988 F.3d 730
4th Cir.2021Background
- In 2008 LaTonya Mallory founded Health Diagnostic Laboratory (HDL); in 2009 Floyd Dent and Robert Johnson formed BlueWave to market HDL and later Singulex tests.
- HDL and Singulex paid volume-based commissions to BlueWave and its independent sales contractors (13.8–24% of lab revenue); labs also paid physicians small "draw" and "process & handling" (P&H) fees for blood draws.
- Medicare and TRICARE paid hundreds of millions for HDL and Singulex testing; the Government alleged many claims were submitted in violation of the Anti‑Kickback Statute (AKS) and thus false under the False Claims Act (FCA).
- At a 12-day jury trial Defendants were found liable for FCA violations; the district court trebled actual damages, added civil penalties, and entered judgments exceeding $111 million (plus additional amounts against Dent and Johnson).
- The district court denied Defendants’ post‑trial motions for judgment as a matter of law and for a new trial; this appeal challenges liability, jury instructions, excluded experts, and prejudgment writs of attachment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Defendants "knowingly and willfully" violated AKS (and thus FCA) | Government: ample evidence (internal and outside lawyer warnings, compliance memos, and documents) shows Defendants knew commissions were unlawful inducements. | Defs: lacked requisite knowledge; AKS ambiguous; relied on counsel/audits. | Court: Evidence sufficed for a rational jury to find willfulness/knowledge; warnings undermined advice‑of‑counsel defense. |
| Whether volume‑based commissions to independent contractors can violate AKS | Government: commissions are "remuneration" intended to induce referrals/arranging and thus fall within AKS; safe harbor does not cover independent contractors. | Defs: commissions to salespeople cannot be kickbacks; or safe harbor should apply. | Court: No statutory bar to treating commissions as kickbacks; regulatory history excludes independent contractors from the employment safe harbor; commissions can violate AKS. |
| Jury instructions — advice of counsel, Fifth Amendment inference, materiality/purpose | Government: district court gave appropriate good‑faith instruction and limited adverse‑inference charge; AKS violation is per se false claim under FCA §1320a‑7b(g). | Defs: requested stand‑alone advice‑of‑counsel instruction; objected to adverse inference from nonparty's Fifth Amendment invocation; wanted materiality instruction and primary‑purpose language. | Court: Refusal to give stand‑alone instruction harmless because good‑faith instruction covered it; adverse‑inference instruction proper (LiButti factors applied); AKS violation is per se false claim and only one purpose need be proving inducement. |
| Exclusion of defense experts (legal, nursing, FMV) | Government: experts’ opinions were legal conclusions or methodologically unreliable under Daubert. | Defs: excluded experts were necessary to show lawfulness, Medicare practice, and fair market value of P&H fees. | Court: District court acted within discretion excluding testimony that opined on legal conclusions or used unreliable methodology or lacked foundation. |
| Prejudgment writs of attachment for property transfers | Government: transfers to Dent’s wife and her corporations were fraudulent (timing, nominal consideration, insider transferees, retained control) warranting attachment. | Dent: transfers challenged as improper. | Court: Transfers satisfied fraudulent‑transfer factors under FDCPA; attachment was proper. |
Key Cases Cited
- Konkel v. Bob Evans Farms Inc., 165 F.3d 275 (4th Cir. 1999) (standard for reviewing JMOL denial)
- Cavazos v. Smith, 565 U.S. 1 (2011) (verdict will be set aside only if no rational trier of fact could agree)
- United States v. Vernon, 723 F.3d 1234 (11th Cir. 2013) (upheld AKS conviction based on commission payments)
- United States v. St. Junius, 739 F.3d 193 (5th Cir. 2013) (commissions to third parties can violate AKS)
- United States v. Polin, 194 F.3d 863 (7th Cir. 1999) (commissions as unlawful remuneration)
- U.S. ex rel. Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir. 2015) (on effect of ambiguous evidence and advice‑of‑counsel issues)
- U.S. ex rel. Drakeford v. Tuomey, 792 F.3d 364 (4th Cir. 2015) (consideration of all advice when assessing reasonable reliance on counsel)
- United States ex rel. Lutz v. United States, 853 F.3d 131 (4th Cir. 2017) (AKS violation that results in federal payment is per se false claim under FCA)
- Baxter v. Palmigiano, 425 U.S. 308 (1976) (civil proceedings: adverse inferences permissible from invocation of Fifth Amendment)
- Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) (trial court’s gatekeeping role for expert admissibility)