOD to pay the invoices.
00;11;39;04 - 00;12;04;17
Kip Randall
The relator tried to argue that the alleged misrepresentation could have influenced the government's decision, but the court found it should not ignore what actually happened when it has the benefit of hindsight. And what actually happened was FDA continued to authorize the vaccine. Also, the court found the allegations did not show that the alleged violations resulted in the FDA receiving fabricated, inaccurate or misleading data about the safety and efficacy of the vaccine.
00;12;05;19 - 00;12;20;02
Kip Randall
And finally, the interview only operated 360 sites, which only enrolled about 3% of the test subjects. And the violations only affected a small fraction of the 3%. So ultimately, the noncompliance was minor.
00;12;20;25 - 00;12;40;08
Jonathan Porter
Thanks. To me, that's a really interesting case. It sort of shows what happens when the government finds out about something and they decide, what do we do about this? That's what materiality is. And I think it's really helpful to see one instance where a court said something is not material. And so I think we've got our good bookends.
00;12;40;17 - 00;12;57;28
Jonathan Porter
So now what I want to do is something a little bit different. So on this podcast, we talked a lot about past cases. We are about how to use those past cases to make good decisions going forward. But we haven't yet tried to peg what future courts might do with things that are happening right now. And I want to try that here.
00;12;57;29 - 00;13;28;02
Jonathan Porter
So let's talk about cybersecurity. Data breaches are a big deal right now. Failing to safeguard things the government wants to keep confidential is a problem in many industries for defense contractors. Think about safeguarding classified information for health care providers. Think about patient data. There are a host of regulations on those points, but at least in my knowledge, we really haven't seen a scenario where a hospital for one example, where a hospital treats a thousand Medicare patients, has a data breach and everything about those patients gets exposed.
00;13;28;02 - 00;13;50;03
Jonathan Porter
And then DOJ or a whistleblower says that maintaining confidentiality for those, say, 1000 patients was material to Medicare's decision to pay for services in the first place, and therefore, the claims were false. I don't think we've seen that exact scenario, but could we see that scenario? Walk us through the analysis and then let's discuss how that case might play out under the False Claims Act.
00;13;50;13 - 00;13;50;23
Jonathan Porter
Sure.
00;13;50;23 - 00;14;12;13
Kip Randall
So before we really get into that analysis, let's talk about three recent cases involving cybersecurity. Now, all three of these cases resulted in settlement agreements. So we don't have the benefit of court opinions on materiality. So we'll look at the facts and then we'll will analyze how we view the materiality in those cases. The first case is Jelly Bean from Florida.
00;14;12;23 - 00;14;48;20
Kip Randall
The settlement agreement was executed in March of 2023. And here are the facts from the covered conduct in July of 2012, Florida's Agency for Health Care Administration contracted with the company Florida Health Kids Corporation, to provide services for the State Children's Health Insurance Plan Program. Now, this included implementing technical safeguards to protect the confidentiality, integrity and availability of electronically protected health information received and obtained on behalf of the agency.
00;14;49;10 - 00;15;23;21
Kip Randall
Now, the prime subcontractor with Jelly Bean for website design programing, hosting services and the agreement required, among other things, that Jelly Bean provide a fully functional hosting environment that complied with HIPA. The agreement provided that Jelly Bean would adapt, modify and create the necessary code on the web server to support the secure communication of data. And under its contract at the time between 2013 and 2020, Jelly Bean created, hosted and maintained the website Healthy Kids org.
00;15;24;19 - 00;15;46;28
Kip Randall
Around December 2020, it became apparent that more than 500,000 applications submitted at Healthy Kids dot org have been hacked by third parties. According to the settlement agreement, the website created by Jelly Bean was running multiple outdated and vulnerable applications, including some software the Jelly Bean had not updated or patched since November 2013, when it originally got the contract.
00;15;47;25 - 00;16;11;13
Kip Randall
In response to this data breach, the prime shut down the websites application portal in December of 2020. Now getting into the analysis materiality seems straightforward to me here. Jelly Bean was a subcontractor who was involved specifically to provide it website design that was HIPA compliant and Jelly Bean was running outdated software. And ultimately there was a data breach.
00;16;12;16 - 00;16;34;01
Kip Randall
So jelly beans, false claims were at the heart of what the Florida State was paying them for. This goes even further than Triple Canopy's Common sense approach, because there was no security incident at the base in Triple Canopy. But here there was a security incident and a data breach. Likewise, the government pursued this action rather than or later.
00;16;34;16 - 00;17;08;22
Kip Randall
Then also looking at Victoria, the prime shut down the website the same month the data breach was discovered, suggesting that further payments and approval were not authorized and the data breach was rather sizable. At 500,000 applications being breached. So in this case, I think both the analysis from the interview and Triple Canopy point towards the data breach and the cybersecurity being material, the next case is insight blow Pennsylvania there.
00;17;08;22 - 00;17;45;00
Kip Randall
The settlement agreement wasn't executed april of this year. Looking at the facts of the case around August 2020, Insight Global, which was an international staffing agency contracted with the Pennsylvania Department of Health to provide staffing for COVID 19 contact tracing in the contract insight global represented that it recognized the next steps that the contact tracing workforce will have access to personal health, information of contact tracing subjects, and must ensure that in all such information related services being provided must be kept confidential and secure.
00;17;45;27 - 00;18;11;21
Kip Randall
Now the staff provided by Insight World will receive certain AI and PII of contact tracing subjects in the body of unencrypted emails, including emails that by the government personnel at the insight World staff, they shared passwords used to access such information with each other and transmitted such information using Google files that were not password protected and were potentially accessible to the public.
00;18;11;21 - 00;18;36;16
Kip Randall
The Internet links. But basically they were very loose with their handling of API inside global learned of the behavior at the end of 2020 and by April 2021, it had taken proactive measures to correct them. But according to the settlement agreement insight Global should have and could have provided more data security resources and training to its personnel who are implementing the contract.
00;18;37;04 - 00;19;02;23
Kip Randall
Now for me, materiality and a closer call here like Triple Canopy personnel were being provided to perform a service. But I can see both arguments, whether it was at the heart of the agreement. Now, on one hand, data security seems tangential, but looking at the reasoning and triple canopy like you need guards who can shoot straight, you need medical staff to properly handle PII.
00;19;03;10 - 00;19;28;07
Kip Randall
Also, no breach occurred here, but sure, Canopy shows us that that is actually necessary. And finally here, the government issued a civil investigative demand, but we don't know whether the Pennsylvania Department of Health continue discussions with Insite Global and pay them. So our interview analysis is very limited. But we do know that insight global made significant corrective actions overall.
00;19;28;07 - 00;19;53;21
Kip Randall
I think I come down on the side of material, but I believe there's space for defense counsel to argue otherwise. And we'll look at one last case here. Finally from New York in May of this year, we have Guidehouse now going back to April 20, 21 as part of the COVID 19 Relief funding, New York State contracted with Guidehouse to administer their emergency rental assistance program.
00;19;54;06 - 00;20;40;07
Kip Randall
GUIDEHOUSE provides consulting services to public and private entities related to management, technology, risk consulting, business process outsourcing and digital services. So they subcontracted with Nan Mackay, and NAN Mackay provides consulting operations and training services for municipal and state government agency, is engaged in various housing related programs. So under the contract, Guidehouse was to administer the Emergency Rental Assistance Program with a requirement to perform certain cybersecurity testing on the application, and that included tests and scans in accordance with industry standard practices, which ultimately they are required to perform a test on the application before it went live.
00;20;40;21 - 00;21;07;22
Kip Randall
Guidehouse included the requirement to do this cybersecurity testing in the subcontract with Nan Mackay about a month later, Nan Mackay told Guidehouse it was having trouble with one of its cybersecurity testing tools and wouldn't be able to complete the pre-production testing, Guidehouse said it would take over, but even with another tool, it didn't complete the testing. The application went live and 12 hours later, data from the program was appearing on the Internet.
00;21;08;07 - 00;21;37;15
Kip Randall
No PII was viewed or used by unauthorized parties, but it was accessed by commercial search engines, which presumably would have been caught if the pre production testing had gone forward. Again, this is a close call for me. You know, cybersecurity testing is a very small piece of the application for a much larger rental assistance program. So making this seem more like a breach of contract claim than an FDA claim.
00;21;38;00 - 00;22;03;16
Kip Randall
But I will acknowledge that a data breach occurred. That brings up the concern, though, that any time a data breach occurs on a federal contract, you have to worry about an FDA claim. You can be sure that with cybersecurity being such a hot topic, all government contracts are going to include cybersecurity language. So for me, really here, the deciding factor is that the application was taken offline overnight by the Prime, suggesting it's materiality.
00;22;03;20 - 00;22;28;22
Kip Randall
But again, I think there is room for defense counsel to argue that. So with the benefit of those three examples, let's talk about your hypothetical, Jonathan. A hospital has a breach of a thousand Medicare patients data. Is the data security really at the heart of the agreement to treat those patients? Also, I would look at whether CMS immediately suspending the hospital or if they suspended other hospitals for similar breaches.
00;22;29;08 - 00;22;54;23
Kip Randall
And we'd also want to determine how large a percentage wise a thousand patients is related to the total number of patients being treated. All of those factors would play into materiality based on what we've seen with both Triple Canopy and B.A.. Likewise, in the defense contracting space, unless a defense contractor is specifically contracted to provide cyber security is probably not at the heart of the agreement.
00;22;54;23 - 00;23;19;16
Kip Randall
Like if the defense contractor is producing bullets, cybersecurity is not going to be at the heart of that agreement. So we'll also have to look at whether DOD is using contractors that have had data breaches and continue to use them later or not even canceling the existing contract. And I think we've already seen some of these cases where a data breach leads to a false claim and cybersecurity is not at the heart of the agreement.
00;23;19;29 - 00;23;27;13
Kip Randall
I expect we'll continue to see more additional expansion. So we'll see for defense counsel to continue to challenge materiality when possible.
00;23;28;03 - 00;23;49;10
Jonathan Porter
Thanks for that. Yeah, I think you're right. I think we're going to continue to see this issue play out in the courts. You know, my frustration with materiality as a concept is that it pretends like there are standard responses to situations that are uniform across a government agency. I recall one particular case when I was at DOJ where we were investigating a defense contractor.
00;23;49;23 - 00;24;27;18
Jonathan Porter
You know, we reached a point where the attorney for the defense contractor brought up the notion of administrative sanctions. And for those asking questions about that, you had to go back and listen to our episode on parallel proceedings, which talks about how administrative matters happened on a different parallel track than the civil investigation brought under the FCA. So the attorney for the defense contractor brings up administrative sanctions, which is pretty standard, but also says something along the lines of, hey, we're not all that worried about suspension or debarment here because we make this widget that DOD uses in a particular high priority DOD thing that I won't name here.
00;24;28;03 - 00;24;52;09
Jonathan Porter
And we're the only company that makes this widget. And so I don't think DOD was suspended by us because frankly, they need our widget and they were right. You know, DOD needed to do business with this company. Chip, this notion of materiality to me makes a lot of sense in a one hour contracts class or in court. But I don't think it makes a whole lot of sense in a government that acts inconsistently in response to stuff.
00;24;52;09 - 00;25;19;12
Jonathan Porter
When I was at DOJ, I interviewed enough army contracting officers to know that they just want to get their projects done. They're largely the decision makers there, but they're not terminating contracts because of some obscure regulatory shortcoming. And the idea of asking courts to guess what those contracting officers would have done if they'd known about something like a Davis-Bacon violation, for example, or passing through too much work on a small business set aside contract.
00;25;19;12 - 00;25;40;27
Jonathan Porter
That's just, to me a little silly. And so to me, materiality is a frustrating concept because we don't know how to advise our clients when it comes to materiality. So leave our listeners with your wisdom about how to discover and argue materiality. Tell me it's more than just a judge's gut feeling about whether a thing is important.
00;25;40;27 - 00;26;06;19
Kip Randall
Well, let me put it this way. I think there is a lot of room to litigate materiality now going through the case law on materiality. I was struck by the Fourth Circuit's reasoning in trouble. Can it be that the best manner for continuing to ensure that plaintiffs cannot shoehorn a breach of contract claim into an SCA claim is strict enforcement of the Act's materiality and requirements.
00;26;06;29 - 00;26;37;13
Kip Randall
Now, looking back at some of the cases we discussed today, I think we might be closer to breach of contract than to the claims. And so for me, that means we have to keep coming back to some of the questions that we were asked. And today, one, does the alleged false claim go to the heart of what the government is paying for in to in this case, the government agency immediately suspend the company after it learned of the allegations or did it continue to pay it in 3 hours?
00;26;37;13 - 00;27;02;00
Kip Randall
The government acted in similar situations in the past. Now it means we have to dig in to the facts and we're faced with the question of materiality, how we're going to use discovery to learn when the government became aware of the allegations and internal communications about the government's response, and then we're going to determine whether or not the government continue to pay out in some situations that may be clearer than others.
00;27;02;16 - 00;27;26;13
Kip Randall
So we're in depositions. You should be inquiring with the contracting officer or other comparable individuals within the agency about when they learned about the allegations and how they responded. And it also means we have to keep track of these cybersecurity cases. The materiality case generally. We need to know how government agencies are acting in a historical way relative to the allegations.
00;27;27;10 - 00;27;48;00
Kip Randall
So in those depositions, you can inquire about specific cases you've been tracking as well as generally how the agency responds to those particular allegations. So it's going to be key to a successful materiality argument to be able to argue the government's behavior in the past as well as the current case so that the alleged false claim didn't actually matter in the end.
00;27;48;07 - 00;28;08;04
Jonathan Porter
I totally agree, Kim. That is the key right there. I think you hit the nail on the head when you said that using the discovery process to test materiality is important. And that argument that you told our listeners about there at the end is super important. And so, Kim, thanks for that. Thanks for joining the podcast, telling our listeners a little bit about this materiality issue.
00;28;08;14 - 00;28;09;13
Kip Randall
Thanks. I appreciate it.
00;28;09;22 - 00;28;40;08
Jonathan Porter
Let me close by putting a real life bow on this materiality package. You know, when I was at DOJ, I was part of a large national takedown called Operation Rubber Stamp. You can Google it. But here's the short version as a follow on operation to Operation Brace Yourself, Operation Double Helix. But in that takedown, in addition to a bunch of new charges that were brought by grand juries across the country, CMS Center for Program Integrity revoked Medicare billing privileges of over 250 medical professionals.
00;28;40;08 - 00;29;03;21
Jonathan Porter
It was a pretty big deal at the time. But what does that say about health care investigations where the Center for Program Integrity doesn't revoke billing privileges? Are those not material? Another investigation comes to mind when I was at DOJ, where I investigated and prosecuted a pharmacist who ultimately pled guilty to health care fraud and drug dealing. And in that investigation, we got a search warrant.
00;29;03;21 - 00;29;28;26
Jonathan Porter
But also DEA obtained an immediate suspension order that went into effect the day of the execution of that search warrant. But what does that say about all of the other pharmacists out there who weren't immediately suspended when DEA learned of drug dealing? Are again, those not material? I think the appellate courts think of materiality as a straightforward concept where there are policies and consistent responses to particular facts.
00;29;28;26 - 00;29;48;20
Jonathan Porter
But that's that's not the way it actually works in real life. And yet materiality is an element of the False Claims Act, no less important than falsity or knowledge or any of the other ones. And so it's our job to develop facts and legal arguments to bring those to court. But here's something weighing in the back of my mind on materiality.
00;29;49;11 - 00;30;11;26
Jonathan Porter
If courts start to grant summary judgment on materiality based on the fact that CMS or DOD or whoever isn't taking immediate action when learning of regulatory shortcomings, is the response by CMS or DOD going to be to start taking immediate action? Is that a good thing? I don't think it is. I have plenty of clients under investigation right now for things.
00;30;11;26 - 00;30;38;28
Jonathan Porter
I'm confident they'll be cleared up and it would be a travesty if the law adopted some standard where federal agencies had to suspend health care providers or defense contractors as soon as they heard of fraud allegations. From a policy perspective, that's just bad. And so materiality is this concept that is important. But courts need also not to put federal administrators in the spot of making premature judgments.
00;30;39;12 - 00;31;03;12
Jonathan Porter
My recommendation is to use Discovery to track what federal decision makers did in past similar cases. That's how we test materiality. What did federal decision makers do, not just in this case, but in all other cases when confronted with whatever issue. But that takes a lot of effort on the Discovery front, and I enjoyed hearing Kip's thoughts there, so I hope you enjoyed this discussion of materiality.
00;31;03;27 - 00;31;29;15
Jonathan Porter
If you enjoyed this discussion, other discussions that we've had in past episodes, I'd encourage you to subscribe. However you're listening to this. Leaving a review also helps people find it. You know, this podcast was recently named one of five podcasts worth listening to for Health Care and Life Sciences Lawyers by Law360. I'm honored by that distinction, but you know, we'd love more people to listen to this and so help your friends find us too.
00;31;29;26 - 00;31;44;03
Jonathan Porter
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