SuperValu Wins False Claims Act Case with a “No Harm, No Foul” Jury Verdict
On March 5, 2025, SuperValu, Inc. (SuperValu), a grocery store chain that operates in-store pharmacies, was cleared of liability by a Central District of Illinois federal jury—finally quashing whistleblower claims that the company improperly over-billed the government and violated the False Claims Act (FCA). This jury verdict came after a long 14-year battle, which included a Supreme Court reversal of lower court decisions on the FCA’s scienter standard.
In 2006, SuperValu’s pharmacies began discounting generic drugs through a price-matching system (if a customer provided evidence of a cheaper price for certain drugs available at another pharmacy, SuperValu would match that price) and other loyalty programs. Many of SuperValu’s customers took advantage of these programs. However, when the company reported its “usual and customary” price to federal and state governments for reimbursement, SuperValu reported the much higher retail price of the drugs. After these programs ended, whistleblowers brought suit against SuperValu under the FCA’s qui tam provision. In the qui tam actions, plaintiffs alleged that SuperValu offered discounted pricing through these programs to so many customers that the discounted price was effectively their “usual and customary” price. As SuperValu did not offer the discounted pricing to Medicare and Medicaid, which were required by law to be charged the “usual and customary price,” the whistleblowers alleged SuperValu overcharged the government for years when seeking reimbursements for prescription drugs.
In 2020, the District Court granted SuperValu’s motion for summary judgment, holding that SuperValu had submitted false claims as defined under the FCA, but concluding that SuperValu did not possess the required scienter necessary to establish FCA liability. The government appealed to the Seventh Circuit, which affirmed the lower court’s decision. The Seventh Circuit applied a two-part test to determine if SuperValu knowingly or recklessly submitted false claims:
Was the defendant’s interpretation of law objectively reasonable (including not being ruled out by prior precedent); and
If the defendant’s interpretation was not objectively reasonable, did the defendant have a subjective belief the claims they were submitting were false?
If the defendant’s interpretation was not objectively reasonable, and the defendant had a subjective belief it was submitting false claims, the defendant knowingly or recklessly submitted false claims. The Seventh Circuit held that SuperValu’s interpretation of the law was objectively reasonable and, therefore, SuperValu did not possess the required scienter under the FCA.
In 2023, the Supreme Court reversed the Seventh Circuit, holding that, whether a defendant possessed scienter sufficient to satisfy the FCA requirements depended solely on that defendant’s subjective knowledge—doing away with the Seventh Circuit’s “objectiveness” test. Focusing on the plain language of the FCA, the Supreme Court held that, to prove a false claim, two elements must be satisfied: (1) the claim that was submitted was, in fact, false and (2) the defendant subjectively believed the claim was false.
Nearly fourteen years after its initial filing, the case returned to the District Court on remand from the Supreme Court for a jury trial. While the jury ultimately found that SuperValu did knowingly submit false claims under the Supreme Court’s scienter standard, the question of whether the jury would impose liability came down to whether the federal or state governments suffered damages due to SuperValu’s false claims. In a pre-trial motion, SuperValu argued that any evidence the plaintiffs offered of the alleged overpayments was evidence only of a gain to SuperValu—not a loss to the government. Because the government determines reimbursement rates under Medicare Part D plans, SuperValu argued that plaintiffs would have to prove that the alleged false claims changed the amount government actually paid and, thus, caused damages. It appears the jury accepted this argument. The jury unanimously decided the plaintiffs had not proved that either the federal or state governments suffered damages and, as a result, SuperValu was found “not liable.” After a long and tortured history, the whistleblowers’ claims were finally put to rest. The case ultimately ended with a “no harm, no foul” verdict, and SuperValu avoided liability under the FCA. The case suggests a potent line of defense for companies defending against FCA allegations.
No Infringement of Nonfiction Work by Makers of Tetris Film – Court Uses Wrong Analysis to Reach the Right Result
Ackerman v. Pink asks how much of a written history can be claimed as proprietary by the author of that history. The answer: Not much. It is black letter that the author of a non-fiction work cannot prevent others from using historical facts in some other work – even if those historical facts are known only because of the author’s independent research. Copyright covers only the author’s expression of the research, not the research itself.
Ackerman is interesting because the analysis the court uses to separate the historical fact from the author’s expression is misplaced – even though the Court appears to have reached the right conclusion.
Daniel Ackerman, the author, sued several entities claiming that the film Tetris (the “Film”) infringed his copyright in a book he wrote about the video game Tetris – The Tetris Effect: The Game that Hypnotized the World (the “Book”). The Book purports to be a non-fiction history of the development of the video game Tetris. The Film also purports to tell the same story – albeit with some dramatic embellishments.
The opinion by district judge Katherine Polk Failla recites the relatively vanilla proposition that historical facts cannot be claimed by an author of a non-fiction work of authorship. So far, so good. The problem, however, is where the court compares certain purportedly historic scenes in the Book with how they are portrayed fictionally in the Film in an effort to separate the facts from the expression.
The court recounts several factual differences between the portrayal of historical scenes in the Book and the dramatization in the Film to hold that the expression of the former is not copied by the latter. For example, the Book describes one of the characters pitching Tetris to Sega in Japan. In the Movie, however, there are several differences including the fact the scene takes place in Seattle. Given that that historical facts described in the Book are not protected by copyright, whether the Film changed some of the facts should be immaterial to the court’s analysis. To the extent the author of the Book described certain scenes exactly as they happened, the Film was within its rights to portray those same facts as they happened. Nonetheless, the court’s analysis, to some degree, depends on these factual differences to hold that the Film does not copy the Book author’s expression.
The Court went on to compare the “total concept and overall feel of the two works” by focusing on the organization and focus of the Book and Film. This framework does seem to separate Book author’s expression from the unprotected historical facts. For example, the court noted that “the Book jumps through time to provide as much background and context as possible for the people and events it portrays, the Film proceeds largely chronologically.” The court, however, could find no evidence that the Film somehow misappropriated the way the author “selected, coordinated, and arranged the facts in his Book.”
While Judge Polk Failla reached the right result (in our view), her focus on the difference in the facts unnecessarily muddies the water on separating protected expression from something underlying that expression that is in the public domain. A subsequent author who wishes to write a book or make a movie about an historical event should not be required to change the historical facts to avoid a finding that they copied the original author’s expression – even though the makers of the Film chose to do so here.
Federal Appeals Court Rules Against Doctor Seeking to Use Mushrooms to Aide Terminal Patients: How We Learned to Question the Rationale of the Controlled Substances Act
It’s funny how things work out – sometimes you find yourself living in a sort of butterfly effect where the tail seems to wag the dog. In 2023, when we first started writing about the traction psychedelics were gaining as medicine, our goal was not to end up spending years covering the winding legal battle of a Washington physician to legally obtain psilocybin for terminally ill cancer patients to manage their pain.
But here we are. To be clear, while we’re certainly interested in the fate of Dr. Sunil Aggarwal’s efforts, we’ve been following the case closely because it’s one of a few legal cases to shed light onto what courts and federal agencies may do when faced with a medicinal demand for psychedelics outside of the research context.
In his efforts to be able to administer psilocybin to his patients, Aggarwal employed a two-fold approach: (1) he attacked the status of psilocybin as a Schedule I drug, and (2) he tried to get around statutory requirements governing a physician’s right to distribute Schedule I drugs outside of the research context. Neither has been successful (yet).
DEA Says No to Rescheduling, but the Court Keeps the Door Cracked
As a reminder, here’s what happened when Aggarwal petitioned the DEA to reschedule psilocybin:
Since at least 2021, Dr. Sunil Aggarwal has been working to legally obtain psilocybin for terminally ill cancer patients undergoing end-of-life care. Because psilocybin is a Schedule I drug under the Controlled Substance Act (CSA), obtaining the drug to treat his patients was “practically and legally difficult” according to his lawyers. Aggarwal turned to the DEA, petitioning the agency to transfer psilocybin from Schedule I to Schedule II. The DEA denied the petition in a four-sentence letter. Aggarwal then looked to the Ninth Circuit.
The Ninth Circuit Court of Appeals in Aggarwal v. U.S. DEA directed the U.S. Drug Enforcement Agency (DEA) to reconsider its decision not to transfer psilocybin from Schedule I to Schedule II.
The Ninth Circuit sided with Aggarwal. The court held that the “DEA failed to provide sufficient analysis to allow its path to be reasonably discerned” and “failed to clearly indicate that it ha[d] considered the potential problem identified in the petition.” More specifically, the Ninth Circuit noted that the DEA failed to define “currently accepted medical use with severe restrictions,” which was the applicable standard for rescheduling on which Aggarwal relied. The court directed the DEA to clarify or reevaluate its position.
And, while the footsteps may not have been as swift as some would hope, we still stand by the predictions we made in 2023:
The Ninth Circuit’s refusal to accept the DEA’s out-of-hand dismissal of a petition to reschedule psilocybin is yet another step in what appears to be faster and faster footsteps towards the future. What that future holds is yet to be determined – though we will monitor closely – but whatever the future is it promises to be quite a ride.
Will the Right to Try Act Save Practitioners Who Don’t Conduct Research but Want to Administer Schedule I Drugs?
Perhaps realizing that convincing the DEA to reschedule psilocybin may be a tall task, Aggarwal tried his hand before the DEA and then the Ninth Circuit with another approach — trying to get around the Controlled Substance Act (CSA) by way of the Right to Try Act (RTT Act). Aggarwal challenged the DEA’s decision not to exempt him from registration under the CSA, but the FDA’s RTT Act didn’t turn out to be the rescuer he had hoped for.
Because it’s a Schedule I substance, the CSA dictates that psilocybin may only be produced, dispensed, or possessed in the context of a research protocol registered with the DEA and approved by the Secretary of Health and Human Services. In other words, psilocybin may only be dispensed by medical practitioners in the context of “bona fide research,” which requires the approval of the FDA (see21 U.S.C. § 823(g)(2)(A)). The DEA handles registration and “may, by regulation, waive the requirement for registration of certain…distributors, or dispensers if DEA finds it consistent with the public health and safety” (21 U.S.C. § 8222(d)).
The Food, Drug, and Cosmetic Act (FDCA) is even broader and “imposes restrictions on the…distribution of all drugs including but not limited to controlled substances” (21 U.S.C. § 331). Generally, before a new drug can be introduced to the market, it must go through the clinical trial process, but there are other ways. A patient, for instance, may attempt to access a new drug through the FDA’s expanded access program.
Where a prescription drug is a controlled substance, “the FDCA and CSA operate in tandem” and the person distributing the drug must comply with both statutes.
The FDA has also adopted the RTT Act, which is intended to expand access for eligible investigational drugs outside the clinical trail process. “The RTT Act exempts the drugs provided to eligible patients from specified statutory and regulatory requirements concerning drug labeling, marketing, clinical, testing and approval.” “To access an eligible investigational drug under the RTT Act,” an eligible patient’s physician applies directly to the drug’s sponsor, and the FDA is not involved in approving access.
Seeking psilocybin for his terminally ill patients, Aggarwal’s attorneys submitted a letter to the DEA asking the DEA “for authorization to access psilocybin for therapeutic use under state and federal RTT Acts and immunity from prosecution under the CSA.” His lawyers also asked that if it deemed registration was required under the CSA, that the registration requirement be waived.
The DEA said no dice and clung tight to the CSA. In so doing, the DEA made a few things clear:
“Practitioners who seek to dispense or possess [S]chedule I controlled substances must be properly registered as an approved researcher in accordance with the CSA and its implementing regulations.”
The RTT Act does “not provide any exemptions from the CSA or its implementing regulations.”
The RTT Act does “not give the DEA authority to waive CSA requirements.”
Doubling down, the DEA also declined Aggarwal’s request to initiate rulemaking to exempt him from the CSA’s registration requirement. The DEA provided the following as its reasoning:
The DEA could not fully assess Aggarwal’s proposal because it was lacking in detail.
Aggarwal’s desire to administer psilocybin to patients was not consistent with public health and safety. In making this particular finding, the DEA relied heavily on Congress’ determinations in designating psilocybin as a Schedule I drug that it has a high potential for abuse, no currently accepted medicinal use in treatment in the United States, and a lack of accepted safety for use under medical supervision.
Aggarwal’s cited historical scenarios involving Schedule I controlled substances — including marijuana — were not persuasive.
The Ninth Circuit found in favor of the DEA, ruling that the DEA’s reasoning in blocking Aggarwal’s access to the DEA was not arbitrary and capricious. While the Ninth Circuit didn’t declare the following reasoning the rule of land even within the Ninth Circuit, it did make clear that the DEA’s reliance on this reasoning is not arbitrary and capricious:
“The CSA and FDCA together govern access to controlled substances for medicinal purpose.”
“Although the RTT Act itself does not require FDA approval for eligible patients to access eligible investigational drugs, it does not exempt such drugs from the FDA’s Attorney-General-delegated oversight pursuant to the CSA.” “So DEA’s continued enforcement of the CSA’s registration requirement does not affect, modify, repeal, or supersede the FDCA as amended by the RTT Act.”
The Ninth Circuit did not reject the DEA’s reliance on Congress’ determination, as codified in the CSA, that psilocybin has a high potential for abuse, no currently accepted medicinal use in treatment in the United States, and a lack of accepted safety for use under medical supervision.
So, What Does an Opinion Brushing Back One Physician on the West Coast Mean to the Psychedelics Industry More Broadly?
Proponents and physicians who are looking for easier access to psilocybin outside of the research context will see this as a significant step back. The DEA dealt a significant setback to the ability to rely on the RTT Act or to seek a waiver of registration. The Ninth Circuit didn’t really pull back the reigns. The DEA’s position that, even if a physician is able to obtain approval under the RTT, he or she still must obtain registration or a waiver under the CSA has now been approved (or at least not disapproved). And that position was pretty clear: The DEA is still in charge.
So, what does the opinion not mean? This opinion does not foreclose the efforts of physicians interested in conducting research blessed by the CSA and FDA. As we’ve previously reported, interest in researching psychedelics remains high and it appears capital does, too. Indeed, there are strong pushes for research in the federal, state, and private sectors with corresponding funding. There is no indication — and we have no expectation — that it will slow down any time soon, and the Ninth Circuit’s decision does nothing to change our thoughts on that point. Indeed, it appears to be, at least according to the DEA as approved by the Ninth Circuit, the clearest path forward.
What Does the Phrase “Resulting From” Mean? Circuit Courts Split on Standard for Determining When an AKS Violation Is a False Claim
Dating back to the 19th century, the U.S. Supreme Court has held that when construing a statute, the courts are to “give effect, if possible, to every clause and word of a statute, avoiding, if it may be, any construction which implies that the legislature was ignorant of the meaning of the language it employed.”[1]
However, there’s currently a split among the federal courts regarding how to interpret a phrase in a 15-year-old amendment to the Anti-Kickback Statute (AKS).[2] In 2010, Congress amended the AKS to provide that where the statute is violated, in addition to criminal penalties, any “claim that includes items or services resulting from [that] violation of [the AKS] constitutes a false or fraudulent claim for purposes of the [False Claims Act (FCA)].”[3] The circuit courts disagree over what it means for a claim to “result from” a violation of the AKS.
On February 18, 2025, the U.S. Court of Appeals for the First Circuit, in United States v. Regeneron Pharmaceuticals, held that to show a claim “results from” a violation of the AKS, the government must prove that a claim would not have been submitted “but for” the illegal kickback. [4] While this ruling aligns with recent decisions by the Sixth[5] and Eighth[6] Circuits, it conflicts with a Third Circuit decision[7] holding that the government must merely prove a “causal connection” between an illegal kickback and a claim being submitted for reimbursement. This Insight explores the courts’ approaches to evaluating what the words “resulting from” mean in the context of the AKS.
History of the Relationship Between the AKS and the FCA
The AKS makes it a crime to knowingly and willingly offer, pay, solicit, or receive any remuneration to induce referrals or services reimbursable by a federal health care program (e.g., Medicare, Medicaid). Each offense under the AKS is punishable by a fine of up to $100,000 and imprisonment for up to 10 years. Violators of the AKS can also be excluded from federal health care programs and face civil monetary penalties: (i) up to $50,000 and (ii) three times the amount of the remuneration in question.[8] Significantly, the 2010 amendment to the AKS clarified that a person or entity must act willfully to violate the statute, even though “a person need not have actual knowledge of [the AKS] or specific intent to commit a violation of [the AKS].” [9]
The FCA is the primary vehicle through which the government (on its own behalf and by virtue of the FCA private right of action provision) pursues fraud, waste, and abuse in the health care industry. Generally, the statute imposes liability on anyone who knowingly presents, or causes to be presented or conspires to present, a false or fraudulent claim for payment or approval.[10]
To establish a violation of the FCA, the government must prove by a “preponderance of the evidence”—a lesser standard than the criminal “beyond a reasonable doubt” standard—that a defendant “knowingly” violated the statute. The FCA defines the terms “knowing” and “knowingly” to mean that a person “(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (ii) acts in reckless disregard of the truth or falsity of the information.” The statute further clarifies that proof of specific intent to defraud is not required.[11]
Before 2010, federal law did not specifically address whether a violation of the AKS could result in a claim being considered false for purposes of the FCA. For almost two decades, the government and qui tam relators attempted to “bootstrap” anti-kickback claims to the FCA to obtain civil penalties based on alleged AKS violations. This bootstrapping theory was premised on the argument that when a provider submits a claim to a federal health care program, the claim includes an implicit certification that the provider was in compliance with applicable laws, including the AKS.
For instance, in Roy v. Anthony,[12] a whistleblower sued under the FCA alleging that physicians in a medical practice referred patients to diagnostic centers in violation of the AKS. The defendants settled the case for more than $1.5 million following a district court decision holding that the plaintiff could prove that the charged claims were false because they were submitted in violation of the AKS. Similarly, the district court in Pogue v. American Healthcorp held that a violation of the AKS could constitute a false claim under the FCA if the whistleblower or the government could show that the defendants engaged in fraudulent conduct with the purpose of inducing payment from the government.[13]
In 2010, as part of the Patient Protection and Affordable Care Act,[14] Congress attempted to resolve the highly litigated issue of whether a violation of the AKS can serve as a basis for liability under the FCA by amending the AKS to state that a “claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of the [FCA].”[15]
Split Among the Courts Interpreting the Causation Standard
Despite the 2010 amendment, the debate has not ended regarding the relationship between the AKS and the FCA, with the courts splitting on what it means for a claim to “result from” a violation of the AKS. The Third Circuit has held that the government must merely prove a “causal connection” between an illegal kickback and a claim being submitted for reimbursement, while the First, Sixth, and Eighth Circuits have adopted the stricter “but-for” standard of causation.
Third Circuit: The “Causal Connection” Standard
In 2017, in United States ex rel. Greenfield v. Medco Health Solutions Inc., the Third Circuit first examined this issue in a case where the qui tam relator argued that the defendant’s alleged kickback scheme amounted to a violation of the FCA because at least some referrals or recommendations were for Medicare beneficiaries and because the defendant falsely certified compliance with the AKS.[16]
Relying on the U.S. Supreme Court’s ruling in Burrage v. United States, the defendant argued that “resulting from” requires “proof the harm would not have occurred in the absence of—that is, but for—the defendant’s conduct.”[17] The government/qui tam relator responded that requiring but-for causation would lead to the “incongruous” result that a defendant could be convicted of criminal conduct under the AKS but be insulated from civil liability under the FCA.
In interpreting the 2010 amendment, the Third Circuit examined the legislative history surrounding its passage. Specifically, the court referenced language from the congressional record in which one senator explained that Congress wanted to “strengthen” actions under the FCA and “ensure that all claims resulting from illegal kickbacks are considered false claims for the purpose of civil action[s] under the False Claims Act.”[18] The court agreed with the government’s position, concluding that imposing a “but-for” standard “would hamper FCA cases under the provision even though Congress enacted it to strengthen[] whistleblower actions based on medical care kickbacks.”
While the Third Circuit sided with the government by rejecting a but-for causation standard, the court, nevertheless, held in favor of the defendant. The complaint alleged that (1) the defendant paid illegal kickbacks to Party A, (2) Party A forwarded that money to Party B, (3) Party B included the defendant as an approved provider for Party B’s members, (4) the defendant filed claims on behalf of 24 federally insured patients, and (5) the defendant violated the FCA because the defendant incorrectly certified that it did not pay any illegal kickbacks. The Third Circuit disagreed, relying on an Eleventh Circuit case holding that a plaintiff cannot “merely … describe a private scheme in detail but then … allege … that claims requesting illegal payments must have been submitted, were likely submitted[,] or should have been submitted to the Government.”[19] Instead, the government/relator must provide evidence of the actual submission of a false claim. In Medco, the Third Circuit held that even if it were to assume the defendant paid illegal kickbacks, “that is not enough to establish that the underlying care to any of the 24 patients was connected to a breach of the AKS; we must have some record evidence that shows a link between the alleged kickback and the medical received by at least one” of the patients.
First, Sixth, and Eighth Circuits: The “But-For” Causation Standard
While the Third Circuit refused to find the Supreme Court’s Burrage decision controlling, the First, Sixth, and Eighth Circuits relied on Burrage to support the but-for causation standard.
In 2022, in United States ex rel. Cairns v. DS Medical LLC,[20] the Eighth Circuit relied on Burrage, as well as on several dictionary definitions of the words/phrases “resulting” and “results from,” and concluded that these words require a “but-for” causal connection. The Eighth Circuit addressed the Third Circuit’s holding in Medco and declined to follow that case, rejecting the Third Circuit’s approach of relying on legislative history and “the drafters’ intentions.” The Eighth Circuit held that if Congress had not intended to impose this “but-for” causation standard, then it could have adopted a different standard such as “tainted by” or “provided in violation of.”
The following year, the Sixth Circuit, relying on Burrage and United States ex rel. Cairns v. DS Medical LLC, held that the government/whistleblowers needed to satisfy the but-for causation standard and ruled in favor of the defendants where there was no evidence that the alleged kickback arrangement changed any of the parties’ behaviors. In other words, regardless of the improper payments, the same referrals would have occurred, and the same claims would have been submitted to the federal government. [21]
The First Circuit recently joined the Eighth and Sixth Circuits in adopting the but-for causation standard. The First Circuit noted that while the Supreme Court has held that “as a result from” imposes a requirement of causality—meaning that the harm would not have occurred but for the conduct—“that reading serves as a default assumption, not an immutable rule.” Nevertheless, the First Circuit determined that nothing in the 2010 amendment contradicts the notion that “resulting from” requires proof of but-for causation.
While it agreed that the criminal provisions of the AKS do not include a causation requirement, the First Circuit observed that different evidentiary burdens can exist for claims being brought for purposes of criminal versus civil liability. The First Circuit concluded that although the AKS may criminalize kickbacks that do not ultimately cause a referral, a different evidentiary standard can and should be applied when the FCA is triggered. As a result, the First Circuit affirmed the lower court’s decision that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”
In light of this decision, a majority of the Circuits that have addressed this issue have adopted the “but-for” causation standard based on the 2010 amendment, leaving the Third Circuit as the only circuit court to adopt the more lenient “causal connection” standard. Notably, while three Circuits have now aligned on interpreting the “resulting from” language in the 2010 amendment to require but-for causation, this standard applies to those FCA cases based upon AKS violations that do not involve a false certification theory. These but-for cause decisions do not address causation in AKS-based FCA cases where the alleged falsity is a false certification of compliance with the AKS. This false certification theory remains viable, which the First Circuit specifically addressed in Regeneron.
Conclusion
Entities in the health care and life sciences industries facing allegations of AKS and FCA violations should be aware of the current state of the law and be prepared to vigorously challenge efforts by the government, or qui tam relators, to seek to deviate from the but-for causation standard.
Although the U.S. Supreme Court denied a petition to review this specific issue in 2023, it may once again be called upon to weigh in, as there inevitably will continue to be a division in how the courts interpret this “resulting from” language.
ENDNOTES
[1] Montclair v. Ramsdell, 107 U.S. 147 (1883).
[2] See 42 USC § 1320a-7b(b).
[3] See 42 USC § 1320a-7b(g) (emphasis added). The federal False Claims Act (FCA) can be found at 31 U.S.C. § 3729 et seq.
[4] United States v. Regeneron Pharmaceuticals, 2025 WL 520466 (1st Cir. Feb. 18, 2025).
[5] United States ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052–55 (6th Cir. 2023).
[6] United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834–35 (8th Cir. 2022).
[7] United States ex rel. Greenfield v. Medco Health Solutions Inc., 880 F.3d 89, 100 (3d Cir. 2018).
[8] See 42 U.S.C. § 1320a-7b(b).
[9] See 42 U.S.C. § 1320a-7b(h).
[10] See 31 U.S.C. § 3729(a)(1).
[11] See 31 U.S.C. § 3729(b)(1).
[12] See United States ex rel. Roy v. Anthony, No. C-1-93-0559 (S.D. Ohio 1994).
[13] See United States ex rel. Pogue v. American Healthcorp., Inc., 1995 WL 626514 (M.D. Tenn. Sept. 14, 1995); United States ex rel. Pogue v. American Healthcorp., Inc., 914 F. Supp. 1507 (1996).
[14] Patient Protection and Affordable Care Act (PL 111-148).
[15] Id. at § 6402(f)(1) codified at 42 U.S.C. § 1320a-7b(g).
[16] United States ex rel. Greenfield v. Medco Health Solutions Inc., 880 F.3d 89, 100 (3d Cir. 2018). It should be noted that, in this case, the government originally declined to intervene.
[17] Id. quoting Burrage v. United States, 134 S. Ct. 881, 887-888 (2014).
[18] Id. citing 155 Cong. Rec S10852, S10853 (daily ed October 28, 2009).
[19] Id. citing United States ex rel. Clausen v. Lab Corp. of Am., 290 F3d 1301, 1311 (11th Cir. 2002).
[20] United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834–35 (8th Cir. 2022).
[21] United States ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052–55 (6th Cir. 2023).
BOLD: Before Even Being Allowed in the Case NCLC Submits An Aggressive Challenge to Eleventh Circuit IMC Ruling
The FCC’s TCPA one-to-one consent rule still has the faintest of pulses as the NCLC continues to struggle to bring it back to life.
In a new filing yesterday the National Consumer Law Center has submitted a proposed petition seeking a full en banc re-hearing and characterizing the Eleventh Circuit panel’s ruling in IMC v. FCC as a departure from established judicial review norms and contrary to supreme court precedent.
As the Czar previously explained the IMC ruling is, indeed, a breathtaking departure from the rules courts would ordinarily apply to such appeals. However, this change appears to have been enabled by the recent destruction of Chevron deference and concomitant strengthening of judicial review.
The issue really boils down to this:
In the old days (last year) a court had to defer to an agency’s interpretation of vague phrases in a statute. That is no longer the case.
The IMC could held, however, that an agency had to defer to a court’s interpretation of vague phrases statute. This had never happened before.
While IMC’s approach seems permissible following the death of Chevron it by no means follows that they adopted the correct framework. Under a doctrine called Skidmore deference courts and agencies are essentially equally powerful– and if Skidmore deference were applied IMC probably would have come out differently.
NCLC’s petition argues the Eleventh Circuit Court of Appeals–all of it–should get together and decide whether Skidmore applies here or whether IMC sets a vast new paradigm for judicial review of agency action.
Part of me kind of wants to know the answer because I’m a nerd.
But on the other hand, I don’t think lead gen is capable of handling another pendulum swing on one-to-one so let’s hope this whole thing stays dead.
Anyway you can read the whole petition here: NCLC En Banc
No Copyright Protection for Birkenstock Sandals: A Significant Decision from the German Federal Court of Justice
On 20 February 2025, the German Federal Supreme Court (BGH) delivered a landmark ruling in a case concerning the copyright protection of Birkenstock sandals. In its decision, the BGH firmly rejected the claim that Birkenstock’s sandal designs qualify for copyright as “applied art” under German copyright law. This judgment not only clarifies the scope of protection for industrial design works but also contrasts with prior rulings from regional courts in Hamburg and Cologne, highlighting the challenges of determining what constitutes “creative” or “artistic” design in functional products.
The Case: Birkenstock’s Fight for Copyright Protection
The case arose when Birkenstock, a prominent footwear brand, sought copyright protection for several of its sandal models, arguing that the designs were works of applied art. The company pursued legal action against various defendants selling or manufacturing sandals that allegedly infringed its copyright. Birkenstock’s argument was based on the claim that its models exhibited a level of artistic creativity deserving of copyright under Section 2 of the German Copyright Act (UrhG), which protects works of applied art if they meet certain requirements.
In earlier proceedings, both the Hamburg District Court and the Cologne Higher Regional Court had taken differing stances on the matter, with one court finding that the sandals could indeed be protected under copyright, and the other dismissing such a claim. However, the BGH ultimately sided with the Cologne Higher District Court, confirming that the Birkenstock sandals did not meet the required threshold for copyright protection.
The BGH’s Reasoning
The BGH’s decision hinges on the fundamental principle that copyright protection is reserved for creations with a certain degree of artistic and creative originality. The court emphasised that applied artworks, such as footwear designs, must reflect a “free and creative” use of design space. When a product’s design is primarily driven by technical or functional constraints, such as the necessity for comfort or durability, it cannot qualify for copyright protection. This has been described by the Cologne Higher District Court (6 U 89/23) as follows:
‘Art tends to be characterised by its freedom of purpose, design by its orientation towards use. Art begins with an idea. Design begins with a task.’
According to the BGH, the designs in question lacked the “design freedom” required to be considered works of applied art. The court pointed out that any creative contribution to the sandal designs was too minimal to meet the necessary level of artistic originality. Essentially, Birkenstock’s sandals were seen as primarily utilitarian products, with the decorative aspects insufficient to elevate them to the level of artistic creation worthy of copyright protection.
Diverging Opinion from the Hamburg District Court
Interestingly, the Hamburg District Court had previously taken a different view on the matter. In the 2022 case (310 O 40/22), the Hamburg District Court ruled that Birkenstock sandals were indeed eligible for copyright protection, recognizing the designs as works of applied art. The court took a more lenient approach, arguing that the aesthetic aspects of the sandals, despite their functional purpose, exhibited enough individuality to warrant copyright recognition.
Conclusion
In fact, the BGH’s decision probably does not change much from a practical perspective when seen in context with the BGH’s reference for a preliminary ruling to the European Court of Justice (ECJ) in the USM Haller case (BGH: ECJ referral on the concept of a work under copyright law — USM Haller GRUR 2024, 132, marginals # 18, 20).
In this reference for a preliminary ruling to the ECJ, the BGH stated that it does not understand the “Cofemel” decision of the Court of Justice (ECJ GRUR 2019, 1185 para. 50–52 — Cofemel) to mean that copyright protection for works of applied art should be subject to stricter requirements than copyright protection for works of purpose free art.
Furthermore, the BGH takes the view that the examination of originality for all types of works must be carried out objectively and uniformly based on the specific work submitted. The subjective view of the author in the sense of creative intention or the awareness of free creative decisions, according to the BGH, should not be relevant (BGH: ECJ referral on the concept of a work under copyright law — USM Haller GRUR 2024, 132, marginal # 27).
The examination is carried out based on circumstances in which a possible creative intention of the creator is expressed in an objectively ascertainable manner. It cannot be inferred from the case law of the Court of Justice that, in addition to the finding that the author made an objectively unconstrained and thus free (creative) decision, it is necessary to establish that the author was aware that he was making a free (creative) decision in this sense.
The awareness of making a creative decision cannot be required either, because artistic achievements can also be made unconsciously or subconsciously (BGH: ECJ referral on the concept of a work under copyright law — USM Haller GRUR 2024, 132, marginal # 30). Insofar as the Court of Justice in the “Brompton Bicycle” decision referred to the factors and considerations that guided the creator in choosing the shape of the product (ECJ GRUR 2020, 736 para. 35 f — Brompton Bicycle), it does not follow from this, in the opinion of the BGH, that the assumption of originality presupposes the establishment of a “conscious” creative decision by the creator. Rather, it follows from the context of the grounds of the court’s decision in the “Brompton Bicycle” case that what matters is whether the result of the creative process constitutes an artistic achievement.
Thus, the national courts must determine whether the author of the product has expressed his creative ability in an independent manner by choosing its shape, by making free creative choices and by designing the product in such a way that it reflects his personality (ECJ GRUR 2020, 736 para. 34 — Brompton Bicycle) (BGH: ECJ referral on the concept of a work under copyright law — USM Haller GRUR 2024, 132, marginal # 31).
While Birkenstock’s iconic sandals are undoubtedly well-recognised globally for their design and comfort, the BGH made it clear that these features alone are not sufficient for protection as copyright. Birkenstock’s iconic sandals, in the view of the BGH, began with a task rather than with an idea. As such, they do not meet the threshold of required creativity. While this ruling contributes to the ongoing dialogue around the limits of intellectual property protection for designs that straddle the line between functionality and artistry, it will certainly not mark the end of this dialogue.
Time Was Not on Her Side: 5th Circuit Rules Unpaid Mentor’s Claim of Discrimination Is Untimely
In Title VII actions, plaintiffs have a limited amount of time to file a charge of discrimination (or a court can dismiss the case as untimely). In the case of Wells v. Texas Tech University, the timeliness dynamic was further complicated by a question of whether unpaid participation in a program can make you an employee. The Fifth Circuit took a hard look at both and determined that the plaintiff’s claim was too late.
(Paid) Life in the Lab and Unpaid Mentoring
Cara Wells was a research assistant back in 2009 in the Animal and Food Sciences Lab at Texas Tech University. In that position, Wells claimed that two professors bullied and harassed her, including forcing her to share a hotel room with a male professor during certain conferences. After she graduated and started her PhD program, she continued to work in that lab. She graduated from her doctoral program in 2017 but stayed at the lab as an assistant. She then went on to participate in Texas Tech’s Accelerator Hub program and founded two companies, using one of her former professors as a mentor. There were some professional issues between Wells and the professor, and in 2020, Wells ultimately reported to the Texas Tech the harassment she claimed she suffered during her student days.
In May 2022 (about two years after her harassment report), Wells joined Texas Tech’s Hub program as an unpaid mentor. Texas Tech removed her from that program about a month later, removed her from the website, and took her off any publications. In November 2022, Wells filed an EEOC charge alleging sex discrimination, sex harassment, and retaliation. She claimed the harassment started in 2012 when she was an undergrad research assistant and continued through 2022 when she was removed as a Hub mentor. She later filed suit against Texas Tech for the same claims.
Employee Status and Timeliness
Texas Tech moved to dismiss Wells’ claims as untimely. Title VII requires that a charging party file an EEOC charge within 180 days of the unlawful employment action. The lower court determined that Wells’ last employment with Texas Tech was in 2017 (while she was a doctoral student), so her November 2022 charge was far outside the required time period. Wells argued that her participation in the unpaid Hub mentor program in 2022 gave her employee status.
The Fifth Circuit used the “direct-renumeration” test to determine whether Wells was an employee for the purpose of Title VII. The test requires that an individual receive either wages or job-related benefits to be considered in an employment relationship. As an unpaid mentor, the court decided that Wells received neither and therefore was not an employee after 2017. The court found that her claims were untimely.
Wells also argued that even if her employment with Texas Tech ended in 2017, she reported the harassment in 2020 and was retaliated against in May 2022 — so her November 2022 charge of discrimination was timely. The court did not agree and stated that while former employees had the ability to file retaliation claims, the system was not set up “to permit a perpetual cause of action for any unfavorable action taken in the future.” Courts should look to see if the time passing between the protected activity and the adverse employment action is too “attenuated” to support a claim for retaliation. In this case, the court held that the two years between her reporting the harassment and her subsequent removal from the mentor program was too long to establish a causal connection.
What Can We Learn from This?
As with most employment issues, documentation is key. When trying to establish a timeline of when things occurred, having memos in the file and completed forms with dates makes a big difference. An employer who can definitely show when a complaint was filed may be able to use it to further a timeliness defense.
The court’s discussion of the plaintiff’s unpaid mentoring status also shows why written job descriptions and payment/benefits statements are helpful. Employers should consistently update the duties and pay (or non-pay) of positions within the company. It is also important to evaluate what sort of benefits are provided to unpaid interns and fellows so you don’t put yourself into an employment relationship without knowing it.
Supreme Court Limits Clean Water Act Permit Requirements in San Francisco v. EPA
On March 4, 2025, the U.S. Supreme Court in City and County of San Francisco v. Environmental Protection Agency held that “end-result” permit requirements are not allowed under the Clean Water Act (“CWA”). The Supreme Court characterized end-result requirements as “permit provisions that do not spell out what a permittee must do or refrain from doing,” but instead make a permit holder responsible for receiving water quality. Many individual and general National Pollutant Discharge Elimination System (“NPDES”) permits contain such “end-result” requirements—and the Supreme Court’s ruling is expected to have significant impacts on NPDES permitting going forward.
Background
The CWA prohibits anyone from discharging “pollutants” through a “point source” into a “water of the United States” without a NPDES permit. “Pollutants” and “point source” are broadly defined in the CWA. The Supreme Court recently addressed what constitutes a “waters of the United States,” which we discussed here.
NPDES permits authorizing discharges of pollutants are issued by authorized states, tribes, and/or the EPA, depending on which agency has jurisdiction over the discharge area. NPDES permits contain conditions to protect water quality, such as “effluent limits” that restrict the quantities, rates, and concentrations of pollutants that can be discharged by the permittee. They also include monitoring, reporting, and “best management practice” requirements.
San Francisco v. EPA Decision
In 2019, EPA and the California Regional Water Quality Control Board issued a renewed NPDES permit for a San Francisco wastewater treatment facility that discharged treated wastewater into the Pacific Ocean. The renewed permit contained two new “end-result” provisions that:
“prohibit[ed] that facility from making any discharge that ‘contributes to a violation of any applicable water quality standard’ for receiving waters” and
“provide[d] that the city cannot perform any treatment or make any discharge that ‘creates pollution, contamination, or nuisance as defined by California Water Code section 13050.’”
On appeal, the Ninth Circuit Court of Appeals upheld these end-result provisions. The Court reasoned that such open-ended conditions were authorized by CWA Section 1311(b)(1)(C), which states that EPA may impose “any” limitation necessary to meet applicable water quality standards.
In a 5-4 decision, the Supreme Court reversed the Ninth Circuit and held that the CWA does not authorize the inclusion of “end-result” provisions in NPDES permits. Rather, the agency issuing the permit is responsible for determining and spelling out specifically “what steps a permittee must take to ensure that water quality standards are met.”
To support its interpretation, the Court focused on the text of Section 1311(b)(1)(C) and the broader statutory scheme. The Court pointed to the CWA’s so-called “permit shield” provision, which deems a permit holder to be in compliance with the CWA if it follows all permit terms. Noting the importance of the permit shield given the CWA’s imposition of strict liability and harsh penalties for violations, the Court held that the permit shield’s benefit be “eviscerated” by a decision to allow end-result requirements.
The Court also emphasized differences between the CWA and the “Water Pollution Control Act” (“WPCA”), the CWA’s predecessor statute. The WPCA which included a provision expressly allowing end-result requirements, an approach the Court called “backward-looking” and “impractical” –especially in situations where multiple permittees discharge pollutants into a single water body, requiring regulators to “unscramble the polluted eggs after the fact.”
In issuing its decision, the majority heavily relied on the amicus briefs of regulated entities. The dissent believed end-result provisions benefit regulated entities by providing a regulatory tool that can avoid permit delays or denials, but the majority disagreed, stating that the “long list of municipalities and other permittees” supporting San Francisco’s position are “sophisticated entities” who are “better positioned than the dissent to judge what is good for them.”
Impact of San Francisco v. EPA
The Supreme Court’s decision puts an end to “end-result” requirements, which have been used routinely in NPDES permits issued by states and the EPA. The Supreme Court’s ruling means agencies issuing NPDES permits must translate water quality standards into specific, measurable discharge limitations, rather than simply prohibiting contributions to water quality violations.
The Supreme Court’s decision, which applies equally to federal and state NPDES permits, will likely prompt more specific permit requirements. The decision could benefit some permittees by easing permit compliance, providing more certainty as to potential CWA liability, and reducing the number and scope of enforcement actions. However, the decision is also likely to cause delays in permit issuance, while states and the EPA work to implement the new standard announced by the Court.
Delaware Court of Chancery Reminds Delaware Counsel of the Court’s Expectations
The Delaware Court of Chancery is the nation’s preeminent business court due to the large number of businesses that call Delaware home. Both Delaware state and federal courts require Delaware counsel to be actively involved in all aspects of the case. For example, Delaware Court of Chancery Practice Guidelines state that “The concept of ‘local counsel’ whose role is limited to administrative or ministerial matters has no place in the Court of Chancery. The Delaware lawyers who appear in a case are responsible to the Court for the case and its presentation.” While these guidelines are a good start, clients who find themselves in this Court should rely on local counsel for expectations related to Delaware practice that will not be found within the Guidelines.
An example of this unwritten guideline is a Delaware practice touchstone—civility. Clients unfamiliar with Delaware should be aware that although zealous litigation is expected, the Court will not tolerate a deviation from the Delaware practice of civility. The head of the Court of Chancery recently reminded parties in a letter filed on the docket to both parties of the Court’s expectations. In In re SwervePay Holdings Acquisition, LLC, C.A. No. 2021-0447-KSJM, Chancellor McCormick reminded the Parties:
You all have been less than understanding with each other, and that is regrettable. You can do better. Dig deep and hit reset, please. Allow the Delaware attorneys to advise on all aspects of this matter, including the relevant deadlines, the need to meet them, and the need to extend basic courtesies like brief extensions when requested. I am not sure what happened in these circumstances, but it also bears reminding that non-Delaware attorneys should not dump a brief on their Delaware friends at the last minute. If that admonition is irrelevant to the parties here, all the better.
The Court of Chancery has had a steady increase in expedited actions, which leaves little patience for the Court’s involvement in trivial scheduling or discovery disputes. According to the most recent Court of Chancery Annual Report of the Judiciary, the request for expedition increased 8% and the overall caseload increased 10%.
If your client is in Delaware, rather than run to the Court to work it out for you, the parties should work it out when possible. Delaware is not a jurisdiction for gamesmanship, especially in the Court of Chancery where your fact-finder is the Chancellor or Vice Chancellor, as there are no jury trials in the Court of Chancery.
Make sure you keep local counsel actively involved, as they can advise on best practices in the Delaware Court of Chancery.
Unified Patent Court Publishes First Annual Report
The Unified Patent Court (UPC) and the Unitary Patent, which launched on June 1, 2023, marked a historic milestone, allowing for the enforcement of patents across borders via a single court. The UPC has now issued its first Annual Report.
Of note, since its inception, the UPC has handled a significant number of cases, with 633 actions filed by the end of 2024. This large influx of filings has enabled the Court to already develop a baseline comprehensive body of case law, enhancing legal certainty and predictability.
Of further note, looking ahead, the UPC plans to implement a new Case Management System by mid-2025, in collaboration with the European Patent Office, to address current system limitations. The Court also aims to establish the Patent Mediation and Arbitration Centre to enhance its dispute resolution capabilities, with a goal of allowing it to become operational this year. We will continue to monitor these new developments as the UPC continues to evolve as a pillar of the European patent system.
Venezuela TPS Update: 18 State Attorneys General File Amicus Brief Supporting Plaintiffs Challenging TPS Termination
On Feb. 19, 2025, the National TPS Alliance, an advocacy group for immigrants who have been granted Temporary Protected Status (TPS), and seven Venezuelans living in the United States, filed a lawsuit in U.S. District Court for the Northern District of California challenging the decision of Department of Homeland Security (DHS) Secretary Kristi Noem to terminate Venezuela TPS. Noem had decided not to extend the 2023 Venezuela TPS designation. That designation will expire April 7, 2025.
On March 7, 2025, the attorneys general of 18 states, including California, Massachusetts, and New York, filed an amicus brief in support of the plaintiffs. The attorneys general contend that Secretary Noem’s decision to terminate Venezuela TPS was “baseless and arbitrary” and founded on unsubstantiated claims that Venezuelans with TPS cost the United States billions in tax dollars and threaten the nation’s economy, safety, and public welfare.
The attorneys general argue, “The vacatur and termination at issue in this litigation, which aim to strip legal protection from a community that comprises more than 50 percent of all [temporary protected status] holders, rest largely on such erroneous and unsubstantiated assertions. … Far from being a burden or threat to our States, Venezuelan TPS holders are a resounding benefit.”
In response, DHS argues that the court lacks the authority to review its discretion to terminate Venezuela’s TPS designation and that the plaintiffs have failed to provide evidence demonstrating Secretary Noem’s decision to terminate the designation was motivated by discrimination or animus.
FTC Requests Input from Tech Platform Users About Speech
The Federal Trade Commission recently requested public comment from users of tech platforms. In particular, the impact the platforms may have on user speech. Input is sought -by May 21- on the extent to which tech firms are engaging in potentially suppressing free speech.
Using terms like “censorship,” “demonization,” and “shadow banning,” this request for public comment signals a new direction of the agency under Andrew Ferguson. The direction being taken reflects the concern expressed before the new administration: that tech platforms were using their roles to censor speech (see Murthy v. Biden).
The request is unlike those we had seen in the past from the FTC, insofar as it requests comment about the tech platforms not from the platforms themselves, but instead directly from users. As of this writing, the agency had received over 1,000 comments. Among other things, the agency has asked people to provide input on:
Impact: Whether tech platforms banned users from the platform because of the content of their speech, or took other adverse actions and the extent to which those actions adversely impacted them. Relatedly, the request asks if people were given a “meaningful” way to challenge adverse decisions.
Moderation: Whether there were moderation policies in place, and if the platform told people (even implicitly) that they could appeal the platforms’ decisions. Also asked was whether the platforms used “opaque” or “unpredictable” processes to restrict access.
Pressure: Interestingly, the request asks potential commenters to speculate on “factors [that] motivated platforms’ decisions.” Included in these might be measures that resulted in them getting banned from the platform. This includes suggestions like pressure from advertisers, state or local governments, or foreign governmental action.
Competition: If the tech platforms were coordinating directly or through trade associations about policy and adverse actions.
Putting it into Practice: Private platforms’ moderation policies date to the early days of the Internet, and the Digital Millennium Copyright Act and the Communications Decency Act. These policies typically indicate that content that violates the policy will be removed (the alternative -modifying content- would run the risk of the platform participating in the creation of the content, losing the shield of the DMCA or CDA). We anticipate comments from industry groups, in addition to the many already received from users themselves. The comment period closes May 21.
James O’Reilly also contributed to this article.
Listen to this post