Nothing to fear: whistleblower action timeline not suspended during war

Although war can present “‘exceptional opportunities’ for fraud on the United States Government,” the statute of limitations for civil actions, including qui tam actions brought under the False Claims Act (31 USC §3729 et seq.), is not tolled by the Wartime Suspension of Limitations Act (WSLA) (18 U.S.C. §3287). On May 26, 2015, the Supreme Court issued its ruling in Kellogg Brown & Root Services, Inc. v. U.S. ex rel Carter, finding that when the United States is involved in an armed conflict, only criminal charges are suspended by the WSLA. The High Court also interpreted language in the False Claims Act regarding the first-to-file rule.

The Wartime Suspension of Limitations Act

Congress enacted the WSLA 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, Section 855 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (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.

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 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. Although 31 U.S.C. §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 United States Supreme Court granted certiorari on July 1, 2014.

Health care amicus brief

The Pharmaceutical Research and Manufacturers Association (PhRMA), the American Hospital Association (AHA), and the American Medical Association (AMA) joined with the Chamber of Commerce of the United States of America and the Clearing House Association, an organization of banks, to file an amicus curiae brief. The brief raised concerns that business generally, and health care-related businesses in particular, would be unable to plan when the country is involved in military operations. It also contended that the Fourth Circuit’s interpretation of the first-to-file rule allows relators to dismiss and re-file, adding to the uncertainty that potential claims may never die (see Wartime extensions of limitations should not apply to qui tam cases: PhRMA, AHA, AMA, Health Law Daily, September 8, 2014).

Supreme Court

The Supreme Court held that the WSLA applies only to criminal charges, and not to civil claims. Writing for a unanimous Court, Justice Alito noted that the WSLA should be construed narrowly, finding that “the WSLA does not suspend the applicable statute of limitations under either the 1948 or the 2008 version of the statute.” With regard to the first-to-file rule, the Court found no reason not to interpret the term “pending” in the FCA in accordance with its ordinary meaning and affirmed part of the Fourth Circuit’s opinion, holding that “a qui tam suit under the FCA ceases to be ‘pending’ once it is dismissed.” The Court remanded the case to the Fourth Circuit for further proceedings consistent with its opinion.

We’ve heard enough: court draws the line at accommodation, denies rehearing

Priests for Life, a nonprofit organization, was denied a rehearing en banc regarding its objections to the accommodation allowing religious non-profits to pass the burden of providing contraceptives to which they object on religious grounds to a third party. The U.S. Court of Appeals for the District of Columbia Circuit found that the accommodation allows religious nonprofits to continue in the manner they operated regarding contraceptives prior to the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and its contraception mandate. Two judges provided a lengthy dissent regarding why they would rehear the case in light of the Supreme Court’s ruling in Burwell v. Hobby Lobby (Hobby Lobby) (Priests for Life v. HHS, May 20, 2015, Pillard, N.).

Accommodation

Although Hobby Lobby provided an exception to the contraception mandate for closely held corporations that object to birth control, particularly IUDs and emergency contraception, no such exception was given to religious nonprofits. Nonprofits have been afforded an accommodation, which allows them to pass the burden of managing and paying for contraceptives to insurers or third-party administrators. This accommodation was given in order to remove a nonprofit’s direct involvement in the provision of contraceptives, while still allowing employees of the organizations to have access to the medications.

 Notre Dame

Some nonprofits have chafed against this accommodation, arguing that that the requirement to fill out EBSA Form 700 places a substantial burden on the exercise of religion because the submission “triggers” coverage of contraception (see Notre Dame signs EBSA Form 700-Certification, not substantially burdened, February 26, 2014). Courts such as the U.S. Court of Appeals for the 7th Circuit have specifically addressed this issue, finding that the financial burden shifts away from the university and on to the government when the form is submitted. On May 19, 2015, the 7th circuit went further and denied the University of Notre Dame’s petition for a preliminary injunction barring even the insurer and administrator from providing the contraceptives to students and employees. The 7th circuit held that the accommodation fulfilled its purpose in removing Notre Dame’s involvement in providing contraceptives (see Injunction junction need not function, contraceptive accommodation is enough for 7th circuit, May 21, 2015).

 Legal, not religious

The court in this case found that the dispute at hand was not about religious beliefs, but about how the law functions. Priests for Life argued that their act of shedding responsibility for providing coverage for contraception allowed the coverage to become available to employees, which goes against Catholic beliefs. The court disagreed, stating that the accommodation allows nonprofits to “arrange for contraception to be excluded from the health insurance coverage they provide,” which is what the nonprofits did prior to the ACA. Now, due to the ACA’s mandate, women receive contraception coverage under a separate plan not funded by the employer. The court felt that the dispute was not based on religious beliefs, but rather how the law operates, because contraceptive coverage will be provided regardless of the nonprofit’s objections. By deciding the dispute on “which party is right about how the law works,” the court said that there is no violation of the Religious Freedom Restoration Act (RFRA) (42 U.S.C. §§2000bb et seq.), which protects the exercise of religion.

 Dissents

Two dissents accompanied the opinion. The first, written by Judge Brown and joined by Judge Henderson, asserted that the majority failed to apply RFRA’s protections, which provide that the government may only substantially burden the free exercise of religion in pursuit of a compelling interest, and by the least restrictive means possible. The dissenting judges believed that court was not authorized to scrutinize religious belief, and that “the panel trespassed into an area of inquiry Supreme Court precedent forecloses.”

Judge Kavanaugh’s dissent stated that the panel contradicted the Hobby Lobby decision, which stated that regulations requiring organizations to act contrary to their religious beliefs or pay significant fines substantially burdens religion. Judge Kavanaugh stated that the case comes to the “least restrictive means” question under RFRA, and pointed to other decisions such as Wheaton College v. Burwell (Wheaton College) in which the Supreme Court decided that a religious organization does not have to identify or notify its insurer of its objections and can instead notify HHS, which then takes the appropriate steps to ensure that contraceptive coverage is provided. This dissent focused on the “extremely strong signals” provided by the Supreme Court in cases like Wheaton College, and argued that allowing organizations to provide notice to HHS directly was a less restrictive way to further the government’s interest in providing contraception.

Injunction junction need not function, contraceptive accommodation is enough for 7th Circuit

The Seventh Circuit held that the University of Notre Dame was not entitled to a preliminary injunction barring its insurer and third party administrator from providing contraception coverage to University students and employees under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) contraception mandate. On remand from the United States Supreme Court, the Seventh Circuit held that the accommodation provided by EBSA Form 700 adequately removed Notre Dame from complicity in what Notre Dame called the “sin of contraception.” The court reasoned that because only a third party administrator and Notre Dame’s insurer were engaged in the provision of contraceptives, no religious objection by Notre Dame was sufficient to prevent continuation of that coverage (University of Notre Dame v. Burwell, May 19, 2015, Posner, R.).

ESBA Form 700

Because Notre Dame did not meet the ACA’s religious employer exception, the university was required to execute EBSA Form 700, certifying that it was a nonprofit entity holding itself out as a religious organization and that it opposed the provision of contraceptive services. By signing the form, the burden of covering contraceptives shifted from Notre Dame to Aetna and Meritain Health, Inc., the university’s health insurance provider and third party administrator. The university asserted that executing the form constituted a substantial burden on its exercise of religion. A district court and the Seventh Circuit disagreed with that analysis and held that the form served as a “warning” and not a “trigger” because it merely shifted the obligation to a different entity that was obligated to provide contraception coverage under federal law anyway (see Notre Dame signs EBSA Form 700-Certification, not substantially burdened, Health Reform WK-EDGE, February 26, 2014).

Supreme Court

After the U.S. Supreme Court handed down its decisions in Burwell v. Hobby Lobby Stores, Inc. (Hobby Lobby) and Wheaton College v. Burwell (Wheaton College), Notre Dame filed a petition for a writ of certiorari with the Supreme Court, asking it to vacate the Seventh Circuit decision and remand it for consideration. Notre Dame relied on the Hobby Lobby decision and renewed its position that the mandate substantially burdened its exercise of religion without either serving a compelling government interest or being the least restrictive means of doing so. The Supreme Court granted the petition, vacated the Seventh Circuit’s decision, and remanded the case back to the appellate court (see Notre Dame contraception battle revived, Health Reform WK-EDGE, March 11, 2015).

Trigger

On remand, the Seventh Circuit was unpersuaded by Notre Dame’s objections to the accommodation. In particular, the appellate court rejected the position that the mailing of EBSA Form 700 caused or triggered the provision of contraceptive coverage. The court reasoned that once Notre Dame opted out of providing federally mandated contraception coverage, by exercising its religious exemption, the federal government—and not Notre Dame—enlisted the third party administrator and insurer to provide the coverage.

Conduit

As a result, the court held that Notre Dame was not functioning as a “conduit” to deliver contraceptives. On the contrary, the court reasoned that the university had its religious burden “lifted” when it filled out EBSA Form 700. Because the effect of the form was to have students and staff members do business directly with Aetna and Meritain to obtain contraceptives, Notre Dame bypassed the objectionable act. Additionally, the court reasoned that Notre Dame could not have, as it argued, “triggered” the provision of contraceptives because federal law mandated such coverage. The filling out of the form merely shifted who was responsible for providing that coverage.

Hobby Lobby

In accordance with the Supreme Court’s request, the Seventh Circuit analyzed the effect of the Hobby Lobby decision where the high court held that the contraceptive mandate could not be applied to for-profit closely-held corporations with religious objections to contraceptive coverage because the mandate violated the Religious Freedom Restoration Act (RFRA) (42 U.S.C. §§2000bb et seq.). In that case, the Supreme Court held that the RFRA should apply to “nonreligious institutions owned by persons having sincere religious objections to their institutions’ having to comply with the ACA’s contraceptive regulations.”

Accommodation

The Seventh Circuit distinguished the Hobby Lobby decision from the Notre Dame case on the fact that in Hobby Lobby, the complaining organizations requested the right to fill out the form for religious accommodation, whereas, Notre Dame’s principal objection was to filling out the form at all. Although the Seventh Circuit acknowledged that the Hobby Lobby Court left open the possibility that the accommodation could substantially burden the free exercise of religion for some organizations in some cases, the Seventh Circuit found no meaningful explanation in the record of feasible alternatives to the status quo accommodation.

Balance

Additionally, the Seventh Circuit pointed to the accommodation struck in Wheaton College where the Supreme Court held that an objecting organization could evade the ESBA Form 700 and directly inform HHS of its objection as an alternative. The court held that accommodation “implies a balance of competing interests.” Accordingly, the court balanced the burden on Notre Dame of “simply notifying the government that the ball is now in the government’s court” with the potential burden of devising an “entirely new method of providing contraceptive coverage.” The court held that the balance did not favor an injunction for the university.

Concurrence

Judge Hamilton concurred with the opinion on the grounds that, based upon the current state of the record, Notre Dame was not entitled to preliminary injunctive relief. The concurrence reasoned that “an injunction would disrupt the status quo and temporarily cut off contraceptive coverage for hundreds or thousands of women.” According to the concurrence, the merits of the case required further exploration at a trial. The concurrence articulated important differences between Hobby Lobby and the Notre Dame case and reasoned that those distinctions rendered the Hobby Lobby case less than instructive on the breadth of religious freedom for an institution like Notre Dame.

Notably, the concurrence pointed out distinction arising from the “extraordinary feature” of the lawsuit—Notre Dame’s claim that the process of requesting the accommodation itself was a substantial burden on its exercise of religion. Like Judge Posner, Hamilton concluded that the triggering or casual arguments raised by Notre Dame were unpersuasive because the contraceptive coverage provided to students and staff members of Notre Dame were “caused” by federal law and not by any action of the university. The concurrence articulated Notre Dame’s objection not as an objection to the accommodation itself but to the fact that its exemption was coupled with a substitute—specifically, that someone else would provide the coverage. Accordingly, the concurrence reasoned that Notre Dame’s request reached beyond the protections afforded to it by the RFRA.

Dissent

Judge Flaum dissented on the grounds that the contraceptive mandate forced Notre Dame to act as a conduit for the provision of cost-free contraception, which made Notre Dame complicit in something that the university saw as a violation of its religious beliefs. The dissent reasoned that Notre Dame articulated a substantial burden for purposes of the RFRA because of its position as a self-insurer (through its contract with Meritain) and as an insurance broker (through its contract with Aetna). Although the accommodation removed the university’s obligation to pay for contraceptives, the dissent concluded that the ACA nevertheless obligated Notre Dame to occupy a “facilitator’s role” regarding the provision of contraception. Judge Flaum held that the Hobby Lobby decision required a different burden than the one applied by the court. The dissent reasoned that the RFRA analysis should have asked “whether the means by which the government is attempting to advance its compelling interest is the least burdensome on Notre Dame’s religious beliefs.”

Cert denied, substantially anticompetitive hospital merger set to unravel

The merger between two Ohio hospitals, which was deemed to be substantially anticompetitive by the Federal Trade Commission (FTC) and later, the Sixth Circuit, must now undergo divestiture as a result of the U.S. Supreme Court’s denial of the hospital system’s petition for writ of certiorari. Despite the hospital system’s argument in ProMedica Health System, Inc. v. Federal Trade Commission that the FTC decision would have a “drastic and effectively outcome-determinative impact on countless hospital mergers,” the Court declined to hear the case.

Background

In 2010, two of the four hospital systems in Lucas County, Ohio, ProMedica Health System, Inc. and St. Luke’s Hospital, merged. As a result of the merger, ProMedica gained a market share above 50 percent in the primary and second service market, and above 80 percent in the obstetrical market. The FTC challenged the merger under Section 7 of the Clayton Act (15 U.S.C. §18) on the basis that it would adversely affect competition. The FTC then ordered ProMedica to divest St. Luke’s. ProMedica filed a petition with the Sixth Circuit Court of Appeals to review the FTC decision, which was denied.

The Sixth Circuit first determined that the relevant markets included, (1) a cluster of primary and secondary inpatient services, known as the “General Acute Care” (GAC) market, which did not include, (2) a separate market for obstetrical (OB) services. The court utilized the Herfindahl-Hirschman Index (HHI) to measure market concentration before and after the hospital merger. A merger can be presumed to be anticompetitive if it increased the HHI by over 200 points. The merger at issue increased the HHI for the GAC market by 1,078 points and the HHI for the OB market by 1,323 points, which raised a presumption of illegality. The strong correlation between market share and price, and the further concentration of markets that were already highly concentrated supported the FTC’s presumption of illegality. Finally, ProMedica did not rebut the presumption by arguing that the merger would benefit consumers. Instead, the evidence suggested that ProMedica and St. Luke’s were direct competitors, and therefore, a merger would give ProMedica the ability to raise rates. The Sixth Circuit therefore determined that the FTC properly presumed that the merger was substantially noncompetitive and that ProMedica failed to rebut that presumption (see Ohio hospital merger deemed substantially anticompetitive, ordered to divest, Health Law Daily, April 23, 2014). ProMedica then filed a petition for certiorari before the U.S. Supreme Court.

Patient Protection and Affordable Care Act

In urging the U.S. Supreme Court to grant its petition, ProMedica argued, among other things, that the implementation of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and associated federal mandates require “economies of scale and encourage greater integration among health care providers,” which can be difficult for small hospitals because they cannot access the capital necessary to meet the ACA’s goals to improve quality and contain cost. As a result, many smaller hospitals seek to enter into mergers. ProMedica then argued that the Sixth Circuit’s decision would create a “virtual irrebuttable presumption of anticompetitive harm,” which will drastically impact many such hospital mergers and allow the FTC to have a “near veto over almost any proposed hospital merger.” ProMedica’s petition was denied, leaving the Sixth Circuit’s order of divestiture intact.