Judge Kevin Thomas Duffy, Southern District of New York, in a recent decision has expressed serious doubt that relators in qui tam actions can assert that purported violations of the Anti-kickback Act, 42 U.S.C. § 1320a-7 ("AKA"), also constitute violations of the False Claims Act, 31 U.S.C. §§ 3729 et seq ("FCA"). United States ex rel Barmak v. Sutter Corp, No. 95 CV 7637(KTD)(RLE), 2002 U.S. Dist. LEXIS 8509 (S.D.N.Y. May 14, 2002).

The case involved allegations that a durable medical equipment company and its parent company had improperly billed Medicare for continuous passive motion exercisers because it had waived co-payments, employed forged certificates of medical need, and paid kickbacks to hospitals and doctors for patient referrals. Subsequent to a settlement with the government and the relator as to the co-payment allegations, the relator instituted a second amended complaint seeking recovery under the same core allegations. Defendants moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).

Arent Fox represented a separate defendant in this action; this element of the litigation was resolved entirely through settlement with the relator and the government. That defendant is not a party to the second amended complaint at issue in this decision. "Relator appears to claim that the kickbacks violate the FCA because: 'A portion of the home patient referrals were for beneficiaries of federal health insurance programs which paid in part for services procured as a result of the inducement.' " Id. at *15-*16.

Judge Duffy, however, was not prepared to accept this theory in qui tam cases for several reasons, even though the Court recognized that some other courts have recognized such a cause of action. See Pogue v. American Healthcorp., Inc., 914 F. Supp. 1507 (M.D. Tenn. 1996); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997).

The Court pointed to several law review articles as evidencing that this issue "remains a hotly disputed and controversial area of the law." Id. at *16.

While noting that the Second Circuit had not passed upon the issue, Judge Duffy did point to the recent decision in Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 2001), as being pertinent. There, the Circuit held that a party can only be held liable under the FCA for violation of a statute or regulation if it has explicitly certified its compliance with those statutes or regulations as a condition for payment. Nor, did the Circuit hold, was the FCA "designed to reach every kind of fraud practiced on the government." Id.

The first reason underlying Judge Duffy's skepticism is that the AKA is a felony statute. "There is absolutely no private right of action provided and the statute is to be enforced by the Department of Justice ("DOJ") through the appropriate United States Attorneys' Office. 28 U.S.C. § 516 (1994)." Id.

In short, for Judge Duffy enforcing the AKA is within the "exclusive jurisdiction" of DOJ. Secondly, the district court expressed doubt that relators could establish that a violation of the AKA was "ipso facto" a violation of the FCA. Here no causal connection between the purported AKA violations and the submissions of the claims had been pleaded. Nor was there any allegation that defendants had certified compliance with the AKA, and the government had placed reliance upon that certification, as part of the payment process.

Although the district court granted the motion to dismiss, it did so with a right to amend granted to the relator. So it seems safe to assert we have not heard the last regarding this issue in the case. Nonetheless, Judge Duffy's explicit reluctance to recognize this cause of action in a qui tam case is significant.

First, it places a substantial burden on relators to successfully survive motions to dismiss premised on these and related arguments.

Second, Judge Duffy's concerns about the need to plead some manner of causal connection, and the requirement of an explicit certification, are equally applicable to DOJ efforts to contort the AKA into a source of FCA violations. The views of a respected district court judge on this issue undoubtedly will play an important role in this continuing debate.