United States Ex Rel. Absher v. Momence Meadows Nursing Center, Inc., 764 F.3d 699

Background

Momence Meadows Nursing Center (Momence), a Medicare/Medicaid-funded 140-bed facility, and its president Jacob Graff were sued in a qui tam action by two former nurses, Vanessa Absher and Lynda Mitchell, alleging thousands of false claims to Medicare/Medicaid and retaliatory discharge.
Relators alleged systemic regulatory noncompliance (infection control/scabies, pressure ulcers, medication, staffing, documentation) and active concealment (instructing staff not to chart certain conditions, temporarily improving conditions when surveyors visited).
The jury found Momence submitted 1,729 false claims, imposed $11,000 penalties per claim (~$19M) and compensatory damages of $3,030,409 (trebled to ~$9.09M under the FCA); jurors also awarded $150,000 to Absher and $262,320 to Mitchell for retaliation.
The district court trebled damages but vacated the statutory penalties as excessive under the Eighth Amendment. The United States and Illinois declined to intervene in the qui tam; the government filed an amicus brief on appeal.
On appeal the Seventh Circuit considered: (1) whether FCA jurisdictional bars (§ 3730(e)(3) & (e)(4) as they existed pre-2010) applied; (2) sufficiency of the relators’ theories—"worthless services" and false certification (implied and express via MDS/plans of correction); and (3) retaliation claims under the FCA and Illinois whistleblower law.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 3730(e)(3)/(e)(4) public-disclosure / prior-proceedings bars jurisdiction	Relators: government surveys didn’t disclose fraudulent misrepresentations; relators are original source of fraud evidence	Momence: survey reports and administrative penalties publicly disclosed non-compliant care and facts supporting fraud, so FCA bars apply	Court: Bars do not apply — surveys didn’t disclose the misrepresentation/scienter element required for FCA claims; relators’ claims not barred
Whether "worthless services" theory can support FCA liability	Relators: services were so deficient as to be worthless and thus claims false	Momence: services provided some value; not equivalent to no performance	Court: Even if recognized, relators failed to show services were effectively worthless; theory cannot support verdict
Whether false-certification theories (implied certification, plans of correction, MDS forms) support liability and amount of false claims	Relators: MDS and acceptance of per-diem payments impliedly/expressly certified compliance; plans/MDS were false; many claims therefore false	Momence: relators failed to prove certifications were conditions of payment or how many specific claims were false; some theories not presented to jury	Court: Implied-certification theory waived/not argued as condition of payment; plans-of-correction theory waived; MDS theory lacks evidence quantifying how many specific forms were false -> insufficient to support 1,729 false claims
Whether retaliation claims under FCA/IWRPA are proven	Relators: they reported fraud/poor care to regulators and were terminated/constructively discharged because of protected activity	Momence: plaintiffs reported standard-of-care problems, not reasonable belief of employer fraud; Absher resigned (not terminated); Mitchell’s call to IDPH not evidence of protected FCA activity	Court: Retaliation claims fail — plaintiffs lacked evidence they acted with actual and reasonable belief of fraud and one plaintiff was not terminated; constructive discharge not shown

Key Cases Cited

Rockwell Int’l Corp. v. United States, 549 U.S. 457 (2007) (§ 3730(e)(4) jurisdictional analysis pre-2010 amendments)
Eisenstein v. City of New York, 556 U.S. 928 (2009) (qui tam procedure/seal implications)
Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) ("worthless services" theory described; services must be effectively no performance)
Rogan v. Menchey, 517 F.3d 449 (7th Cir. 2008) (approach to measuring FCA recovery where every claim is false; evidentiary/statistical methods discussed)
U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) (interpretation of "allegations or transactions" requires disclosure of fraud elements)
U.S. ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492 (7th Cir. 2003) (FCA jurisdictional bars and burden on relator)
U.S. ex rel. Crews v. NCS Healthcare of Ill., Inc., 460 F.3d 853 (7th Cir. 2006) (plaintiff must identify specific false claims under the FCA)
Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469 (7th Cir. 2004) (elements of FCA retaliation protection and required belief of fraud)
Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011) (discussion of "worthless services" and FCA liability)
Science Applications Int’l Corp. v. United States, 626 F.3d 1257 (D.C. Cir. 2010) (damages measure and diminished-value discussion under FCA)