Don’t Apply Wartime Extensions of Limitations to Qui Tam: PhRMA, AHA, AMA

Three major players in health care litigation have urged the Supreme Court to reverse a Fourth Circuit decision that would extend the deadlines to bring whistleblower suits under the False Claims Act (31 USC sec. 3729 et seq.) when the United States is involved in armed conflict. The Pharmaceutical Research and Manufacturers Association (PhRMA), the American Hospital Association (AHA), and the American Medical Association (AMA) joined with the national Chamber of Commerce and the Clearing House Association, an organization of banks, to file an amicus curiae brief in Kellogg Brown & Root Services, Inc. v United States ex rel. Carter. The United States Supreme Court granted certiorari on July 1, 2014.

The Wartime Suspension of Limitations Act

Congress enacted the Wartime Suspension of Limitations Act (18 U.S.C. sec. 3287) in 1942 in order to preserve the options of federal prosecutors to bring criminal charges against perpetrators of fraud against the federal government during wartime until three years after the war was over. Before a 2008 amendment, it provided that the running of any statute of limitations applicable to any offense involving fraud committed against the United States was suspended “while the United States is at war.” In 2008, the Wartime Enforcement of Fraud Act (P.L. 110-417) amended the law to apply when Congress has enacted specific authorization for the use of military force, until there is either a presidential proclamation or concurrent resolution of congress declaring that hostilities have ended. The law originally applied only to criminal prosecutions, but the words “now indictable” were deleted in 1944, and courts have accepted the government’s position that the law applies to civil actions as well.

Application to Qui Tam Actions

The case before the Supreme Court involves allegations of fraud by government contractors billing for their work in Iraq. The relator was an employee of one of the contractors; the United States declined to intervene. The contractors raised the statute of limitations as a defense, and the relator argued that the WSLA tolled the statute of limitations. The trial court dismissed the complaint, ruling that the WSLA applied only when the government was a party to the litigation.

The Fourth Circuit Ruling

The Court of Appeals reversed, ruling that the WSLA applied to all matters involving alleged fraud against the United States government. In addition, it held that the “first to file” rule did not bar the relator’s claims because the earlier lawsuits had been dismissed.

Amici Concerns About the WSLA

Although the particular case involved government contractors doing work for the military, the court’s ruling was not limited to defense contractors. Thus, the decision would suspend the statute of limitations in all actions under the False Claims Act, including those involving alleged health care fraud, anti-kickback violations, or other matters completely unrelated to activities of the military. The amici contend that business generally, and health care-related businesses in particular, would be unable to plan when the country is involved in military operations. The United States’ intervention in Afghanistan, for example, has lasted more than 10 years and is ongoing. Neither the President nor Congress has any obligation or incentive to declare that hostilities have ended.

The amici argue first that the law was intended to apply only to criminal prosecutions. They do not address the argument that Congress was aware that courts had applied the law to civil litigation and chose not to address the question when it amended the statute in 2008. Their main point is that the lack of a definitive deadline to bring an action will encourage relators to delay filing in order to increase their awards, according to amici. The level of uncertainty is intolerable for business. The amici also argue that there is no need to extend the limitations period to qui tam actions once the government has decided not to participate, as the government has decided it has no interest to protect. They note that only about 10 percent of the cases the government declines ever result in a payment; the rest are dismissed. The need to preserve scarce government resources does not apply to private parties.

First-to-File Rule

Although 31 U.S.C. sec. 3730(b)(5) provides that no party other than the government may sue under the False Claims Act when there already is another action pending on a related claim, the Fourth Circuit ruled that the provision no longer applies if the previous litigation has been dismissed. The amici contend that this interpretation allows relators to dismiss and re-file, adding to the uncertainty that potential claims may never die. Indeed, the relator had dismissed and re-filed after earlier litigation was dismissed; it did not matter that the same litigation was pending when he originally filed.

Oral argument has not been scheduled. The respondents’ brief is due October 14, 2014.

Exempt from Vaccination, Excluded from School

Unvaccinated children in the state of New York will continue be excluded from school during outbreaks of vaccine-preventable illnesses (VPIs), even if they have been granted a religious exemption to vaccinations, a judge for the U.S. District Court for the Eastern District of New York recently ruled.  In Phillips v City of New York, three families brought constitutional and state law challenges to a state policy requiring the exclusion of unvaccinated children from school during outbreaks of diphtheria, polio, measles, rubella, and mumps until the danger of transmission has passed (10 NYCRR sec. 66-1.10).

The children of two of the families had received religious exemptions to the vaccination requirements, while one was denied an exemption.  The families argued that the exclusion provision violated their First Amendment right to free exercise of religion, as well as their rights to due process under the Ninth Amendment and equal protection under the Fourteenth Amendment, and rights conferred by the New York Constitution and state laws.  Judge William F. Kuntz dismissed the allegations, noting “courts in this Eastern District have resolutely found there is no such constitutional exemption” to vaccination based on religion.  He referred to Second Circuit case law establishing that the vaccine program falls within the state’s police power; thus, “its constitutionality is too well established to require discussion.

Exemption Policy

In New York, children may receive a religious exemption to vaccinations if their parent submits a statement of sincerely held religious belief describing “the religious principles that guide [his or her] objection to immunization.”  If parents only seek exception from certain immunizations, they must explain “the religious basis that prohibits particular immunizations.”  If an explanation is deemed insufficient, the Department of Education may request additional documentation in support of the belief.  New York differs in this requirement from other states that merely require a statement from parents that they hold a sincere religious belief.

Dina Check claimed that her daughter was denied a religious exemption after a nurse mistakenly submitted a request for a medical exemption on her daughter’s behalf.  Check maintains her beliefs are sincere.  “Disease is pestilence, and pestilence is from the devil. The devil is germs and disease, which is cancer and any of those things that can take you down. But if you trust in the Lord, these things cannot come near you.”  The families’ lawyer has filed a request for rehearing and may appeal the decision.

Upcoming Expansion

The exclusion provision is intended to prevent the spread of disease among susceptible children.  Twenty-five cases of measles were reported in New York City between February and April, including two unvaccinated children of school age, one of whom was home-schooled.  Officials excluded the child’s sibling from attending school; the sibling later developed the measles.  Officials cite to this instance as an example of the importance of the exclusion provision in preventing the spread of illness.  On July 1st, new regulations broadening the state’s exclusion powers to include  varicella (chicken pox), Haemophilus influenzae type b (Hib), pertussis (whooping cough), tetanus, pneumococcal disease, and hepatitis B will become effective.


Closely-Held ‘Corporate Christians’ Win Crusade Against Contraceptive Coverage

By Michelle Oxman, JD, LLM, Sheila Lynch-Afryl, JD, MA, and Danielle Capilla, JD

In a 5-4 decision, the Supreme Court ruled that HHS regulations requiring employer-sponsored health plans to include all FDA-approved contraceptives among the preventive services covered without cost sharing could not be applied to for-profit corporations with religious objections to some of the contraceptive methods. The Court ruled that the regulations violate the Religious Freedom Restoration Act (RFRA), which requires that federal government requirements that substantially burden religious freedom must serve a compelling interest and be the least restrictive means of furthering that interest. The Court rejected the government’s arguments that the corporate employers were separate from their owners and that for-profit organizations do not “exercise religion” (Burwell v Hobby Lobby, June 30, 2014, Alito, S).

Barbara Green, co-founder of Hobby Lobby, said in a statement, “Today the nation’s highest court has re-affirmed the vital importance of religious liberty as one of our country’s founding principles. The Court’s decision is a victory, not just for our family business, but for all who seek to live out their faith.”

The Rev. Barry W. Lynn, executive director of Americans United for Separation of Church and State, which filed a friend-of-the-court brief in the case, said, “The justices have set a dangerous precedent. While the Obama administration may arrange for the government to provide contraceptives, a future administration could easily take that away. In years to come, many women may find their access to birth control hanging by a thread.”

The Preventive Services Coverage Requirement

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) amended Public Health Service Act sec. 2713 to require employer-sponsored health insurance plans to cover the preventive services rated A or B by the United States Preventive Services Task Force and any additional preventive services for women recommended in comprehensive guidelines issued by the Health Resources and Services Administration (HRSA). As Wolters Kluwer has reported, HRSA added all FDA-approved contraceptives to the list based upon the recommendations in a report by the Institute of Medicine. HHS adopted the HRSA list in a Final rule in July 2010.

The RFRA Issues

Hobby Lobby, Inc. owns a national craft store chain. Conestoga Wood Specialties, Inc. (Conestoga) owns a for-profit business manufacturing wood parts that are incorporated into the products of others. Both Hobby Lobby and Conestoga are closely-held corporations owned by members of one family. The Greens, owners of Hobby Lobby and a chain of Christian bookstores called Mardel, are Christians who believe that both emergency contraception and two intrauterine devices (IUDs) cause abortion, so that coverage violates their beliefs. The Hahns, owners of Conestoga, believed that two forms of emergency contraception approved by the FDA cause abortion, so that coverage violates their Mennonite beliefs. The corporations and their individual shareholders sought injunctions against the enforcement of the contraceptive coverage mandate against them.

In both cases, the government argued that the rights of the individuals to free exercise of religion were not violated because the mandate applied to the corporations, not to them as individuals, and a fundamental principle of the law of corporations is that they are legal “persons” separate and apart from their owners. Further, the government argued, for-profit corporations do not exercise religion; they do not pray, perform sacraments, or have religious beliefs. Therefore, the corporations must be bound by the law just like any other employer of their size.

The Lower Court Decisions

Initially, the district court in Oklahoma denied Hobby Lobby’s request for an injunction, and the district court in Pennsylvania denied Conestoga’s request. Both courts accepted the government’s argument that for-profit corporations do not exercise religion. Therefore, neither court found that the plaintiffs were likely to succeed on the merits. On appeal, the Tenth Circuit reversed and directed the district court to enter the injunction in favor of Hobby Lobby. The Third Circuit upheld the denial of the injunction requested by Conestoga.

The Solicitor General filed a petition for writ of certiorari for the Hobby Lobby case, asking the Supreme Court to determine whether the RFRA allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners. Conestoga also sought review in the Supreme Court, and the cases were consolidated.

Corporations as Separate Persons

The majority opinion rejected the government’s argument that closely held corporations’ legal obligations were separate from those of the owners. It framed the government’s position as forcing the owners of family businesses to choose between protection of their right to practice their faith in the operation of their business and the advantages of incorporation. The court reasoned that the corporate form exists to protect the human beings who create them and the corporation acts only through those human beings.

The Application of RFRA

The Court found that the language of the RFRA referred to “persons” but did not define the term. Therefore, the Court determined that the definition in the Dictionary Act in the U.S. Code applied “unless the context suggests otherwise.” That definition included corporations as well as partnerships, individuals, and other entities, and it did not distinguish between for-profit and other corporations.

HHS argued that the RFRA was intended to restore the state of the law as it existed before Employment Division, Dept. of Human Resources of Oregon v Smith, 494 U.S. 872 (1990). It relied on the findings in RFRA, which cited specifically to two Supreme Court decisions. Wisconsin v Yoder (406 U. S. 205 (1972)) had upheld the right of Amish parents to keep their children out of public school, and Sherbert v Werner (374 U. S. 398 (1963)) held that the state could not deny unemployment compensation to a former employee who was terminated because she would not work on the Sabbath. Both of these cases involved religious practices of individuals.

For-Profit Corporations

All parties agreed that the RFRA had been properly applied to churches organized as nonprofit corporations. The majority referred to them as nonprofit corporations and held that there was no basis for distinguishing among nonprofits or between nonprofits and for-profit corporations.

Compelling Interest Test

The RFRA requires that the federal law serve a compelling interest and provide for the least restrictive means of accomplishing that interest. The Court declined to rule on whether the government’s interest was compelling because it found that the agency did not use the least restrictive means to accomplish its goal. The agency had created an exemption for religious institutions, as defined in the tax code, and it had created an “accommodation” for certain related nonprofit entities, whereby the insurer administered the contraceptive benefit separately (76 FR 46621, August 3, 2011). The majority saw no reason why a similar accommodation could not be made for the for-profit plaintiffs.

Justice Kennedy’s concurring opinion stressed that the majority was ruling only on the contraceptive coverage mandate and that the logic of the case should not be extended to other medical procedures to which employers might object, such as blood transfusions. In addition, the RFRA could not be used as a back-door means to evade antidiscrimination laws.

The Dissents

Justices Ginsburg, Sotomayor, Breyer, and Kagan dissented, guided largely by their concern for women’s health issues, as embodied in the Women’s Health Amendment to the ACA, which required coverage of preventive services specific to women. The dissent, written by Justice Ginsburg, accused the majority of stepping into a “minefield … by its immoderate reading of RFRA” and characterized the majority’s decision, one of “startling breadth,” as allowing commercial enterprises to “opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.”

Incidental Effect

The dissent concluded that any Free Exercise Clause claim the plaintiffs assert is foreclosed by the Supreme Court’s decision in Smith. In Smith, two members of the Native American Church were fired from their jobs after ingesting peyote at a religious ceremony. The Court in that case held that no First Amendment violation occurs when prohibiting the exercise of religion is an incidental effect of a generally applicable and otherwise valid regulation. Justice Ginsburg asserted that the ACA’s contraceptive coverage requirement applies generally, is “otherwise valid,” and “trains on women’s well-being,” not on the exercise of religion, such that the effect it has on such exercise is incidental.

Interests of Third Parties

Justice Ginsburg also cited the rule that accommodations as to religious beliefs must not significantly impinge on the interests of third parties. According to the dissent, the exemption sought by the plaintiffs would override the “significant interests” of the corporations’ employees and dependents and “deny legions of women who do not hold their employers’ beliefs access to contraceptive coverage that the ACA would otherwise secure.”

RFRA Claim

The dissent criticized the majority’s view of the RFRA. Justice Ginsburg reasoned that the RFRA reinstated the law as it was before Smith; however, the majority saw the RFRA as setting a new course departing from pre-Smith jurisprudence. The RFRA applies to government actions that “substantially burden a person’s exercise of religion.” Justice Ginsburg contended, however, that there is no support for the idea that free exercise rights apply to a for-profit corporation. While religious organizations exist to serve a community of believers, no religion-based criterion can restrict the work force of for-profit corporations, which use labor to make a profit, not perpetuate religious values. For this same reason, Justice Ginsburg disagreed with the majority’s suggestion that the accommodation afforded to nonprofit religious-based organizations be extended to commercial enterprises.

Justice Ginsburg further found that the connection between the families’ religious objections and the contraceptive coverage requirement is too attenuated to be considered “substantial,” as required by the RFRA.

Breyer and Kagan

Justices Breyer and Kagan agreed with the dissent’s conclusion that the challenge to the contraceptive coverage requirement failed on the merits but asserted that it was unnecessary to decide whether for-profit organizations may bring claims under the RFRA.

Further Response to Verdict

Lori Windham, senior counsel for The Becket Fund for Religious Liberty and counsel for Hobby Lobby, said “This ruling will protect people of all faiths. The Court’s reasoning was clear, and it should have been clear to the government. You can’t argue there are no alternative means when your agency is busy creating alternative means for other people.” According to the Beckett Fund, over 100 cases against the mandate have been filed, almost equally divided between for profit and not-for-profit companies.

Louise Melling, deputy legal director of the American Civil Liberties Union, which also filed a friend-of-the-court brief, said that “for the first time, the highest court in the country has said that business owners can use their religious beliefs to deny their employees a benefit that they are guaranteed by law.”

The case numbers are 13-354 and 13-356.

Closely-held Corporate Christians Win Crusade Against Contraceptive Coverage

The Supreme Court issued a 5-4 ruling in Burwell v Hobby Lobby, holding that closely held corporations cannot be required to provide contraception coverage. The court was asked to determine if the Religious Freedom Restoration Act (RFRA) (P.L. 103-141) allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objection of the corporation’s owners.  Justice Alito issued the majority opinion, joined by the Chief Justice and Justices Scalia, Thomas, and Kennedy. Justice Kennedy wrote a concurring opinion. Justice Ginsburg wrote a dissent in which she was joined by Justice Sotomayor; she was also joined in part by Justices Breyer and Kagan, who separately issued a dissent.

In 2012, Hobby Lobby, a national craft store chain, filed suit against then-HHS Secretary Kathleen Sebelius and various federal government entities, alleging that the preventive care services provision of the ACA, which requires Hobby Lobby to cover FDA-approved contraception in its employee health plans, violated its rights. Hobby Lobby objected because it considers some forms of contraception to be abortifacients, such as Ella®, Plan B One-Step®, and intrauterine devices, and subsequently argued that the preventive care services provision violated the RFRA, the Free Exercise Clause of the First Amendment, and the Administrative Procedure Act. At the direction of the Tenth Circuit, the district court granted Hobby Lobby a preliminary injunction barring the federal government from enforcing the preventive services provision of the ACA.

The Solicitor General petitioned the Supreme Court to hear the case, and the petition was granted. At that time the case was consolidated with a Conestoga Wood Specialties Corp v Sebelius (now Conestoga Wood Specialties Corp. v Burwell), which involved a secular for-profit corporation alleging that the mandate violated its shareholders’ Mennonite beliefs. The Third Circuit had upheld the denial of a preliminary injunction in the case.

For a full history of the cases, please click here.

In-depth analysis of this case will be posted later in the week.