False Claims Act Defendant Loses Bid to Overrule Oral Settlement Agreement

False Claims Act Defendant Loses Bid to Overrule Oral Settlement Agreement

As we have explored in the past, many False Claims Act lawsuits end in a negotiated settlement between the relator/whistleblower, federal government, and defendants alleged to have committed fraudulent acts of misconduct against U.S. taxpayers. The terms of the settlement – which almost always include a clause disclaiming any liability by the defendant – are reduced to writing and eventually submitted to the judge or magistrate tasked with overseeing the False Claims Act lawsuit. Assuming there are no blaring public policy concerns or major issues with the agreement, the parties are generally free to decide upon the terms of the settlement that best reflect the goals of each party, and the agreement becomes an enforceable component of the court’s final order.

Sometimes, however, it isn’t this easy – and the terms of the settlement agreement can quickly become fodder for further conflict and litigation. In today’s case, we explore a recent ruling in favor of the U.S. and California governments with regard to certain oral promises made pursuant to a settlement agreement with San Francisco’s Northeast Medical Services – a federally-qualified medical facility in place to treat underserved populations in the San Francisco area. The case involved allegations of costly Medicaid and Medicare fraud in relation to patients being treated at the center. The case entered the settlement phase in September 2014 – an effort which was eventually derailed, requiring judicial intervention.

Details of the contentions between the government and NEMS

Beginning in September 2014, the non-profit NEMS entered into settlement negotiations with the Department of Health and Human Services, as well as the Department of Justice. Unbelievably, a number of these terms were not reduced to writing, resulting in the inevitable dispute over the precise promises made by either party.

According to reports, NEMS argued against the requirement to submit to a state audit as part of the compliance component of the settlement agreement. Typically, corporations are required to initiate elaborate compliance infrastructures, agree to a five-year monitoring period, and maintain strict procedures for combatting fraud. However, the DOJ reiterated to the judge that it would accept a one-time state audit in lieu of the typical compliance measures. However, NEMS thereafter took great exception to HHS involvement and argued that it could expose itself to additional claims or liability by allowing the audit. The government staunchly objected to this assumption and the court held that the agreement to allow a state audit – although never explicitly delineated in the agreement – would satisfy the compliance component and no additional liability would be realized.

In the words of the court:

“If NEMS had wanted to include more precise, or different, conditions into the settlement, it should have expressed that desire openly, objectively…. [the] law does not permit it to now claim a particular subjective understanding that is not ‘plainly and unambiguously’ captured in the terms to which it assented.”

The court further stated:

“The government made substantial concessions — beyond HHS’s foregoing its standard [compliance integrity agreement] to address NEMS’s concerns. NEMS’s argument does not alter the conclusion that NEMS got what it bargained for: dismissal of the case without a CIA, with a settlement number in a restitution landscape, and with the litigation insulation of a False Claims Act release.”

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By |2022-04-20T14:30:42-04:00February 12th, 2015|Healthcare Fraud|