In United States ex rel. Cairns v. DS Medical LLC, the US Court of Appeals for the Eighth Circuit set a higher bar for proving causation in False Claims Act cases where plaintiffs seek to establish liability under the 2010 amendments to the Anti-Kickback Statute. The court held that, to prove that a false claim includes items or services “resulting from” a violation of the Anti-Kickback Statute, plaintiffs must show an actual or “but-for” causal link between alleged kickbacks and claims for government money.

SPLIT FROM THE THIRD CIRCUIT

In Cairns,[1] the Eighth Circuit split with the Third Circuit, which previously adopted a more lenient causal standard. The Eighth Circuit’s holding imposes a higher bar on claims asserted under the 2010 amendments—a bar for which the industry and defense counsel have long advocated.

Since 2018, False Claims Act (FCA) defendants accused of submitting claims after receiving or soliciting kickbacks have strategized the defense under the shadow of the Third Circuit’s decision in United States ex rel. Greenfield v. Medco Health Solutions, Inc.[2] There, the Third Circuit held that to prove a false claim “result[ed] from” a kickback, plaintiffs need not show a direct causal link. The court acknowledged that “resulting from” most naturally requires direct causation. But it consciously departed from the text because that phrase was added to the Anti-Kickback Statute (AKS) by a 2010 amendment intended “to avert ‘legal challenges that sometimes defeat legitimate enforcement efforts.’”[3] Because Congress intended the amendment to expand enforcement, the Third Circuit reasoned, reading “resulting from” to require direct causation would frustrate legislative intent.

That was not Greenfield’s only notable effect. Greenfield’s premise was, in many ways, as significant as its interpretation of the amendment. It collapsed the distinction between proving “falsity” under the 2010 amendment and the other avenues available for plaintiffs to prove “falsity” for FCA claims arising from AKS violations. Greenfield assumed that any FCA claim tied to an anti-kickback violation would have to prove falsity under the 2010 amendment (and the lower causal standard the Third Circuit adopted).

EIGHTH CIRCUIT FOLLOWS PLAIN LANGUAGE OF THE STATUTE

Cairns gave the Eighth Circuit a chance to consider Greenfield’s analysis. In Cairns, a neurosurgeon used spinal implants distributed by a company his fiancée owned. Through that arrangement, the company received lucrative commissions from an implant manufacturer, and the neurosurgeon was offered a chance to buy that manufacturer’s stock. After buying stock, the neurosurgeon ordered more implants.

The neurosurgeon’s relationships with the distributor and manufacturer resulted in a FCA suit. The government intervened and, at trial, alleged liability solely under the AKS and specifically under the 2010 amendment, which provided that submitting a claim to the government that “includes items or services resulting from [an AKS] violation” makes the claim false under the FCA. A jury heard three claims arising under the FCA and returned a verdict for the government on two of them. The neurosurgeon appealed, arguing that the district court failed to instruct the jury on causation. Following the plain language of the statute, the Eighth Circuit held that the “resulting from” language in the AKS unambiguously expresses a “but-for” causal requirement, which required a jury instruction. It reversed the conviction and remanded for a new trial.

Cairns significantly departed from Greenfield by returning to the plain text of the AKS. While Greenfield adopted a causal standard that was “something in between” a “direct causal link” and “no link at all,” Cairns adopts a more definite standard for claims asserted under the 2010 amendment. That cleaner “but-for” standard gives defendants a significantly enhanced defense that plaintiffs have not shown sufficient connection between alleged wrongful acts and claims submitted.

ONGOING AKS AND FCA ENFORCEMENT

Despite this new decision, defendants should still stay alert. The Eighth Circuit noted that its holding sets the standard only for cases in which plaintiffs rely exclusively on the “resulting from” standard to prove liability. As the Eighth Circuit recognized (in contrast to the Third Circuit), “[t]here are several ways to prove that a claim is ‘false or fraudulent’ under the False Claims Act.” In using the “resulting from” standard as the theory of liability, Cairns concluded that this “creates a but-for causal requirement between an anti-kickback violation and the ‘items or services’ included in the claim.” Although Cairns provides enhanced opportunities for defendants in cases where plaintiffs rely solely or primarily on the “resulting from” standard in the 2010 amendment, the case will likely inspire plaintiffs and the government to explore other avenues of proof in future FCA cases, including proving falsity under traditional methods (such as those discussed by the US Supreme Court in Escobar). The decision clarifies and limits liability under the 2010 amendment to the AKS but leaves open the possibility of liability under other theories. As the AKS has been broadly used and expanded over the years as a basis for FCA liability in the healthcare industry, this developing area should continue to be monitored.

[1] United States ex rel. Cairns v. DS Med. LLC, No. 20-2445, 2022 WL 2930946 (8th Cir. July 26, 2022)

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