What Does the Change in Presidential Administration Mean for Pending Mandamus Actions?
In recent years, many immigration applicants have filed mandamus actions with the federal courts, seeking them to compel U.S. Citizenship and Immigration Services (USCIS) and the Department of State (DOS) to adjudicate delayed immigration benefits applications. Invariably, when a mandamus action is brought, the defendants not only include USCIS, its director, the DOS, and its secretary, but also the U.S. attorney with jurisdiction over the application, the Department of Justice, and the attorney general. With a new presidential administration soon taking office, many mandamus plaintiffs are concerned about whether their lawsuits will be dismissed and if they will need to refile suit.
The Federal Rules of Civil Procedure 25(d) provide that when a public officer who is a party in an official capacity resigns or otherwise ceases to hold office while the application is pending, the federal court action does not cease. In fact, the officer’s successor is automatically substituted as a party to the mandamus action. Later proceedings should be in the substituted party’s name, but a change in public officer cannot adversely impact the parties’ substantial rights. Thus, those who have relied on the courts to help them get decisions on their pending immigration applications may continue pursuing this course of action. 2024 saw a continued increase in mandamus actions nationwide as USCIS and DOS struggle to meet processing time goals even where statutorily required.
‘Motive’ or ‘Animus’? Lessons From Appellate Practice
The term “animus” is often used interchangeably with “motive” by lawyers and courts, but the two words have different meanings and connotations, and confusion between them can become an unnecessary complication. None of us needs any extra complications. So, practitioners may want to choose their words carefully.
Quick Hits
Lawyers may want to avoid using the term “animus” when a case depends solely on “motive,” as employment statutes generally focus on actions taken “because of” a protected characteristic.
The term “animus” can complicate legal cases unnecessarily, and its negative connotations are often irrelevant to the core issue of whether a decision was motivated by a protected characteristic.
Courts and lawyers often use the term “animus” interchangeably with “motive,” but it is crucial to choose words carefully to avoid unnecessary complications in legal arguments.
There is reason for using the term “animus” when “motive” is meant. First, it sounds awkward to write, “the defendant was not motivated by retaliatory motive.” Substituting “animus” at the end sounds better. Second, there is authority for the proposition that “animus” can simply mean “motive” or “intent,” without any negative connotations. For example, according to Black’s Law Dictionary, “animus” is defined as “Mind; soul; intention; disposition; design”), and other dictionaries have similar definitions. Third, as the Supreme Court of the United States explained in a 2024 decision, Murray v. UBS Securities, LLC, evidence of “motive” evidence often also shows “animus,” even when one defines “animus” to include negative connotations, such as “prejudice” or “comparable hostile or culpable intent.” Supervisors motivated by an employee’s race seem likely to be harboring negative feelings about that the employee’s race.
All that said, lawyers may want to consider avoiding the term “animus” when the case depends only on “motive,” which it usually does. Employment statutes generally prohibit “discriminating” against an employee “because of” the employee’s protected characteristic. The Supreme Court pointed out in Gross v. FBL Financial Services, Inc., decided in 2009, that taking an action “because of” a protected characteristic means it was the “reason” for the decision―i.e., what motivated the decision. AndBlack’s Law Dictionary defines “Motive” as the “Cause or reason that moves the will and induces action”). The Supreme Court also noted in Gross, as well as in Bostock v. Clayton County, Georgia, that ‘because of” means that the prohibited reason must have actually made the difference in the sense of being a “but for” cause.
In short, the statutes prohibit employers from treating employees differently because of a protected characteristic, and they do so without regard to the decision’s subtext, the Supreme Court further explained in Murray. That means “animus,” defined with its negative connotations, is irrelevant. Thus, in Murray, it did not matter if the employer treated the whistleblowing employee differently because of a desire for revenge or because of a beneficent “belief that the employee might be happier in a position that did not have SEC reporting requirements.” Similarly, when an employer treats women differently, it does not matter that it generally favors women or wants to protect them, the Court held in Automobile Workers v. Johnson Controls, Inc., a 1991 ruling. The opposite is also true. No matter how much ill will the decisionmaker had, a claim is not actionable if it made no difference in the decision made, the Court stated in Hartman v. Moore, a 2006 decision.
Second Circuit Adopts “At Least One Purpose” Rule for False Claims Act Cases Premised on Anti-Kickback Statute Violations
On December 27, 2024, the U.S. Court of Appeals for the Second Circuit held in U.S. ex rel. Camburn v. Novartis Pharmaceuticals Corporation that a relator adequately pleads a False Claims Act (“FCA”) cause of action premised on violation of the Anti-Kickback Statute (“AKS”) by alleging, with sufficient particularity under Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”), that at least one purpose (rather than the sole or primary purpose) of the alleged kickback scheme was to induce the purchase of federally reimbursable health care products or services.[1]
In doing so, the Second Circuit joins seven other Circuit Courts—the First, Third, Fourth, Fifth, Seventh, Ninth, and Tenth Circuits—in adopting the “at least one purpose” rule. This ruling lowers the bar in the Second Circuit for relators pleading AKS-based FCA claims.
Interplay Between FCA and AKS Violations
Under the AKS, “a claim that includes items or services resulting from a violation [of the AKS] … constitutes a false or fraudulent claim” under the FCA.[2]
The AKS prohibits persons from, among other things, “knowingly and willfully” soliciting or receiving “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—
in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program, or
in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program[.]”[3]
Alleged “Sham” Speaker Events & Excessive Compensation
In U.S. ex rel. Camburn, the relator, a former Novartis sales representative, filed a qui tam action in the U.S. District Court for the Southern District of New York alleging violations of the FCA premised on violations of the AKS. The relator alleged that Novartis operated a kickback scheme with the intent of bribing providers to prescribe Gilenya, a multiple sclerosis drug. Specifically, the relator alleged that Novartis operated a sham peer-to-peer speaker program that served as a mechanism for the company to offer remuneration to physicians in exchange for prescribing Gilenya. The relator alleged that the payments made to providers under the guise of this speaker program “caused pharmacies and physicians to submit false claims to the government and to the states for healthcare reimbursement under programs including Medicare Part D, Medicaid, and TRICARE.”[4]
U.S. District Court’s Dismissal with Prejudice
The federal government, as well as 29 states and the District of Columbia, among other parties, declined to intervene in the lawsuit. After granting the relator multiple opportunities to amend his complaint to plead factual allegations with sufficient particularity required by Rule 9(b), the district court held that the relator still failed to adequately plead the existence of a kickback scheme. Because the relator’s FCA claim was based on violations of the AKS, the district court dismissed the relator’s Third Amended Complaint with prejudice and did not address whether the relator sufficiently pled the remaining elements of his FCA claim.
Second Circuit’s Adoption of “At Least One Purpose” Rule
On appeal, the Second Circuit adopted the “at least one purpose” rule and found that, to survive dismissal, the relator “needed only to allege that at least one purpose of the remuneration was to induce prescriptions, without alleging a cause-and-effect relationship (a quid pro quo) between the payments and the physicians’ prescribing habits.”[5] Applying this standard, the Second Circuit concluded that the relator adequately pleaded an AKS violation with respect to the following three categories of allegations: (1) holding “sham” speaker events with no legitimate attendees, (2) excessively compensating physician speakers for canceled events, and (3) deliberately selecting and retaining certain speakers to induce a higher volume of prescriptions of Gilenya.
Specifically, the Second Circuit found that the relator’s “illustrative examples” of physician-speakers presenting solely to other Novartis speakers or to members of their own practice over lavish restaurant meals supported a strong inference that at least one purpose of the speaker program was to provide kickbacks to prescribers. The panel also found that the relator’s allegations that the compensation paid to physician speakers for canceled events ($20,000 to $22,500 to each speaker) over a two-year period in comparison to the dollar value of the allegedly fraudulent claims submitted to the government for reimbursement (between to $1 to $1.7 million) during that same period gave rise “to a strong inference that the payments constituted, at least in part, unlawful remuneration.”[6] Likewise, the relator’s inclusion of testimony from two Novartis sales representatives regarding the company’s alleged practice of offering speaking engagements to physicians to incentivize them to prescribe Gilenya suggested that these engagements were organized to induce providers to prescribe the drug.
The Second Circuit held that these allegations, accepted as true for purposes of the motion to dismiss, “plausibly and ‘strongly’ suggest Novartis operated its speaker program at least in part to remunerate certain physicians to prescribe Gilenya.”[7] Accordingly, the Second Circuit remanded the case to the district court to determine whether the relator sufficiently pleaded the remaining elements of his FCA claim and to weigh the adequacy of the claims under state and municipal law.
The Second Circuit affirmed, however, the district court’s conclusion that the relator “failed to link Novartis’s DVD initiative, ‘entertainment rooms,’ visual aids for billing codes, and one-on-one physician dinners with a strong inference that Novartis used these tools, at least in part, to induce higher prescription-writing,” with the caveat that another FCA claim predicated on an AKS violation may in fact survive dismissal if similar facts were pleaded with greater particularity.[8]
Practical Takeaways
This case highlights the importance of drug manufacturers and other regulated entities’ duty to implement robust and ongoing health care compliance programs in order to continuously and thoroughly evaluate enforcement and whistleblower risk relative to marketing and other business activities.
This decision’s adoption of the “at least one purpose” rule lowers the bar for relators in the Second Circuit to plead FCA violations premised on noncompliance with the AKS. Indeed, the Second Circuit rejected arguments that remuneration is unlawful under the AKS only if the “sole purpose” or “primary purpose” of the payment is to induce health care purchases. As eight circuits across the country have now held, allegations involving a single improper purpose can allow a case to survive dismissal. In these circuits, a relator merely needs to allege that at least one purpose of the remuneration was to induce the purchase of federally reimbursable health care products or services.
The heightened Rule 9(b) pleading standard fully applies in FCA cases premised on AKS violations. While the “at least one purpose” rule broadens liability, the district court and Second Circuit made clear that FCA allegations will be scrutinized to ensure they comport with the heightened Rule 9(b) pleading requirements.
Epstein Becker Green Attorney Ann W. Parks contributed to the preparation of this post.
ENDNOTES
[1] 2024 WL 5230128 (2d Cir. Dec. 27, 2024).
[2] 42 U.S.C. § 1320a-7b(g).
[3] Id. at § 1320a-7b.
[4] Camburn, 2024 WL 5230128, at *2.
[5] Id. at *4.
[6] Id. at *6.
[7] Id. at *6 (cleaned up) (quoting Hart, 96 F.4th 145, 153 (2d Cir. 2024)).
[8] Id. at *19.
Rule 37 in Action – Case Dismissed
As stated in my previous blog, “A Rule 37 Refresher – As Applied to a Ransomware Attack,” Federal Rule of Civil Procedure 37(e) (“Rule 37”) was completely rewritten in 2015 to provide more clarity and guidance to the sanction process under the Rule.
In Jones v. Riot Hospitality Group, LLC, the Ninth Circuit makes very clear that, when the court faces a sanctions analysis based upon evidence that there is data that should have been preserved, that was lost because of failure to preserve, and that can’t be replicated, then the court has two additional decisions to make: (1) was there prejudice to another party from the loss or (2) was there an intent to deprive another party of the information. If the former, the court may only impose measures “no greater than necessary” to cure the prejudice. If the latter, the court may take a variety of extreme measures, including dismissal of the action. An important distinction was created in Rule 37 between negligence and intention.
Rule 37(e)(2) is clear that the court may impose a variety of extreme measures, including dismissal of a case if there is a violation of Rule 37 with an intent to deprive another party of the relevant information. The Jones case demonstrates this rule in action. The Jones case involves Alyssa Jones, a former waitress at a Scottsdale bar, who sued the bar’s owner-operator, Ryan Hibbert, and his company, Riot Hospitality Group, alleging Title VII violations and common law tort claims. During discovery, upon noticing an unusual pattern of time gaps in the text messages that Jones produced in discovery, along with deposition testimony that demonstrated that particular people had indeed texted with her during those gaps, the court ordered the parties to jointly retain a third-party forensic search specialist to review the phones of Jones and certain witnesses.
The court ultimately found that Jones intentionally deleted relevant text messages with co-workers from 2017 and 2018 and coordinated with her witnesses to delete messages from 2019 and 2020. The court used “reasonable inferences” to determine that it was done with the intent to deprive Riot of use of the messages in the lawsuit. The district court dismissed the case, using the five-factor test for terminating sanctions articulated in Anheuser-Busch, Inc. v. Nat. Beverage Distrib., 69 F.3d 337, 348 (9th Cir. 1995).
The 9th Circuit found that the use of the Anheuser-Busch test was not necessary and that, to dismiss a case under Rule 37(e (2), a district court need only find that:
Rule 37(e) prerequisites are met,
the spoliating party acted with the intent required under Rule 37(e)(2), and
lesser sanctions are insufficient to address the loss of the ESI.
Takeaways:
1. If you are in a spoliation dispute, make sure you have the experts and evidence to prove or defend your case.
2. When you are trying to prove spoliation, know the test. If intent to deprive is proven (with direct or circumstantial evidence), then proving prejudice is not a prerequisite to sanctions.
3. Be aware of, plan for, and enforce data preservation protocols early in your case.