Justia Government Contracts Opinion Summaries

Klund purports to supply electrical parts. In 1991 and in 1993, he was convicted for fraudulent misrepresentations involving defense contracts. Disqualified from the award of government contracts, from 2011-2019, Klund bid on defense contracts using shell corporations, aliases, and the names of employees and relatives. He certified that one shell company was a woman-owned business, eligible for special consideration. Klund bid on 5,760 defense contracts and was awarded 1,928 contracts worth $7.4 million. Klund satisfactorily performed some of his contracts; the Department paid $2.9 million for these goods. But he knowingly shipped and requested payment for 2,816 nonconforming electrical parts and submitted invoices for parts that he never shipped.Klund pleaded guilty to wire fraud, aggravated identity theft, and money laundering. The PSR calculated the intended loss at $5.7 million and the actual loss at $2.9 million. Since Klund fraudulently obtained contracts intended for woman-owned businesses, the PSR did not apply an offset for the cost of goods actually delivered under those contracts. An 18-level increase in Klund’s offense level applied because the loss was more than $3,500,000 but not more than $9,500,000, U.S.S.G. 2B1.1(b)(1)(J). With an advisory range of 87-108 months, Klund was sentenced to 96 months’ imprisonment with a mandatory consecutive sentence of 24 months for aggravated identity theft. The Seventh Circuit affirmed, upholding the loss calculations. View "United States v. Klund" on Justia Law

Plaintiffs worked for MBO and Trustmark, which provide medical billing and debt‐collection services to healthcare providers. After they raised concerns about their employers’ business practices, the plaintiffs were fired. They sued MBO, Trustmark, and MBO's client, the University of Chicago Medical Center (UCMC), under the False Claims Act, 31 U.S.C. 3729. Regulations specify that Medicare providers seeking reimbursement for “bad debts” owed by beneficiaries must first make reasonable efforts to collect those debts. The plaintiffs claim that UCMC knowingly avoided an obligation to repay the government after it effectively learned that it had been reimbursed for non-compliant debts; MBO and Trustmark caused the submission of false claims to the government. Each plaintiff also claimed retaliation.The Seventh Circuit affirmed the dismissal of the complaint, in part. The district court properly dismissed the claim against UCMC, which neither had an established duty to repay the government nor acted knowingly in avoiding any such duty. The direct false claim against MBO was also correctly dismissed. The complaint failed to include specific representative examples of non-compliant patient debts, linked to MBO, for which reimbursement was sought. The court reversed in part; the complaint includes specific examples of patient debts involving Trustmark. Two plaintiffs alleged facts that support the inference that they reasonably believed their employers were causing the submission of false claims. View "Sibley v. University of Chicago Medical Center" on Justia Law

The Seventh Circuit affirmed the judgment of the district court granting the State's motion to dismiss this action brought by two Illinois counties challenging the 2021 passage of a law prohibiting State agencies and political subdivisions from contracting with the federal government to house immigration detainees, holding that the district court properly dismissed the action for failure to state a claim.In their complaint, Plaintiffs argued that the law at issue was invalid under principles of both both field and conflict preemption and that it violated the doctrine of intergovernmental immunity. The district denied relief. The Seventh Circuit affirmed, holding (1) because it was not preempted by federal immigration statutes the law was not invalid as a matter of field or conflict preemption; and (2) the law did not violate principles of intergovernmental immunity. View "McHenry County v. Raoul" on Justia Law

Lanahan was a longtime employee of Cook County’s Department of Public Health responsible for managing federal grants. After her retirement, Lanham filed a qui tam suit, alleging various violations of the False Claims Act, 31 U.S.C. 3729(a)(1), arising out of the use of federal grants. Lanaham claimed she repeatedly warned Cook County it was seeking federal reimbursement for unincurred expenses, for example by estimating the time dedicated to federal service after the fact and pinning the salary allocations submitted for reimbursement to the CDC to pre-performance budget estimates and failing to segregate federal reimbursement funds from unaffiliated Cook County revenue.The Seventh Circuit affirmed the dismissal of the suit. The court noted the lack of specificity about false claims and statements and the complaint’s use of conclusory statements. The complaint alleged, for example, that Cook County failed to segregate government funds but did not allege that the county was not entitled to those funds. View "Lanahan v. County of Cook" on Justia Law

In a suit under the False Claims Act (FCA), Proctor alleged that Safeway knowingly submitted false claims to government health programs when it reported its “retail” price for certain drugs as its “usual and customary” price, although many customers paid less than the retail price because of discount and price-matching programs. The district court granted Safeway summary judgment, concluding that Safeway’s pricing practices were “objectively reasonable” and no “authoritative guidance” cautioned against its interpretation of Medicare and Medicaid regulations.While the case was pending, the Seventh Circuit held that a defendant does not act with reckless disregard as long as its interpretation of the relevant statute or regulation was objectively reasonable and no authoritative guidance warned the defendant away from that interpretation. Failure to satisfy that standard for reckless disregard precludes liability under FCA’s actual knowledge and deliberate indifference provisions, which concern higher degrees of culpability.The Seventh Circuit then affirmed summary judgment in favor of Safeway. A footnote in a Centers for Medicare and Medicaid (CMS) manual does not constitute “authoritative guidance.” CMS can (and did) revise the manual at any time, and a single footnote in a lengthy manual does not support treble damages liability in this case. The other sources of guidance Proctor identified are unpersuasive because they do not come from the agency. View "Proctor v. Safeway, Inc." on Justia Law

Mamalakis, a Wisconsin anesthesiologist, filed a qui tam lawsuit (False Claims Act, 31 U.S.C. 3729), alleging that Anesthetix, his former employer, fraudulently billed Medicare and Medicaid for services performed by its anesthesiologists. His central allegation is that the anesthesiologists regularly billed the government using the code for “medically directed” services when their services qualified for payment only at the lower rate for services that are “medically supervised.” A magistrate judge held that the complaint did not provide enough factual particularity to satisfy the heightened pleading standard for fraud claims, FED. R. CIV. P. 9(b). Mamalakis filed an amended complaint that included 10 specific examples of inflated billing, each identifying a particular procedure and anesthesiologist and providing details about how the services did not qualify for payment at the medical-direction billing rate. Six examples included a specific allegation that the anesthesiologist billed the services using that code; the other four relied on general allegations regarding the group’s uniform policy of billing at the medical-direction rate. The judge dismissed the case with prejudice.The Seventh Circuit reversed. Although Rule 9(b) imposes a high pleading bar to protect defendants from baseless accusations of fraud, Mamalakis cleared it. The examples, read in context with the other allegations in the amended complaint, provide sufficient particularity about the alleged fraudulent billing to survive dismissal. View "Mamalakis v. Anesthetix Management LLC" on Justia Law

Joliet condemned a housing complex managed by New West and paid $15 million. HUD rent subsidies for low-income tenants provided almost all of the money for operating the development. A $2.7 million fund had been established by New West and HUD, to cover necessary maintenance and repairs in the event of a default by New West. HUD refused to release that account to New West, contending that it now holds the account to cover Joliet’s obligations.The Seventh Circuit affirmed the summary judgment rejection of New West’s suit to recover the account. New West cannot establish conversion of the fund without first establishing ownership. HUD’s lien on the fund does not establish ownership of the fund and New West has not established its ownership by showing that it treated deposits into the fund as taxable income. View "New West, L.P. v. Fudge" on Justia Law

Molina Healthcare contracted with the Illinois Medicaid program to provide multiple tiers of medical-service plans with scaled capitation rates (fixed per-patient fees that cover all services within the plan’s scope). The Nursing Facility plan required Molina to provide Skilled Nursing Facility (SNF) services. Molina subcontracted with GenMed to cover that obligation. Molina received a general capitation payment from the state, out of which it was to pay GenMed for the SNF component. Molina breached its contract with GenMed. GenMed terminated the contract. After GenMed quit, Molina continued to collect money from the state for the SNF services, but it was neither providing those services itself nor making them available through any third party. Molina never revealed this breakdown, nor did it seek a replacement service provider.Prose, the founder of GenMed, brought this qui tam action under both the state and federal False Claims Acts, 31 U.S.C. 3729, alleging that Molina submitted fraudulent claims for payments from government funds. The district court dismissed the case. The Seventh Circuit reversed. The complaint plausibly alleges that as a sophisticated player in the medical-services industry, Molina was aware that these kinds of nursing facility services play a material role in the delivery of Medicaid benefits. View "Prose v. Molina Healthcare of Illinois," on Justia Law

A False Claims Act, 31 U.S.C. 3729(a)(1)(A), “qui tam” lawsuit against SuperValu claimed that SuperValu knowingly filed false reports of its pharmacies’ “usual and customary” (U&C) drug prices when it sought reimbursements under Medicare and Medicaid. SuperValu listed its retail cash prices as its U&C drug prices rather than the lower, price-matched amounts that it charged qualifying customers under its discount program. Medicaid regulations define “usual and customary price” as the price charged to the general public. The district court held that SuperValu’s discounted prices fell within the definition of U&C price and that SuperValu should have reported them but held that SuperValu did not act with scienter.The Seventh Circuit affirmed, joining other circuits in holding that the Supreme Court’s 2007 “Safeco” interpretation of the Fair Credit Reporting Act’s scienter provision applies with equal force to the False Claims Act’s scienter provision. There is no statutory indication that Congress meant its usage of “knowingly,” or the scienter definitions it encompasses, to bear a different meaning than its common-law definition. SuperValu did not act with the requisite knowledge. SuperValu’s interpretation of “usual and customary price” was objectively reasonable under Safeco. View "Yarberry v. Supervalu Inc." on Justia Law

Companies that tow or recycle used cars alleged that Milwaukee and its subcontractor, engaged in anticompetitive behavior to self-allocate towing services and abandoned vehicles, a primary input in the scrap metal recycling business. They alleged that an exclusive contract the city entered into with one of the area’s largest recycling providers, Miller Compressing, violated the Sherman Act, 15 U.S.C. 1, and that the contract provided direct evidence of an agreement to restrain trade. They cited laws that require a city-issued license to tow vehicles from certain areas, that obligate towing companies to provide various notices, and that cap maximum charges imposed on vehicle owners who have illegally parked or abandoned their vehicles, as having been enacted to squeeze them out of the market.The Seventh Circuit affirmed the dismissal of the suit. The arrangement between the city and Miller is not per se unreasonable on the basis of horizontal price-fixing. The court also rejected a claim of “bid-rigging.” View "Always Towing & Recovery Inc. v. City of Milwaukee" on Justia Law