Under the provisions of the False Claims Act, the judge may now treble that $43 million and also award the government a penalty of at least $5,500 for each of the 64,575 false claims. In other words, the surgical product distributor is likely on the verge of having a judgment entered against it for more than $400 million.

Since False Claims Act jury trials are relatively rare, it is worth looking at the case to glean some details and takeaways.

Kickbacks Aren’t Just Monetary Payments but Can Comprise Other Items of Value.

Kickbacks are often thought of as money-based—either a set amount or a percentage. But the Anti-Kickback Statute applies to anything of value, given (a) knowingly and willfully, and (b) in return for referring a person or furnishing an item or service for which a Federal health care program (like Medicare) can pay.[2]

In the Minnesota case, the kickbacks came in the form of trips for physicians: to resorts,[3] hunting and fishing,[4] the college football national championship game,[5] and the Masters golf tournament,[6] often on private planes.[7] While it appears that sometimes the physicians paid some money to the distributor, those payments were allegedly “below fair market value” for the benefit.[8] For example, one flight aboard a private plane going on a hunting trip was billed to a physician for $185.73.[9]

The jury concluded that these trips violated the Anti-Kickback Statute, which in turn violated the False Claims Act.

False Claims Act Liability Can Be Premised on Products Included Within a Payment for Surgery.

The surgical product distributor was not submitting claims to Medicare. The physicians were not submitting claims for the products they obtained from the kickback-paying distributor. Instead, the physicians were submitting claims for cataract surgeries, which includes a lump sum payment for both the procedure and the lens.[10]

In other words, the jury found the distributor liable even though the kickbacks arguably did not cost Medicare any additional funds, since the physicians likely would have done the surgeries anyway, which required using lenses. Indeed, nowhere in the lawsuit was there an allegation that the physician’s cataract surgeries were medically unnecessary.

The Minnesota case serves as an important reminder that kickbacks apply not just for drugs or equipment for which payment is claimed directly to the government, but also for procedures that include a product as part of the overall fee. A kickback can taint the entire claim for payment.

Good Faith Instructions Do Not Always Convince Juries.

A jury can find that good faith negates the willfulness element that must be found for a False Claims Act violation.

The Minnesota judge gave the jurors two different good faith instructions, that “good faith negates willfulness” and that it was the government’s burden to show willfulness.[11] The first told the jurors that they could find the defendant acted in good faith if the defendant honestly held a belief or opinion, regardless of whether the belief of opinion was wrong or mistaken.[12] The second permitted a finding of good faith based on acting “in a manner consistent with the advice of counsel.”[13]

It is unclear from publicly available documents what honestly held beliefs were presented as evidence, and what advice of counsel the defendants had received. However, the defense had apparently put forward enough to earn the instructions, but the jury was nevertheless unconvinced.

Many efforts to rely on advice of counsel in these and similar cases fail because a fact finder wants to see precise advice with precise disclosure of all underlying facts, and precise adherence to the advice.

The Threat of Civil Penalties Makes Trials Extremely Risky.

Penalties and treble damages that might push a $43 million single-damages figure to over $400 million in total liability are staggering. Those penalties might actually be a lot higher in the future.

Civil penalties are typically not included when False Claims Act cases settle. However, courts regularly apply civil penalties following False Claims Act trials. For violations occurring before November 2, 2015, the minimum per-claim penalty is $5,500.[14] But for violations occurring after that date, the potential penalties are significantly greater. The minimum penalty assessed after January 30, 2023, is increased to $13,508, and the maximum is $27,018 for each violation.[15]

[1] United States ex rel. Fesenmaier v. The Cameron-Ehlen, Group, Inc. et al., Case No. 0:13-cv-3003 (D. Minn), Doc. 980 (court minutes).

[2] 42 U.S.C. § 1320a–7b(b)(1), (2).

[3] Fesenmaier, Doc. 105 (amended complaint in intervention), ¶¶ 61, 64, 130, 131.

[4] Id., ¶¶ 59, 60, 72, 75, 78, 79, 80, 83, 87, 89, 132–140.

[5] Id., ¶ 105.

[6] Id., ¶¶ 109, 111, 169, 170.

[7] Id., ¶¶ 3, 64, 75, 87, 89, 109, 110, 119, 120, 126, 130, 132, 134, 139, 155, 160, 167.

[8] Id., ¶¶ 97, 121, 131, 132, 139.

[9] Id., ¶ 139.

[10] Id., ¶ 37.

[11] Fesenmaier, Doc. 982 (final jury instructions), at 14–15.

[12] Id. at 14.

[13] Id. at 15.

[14] 28 C.F.R. § 85.3(a)(9).

[15] 28 C.F.R. § 85.5.

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