Courts enforce arbitration agreements and review awards narrowly. It is, therefore, notoriously difficult to overturn an unfavorable arbitration award – the grounds are narrow by statute, and courts are loath to expand the grounds by judicial fiat. This past summer brought five decisions in under two months that turned away five different theories: functus officio, manifest disregard, public policy, plain untimeliness, and arbitrator legal error. One decision does open a door, though not for the party that lost. The Third Circuit held that an arbitration panel may revisit its own award to clarify a genuine ambiguity, and that, where the parties’ chosen arbitration rules let the panel interpret the limits of its own powers, a reviewing court should defer to the clarification – once again, an example of judicial reticence to interfere in the arbitration process.

Executive Summary

Between July and August 2026, the Second, Third and Eighth Circuits, the Southern District of New York, and a California Court of Appeal each declined to disturb an arbitration award, on five distinct grounds. In Prospect Capital Management L.P. v. Stratera Holdings, LLC, 185 F.4th 429 (3d Cir. 2026), the Third Circuit held that a panel’s revised award clarifying an ambiguous fee ruling fell within the ambiguity exception to functus officio, and — because the parties’ AAA rules delegated that question to the panel — deferred to it as at least a rational clarification. In Acorda Therapeutics, Inc. v. Alkermes PLC, No. 25-1896, 2026 WL 2042719 (2d Cir. July 15, 2026) (summary order), the Second Circuit refused to add $65 million to a $16.5 million restitution award in the licensee’s favor, holding the tribunal had not manifestly disregarded patent law because Supreme Court precedent in the patent area does not require restitution of royalties a licensee knowingly paid. In Compeer Financial, ACA v. Corporate America Lending, Inc., 180 F.4th 1119 (8th Cir. 2026), the Eighth Circuit declined to decide whether a public-policy exception survives the Supreme Court’s decision in Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) that the Federal Arbitration Act provides the exclusive ground for vacatur, because the panel had rested on independent alternative grounds that made any violation harmless. In Triad Health LLC d/b/a MediraRx v. Novus Health, Inc., No. 26-CV-1957 (JPO), 2026 WL 2532306 (S.D.N.Y. Aug. 27, 2026), the Southern District of New York confirmed a AAA award in a 340B third-party-administrator dispute, deferring to the arbitrator’s finding that the challenger had waived its jurisdictional objection by not raising it in time, and rejecting an evident-partiality challenge both because no objection was made by the AAA’s deadline and because the disclosed relationship was remote and insubstantial. And in Saberin v. Alation, Inc., 122 Cal.App.5th 165 (2026), a California Court of Appeal held that an arbitrator’s legal error that forecloses a hearing on the merits of an employee’s unwaivable FEHA claim is subject to judicial review — and then affirmed the denial of vacatur anyway, deferring to the arbitrator’s factual findings.

Taken together: the substantive doors remain narrow, the procedural ones close on a clock, and even the one merits door that is genuinely open leaves the arbitrator’s factual findings in place.

Background: The Legal Landscape After Hall Street

The Federal Arbitration Act permits vacatur only on narrow grounds — corruption, fraud or undue means; evident partiality or corruption in the arbitrators; misconduct or misbehavior that prejudiced a party’s rights; and arbitrators exceeding their powers, or so imperfectly executing them that no mutual, final and definite award was made. 9 U.S.C. § 10(a). Section 11 permits modification or correction for evident material miscalculations or misdescriptions, awards on matters not submitted (unless the matter does not affect the merits of the decision on what was submitted), and imperfections of form not affecting the merits. Id. § 11. Some courts have added two judicial glosses: manifest disregard of the law, and a public-policy exception. Both have been in doubt since the Supreme Court decided Hall Street in 2008.

Hall Street arose from a lease dispute in which the parties, partway through federal litigation, agreed to arbitrate one issue and wrote their own standard of review into the agreement: the court would vacate or modify any award whose findings of fact were not supported by substantial evidence or whose conclusions of law were erroneous. 552 U.S. at 579. The Supreme Court held that the FAA would not enforce that bargain. Sections 10 and 11, it held, “provide the FAA’s exclusive grounds for expedited vacatur and modification,” id. at 584, and Section 9’s command that a court “must grant” confirmation unless the award is vacated, modified or corrected under those sections leaves no room for more: “There is nothing malleable about ‘must grant.’” Id. at 587. Parties can agree to arbitrate, and they can shape how the arbitration is run, but under the FAA they cannot contract for a court to review the result based on anything other than what the FAA provides, including expanded appellate review.

That holding put both judicial glosses in doubt. Manifest disregard traces to a phrase in Wilko v. Swan, 346 U.S. 427, 436–37 (1953), overruled on other grounds by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989), and Hall Street declined to say what the phrase meant: perhaps a new ground for review, perhaps a reference to the Section 10 grounds collectively, or perhaps “shorthand for § 10(a)(3) or § 10(a)(4).” 552 U.S. at 585. Two years later, the Court expressly left the question open. Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662, 672 n.3 (2010). The circuits have answered it differently. The Second Circuit treats manifest disregard as a “judicial gloss” on Section 10, T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 340 (2d Cir. 2010); the Ninth folds it into Section 10(a)(4), Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277, 1290 (9th Cir. 2009); and the Fifth and Eleventh hold that the statutory grounds are exclusive, Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349, 355 (5th Cir. 2009); Frazier v. CitiFinancial Corp., 604 F.3d 1313, 1324 (11th Cir. 2010). The Fourth Circuit, expressly declining to follow the Fifth and Eleventh, holds that manifest disregard survives — as an independent ground or as a judicial gloss on Section 10 — without deciding which. Wachovia Securities, LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012). The public-policy exception has a different pedigree — W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 766 (1983), a labor-arbitration case — but after Hall Street it faces the same objection: it is not in Section 10. Hall Street did leave one door ajar. The FAA, the Court said, “is not the only way into court for parties wanting review of arbitration awards,” and state statutory or common law may supply review of a different scope. 552 U.S. at 590.

California runs a parallel regime under its own arbitration statute. Code of Civil Procedure section 1286.2 supplies its own vacatur grounds, including that the arbitrator exceeded their powers. Under Moncharsh v. Heily & Blase, 3 Cal.4th 1, 11 (1992), an arbitrator’s decision generally cannot be reviewed for errors of fact or law, but Moncharsh reserved “limited and exceptional circumstances.” Id. at 32. Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665 (2010), identified one: a clear legal error that prevented an employee subject to mandatory arbitration from obtaining a hearing on the merits of his FEHA claim, which the court held could be vacated under section 1286.2(a)(4). Id. at 669–670, 679–680. Pearson expressly declined to decide whether all legal errors in that setting are reviewable, and it noted that several federal circuits reach comparable errors through manifest disregard as part of Section 10(a)(4). Id. at 677 n.3, 679.

Separately, as a default rule, functus officio prevents arbitrators from redetermining the merits of an issue they have finally decided. Parties may contract around the rule. Its traditional exceptions permit correction of facial clerical or arithmetic errors, resolution of issues that were submitted but not decided, and clarification of genuine ambiguity. Prospect Capital, 185 F.4th at 434–437 & n.1.

That is the toolkit these five cases used over the summer. They show how little of it helps the losing party in arbitration.

Legal Analysis of the Summer 2026 Cases

The arbitral panel has more authority over its own award than a court does. In Prospect Capital, a panel found that Prospect had breached a fee agreement by excluding one category of shares from a calculation, but the award did not make clear how that ruling applied to the other disputed categories. When the parties raised the point, the panel issued a revised award confirming it applied to all of them. Prospect argued that the arbitral panel no longer had jurisdiction and thus functus officio barred the revision. The Third Circuit disagreed. An ambiguity arises where an award “fails to address a contingency that later arises or when the award is susceptible to more than one interpretation” (citation omitted), and this award was. Prospect Capital, 185 F.4th at 438. The court then deferred, concluding the revised award “was at least a rational clarification of its earlier award.” Id. at 440. It tied that deference to the parties’ adoption of the AAA rules, which let the arbitrators interpret and apply the rules governing their own powers — including the rule barring them from redetermining the merits of a decided claim. Id. at 434–435, 440. Two threshold rulings travel with it: an interim award resolving liability but reserving remedy is final as to liability for functus officio purposes, and the doctrine itself remains good law in the Third Circuit.

The court’s power to modify an arbitration award is limited. In Acorda, the fight was over money Acorda had already paid. Acorda licensed a patent from Alkermes and, as its contracts required, kept paying royalties after the patent expired in 2018. About two years later it demanded arbitration and began paying under protest. A tribunal of three retired judges agreed that the clauses requiring post-expiration royalties were unenforceable and ordered Alkermes to refund the roughly $16.5 million Acorda had paid under protest. But it refused to order a refund of the larger sums Acorda had paid earlier without protest, applying New York’s voluntary-payment doctrine, which bars recovery of payments made with full knowledge of the facts. Acorda, 2026 WL 2042719, at *1. Acorda then asked the district court to vacate or modify the award so that it would recover another $65 million, arguing that the tribunal had manifestly disregarded federal patent law. Manifest disregard is not one of the FAA’s statutory grounds, and the Second Circuit treats it as a judicial gloss on the vacatur grounds in Section 10, and a “severely limited” one at that: the challenger must identify “well-defined” and “explicit” law that the arbitrators ignored, and the award stands so long as there is “a barely colorable justification for the outcome reached by the arbitrators.” Acorda, 2026 WL 2042719, at *1–2. (The district court had noted that, since Hall Street, the Second Circuit has recognized manifest disregard only as a ground for vacatur, not modification; the Second Circuit found it unnecessary to decide that question. Id. at *1 n.1.) Acorda could not point to any explicit law requiring full restitution. The cases it relied on, Brulotte v. Thys Co., 379 U.S. 29 (1964), and Kimble v. Marvel Entertainment, LLC, 576 U.S. 446 (2015), bar royalties for post-expiration use of the patented invention; neither establishes that a licensee who knowingly paid the challenged royalties is entitled to complete restitution. Acorda had conceded as much during the arbitration: “neither Brulotte nor Kimble addressed damages.” Id. at *2. With no explicit federal rule requiring full restitution, the tribunal’s use of New York law to measure Acorda’s state-law restitution claim had at least a colorable justification. Id. at *3. The court assumed, without deciding, that a public-policy challenge remains available, and rejected it for the same reason. Id. at *1 n.2, *2–3.

The public-policy question survived by not being reached. In Compeer, the losing party argued the award enforced a contract that violated the Farm Credit Act and therefore public policy. The Eighth Circuit observed that the circuits divide over whether judge-made grounds for vacatur survive Hall Street — as noted above, the Ninth Circuit treats manifest disregard as part of § 10(a)(4), while the Fifth and Eleventh Circuits hold the statutory grounds exclusive — and expressly declined to decide whether the public-policy exception survives. Compeer, 180 F.4th at 1128–29. It did not have to. The panel had granted alternative claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, so even if part of the award offended public policy, the result rested on independent grounds, and any error was harmless. Id. at 1129.

That reasoning is worth more than the holding. An award resting on alternative independent grounds is materially harder to unwind, because a challenger attacking the substance of the award has to defeat every route to the same result rather than the most vulnerable one — though a defect that taints the whole award, such as partiality, is a different matter.

Objections not raised in time during the arbitration are hard to revive. In Triad Health, a 340B third-party administrator, MediraRx, moved to vacate a AAA award holding that the covered entity had properly terminated their administration agreement. It raised three grounds, and none succeeded. First, it argued that the award reached into related pharmacy contracts that carried their own forum-selection clauses. The court disagreed: the award resolved only rights under the administration agreement and, as the arbitrator had found, left the pharmacy contracts to be decided on their own merits in their own forums. Triad Health, 2026 WL 2532306, at *5–6. Second, MediraRx argued that the arbitrator had usurped a court’s role in deciding whether those later contracts limited the arbitration clause. The arbitrator had found that MediraRx waived that objection by not raising it in time under AAA Commercial Rule 7(c), and the court deferred to that finding, explaining that its own view of whether waiver occurred was “irrelevant.” Id. at *7–8. An objection to arbitrability “must be made on a timely basis, or it is waived.” Id. at *7 n.4 (quoting ConnTech Dev. Co. v. Univ. of Conn. Educ. Props., Inc., 102 F.3d 677, 685 (2d Cir. 1996)). Third, MediraRx challenged the arbitrator’s mid-case disclosure of an old connection with its own counsel’s firm. It had never objected by the AAA’s deadline, and in any event the relationship was disclosed, remote and insubstantial, and the claimed bias speculative. Id. at *4–5. The court confirmed the award and declined to award fees, finding that the record did not show the petition was brought in bad faith. Id. at *8.

California review is available, but the arbitrator’s findings still control. Saberin turns on geography. Pejman Saberin, an engineer, worked for Alation, Inc., a data-software company headquartered in California. But he lived in Utah and worked remotely from there, and his direct supervisor worked remotely from Washington state. In October 2023, he was arrested in Florida while returning from a vacation. The two executives who decided to terminate him — one who worked from Utah, the other who ordinarily worked from his home in California — were both in Illinois when they made the decision, with “input” from a human-resources employee who worked in California. The criminal case was later dismissed. Saberin, 122 Cal.App.5th at 170–171, 179–180.

Saberin claimed that Alation violated two California statutes that bar employers from considering an arrest that did not lead to a conviction: Government Code section 12952, part of FEHA, and Labor Code section 432.7. The claims went to arbitration under his employment agreements, one of which called for arbitration “pursuant to California law.” Alation argued that neither statute reaches an employee who lives and works outside California, and the arbitrator agreed. Because Saberin could identify no Utah, federal, or other non-California law under which to proceed, the parties stipulated to an award in Alation’s favor so that he could challenge the ruling promptly. He then petitioned to vacate under Code of Civil Procedure section 1286.2(a)(4), arguing that the arbitrator had exceeded his powers. Id. at 170–172.

The Court of Appeal first held that the ruling was reviewable. Under Pearson, an arbitrator’s legal error that deprives an employee of a hearing on the merits of an unwaivable FEHA claim is subject to judicial review, and the arbitrator’s ruling here had done exactly that. Id. at 173–174. (The court assumed, without deciding, that the same was true of the Labor Code claim. Id. at 173 n.2.) Nor had Saberin waived review. Nothing in Moncharsh suggests a party gives up a section 1286.2(a)(4) challenge “by simply agreeing to arbitrate a dispute,” and Saberin had pressed his California-law arguments before the arbitrator; he did not also have to predict that an adverse ruling would exceed the arbitrator’s powers. Id. at 174–175.

Reviewing the question de novo, the court then held that Saberin could not invoke either statute. Id. at 175. The fact that he had chosen a California forum and California law did not change the answer. The court accepted that California law governed, whether through the choice-of-law clause in his employment agreement or the rule that a forum applies its own law. But California law includes the presumption that its statutes are meant to apply only within the state, so a clause selecting California law brings that presumption with it. Id. at 175–176. The question was therefore not which state’s law applied, but whether the Legislature meant these two California statutes to reach a worker like Saberin, who resided outside of California. Following Ward v. United Airlines, Inc., 9 Cal.5th 732 (2020), which requires a statute-by-statute inquiry into geographic reach, the court concluded that, for a worker outside California, each statute applies only if the unlawful conduct — here, the decision to terminate him because of the arrest — has a sufficient connection to California. Saberin, 122 Cal.App.5th at 176–179. There was none. Saberin, his supervisor, and the arrest all occurred outside the state, and the termination decision was made in Illinois. The decisionmaker’s usual California home did not change that, since nothing suggested he had been sent out of state to avoid California law. As for the HR employee’s input, the arbitrator had called it a “tenuous” thread; the court read that as an implied factual finding that the input was not substantive, and deferred to it. Id. at 179–181.

The sequence is the lesson. Saberin won the argument about whether a court could review the ruling and lost the case anyway: a door to review is not a remedy. Because the court affirmed, it never had to decide what the remedy would have been — Saberin had argued that the arbitration agreement should be set aside and the case returned to court, and the court expressly left that open. Id. at 181 n.6. Note also what survived de novo review: the arbitrator’s factual findings still drew deference. Even in this narrow posture, the reviewing court works from the record the arbitrator built.

Holdings

Prospect Capital: affirmed. The ambiguity exception to functus officio permitted the panel’s revised award, and the clarification was entitled to deference given the parties’ adoption of AAA rules delegating that question to the panel. Precedential.

Acorda: affirmed. No manifest disregard; public-policy challenge rejected, assuming without deciding that such a challenge remains available; the district court correctly confirmed without modifying. Summary order, non-precedential but citable under Second Circuit Local Rule 32.1.1.

Compeer: affirmed, including appointment of a receiver. Whether a public-policy exception survives Hall Street left open; any violation harmless given independent alternative grounds. Precedential.

Triad Health: petition and motion to vacate denied; cross-petition to confirm granted; fees denied. Slip copy.

Saberin: affirmed. An arbitrator’s legal error that deprives an employee of a hearing on the merits of an unwaivable FEHA claim is reviewable under Code Civ. Proc. § 1286.2(a)(4) (assumed, without deciding, for the Labor Code claim), and the challenge is not waived by having agreed to arbitrate; on de novo review, neither statute reached this out-of-state employee, and the award stood. Certified for publication.

Arbitration Awards Remain Difficult to Overturn

For a party weighing a challenge, the arithmetic has not improved. The statutory grounds remain narrow, the judicial glosses remain contested, and procedural objections are held to strict time periods. Where California’s arbitration review rules apply, the statutory-rights exception can permit review of a ruling that forecloses a merits hearing — but Saberin shows that obtaining review is not the same as obtaining vacatur.

For a neutral drafting an award, Prospect Capital is the useful decision, and it cuts both ways. A panel may clarify a genuine ambiguity and, where the parties’ chosen rules leave that call to the panel, a court will defer — but the cleanest form of that protection is an award that was never ambiguous. Say how the ruling applies to every category before anyone has to ask. Compeer is a quiet argument for reaching alternative grounds where the record supports them, since an award with two independent legs is far harder to knock over.

What to Watch

First, whether the Eighth Circuit returns to the public-policy question it reserved in Compeer; it now sits beside an acknowledged split without having chosen a side. Second, how far Prospect Capital reaches — it is precedential, and the line between a permissible clarification and an impermissible second look will be tested by the next party that dislikes what a panel clarified. Third, the timeliness holding in Triad Health is not new law, but it is a recurring and avoidable reason a challenge fails and the one most within a party’s own control. Fourth, for arbitration practitioners, the part of Saberin that matters most is its reviewability holding, which sits alongside a statute-specific extraterritoriality holding that decided the case — expect it to be cited by employees seeking review of adverse FEHA arbitration rulings, and expect employers to press the narrow reading that Pearson reaches only a ruling that forecloses a merits hearing altogether.

Cases cited in this blog: Acorda Therapeutics, Inc. v. Alkermes PLC, No. 25-1896, 2026 WL 2042719 (2d Cir. July 15, 2026) (summary order) | Brulotte v. Thys Co., 379 U.S. 29 (1964) | Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) | Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277 (9th Cir. 2009) | Compeer Financial, ACA v. Corporate America Lending, Inc., 180 F.4th 1119 (8th Cir. 2026) | ConnTech Dev. Co. v. Univ. of Conn. Educ. Props., Inc., 102 F.3d 677 (2d Cir. 1996) | Frazier v. CitiFinancial Corp., 604 F.3d 1313 (11th Cir. 2010) | Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) | Kimble v. Marvel Entertainment, LLC, 576 U.S. 446 (2015) | Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992) | Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665 (2010) | Prospect Capital Management L.P. v. Stratera Holdings, LLC, 185 F.4th 429 (3d Cir. 2026) | Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) | Saberin v. Alation, Inc., 122 Cal.App.5th 165 (2026) | Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010) | T.Co Metals, LLC v. Dempsey Pipe & Supply, Inc., 592 F.3d 329 (2d Cir. 2010) | Triad Health LLC d/b/a MediraRx v. Novus Health, Inc., No. 26-CV-1957 (JPO), 2026 WL 2532306 (S.D.N.Y. Aug. 27, 2026) | W.R. Grace & Co. v. Local Union 759, 461 U.S. 757 (1983) | Wachovia Securities, LLC v. Brand, 671 F.3d 472 (4th Cir. 2012) | Ward v. United Airlines, Inc., 9 Cal.5th 732 (2020) | Wilko v. Swan, 346 U.S. 427 (1953), overruled on other grounds by Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989)

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This blog post and alert discusses published and slip-copy decisions for general informational purposes and is not legal advice.

Healthcare / Anti-Kickback Statute · Beneficiary Inducement Statute · HHS-OIG Advisory Opinions

Introduction

Patient-support programs test the outer edge of the Anti-Kickback Statute, with those offering such seemingly beneficial services to patients arguing that, as a criminal bribery statute, the terms “remuneration” and “induce” must be read narrowly to mean corrupt payments and quid-pro-quo dealing, not ordinary financial help that happens to make a treatment easier to choose. The Second Circuit rejected that reading in Pfizer, Inc. v. U.S. Department of Health & Human Services, 42 F.4th 67 (2d Cir. 2022), cert. denied, 143 S. Ct. 626 (2023), and the Fourth Circuit rejected it in Pharmaceutical Coalition for Patient Access v. United States, 126 F.4th 947 (4th Cir. 2025). On September 4, 2026, the D.C. Circuit made it three, in a case about an advisory opinion issued by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services concerning a gene therapy for sickle cell disease and a program offering patients up to $70,000 toward fertility services that chemotherapy may cost them. In addition to joining its sister circuits in giving “remuneration” and “induce” their ordinary meanings, the court made two other rulings under the Administrative Procedure Act. First, it held that OIG acted arbitrarily and capriciously by brushing past a statutory exception with the observation that it “lack[ed] data.” Second, it held that OIG had no authority to issue regulations allowing it to determine when the 60-day statutory deadline for issuing advisory opinions began and could be tolled.

Executive Summary

Vertex makes Casgevy, a gene therapy for sickle cell disease and transfusion-dependent beta-thalassemia. The treatment requires intensive chemotherapy that can impair fertility, so Vertex created a Fertility Support Program offering patients up to $70,000 toward fertility services. It opened the program to privately insured patients and, in June 2023, asked OIG for an advisory opinion on whether extending it to federally insured patients would violate the Anti-Kickback Statute or the Beneficiary Inducement Statute. OIG didn’t issue its opinion for more than a year, and only did so three days after Vertex sued to compel it, concluding that the program would violate both statutes. The district court sided with OIG on every issue. The D.C. Circuit affirmed in part, reversed in part, and remanded. On the AKS, it held that “induce” and “remuneration” carry their ordinary meanings — to influence or prevail upon a person, and valuable compensation in any form — rather than a narrower sense drawn from criminal solicitation and facilitation, joining the Second Circuit in Pfizer and the Fourth Circuit in Pharmaceutical Coalition for Patient Access. On that reading, the program is remuneration to induce the purchase of Casgevy. But the court set aside OIG’s conclusion that the program would also violate the Beneficiary Inducement Statute, holding that the agency failed to engage with the evidence that the statutory Promotes Access to Care Exception applied. And it held that OIG’s regulations — which start the 60-day advisory-opinion clock at “formal acceptance” rather than receipt, and toll it while the agency seeks more information — are contrary to law.

Background

The two statutes

The AKS criminalizes knowingly and willfully offering or paying “any remuneration (including any kickback, bribe, or rebate) … to any person to induce such person … to purchase” an item or service reimbursable under a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(2)(B). Violations are felonies, and the statute carries an extensive set of safe harbors, with authority in the Secretary to create more. The BIS is the civil counterpart, reaching remuneration offered to a beneficiary that the offeror “knows or should know is likely to influence” the beneficiary’s choice of provider, practitioner or supplier. Id. § 1320a-7a(a)(5). Among the BIS’s own exceptions is one for remuneration that “promotes access to care and poses a low risk of harm to patients and Federal health care programs.” Id. § 1320a-7a(i)(6)(F). Parties may ask OIG for an advisory opinion on whether proposed conduct would violate either statute; the opinion binds both the agency and the requester.

The program and the request

Because older patients often cannot tolerate the chemotherapy regimen, Casgevy is best taken young — by patients with their childbearing years ahead of them, who may then need fertility treatments costing tens of thousands of dollars. That is the concern the Fertility Support Program was designed to address, and Vertex withheld it from federally insured patients until OIG ruled.

Vertex requested the advisory opinion on June 13, 2023. OIG formally accepted it on June 26, requested more information, and tolled the deadline until Vertex responded on October 10. OIG said at a November teleconference that it could not issue a favorable opinion, then did not publish. Vertex asked repeatedly over the following months. On July 15, 2024, Vertex sued to compel issuance. Three days later — more than a year after the request and nine months after the supplemental information — OIG issued the opinion, concluding the program would provide prohibited remuneration under both statutes and that the Promotes Access to Care Exception did not apply because the agency “lack[ed] data.” The district court granted summary judgment for OIG on every issue and held the challenge to the timing regulations nonjusticiable once the opinion had issued.

Legal Analysis

• “Induce” means to influence, not to solicit a crime. Statutes sometimes use “induce” in a specialized criminal-law sense carrying common-law solicitation and facilitation. The court held the AKS does not, and the distinguishing feature is what is being induced. In United States v. Hansen, 143 S. Ct. 1932 (2023), the induced act — illegal immigration — was itself a crime. Under the AKS, the act induced is a beneficiary’s selection of medical services, which is lawful. With no unlawful act at the end of the chain, the presumption that Congress imported the common-law sense weakens considerably.
• The safe harbors are what settle it. The AKS’s safe harbors cover prosaic transactions — a hospital paying its physicians, a health center waiving coinsurance for a patient who qualifies for subsidized services, a pharmacy waiving a co-pay for a patient in good-faith financial need. If “induce” meant criminal solicitation, none of those would ever have needed excepting, and the safe harbors would be largely surplus. The court quoted the Fourth Circuit’s formulation that the narrow reading would “create vast superfluity in the statute.” Pharm. Coal. for Patient Access, 126 F.4th at 958.
• “Remuneration” is not confined to corrupt payments. Vertex argued that the parenthetical — “(including any kickback, bribe, or rebate)” — colors the term under noscitur a sociis (the canon that a word is known by the company it keeps). The court answered on the list’s own contents: a kickback and a bribe carry corrupt connotations, but a rebate is simply a discount or refund. A list that is not uniformly corrupt cannot narrow the general term to corruption. The court also noted the repeated “any” and the illustrative “including,” both signals of breadth.
• Lenity and vagueness got no traction. Neither the rule of lenity nor constitutional avoidance has a role, the court held, where text, context and structure resolve the question. On vagueness, the possibility of close cases does not make a statute vague, and the AKS’s knowing-and-willful scienter requirement alleviates the concern — a point on which the court noted the First, Ninth and Eleventh Circuits have come out the same way.
• The BIS ruling is an administrative-law ruling. The court held that OIG never explained why the Fertility Support Program does not qualify under the statutory exception promoting access to care. Vertex had submitted studies that infertility risk leads sickle cell patients to forgo potentially lifesaving treatment, evidence that many patients cannot afford fertility services, CMS guidance describing lack of access to fertility preservation as a significant access barrier for gene therapy candidates, and program controls limiting eligibility to patients already prescribed the therapy. OIG’s entire response was that it lacked data to determine that the program improves access. It did not say what data, why it could not obtain it, or why Vertex’s showing fell short. The district court’s view that the agency’s “path may reasonably be discerned” did not survive.
• A statutory deadline is a deadline. Congress specified, as part of the required contents of the advisory-opinion regulations, that the Secretary “shall be required to issue” an advisory opinion “not later than 60 days after the request is received.” 42 U.S.C. § 1320a-7d(b)(5)(B)(i). OIG’s regulations started the clock at formal acceptance — up to ten business days after receipt — and tolled it while the agency sought additional information or outside expert advice. Neither provision is authorized by the statute. Drawing on its en banc decision in Allegheny Defense Project v. FERC, 964 F.3d 1 (D.C. Cir. 2020), the court held that OIG has no “unwritten and unilateral power to indefinitely evade” the deadline, that an agency’s practical need for more time does not license tolling, and that a general grant of procedural authority cannot displace specific statutory text. That the statute attaches no consequence to missing the deadline does not imply permission to regulate around it.
• Mootness did not shield the regulations. Issuing the opinion mooted the claim that it was being unlawfully withheld, but not the challenge to the underlying policy. Vertex, which has sought advisory opinions before and credibly represents that it will again, is a repeat player likely to be subject to the same practice — enough for standing, and the purely legal question was ripe.

Holding

Affirmed in part, reversed in part, and remanded. The court held that OIG correctly concluded that the Fertility Support Program would provide remuneration to induce the purchase of Casgevy within the meaning of the AKS. OIG’s determination that the program would violate the BIS was arbitrary and capricious and is set aside. The advisory-opinion timing provisions are contrary to law: the rules starting the 60-day clock at formal acceptance rather than receipt, 42 C.F.R. §§ 1008.41(b), 1008.43(c)(1), and the tolling provisions, which the court set aside, id. §§ 1008.39(a) (second sentence), 1008.41(e), 1008.43(c).

What to Watch

• What the court expressly left open. There are three. The court did not decide how much influence is required to constitute inducement — it did not need to, given the size and design of this program. It did not decide whether “induce” in the AKS is identical in meaning to “influence” in the BIS. And it did not reach OIG’s alternative theory that the program provides prohibited remuneration to physicians and treatment centers through the opportunity to earn treatment-related fees.
• The remand at OIG. The agency must reconsider the Promotes Access to Care Exception and explain its conclusion. The court also noted that OIG may take a different view on remand of whether to grant prospective immunity under the AKS, a question Vertex did not press on appeal. A reasoned denial remains available; a conclusory one does not.
• Whether the AKS question goes further. Three circuits now read “remuneration” and “induce” broadly and none has held otherwise, which makes this an unlikely vehicle for Supreme Court review and a diminishing argument at the district-court level. Watch for a rehearing or certiorari petition on the ordinary timeline; none had been reported as of this writing.
• Advisory opinions as a usable tool. If the 60-day clock runs from receipt and cannot be tolled, the advisory opinion process becomes something a company can plan around rather than an open-ended wait — Vertex’s own took more than a year. OIG’s response to the compressed deadline it now faces will be interesting to watch.
• Program design in the meantime. Patient-support programs tied to a specific product or service remain exposed under the AKS regardless of the benevolence of their purpose. The defensible space has moved to the exceptions and safe harbors, and to the scienter element — which OIG, following its usual practice, did not formally analyze in the advisory opinion at all.

What This Means for Resolving Disputes Involving the AKS

For parties trying to resolve a dispute involving the meaning and scope of the AKS — disputes that most often arise in False Claims Act litigation — the useful observation is that the range of outcomes on the AKS question has narrowed considerably, and narrowing is what makes matters resolvable. A defendant arguing that “remuneration” reaches only corrupt transactions is now arguing against three circuits and none in the other direction. That argument has gone from a plausible dispositive defense to a discount.

The contested space has shifted to ground that is inherently more negotiable. Whether an activity alleged to violate the AKS is in fact legitimate is a highly factual question, not a clean question of statutory construction. Whether conduct was knowing and willful is a fact question too. Disputes that turn on evidentiary judgments of that kind are the ones where a neutral can be useful, because both sides can see the range and neither can be confident of the ends of it. Disputes that turn on a pure question of law, by contrast, tend to be litigated to a decision — which is what the last several years of AKS scope litigation produced, and what this decision brings closer to a close.

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post discusses a published decision for general informational purposes and is not legal advice.

Introduction

Arbitral institutions are competing on efficiency — the ICC’s revised Rules took effect June 1, 2026 with a highly expedited track and codified early determination, and the AAA amended its Commercial Rules in 2022 to make arbitrators weigh the cost of a dispositive motion before allowing one. None of that reaches the decisions that actually drive cost. Those belong to counsel, and most of them are made in the first sixty days. What follows is my top ten list of what counsel can do to make arbitration truly efficient and cost effective for their clients.

The List

1. Draft the clause so it can run itself. If you are drafting the arbitration clause as transactional counsel, or one in a post-dispute agreement to arbitrate, sweat the details – but don’t handcuff the arbitrator and litigation counsel down the road. Name the forum and the rules, and set the seat, governing law, selection method, and form of award. Be careful about discovery – don’t incorporate statutory or procedural rules wholesale, but it might be wise to leave the shape of discovery to the preliminary hearing once the contours of the dispute are known. Watch the recurring defects: conditions precedent so strict a party forfeits the right to arbitrate by missing a step, and a three-arbitrator panel in a contract whose disputes will cost less than the panel.
2. Treat the preliminary hearing as the most important hour in the case. It is not a scheduling call. It is where the schedule, discovery scope, form of testimony, expert treatment, motion protocol and award type are either resolved or scheduled to be resolved. Meet and confer in earnest beforehand and arrive with positions on these critical issues in addition to a calendar. The difference between a conference where counsel have actually spoken and one where they have not is not subtle.
3. Build a schedule that will hold — and book the extra hearing days now. The goal is not the earliest dates; it is dates that survive. Finding additional hearing days later means finding them across three calendars plus the arbitrator’s (or a panel’s, even more complicated), which is how an arbitration starts looking more like litigation. Ask the arbitrator to require good cause for any modification, and put status calls on the calendar while slippage is still correctable.
4. Help the arbitrator get disclosure right. Failure to disclose a prior or ongoing relationship is the most common route to vacatur under the Federal Arbitration Act, and an arbitrator can only run conflicts against names actually supplied. Give the full list — counsel, parties and their ownership, witnesses, experts — and supplement as the case develops. States such as California have specific requirements regarding disclosure, including permitting peremptory disqualification within fifteen days of disclosures, and solicitation-disclosure requirements in consumer matters. The party best served by clean disclosure is the one that prevails.
5. Right-size discovery to the case, not to the rules you are used to. Parties trade the jury and meaningful appellate review for speed and cost. Counsel who then run federal-court discovery have given up the benefits and kept the costs. Focus on what you actually have to present and prove to a sophisticated arbitrator, not a lay jury. Address third-party discovery early, because an arbitrator’s subpoena power is more constrained than that of a court, and disputes over third-party discovery need to be resolved early.
6. Decide the form of testimony before you pick your witnesses and experts. Whether written statements will stand in for direct testimony, and whether opposing experts will be heard concurrently, changes how you prepare for the hearing and can change which expert you retain. Deferring these questions to the eve of the hearing forfeits the savings entirely.
7. Handle procedural disputes with a letter and a phone call. The most efficient protocol in wide use is a three-page letter followed by a call within a day or two. An informal discovery conference with the arbitrator frequently resolves the dispute by the act of being scheduled — parties who have to explain a disagreement out loud tend to settle it first.
8. Reserve dispositive motions for pure questions of law. Provider rules set a deliberately high bar: permission first, plus a showing the motion is likely to succeed and to narrow the case. The reason is Section 10 of the FAA, which permits vacatur where an arbitrator refused to hear evidence “pertinent and material to the controversy.” A dispositive ruling that passes over a genuine factual dispute is the award most exposed on review. Move only where there are no disputed facts at all — not merely none that are material — or make the same argument at the hearing, on a developed record, at a fraction of the risk.
9. Try the case to the arbitrator, not to a jury. Having a third witness read a contract section into the record is a habit imported from jury trials, and it is among the largest recoverable time losses in a hearing. Say you are turning to Section 3 and move on. Enter into as many stipulations as the parties may agree to. Use written direct for minor and records witnesses — but not for a party, and not for a witness who has to teach something like a damages model, and always take some live direct so the witness is settled before cross.
10. Carve out the issue that decides the case, and choose the award form before you need it. A great many disputes turn on one question — whether a contract was formed, whether particular conduct was a breach. Resolving it first gives both sides a shared reference point, and the interim ruling often does more to resolve the matter than the rest of the hearing would have. Mind the difference between an interim award and a partial final award, because a final award starts the clock on confirmation and vacatur. On the award itself: decide at the preliminary hearing whether you want standard, reasoned, or findings and conclusions, note that provider rules impose deadlines for requesting a reasoned award, and remember that if there is any prospect of seeking vacatur, a reasoned award is the one to have.

The Common Thread

Every item on this list is a decision counsel can make, most of them early, and nearly all of them are forfeited by default rather than lost on the merits. Arbitration’s advantage is that it is the parties’ process — almost every procedural feature is negotiable at a point when negotiating it still matters. Counsel who treat the rules as a fixed track have paid for an option they never exercise.

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post discusses arbitration practice for general informational purposes and is not legal advice.

Introduction

For most of the 340B program’s life, a covered entity that thought it was being overcharged had exactly one place to go, and it wasn’t a courthouse. Congress wrote no private right of action into Section 340B, and in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011), the Supreme Court closed the contract route as well, holding that covered entities can’t sue manufacturers as third-party beneficiaries of their pricing agreements with the government. That left administrative dispute resolution as the only forum, and it has remained a narrow channel while the program itself has grown. So covered entities have been looking for another one. Adventist Health System of West found it in the False Claims Act — not by suing for what it overpaid, but by pointing out that Medicaid and Medicare reimburse providers based on cost, which means the government overpaid right alongside it. The district court called that an end-run around the ban on a 340B private right of action decided in Astra, and dismissed with prejudice. The Ninth Circuit reversed. And while the appeal was pending, the Supreme Court set down its own question about whether covered entities can reach manufacturers at all, on the September 28 conference list. The search for a forum continues.

Executive Summary

In United States ex rel. Adventist Health System of West v. AbbVie Inc., 169 F.4th 1137 (9th Cir. 2026), the Ninth Circuit reversed the dismissal under Federal Rule of Civil Procedure 12(b)(6) of a qui tam complaint brought by a 340B covered entity against pharma manufacturers AbbVie, AstraZeneca, Novartis, and Sanofi. The Ninth Circuit held that the absence of a private right of action under Section 340B does not foreclose False Claims Act claims by covered entities, because an FCA action is independent of the statute whose violation supplies the underlying facts. Adventist wasn’t seeking to recover amounts it allegedly had been overcharged; instead, it was alleging that the manufacturers’ inflated prices caused covered entities to submit inflated reimbursement claims for those drugs to Medicare and Medicaid, and that the government paid them. The court also held that falsity was plausibly pled, and declined to affirm on the manufacturers’ alternative argument, which it treated as a merits question for discovery.

Background

The program and the price

Congress created the 340B Drug Pricing Program in 1992 to improve access to care for low-income and uninsured patients at safety-net hospitals and clinics. Veterans Health Care Act of 1992, Pub. L. No. 102-585, 106 Stat. 4943. Manufacturers opt in by signing a pharmaceutical pricing agreement, or PPA, with the Secretary of Health and Human Services, and in exchange for that agreement they may not charge covered entities more than a statutory ceiling price. 42 U.S.C. § 256b(a)(1). The Health Resources and Services Administration (HRSA), a unit of HHS, administers the program, including a dispute resolution mechanism. 42 U.S.C. § 256b(d)(3); 42 C.F.R. §§ 10.3, 10.21.

The statutory formula can produce a ceiling at or below zero. When it does, the “penny pricing” policy caps the charge at $0.01 per unit. HRSA formally adopted that position in written guidance in 2011 — Clarification of Penny Pricing Policy, Policy Release No. 2011-2 — and then issued a final rule imposing civil monetary penalties for non-compliance, 83 Fed. Reg. 61563 (Nov. 30, 2018), effective January 1, 2019. The timing matters to the falsity question below.

Adventist alleged that it only discovered the overcharges after the penny pricing guidance came into effect and the prices manufacturers were charging for many drugs precipitously dropped to a penny, suggesting that before that manufacturers were ignoring the statutory formula for calculating the ceiling price.

The allegations

Adventist Health System of West is a nonprofit that operates clinics and facilities in several states and qualifies as a 340B covered entity. It bought drugs from the defendants for its patients, and Medicaid and Medicare reimbursed it based on the prices the defendants charged. See 42 C.F.R. § 447.502; 42 U.S.C. § 1395m(g)(1).

The amended complaint alleged that the manufacturers knowingly charged “materially false, unlawfully inflated prices” that “bore no relation to the statutory formula,” for years, and changed course only when the 2019 rule attached penalties. Adventist said it discovered the scheme when prices “dropped precipitously to $0.01 per unit” shortly after January 2019 — a drop it contended market forces and formula changes could not explain. The complaint alleged the fraud “caused the federal and state governments to wrongly pay hundreds of millions of dollars.”

The dismissal

The manufacturers moved to dismiss based on Astra, arguing that there is no private right of action under 340B. Because Astra holds that a covered entity must use the administrative ADR process to challenge a manufacturer’s pricing, they argued, a covered entity cannot sue under the FCA on facts that amount to a 340B pricing violation. The district court agreed, dismissed the amended complaint with prejudice, and reasoned that allowing the claims would disrupt the administrative scheme Congress built. Adventist appealed.

How the overcharge reaches federal money

Here is what made this an FCA case, not a pricing dispute. Adventist was not asking to be paid back for what it was overcharged — that’s what the ADR process is for, and Astra held that was the only route. Adventist said the overcharge did not stop with the covered entity. It was passed through to the government, because that’s how these programs are structured. The complaint identified three channels.

• Medicaid. Covered entities are reimbursed on what they actually paid for the drug. See 42 C.F.R. § 447.502. Inflate the acquisition cost, and you inflate the reimbursement claim that follows it.
• Medicare. Critical access hospitals bill at 101% of drug cost under 42 U.S.C. § 1395m(g)(1). An inflated cost passes straight through — with another one percent riding on top of it.
• Direct federal purchase. Government-funded prisons and clinics bought the drugs themselves and paid the inflated prices directly. No intermediary at all.

Cost-based reimbursement is the mechanism converting a private overcharge into a loss for the federal fisc, thus implicating the False Claims Act. With it, every covered entity that bought a drug and billed for it became an unwitting conduit. The claims the government paid weren’t Adventist’s 340B claims. They were reimbursement claims, submitted by entities with no reason to know the price they passed along was wrong.

Why this is an FCA claim

The manufacturers never submitted a direct claim to Medicare or Medicaid. Adventist argued instead that the manufacturers were liable under § 3729(a)(1)(A), which reaches anyone who “knowingly presents, or causes to be presented,” a false or fraudulent claim for payment, and § 3729(a)(1)(B) reaches anyone who makes or uses a false record or statement material to such a claim. The alleged false claims were the covered entities’ reimbursement claims. The manufacturers’ alleged conduct — charging above the ceiling price, for years — was what made those downstream claims inflated. That was the causal architecture, and it was ordinary FCA law rather than anything peculiar to 340B.

Adventist, the Ninth Circuit stated, “seeks redress for the alleged false claims, not for the alleged violations of Section 340B’s ceiling price formula,” and the court quoted United States ex rel. Sutton v. Double Day Office Services, Inc., 121 F.3d 531 (9th Cir. 1997), for the necessary corollary: “[t]he violation of a statute does not itself create a violation of the FCA.” A 340B pricing violation is not automatically an FCA case. It becomes one when it causes a false claim to be presented — and pleading that chain is the relator’s burden, on remand as much as on appeal.

The remedy confirmed the characterization. Adventist sought civil penalties and treble damages on behalf of the government under § 3729(a)(1) and a relator’s share under § 3730(d)(2). It was not seeking the overcharges it paid out of its own pocket.

Legal Analysis

• The absence of a private right of action under Section 340B is immaterial to an FCA claim. The Ninth Circuit treated FCA claims as “free-standing and independent of Section 340B.” Because Adventist was not seeking reimbursement for overcharges or otherwise seeking relief for a 340B violation, it did not matter that Section 340B gives covered entities no mechanism to sue. The court drew on Sutton, where a relator’s FCA claim survived even though the Service Contract Act supplied no private right of action.
• Astra bars repackaged contract claims, not fraud claims. Astra held that suits to enforce Section 340B and suits to enforce the PPAs are “in substance one and the same,” and that covered entities may not sue as third-party beneficiaries of those agreements. The Ninth Circuit distinguished it on the ground that Adventist did not allege the manufacturers were liable merely for violating Section 340B. The claim was that they caused false claims to be submitted to Medicare and Medicaid — a different wrong, seeking a different remedy, on behalf of a different party.
• The remedies available under the FCA did real work. Following Sutton, the court reasoned that if the action were equivalent to a 340B action, the damages would be Adventist’s own overcharges. They were not. Adventist sought statutory damages plus penalties for the government, and a statutory share of any recovery under § 3730(d)(2). “Standing in the shoes of the government,” the Ninth Circuit wrote, Adventist sought statutory damages, not compensatory damages for its own losses.
• No implied preemption, because there is no “positive repugnancy.” Barring the claims would require holding that Section 340B impliedly preempts the FCA. Repeals by implication are disfavored, and neither statute contains language displacing the other, so the court gave effect to both. It also invoked the presumption that Congress says in a statute what it means — Congress wrote no 340B exception into the FCA, and the Ninth Circuit declined to write one in.
• Falsity was plausibly pled for the pre-2019 period. The manufacturers argued that no penny-pricing obligation existed before the 2019 final rule. The Ninth Circuit disagreed, because Adventist plausibly alleged that the plain text of the statutory formula did not authorize any price above $0.01 regardless of the guidance, and because HRSA’s 2011 written guidance had already directed manufacturers to charge $0.01 when the formula yielded a negative ceiling price. The 2019 rule added penalties; it did not create the obligation.
• The alternative ground was left for remand. The manufacturers also argued that HRSA’s price reporting and verification system rendered the allegations implausible under Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The court declined to affirm on that basis, calling it a merits argument that turned on factual disputes and required discovery. It remained available below.

Who showed up

The amicus lineup is worth noting. The United States appeared in support of Adventist, through the Civil Division and the United States Attorney for the Central District of California, and the Ninth Circuit quoted the government’s brief for the proposition that the FCA is “the federal government’s primary tool to combat fraud and recover losses due to fraud in federal programs.” The Anti-Fraud Coalition and Ryan White Clinics for 340B Access also supported the relator; the Pharmaceutical Research and Manufacturers of America appeared on the other side. The government’s participation is consistent with its usual position of arguing against limitations on the False Claims Act.

Holding

Adventist asserted cognizable claims for relief under the FCA and had satisfied the applicable pleading requirements. The dismissal was reversed and the case remanded for further proceedings. The Ninth Circuit treated the FCA and its state-law analogues together, no party having argued that the differences mattered. Petitions for rehearing were denied on May 27, 2026.

What to Watch

• On remand, the merits questions that were never reached. Falsity, scienter, materiality and causation now have to be proven across three distinct payment channels, on a factual record that must be developed.
• The Supreme Court’s own 340B question, September 28, 2026. AstraZeneca Pharmaceuticals LP v. Mosaic Health, Inc., No. 25-1070, has been distributed for the long conference. It asks whether safety-net providers have antitrust standing under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), to sue manufacturers over the withdrawal of contract-pharmacy discounts. Different doctrine, same pressure: covered entities looking for a forum that Section 340B and the administrative ADR process did not give them.
• Whether other circuits follow. This is a published Ninth Circuit opinion on a question that has mostly been litigated in district courts. If the FCA is a durable route around Astra, manufacturer exposure under 340B stops being primarily administrative — and the exposure changes character, from ordered reimbursement of overcharges to penalties and treble damages.

What it means for resolving these disputes

For a neutral, the useful observation is that this ruling doesn’t narrow anything. It widens the field at the pleading stage. A manufacturer facing a covered-entity relator now has to litigate a multi-year pricing history across Medicaid, Medicare and direct federal purchasers, with treble damages and per-claim penalties at the end of it, and with the government watching closely enough to have filed a brief. A relator, for its part, faces a causation chain it has to prove entity by entity and claim by claim, having survived a motion to dismiss and nothing more.

That is not a narrowed range of outcomes. It is a wide one, expensive at both ends, with genuine uncertainty on both sides of the caption — which is the profile of a dispute that tends to resolve, and tends to resolve better when the parties get a neutral involved before the discovery bill arrives rather than after. Cases like this one settle on the strength of the causation chain, and that is precisely the thing neither side can price until they’ve spent a great deal of money finding out.

Cases cited in this brief: United States ex rel. Adventist Health Sys. of W. v. AbbVie Inc., 169 F.4th 1137 (9th Cir. 2026) (No. 24-2180), rev’g and remanding No. 2:21-cv-04249-DSF-SK (C.D. Cal.) | Astra USA, Inc. v. Santa Clara Cnty., 563 U.S. 110 (2011) | United States ex rel. Sutton v. Double Day Off. Servs., Inc., 121 F.3d 531 (9th Cir. 1997) | Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) | Ashcroft v. Iqbal, 556 U.S. 662 (2009) | Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post discusses a published decision for general informational purposes and is not legal advice.

Healthcare / False Claims Act — qui tam constitutionality (Appointments Clause)

Introduction

The Eleventh Circuit has finally spoken in a closely watched case challenging the constitutionality of the qui tam provisions of the False Claims Act. In September 2024, a district court in Tampa held that relators are officers of the United States who were never appointed by anyone and dismissed a Medicare fraud case outright. Defendants around the country promptly added the argument to their motions, the government intervened in the case, one it had already declined, in order to defend the statute, and everyone waited on the Eleventh Circuit. On September 1, the answer came, but it was narrow: relators aren’t officers, because they don’t occupy a continuing position. Two other constitutional theories go back to the same district court that ruled for the defendants the first time around.

Executive Summary

A unanimous Eleventh Circuit held that FCA relators are not “officers of the United States” within the meaning of the Appointments Clause, because they do not occupy a continuing position established by law. The court vacated the district court’s dismissal and remanded for consideration of the other constitutional issues neither court has yet addressed.

Three features of the opinion merit attention. First, the circuit court resolved only one of the two requirements the Supreme Court set out in Lucia v. SEC, 585 U.S. 237 (2018) to determine an Appointments Clause violation: it only decided that relators do not occupy a “continuing” position established by law and expressly declined to decide whether they are officers exercising “significant authority pursuant to the laws of the United States.” Second, the circuit court assumed without deciding that the Lucia framework even governs relators, who are not government employees. Third, the Take Care Clause and Vesting Clause challenges — which the district court did not consider given the Appointments Clause ruling — return below for decision in the first instance.

Background

The statute

The FCA authorizes private parties — relators — to sue “for the person and for the United States Government” in the government’s name. 31 U.S.C. § 3730(a), (b)(1). A relator’s complaint stays under seal for at least sixty days while the government decides whether to intervene. § 3730(b)(2). If it intervenes, then or later on good cause, it can dismiss over the relator’s objection. The court, applying ordinary Federal Rule of Civil Procedure 41 standards, owes the government “substantial deference,” and grants dismissal in “all but the most exceptional cases.” United States ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419, 425–27, 437 (2023). A successful relator takes a contingent share of up to 30% of the proceeds. § 3730(d).

The district court decision

Dr. Clarissa Zafirov sued her employer and related entities in 2019, alleging they knowingly submitted false diagnosis codes to Medicare. The government declined to intervene. After several years of litigation, the defendants moved for judgment on the pleadings, arguing the qui tam provisions violate the Appointments Clause, the Take Care Clause, and the Vesting Clause. The government then intervened solely to defend the statute’s constitutionality.

The district court ruled for the defendants on the Appointments Clause issue and did not reach the others. Applying Lucia v. SEC, 585 U.S. 237 (2018), the court held that relators exercise “significant authority” because their civil enforcement power resembles that of FEC commissioners and special prosecutors, and that they occupy a continuing position — an “office of relator” that “exists whether a person is appointed to that office or not,” and is therefore “continuous even if it is not continually filled.” 751 F. Supp. 3d at 1307–17. The district court dismissed the case, reasoning that the only litigant on the plaintiff’s side of the enforcement action lacked authority to prosecute it.

Legal Analysis

The Eleventh Circuit vacated the district court’s Appointments Clause ruling, and left the door open for the two other constitutional challenges.

• The court resolved one requirement and stopped. Lucia sets two: the person must occupy a “continuing” position established by law and must exercise significant authority pursuant to the laws of the United States. Lucia, 585 U.S. at 245. Zafirov and the government offered three arguments; the circuit court decided on the continuing-position point, found it dispositive, and wrote that it “need not reach any of their remaining arguments.” Whether relators wield executive power — the premise of the Take Care and Vesting Clause theories — remains open.
• It assumed the framework rather than settling it. A footnote records that the court “assume[s] without deciding that Lucia’s framework governs relators, who are not government employees.” That is a real reservation. Lucia distinguishes officers from employees; relators are neither, nor did the circuit court resolve whether the officer/employee taxonomy is the right lens at all.
• Tenure and duration are measured by regularity, not by length. The court cited United States v. Germaine, 99 U.S. 508 (1879), and Auffmordt v. Hedden, 137 U.S. 310 (1890) — a pension-examining surgeon who might conduct “fifty of these examinations in a year, or none,” and a merchant appraiser called in occasionally for his special knowledge. Under those cases, neither was an officer of the United States. A relator likewise may bring several cases in a year or none, and need not keep a place of business. The defendants’ point that some qui tam actions run for years drew a direct answer: the Supreme Court has not focused on the overall length of a person’s time fulfilling his duties when evaluating the duration of the position.
• A contingent share of a recovery is not a continuing emolument. The circuit court tracked Germaine point for point. A relator is paid a one-time award contingent on success, not through any regular appropriation; works intermittently; and faces no penalty for declining to perform beyond losing the fee in that case. The recovery share may or may not be an “emolument” at all — the court did not need to decide — but it plainly is not a continuing one.
• The personal nature of a relator’s duties is what distinguishes the leading case on independent counsels. The defendants’ best authority was Morrison v. Olson, 487 U.S. 654 (1988), where an independent counsel appointed “essentially to accomplish a single task” was still an officer — proof that a temporary role can be a continuing position. The circuit court accepted the premise and distinguished on two grounds: an independent counsel’s duties were not personal, and an independent counsel was on the public payroll under a permanent indefinite appropriation. Morrison herself had replaced McKay “with the same jurisdiction,” picking the work up mid-investigation. The FCA provides no mechanism for replacing a relator who abandons the claim. The defendants’ death-and-bankruptcy counterexample was turned around: in those cases, a personal representative or bankruptcy trustee carries the claim forward on the relator’s behalf — the relator cannot be replaced with an unrelated person.
• There is no “office of relator.” The circuit court rejected the district court’s finding that the qui tam provisions create an “office of relator.” This term does not appear in the FCA. More fundamentally, Lucia asks whether an individual occupies a continuing position, not whether an abstract office is continuing; no precedent has held that the mere existence of an unfilled position makes its occupant an officer. A footnote puts it bluntly: evaluating a “fictional ‘office of relator’” departs from the Supreme Court’s own method in Auffmordt and Germaine, which examined the duration of the actual customs appraiser and the actual surgeon in front of them.
• The circuit court declined the Second Circuit’s test. The district court had used the three-factor continuing-position framework from United States v. Donziger, 38 F.4th 290 (2d Cir. 2022). The Eleventh Circuit noted that the test is that circuit’s own distillation of Supreme Court caselaw, is not binding, and declined to adopt it, working from the Supreme Court’s guidance directly.

Holding

Relators do not occupy a continuing position established by law and therefore are not officers of the United States subject to the Appointments Clause. The qui tam provisions of the FCA do not violate the Appointments Clause. The district court’s order dismissing the case is vacated, and the case is remanded for that court to evaluate the defendants’ Take Care Clause and Vesting Clause arguments in the first instance. Published opinion; no concurrence or dissent.

What to Watch

• Rehearing en banc and certiorari. Defense counsel has said publicly that the defendants are assessing their options. Watch for a petition for rehearing en banc in the Eleventh Circuit, and for a cert petition after that.
• Whether the Supreme Court wants it. In Polansky, Justice Thomas dissented, partially based on the view that the qui tam provisions raise serious constitutional questions, writing that “there are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” Justices Kavanaugh and Barrett, concurring, agreed with that statement and added that the Court should consider the competing arguments on the Article II issue in an appropriate case. Three Justices have effectively asked for the vehicle. Zafirov’s narrowness makes it an unlikely candidate, but at some point a more appropriate case may reach the Court, and may interest four Justices enough to grant cert.
• The remand, first and most immediately. If further appellate activity does not generate additional opinions, the Take Care and Vesting Clause theories go back to the district court, which has already held once that relators wield core executive power — a finding the Eleventh Circuit did not disturb because it did not reach it. The district court is free to decide these remaining issues.
• The Third Circuit. A parallel appeal is fully briefed and argued and is awaiting decision: United States ex rel. Penelow v. Janssen Products, LP, No. 25-1818 (3d Cir.), argued March 18, 2026. It arises from a declined qui tam that produced a jury verdict of more than $1.5 billion against a Johnson & Johnson subsidiary over off-label promotion, and the Department of Justice has again appeared to defend the statute’s constitutionality. What makes it the more consequential vehicle is its scope: the defendants raised the Appointments Clause, the Vesting Clause, and the Take Care Clause together, so the Third Circuit has before it — on a full trial record, with damages of a size that concentrates attention — the two questions Zafirov declined to reach and sent back down. A circuit court that answered all three, in either direction, would do more to shape the landscape than a remand to the Middle District of Florida. The U.S. Chamber of Commerce filed a coalition amicus brief in July 2025 urging the court to hold the qui tam provisions unconstitutional and arguing that the Article II defect contributed to a constitutionally excessive fine.

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This alert discusses published and slip-copy decisions for general informational purposes and is not legal advice.

Executive Summary

Roughly two dozen states have enacted statutes barring drug manufacturers from restricting delivery of 340B-discounted drugs to a covered entity’s contract pharmacies, and the manufacturers have challenged nearly all of them mostly on preemption grounds, as well as other arguments. The Fifth and Eighth Circuits have upheld those statutes four times between them. The Fourth Circuit, on the other hand, found these state restrictions preempted in two separate cases. However, rehearing en banc has been granted, and thus both of these Fourth Circuit decisions have been vacated. While there is no operative circuit split at this moment, one could develop depending on the outcome of the Fourth Circuit rehearing or in other circuits which have not yet reached the issue. Meanwhile the district courts have overwhelmingly refused to enjoin these statutes, with one notable exception in the Western District of Oklahoma. And in August the Southern District of Mississippi held, on a full summary-judgment actual record, that how the 340B program operates in practice does not change the preemption analysis based on a facial review of the federal and state statutes. Colorado is now the most heavily litigated of these states: three judges of that district have dismissed three separate challenges to its contract-pharmacy statute, two of them within two days of each other, and the first is now on appeal to the Tenth Circuit.

Background: How Contract Pharmacies Became the Battleground

Congress created the 340B program in 1992. As a condition of having their products covered under Medicaid and Medicare Part B, pharma manufacturers must agree to offer certain drugs to “covered entities” — principally federally or state-funded hospitals and community health centers serving low-income patients — at no more than a statutory “ceiling price.” 42 U.S.C. §§ 256b(a)(1), 1396r-8(a)(1), (5).

The statute places four key restrictions on covered entities: a bar on duplicate 340B and Medicaid discounts, § 256b(a)(5)(A); a bar on diversion — a covered entity “shall not resell or otherwise transfer” a discounted drug “to a person who is not a patient of the entity,” § 256b(a)(5)(B); an audit obligation, requiring covered entities to let HHS and manufacturers examine their records for compliance with the first two restrictions, § 256b(a)(5)(C); and recovery liability — a covered entity that violates either ban “shall be liable” to the manufacturer for the amount improperly received, § 256b(a)(5)(D). AbbVie, Inc. v. Fitch, 152 F.4th 635, 640 (5th Cir. 2025). Congress therefore put the substantive compliance duties on covered entities but gave manufacturers the audit and recovery rights. The manufacturer is the party expected to detect the problem and pursue it. That allocation worked tolerably when the number of dispensing points was small. The manufacturers argue that this allocation stopped working when the number of contract pharmacies used by covered entities exploded.

The statute is silent about the issue of delivery, that is, how drugs get from manufacturer to patient. The Health Resources and Services Administration (HRSA), the Department of Health and Human Services unit tasked with administering the 340B program, stepped into the issue in 1996 when it limited a covered entity that lacked an in-house pharmacy to contracting with just a single outside pharmacy. In 2010 it reversed course, permitting covered entities — including those with in-house pharmacies — to contract with an unlimited number of outside pharmacies to receive and dispense drugs under the 340B program. “After the 2010 guidance, the use of contract pharmacies skyrocketed.” Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., 58 F.4th 696, 700 (3d Cir. 2023). As the Government Accountability Office noted, the number of contract pharmacies used by covered entities surged from about 1,300 at the beginning of 2010 to around 23,000 in 2019. U.S. Gov't Accountability Off., GAO-20-212, 340B Drug Discount Program: Oversight of the Intersection with the Medicaid Drug Rebate Program Needs Improvement 2 (Jan. 2020).

In 2020 manufacturers responded unilaterally, limiting 340B delivery to a covered entity’s in-house pharmacy or a single designated contract pharmacy. HHS issued an advisory opinion declaring that 340B requires delivery to any contract pharmacy a covered entity chooses. The manufacturers sued and prevailed: the Third Circuit in Sanofi and the D.C. Circuit in Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024), both confirmed that 340B is silent on delivery and does not compel shipment to unlimited contract pharmacies. HHS withdrew the opinion. That is when the states stepped in, invoking their police power over healthcare and pharmacy practice to accomplish by state law what HHS could not accomplish by advisory opinion. Arkansas went first with Act 1103 in 2021 — PhRMA sued that September — and roughly two dozen states followed with materially similar statutes. The litigation now before the courts is not about what HHS may require of manufacturers. It is about what a State may require of them.

Understanding the manufacturers’ position in opposition to these state laws requires understanding how contract pharmacies actually stock 340B drugs. The D.C. Circuit’s description in Johnson, 102 F.4th at 457–58, is the one the later opinions quote:

“While some contract pharmacies maintain separate inventories of section 340B drugs, most fill prescriptions from inventories that intermingle discounted and non-discounted drugs. Only after dispensing the drugs do these pharmacies attempt to discern whether individual customers were patients of covered entities . . . . Many pharmacies outsource this determination to third-party administrators, who often receive a larger fee for every prescription deemed eligible for the discount. Once the pharmacy or the administrator categorizes a certain number of prescriptions as eligible, the pharmacy places an order to replenish its section 340B purchases. The covered entity, the pharmacy, and the third-party administrator often divvy up the spread between the discounted price and the higher insurance reimbursement rate. Each of these actors thus has a financial incentive to catalog as many prescriptions as possible as eligible for the discount.”

The replenishment model is thus simply an inventory-accounting method: dispense from a commingled inventory, determine eligibility afterward, reorder at the 340B price to backfill.

From the manufacturers’ standpoint, the proliferation of contract pharmacies accounting for 340B pricing after the fact creates an enforcement problem and affects their ability to vindicate their audit and recovery rights to police diversion and duplicate discounts. But under a replenishment system spread across an unlimited number of contract pharmacies, the manufacturer is auditing a retrospective eligibility determination made by someone else, about a dispensing event that has already happened, in an inventory where 340B and non-340B units were never physically distinguished. Every additional contract pharmacy multiplies those determinations while making each one harder to verify. Whether or not one credits the manufacturers’ estimates of the resulting abuse, the structural point is sound: Congress gave manufacturers a policing role, and the explosion in the number of contract pharmacies made that role progressively harder to perform. That is why manufacturers describe these state statutes as doing something more than regulating delivery logistics.

Action in The Circuits: Which One Held What, and Where Things Stand

As we have seen, the Third Circuit in Sanofi and the D.C. Circuit in Johnson decided whether HHS could compel unlimited contract-pharmacy delivery. The issue of whether a State may prohibit manufacturers from restricting the use of contract pharmacies was not before these courts. They are the backdrop to the split, not part of it. The potential division regarding state efforts in the contract pharmacy issue follows:

• Eighth Circuit — statutes upheld, twice. Pharmaceutical Research & Manufacturers of America v. McClain, 95 F.4th 1136 (8th Cir. 2024), affirmed summary judgment for Arkansas on Act 1103. Novartis Pharms. Corp. v. Hanaway, 180 F.4th 1097 (8th Cir. 2026), affirmed denial of a preliminary injunction against Missouri’s S.B. 751. Status: certiorari denied in McClain on December 9, 2024, 145 S. Ct. 768 (2024); no rehearing or petition reflected in the record in Hanaway as of this writing.
• Fifth Circuit — statutes upheld, twice. AbbVie v. Fitch, 152 F.4th at 640, affirmed denial of a preliminary injunction against Mississippi’s H.B. 728. AbbVie, Inc. v. Murrill, 180 F.4th 747 (5th Cir. 2026), affirmed summary judgment for Louisiana on Act 358 — a full merits record rather than a preliminary posture. Status: no rehearing en banc or certiorari petition reflected in the record as of this writing. An earlier Murrill panel opinion issued February 9, 2026; the July 6 decision is the operative one.
• Fourth Circuit — statutes likely preempted, twice — but both decisions are vacated and rehearing granted. Pharmaceutical Research & Manufacturers of America v. McCuskey, 171 F.4th 675 (4th Cir. 2026) (argued Sept. 9, 2025), reh’g en banc granted (4th Cir. June 2, 2026), affirmed a preliminary injunction against West Virginia’s S.B. 325; Judge Richardson wrote for the majority, Judge Benjamin dissented. Two weeks later, AbbVie, Inc. v. Brown, 2026 WL 1005576 (4th Cir. Apr. 14, 2026) (unpublished), reh’g en banc granted (4th Cir. June 2, 2026), vacated a district court’s denial of an injunction against Maryland’s H.B. 1056 and remanded in light of McCuskey. Those grants vacated the panel opinions. No argument date has been announced as of this writing.

Legal Analysis

The litigation over the state statutes highlights several legal and factual issues. First, while the manufacturers have raised several other legal theories, the primary challenge to these state statutes has been preemption. The first appellate court case to address the issue was McClain, 95 F.4th at 1142, which affirmed summary judgment upholding Arkansas’s Act 1103 against Pharma’s challenges. Pharma argued that Act 1103 was preempted under all three preemption doctrines – field, obstacle and impossibility — and the court rejected all three arguments. The obstacle-preemption passage is the one later courts keep returning to: Act 1103 “does not create an obstacle for pharmaceutical manufacturers to comply with 340B, rather it does the opposite: Act 1103 assists in fulfilling the purpose of 340B.” McClain, 95 F.4th at 1144–45. The reasoning is narrow — Act 1103 neither requires manufacturers to extend 340B pricing to contract pharmacies nor sets or enforces discount pricing at all. The Supreme Court denied certiorari on December 9, 2024, 145 S. Ct. 768 (2024) — at a time when no circuit had disagreed.

Second, the preemption issue highlights the prevailing view (to date) that courts have viewed the states as regulating something different than the federal statute. Murrill held that Congress left the delivery-and-distribution space conspicuously silent, defeating field, conflict and obstacle preemption, and declined to read Sanofi and Johnson as limiting state, as opposed to federal agency, authority. In this view, federal agency authority over the program and state police power over distribution conduct operate independently. Thus, states can legislate in a space a federal agency was told it could not reach by advisory opinion. AstraZeneca Pharmaceuticals LP v. Fitch, 2026 WL 2455376 (S.D. Miss. Aug. 21, 2026), adopted the formulation from Murrill, 180 F.4th at 761: the state law “does not regulate prices; it regulates conduct.” AstraZeneca argued the inverse — that price is the only thing distinguishing a 340B drug from any other drug, so a law reaching 340B drugs necessarily regulates price. The court’s answer was that the 340B statute sets the price and Mississippi’s H.B. 728 governs only where a covered entity’s patient may pick the drug up: “[t]hese drugs would cost the same amount if they were picked up at a covered entity’s in-house pharmacy.” 2026 WL 2455376, at *9. Everything else in this area turns on whether that distinction holds.

The now vacated Fourth Circuit opinions took a different view on the structure of the program. The McCuskey majority did not principally hold that West Virginia was regulating price. Its theory was that West Virginia’s S.B. 325 “springs obligations on manufacturers specifically by virtue of their participation in a federal program,” does not apply equally to all manufacturers selling drugs in the State, and therefore “targets a federal domain.” McCuskey, 171 F.4th at 689. Drawing on Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001), the court reasoned that the statute injects the State into a relationship between a federal agency and its regulated entities that is “inherently federal in character.” It then treated Section 340B as spending-power legislation “much in the nature of a contract,” id., and asked whether the State had added uninvited conditions to a federal bargain.

In AbbVie Inc. v. Drummond, 2025 WL 3048930 (W.D. Okla. Oct. 31, 2025), District Judge Wyrick enjoined enforcement of Oklahoma’s H.B. 2048, codified at Okla. Stat. tit. 36, §§ 5403, 5404(B), essentially on these grounds, addressing the delivery/price distinction with a colorful analogy: if Congress required pizza parlors to sell at a 50% discount to anyone named John, and a State then required those parlors to deliver half-priced pies to anyone John designated, “could that state law possibly be described as a mere ‘delivery’ regulation? Of course not.” 2025 WL 3048930, at *5. In other words, the state statutes ostensibly about delivery sneak price through the back door, thus encroaching on 340B’s territory. Federal law does not use the term “340B drug” at all, the court observed, because the drug is the same either way — “[a]ll the 340B Program does is set the price for certain sales of drugs.” Id. at *6.

Judge Wyrick went on to address another factual question about the way contract pharmacies operate: who actually owns the drug sitting on the contract pharmacy’s shelf? This question bears directly on the replenishment model. McClain rests on the premise that contract pharmacies “do not purchase 340B drugs, and they do not receive the 340B price discounts” — the covered entity purchases and holds title, and the pharmacy merely dispenses. McClain, 95 F.4th at 1144. Drummond found the record did not establish that Oklahoma covered entities in fact retain title while the drugs sit at contract pharmacies and held that replenishment “significantly muddies the waters as to who is the actual purchaser of the 340B drugs.” Drummond, 2025 WL 3048930, at *6. If the contract pharmacy is the real purchaser, a statute compelling discounted delivery to it effectively expands the statutory list of covered entities — and contract pharmacies are not among the sixteen designated types. The title question is factual, and it has not been developed in most of these cases.

However, a recent district court opinion was unimpressed, essentially holding that facts about the actual operation of the 340B program did not preclude summary judgment finding that the Mississippi statute at issue there was not preempted. In AstraZeneca v. Fitch, the manufacturer did what Drummond suggests is necessary: it took discovery aimed at showing that Mississippi’s H.B. 728 is preempted based on how the program actually operates, and that earlier courts had incorrectly ruled about how replenishment works and who holds title. Judge Guirola granted the State summary judgment anyway, denied the cross-motion, found the motion to exclude AstraZeneca’s expert moot, and dismissed AstraZeneca’s challenge with prejudice. The reasoning is short and consequential: “The Court’s focus in this case is the language and intent of 340B and H.B. 728, not testimony and evidence related to the manner in which entities operate under those statutes.” 2026 WL 2455376, at *12. The discovery material “has not changed this determination.” Id. at *8. The escape hatch Drummond left open is, at least in this district, shut.

Colorado has now produced three decisions, and it is the state to watch. The first came in AbbVie, Inc. v. Weiser, 2026 WL 1678085 (D. Colo. June 10, 2026) (slip copy), where Judge Martínez dismissed AbbVie’s challenge to the Colorado 340B Contract Pharmacy Protection Act, SB25-71. AbbVie’s Section 340B preemption and Takings claims were dismissed with prejudice for failure to state a claim, and amendment held futile. Its remaining claim is the more interesting one: AbbVie argued the Act was preempted not by Section 340B but by HRSA’s rebate pilot. That claim was dismissed without prejudice for lack of standing, because the pilot had not begun when AbbVie filed suit — the comment period had not closed and AbbVie had not yet applied to participate — and standing is measured at filing, so later approval to participate could not supply it after the fact. The court never reached the merits of that theory. AbbVie has appealed to the Tenth Circuit, which has yet to rule on these issues.

Two more followed in the space of two days. In AstraZeneca Pharms. LP v. Weiser, 2026 WL 2568299 (D. Colo. Aug. 31, 2026) (slip copy), Judge Brimmer granted the State’s motion to dismiss AstraZeneca’s challenge to the same statute, rejecting several theories put forward by AstraZeneca, including conflict and field preemption. The court dismissed the argument that SB25-71 regulates price and delivery, noting that the state law says nothing about price and denying the distinction's significance in any event. The court also noted that the replenishment model, far from relating to price, “is a means of efficient distribution” and does not implicate the price or discount under 340B. Finally, the court also rejected AstraZeneca’s arguments that SB25-71 interfered with federal enforcement mechanisms under 340B and that the claims-data restriction would prevent it from establishing the “reasonable cause” needed to commence the audits to which it is entitled under 340B.

A day later, in Pharmaceutical Research & Manufacturers of America v. Weiser, 2026 WL 2582197 (D. Colo. Sept. 1, 2026) (slip copy), Judge Rodriguez dismissed PhRMA’s parallel challenge to the same statute with prejudice. The magistrate judge had recommended dismissal without prejudice for lack of associational standing; the court instead found standing satisfied — PhRMA’s members had individually engaged in conduct that SB25-71 now proscribes — and adopted the recommendation on alternative grounds, overruling PhRMA’s objection and reaching the merits. It then held that Section 340B does not occupy the field, that the presumption against preemption applies to state regulation of health matters, that PhRMA had alleged no actual conflict with Section 340B, and that its extraterritoriality claim failed. The dismissal was with prejudice because no additional facts could cure the defects.

Holdings and Current Consensus

The Eighth Circuit held Arkansas’s Act 1103 preempted under neither field, obstacle nor FDCA impossibility theories (McClain), and held Novartis had not shown a likelihood of success on its dormant Commerce Clause or preemption claims against Missouri’s S.B. 751 (Hanaway). The Fifth Circuit held Louisiana’s Act 358 not preempted and violative of neither the Takings Clause, the Contracts Clause nor vagueness doctrine (Murrill), having earlier affirmed denial of a preliminary injunction against Mississippi’s H.B. 728 (AbbVie v. Fitch). The Southern District of Mississippi held H.B. 728 preempted by neither the 340B statute nor federal patent law, violative of neither the Contracts Clause nor the Takings Clause, and that discovery into the program’s practical operation did not alter the analysis; summary judgment for the State, claims dismissed with prejudice (AstraZeneca v. Fitch). The Western District of Oklahoma reached the opposite conclusion and enjoined Oklahoma’s statute (Drummond). The Fourth Circuit twice held these statutes likely preempted on a spending-power-bargain theory (McCuskey; Brown) — but both panel opinions are vacated pending rehearing en banc. The District of Colorado has now dismissed three separate challenges to Colorado’s SB25-71 — two by manufacturers, one by a trade association — and the theories rejected differ case by case. In AbbVie v. Weiser, the Section 340B preemption and Takings claims were dismissed with prejudice while a preemption claim resting on HRSA’s rebate pilot went out without prejudice for lack of standing; that case is on appeal to the Tenth Circuit. In AstraZeneca v. Weiser, field and conflict preemption, patent preemption, the Contracts Clause and the Takings Clause were all rejected and the claims dismissed with prejudice. In PhRMA v. Weiser, field preemption, conflict preemption and extraterritoriality were rejected, again with prejudice.

The consensus therefore favors the states. The Eighth Circuit has upheld these statutes twice and the Fifth Circuit twice; Judge Benjamin’s dissent in Brown catalogues at least eleven district courts that have refused to preliminarily enjoin comparable statutes, including in Colorado, Hawai’i, Maine, Mississippi, Rhode Island, Tennessee and Maryland, see Brown, 2026 WL 1005576, at *3 n.2 (Benjamin, J., dissenting); district courts within the Fifth and Eighth Circuits are following (see AbbVie Inc. v. Jackley, 2026 WL 2280929 (D.S.D. Aug. 7, 2026)); the Supreme Court declined the question in 2024; and the manufacturers’ factual theory has now failed on a full record. Drummond is the conspicuous outlier, and the West Virginia district court whose injunction the Fourth Circuit affirmed is the other. Colorado, which appears in that dissent among the districts that declined to enjoin, has since dismissed all three challenges before it.

Where We Are Now

For manufacturers, the litigation posture at the appellate level rests with the Fourth Circuit en banc ruling and the hope that it can create a circuit split interesting to the Supreme Court. The statutory arguments have lost in two circuits, the Supreme Court declined the question in 2024 when there was no split, and the fact-based theory has now failed on a developed record. What remains is the Fourth Circuit sitting en banc — and, newly, the Tenth, where AbbVie has appealed the first of the Colorado dismissals to a court that has not yet spoken. Several district court cases in other circuits are also pending, any of which could upend the game board and create new splits on preemption or other issues.

For covered entities, hospital associations and their counsel, there is a durable template in the Fifth and Eighth Circuits, tempered by some risk concentrated in the Fourth, and developments to come in other circuits where similar cases are percolating.

What to Watch

First, the Fourth Circuit en banc in McCuskey and Brown — that is where this area gets decided next, and an argument date has not yet been announced. Second, AstraZeneca Pharms. LP v. Mosaic Health, Inc., No. 25-1070 (U.S.), distributed for the Supreme Court’s September 28, 2026 long conference and relisted twice; it presents an antitrust-standing question under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), rather than preemption, but a grant could potentially put 340B contract-pharmacy economics before the Court for the first time. Third, whether the manufacturers seek certiorari from Murrill or Hanaway, a petition filed while the Fourth Circuit sits en banc would present the Court with an unusually well-developed record of disagreement. Fourth, AbbVie’s appeal to the Tenth Circuit from the June dismissal in Colorado — the first of these state-statute cases to reach a court of appeals outside those that have already ruled, and another potential source for a circuit split. Fifth, and on a different front altogether, HRSA has issued its 340B Rebate Model Pilot Program, 91 FR 48883-01 (Aug. 3, 2026). The pilot would let qualifying manufacturers deliver the 340B ceiling price for a limited set of drugs as a post-sale rebate rather than an up-front discount, with manufacturer plans due August 24, 2026, and a January 1, 2027, effective date. HRSA notes that a post-sale rebate program, coupled with standardized submission of claims data, would make duplicate discounts and diversion easier to prevent. The implementation of this approach could also change the preemption analysis by some courts — and the attempt has already been made. AbbVie pleaded the rebate pilot as an independent preemption theory in Colorado and lost it on standing rather than on the merits, because the pilot had not yet begun when it filed. That theory is untested, not rejected, and could return once the pilot is running.

Cases and agency materials cited in this blog: AbbVie, Inc. v. Brown, 2026 WL 1005576 (4th Cir. Apr. 14, 2026), reh’g en banc granted (4th Cir. June 2, 2026) | AbbVie, Inc. v. Drummond, 2025 WL 3048930 (W.D. Okla. Oct. 31, 2025) | AbbVie, Inc. v. Fitch, 152 F.4th 635 (5th Cir. 2025) | AbbVie, Inc. v. Jackley, 2026 WL 2280929 (D.S.D. Aug. 7, 2026) | AbbVie, Inc. v. Murrill, 180 F.4th 747 (5th Cir. 2026) | AbbVie, Inc. v. Weiser, 2026 WL 1678085 (D. Colo. June 10, 2026) (slip copy), appeal filed (10th Cir. June 25, 2026) | AstraZeneca Pharms. LP v. Fitch, 2026 WL 2455376 (S.D. Miss. Aug. 21, 2026) | AstraZeneca Pharms. LP v. Mosaic Health, Inc., No. 25-1070 (U.S.) | AstraZeneca Pharms. LP v. Weiser, 2026 WL 2568299 (D. Colo. Aug. 31, 2026) (slip copy) | Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001) | Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) | Novartis Pharms. Corp. v. Hanaway, 180 F.4th 1097 (8th Cir. 2026) | Novartis Pharms. Corp. v. Johnson, 102 F.4th 452 (D.C. Cir. 2024) | Pharmaceutical Research & Manufacturers of America v. McClain, 95 F.4th 1136 (8th Cir. 2024), cert. denied, 145 S. Ct. 768 (2024) | Pharmaceutical Research & Manufacturers of America v. McCuskey, 171 F.4th 675 (4th Cir. 2026), reh’g en banc granted (4th Cir. June 2, 2026) | Pharmaceutical Research & Manufacturers of America v. Weiser, 2026 WL 2582197 (D. Colo. Sept. 1, 2026) (slip copy) | Sanofi Aventis U.S. LLC v. U.S. Dep’t of Health & Hum. Servs., 58 F.4th 696 (3d Cir. 2023) Agency material: Notice Regarding 340B Rebate Model Pilot Program, 91 FR 48883-01 (HHS/HRSA Aug. 3, 2026).

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This blog post and alert discusses published and slip-copy decisions for general informational purposes and is not legal advice.

This document covers the second quarter of 2026 (April 1 – June 30, 2026), continuing the quarterly False Claims Act case summaries. Cases are categorized by statutory provision, with Westlaw citations, courts, and decision dates after each case name.

Coverage focuses on decisions that bear on an FCA legal question—liability elements, qui tam procedure, relator awards and fees, the public-disclosure bar, and retaliation. Purely ancillary rulings in FCA cases (routine discovery, sealing, and similar) are omitted.

2026Q2 (April 1 – June 30, 2026)

31 U.S.C. § 3729(a)(1)(A) and (B) — Liability for False Claims and Statements

United States ex rel. Lynn v. City of Detroit 2026 WL 973955 (U.S.C.A, Sixth Circuit, April 10, 2026) — Affirmed dismissal of a qui tam alleging the City falsely certified compliance in its annual federal-grant Certification, where the complaint failed to plausibly allege a knowingly false presentment or statement under § 3729(a)(1)(A)-(B).

United States ex rel. Bauer v. Republic Services of Montana (Allied Waste) 2026 WL 1283968 (U.S.D.C., D. Montana, May 11, 2026) — Granted a Rule 12(b)(6) dismissal of a qui tam alleging a waste-services contractor misrepresented the products and services it billed to the federal and state governments, ending the case.

United States ex rel. Kuriyan v. Molina Healthcare of New Mexico, Inc. 2026 WL 1470124 (U.S.D.C., D. New Mexico, May 26, 2026) — Addressed the relator’s post-judgment motion to alter or amend the judgment dismissing his federal and state FCA claims against Medicaid managed-care organizations, weighing whether intervening state-law developments warranted relief from the prior dismissal.

United States ex rel. Solano v. Barton Associates, Inc. 2026 WL 1493019 (U.S.C.A, First Circuit, May 28, 2026) — Affirmed dismissal of a qui tam against a medical-staffing agency for failure to plead the alleged scheme to induce false Medicare claims with Rule 9(b) particularity.

United States ex rel. Relator LLC v. McGlauflin (DNT Construction) 2026 WL 1508877 (U.S.D.C., W.D. Texas, May 29, 2026) — Magistrate judge recommended DENYING the defendants’ motion to dismiss a Paycheck Protection Program (PPP) loan-fraud qui tam, finding the relator adequately pleaded the alleged false certifications.

United States ex rel. Kyer v. Thomas Health System, Inc. 2026 WL 1595887 (U.S.C.A, Fourth Circuit, June 4, 2026) — Affirmed dismissal of a multi-defendant hospital qui tam premised on Stark Law/Anti-Kickback-tainted physician-compensation (wRVU) arrangements, for failure to adequately plead the FCA elements across five defendants and three statutes.

United States ex rel. Craig v. Hawthorne Machinery Co. 2026 WL 1653486 (U.S.D.C., S.D. California, June 8, 2026) — Granted the defendants summary judgment against the relator on all claims, entering judgment for the defense.

United States v. Ma (Ma Acupuncture Center, P.C.) 2026 WL 1719074 (U.S.C.A, Fifth Circuit, June 15, 2026) — Affirmed the district court’s enforcement of a settlement the government and an acupuncture provider reached at pre-trial mediation in an FCA suit over inflated Veterans Affairs billings, holding the parties bound their material terms at mediation.

United States v. New Life Center for Change, Inc. (Teen University) 2026 WL 1753972 (U.S.D.C., M.D. Alabama, June 18, 2026) — Entered the parties’ joint consent judgment resolving the government’s FCA claims against a residential group home and its principal.

United States v. Gardner, D.D.S. 2026 WL 1786348 (U.S.D.C., D. New Mexico, June 22, 2026) — In the government’s FCA action against a dentist, resolved a series of motions—denying the defendant’s motions to dismiss for improper/lack of service and under Rule 60(b)(4) and imposing a $4,000 sanction—while addressing the government’s summary-judgment motion.

United States v. Crites 2026 WL 1782154 (U.S.D.C., M.D. Alabama, June 22, 2026) — Denied the pro se defendant’s Rule 59(e)/60(b) motion to set aside a roughly $31 million FCA judgment previously entered on summary judgment.

United States ex rel. Ellis v. CVS Health Corp. 2026 WL 1791002 (U.S.D.C., E.D. Pennsylvania, June 22, 2026) — Granted CVS summary judgment, rejecting a ‘worthless services’ theory premised on temperature-excursion risk to shipped biologic medications where the relator produced no evidence that any drug’s efficacy was actually impaired.

United States ex rel. Cobb v. Charleston County School District 2026 WL 1830950 (U.S.D.C., D. South Carolina, June 25, 2026) — Granted in part and denied in part the district’s motion to dismiss—dismissing the state whistleblower claim, allowing the FCA claim to proceed, and ordering the relator to file a more definite statement of the FCA claim.

United States ex rel. White v. Gainwell Technologies LLC 2026 WL 1864033 (U.S.D.C., D. Massachusetts, June 29, 2026) — Granted dismissal, concluding on fuller briefing that the relators failed to state an FCA claim against a state Medicaid fiscal agent—reversing the court’s earlier view when it had allowed the amendment.

31 U.S.C. § 3730(b) — Actions by Private Persons (Qui Tam)

United States ex rel. Nicholson v. Clarksville Pain Institute, LLC 2026 WL 908546 (U.S.D.C., M.D. Tennessee, April 2, 2026) — Granted the United States leave to amend its complaint-in-intervention in a qui tam alleging pain-clinic billing fraud, after the government partially intervened.

United States ex rel. Duell v. State of Hawaii 2026 WL 915149 (U.S.D.C., D. Hawaii, April 3, 2026) — Ordered a pro se relator to show cause why his ‘qui tam’ complaint should not be dismissed—because a non-attorney cannot prosecute an FCA action on the government’s behalf—and directed the clerk to unseal the complaint.

United States ex rel. Buxbaum v. Legal Aid Society of Rockland County 2026 WL 926728 (U.S.D.C., S.D. New York, April 6, 2026) — Dismissed a pro se plaintiff’s attempt to reframe his suit as an FCA qui tam, for lack of subject-matter jurisdiction.

United States ex rel. Compton v. HCR ManorCare, Inc. 2026 WL 1066520 (U.S.D.C., E.D. Pennsylvania, April 17, 2026) — Granted a defendant’s motion to unseal the docket in a consolidated nursing-home ‘worthless services’ qui tam, subject to the government’s opportunity to seek limited redactions.

United States ex rel. Dow v. HC2, Inc. 2026 WL 1179712 (U.S.D.C., District of Columbia, April 30, 2026) — Dismissed a qui tam for failure to prosecute where the relator—who must be represented by counsel—went nine months without replacement counsel; also ruled in part on unsealing.

United States ex rel. v. Hospice Source, LLC 2026 WL 1189202 (U.S.D.C., E.D. California, April 30, 2026) — Dismissed a qui tam with prejudice as to the relator and without prejudice as to the United States and plaintiff States under Rule 41, consistent with the FCA’s § 3730(b)(1) requirement of court and Attorney General consent.

United States ex rel. Chao v. County of Santa Clara 2026 WL 1395940 (U.S.D.C., N.D. California, May 18, 2026) — Dismissed the pro se plaintiff’s FCA qui tam and FCA retaliation claims without leave to amend.

United States ex rel. Doe v. Trustees of Columbia University 2026 WL 1533795 (U.S.D.C., S.D. New York, May 28, 2026) — On a pro se relator’s in forma pauperis and pseudonym requests in a purported qui tam, granted 60 days to retain counsel, reiterating that a non-attorney cannot pursue an FCA action pro se.

United States ex rel. Scheffler v. Golden Shovel Agency, LLC 2026 WL 1723921 (U.S.D.C., D. Minnesota, June 15, 2026) — Granted in part a motion to dismiss a CARES Act/PPP-funding qui tam but gave the relator leave to file a second amended complaint.

31 U.S.C. § 3730(d) — Award to Qui Tam Plaintiff

United States ex rel. Thrower v. Academy Mortgage Corp. 2026 WL 923856 (U.S.C.A, Ninth Circuit, April 6, 2026) — In companion appeals arising from an FCA relator’s award of attorneys’ fees, costs, and expenses, the court addressed the fee award—including when postjudgment interest begins to accrue on it—affirming the district court (see also 2026 WL 923862).

United States ex rel. Osinek v. Permanente Medical Group, Inc. (Kaiser) 2026 WL 970482 (U.S.D.C., N.D. California, April 10, 2026) — Denied a third party’s motion for a share of the settlement proceeds in the consolidated Kaiser Medicare Advantage risk-adjustment qui tam actions.

United States ex rel. Quesenberry v. Breaks Interstate Park Commission (Rockbridge Regional Library) 2026 WL 1534496 (U.S.D.C., W.D. Virginia, June 1, 2026) — Awarded the relator $3,400 of the $12,600 sought in attorneys’ fees connected to a defendant library’s default.

31 U.S.C. § 3730(e)(4) — The Public Disclosure Bar

United States ex rel. Anderson v. Saint Elizabeth Medical Center, Inc. 2026 WL 1047118 (U.S.C.A, Sixth Circuit, April 17, 2026) — Affirmed judgment on the pleadings for the hospital, holding the relator’s allegations of medically unnecessary procedures and kickbacks were substantially the same as publicly disclosed information and that he was not an original source (also failing Rule 9(b) particularity).

31 U.S.C. § 3730(h) — Relief From Retaliatory Actions

Brandt v. Federal Reserve Bank of San Francisco 2026 WL 1224044 (U.S.D.C., W.D. Washington, May 5, 2026) — Dismissed the plaintiff’s FCA retaliation claim without prejudice and granted leave to amend, while dismissing her related ‘outrage’ tort claim with prejudice.

Evans v. Individual Advocacy Group, Inc. 2026 WL 1250650 (U.S.D.C., District of Columbia, May 7, 2026) — Denied the employer’s motion to dismiss the FCA retaliation claim, allowing the theory that the plaintiff was fired for protected activity to proceed (and denying a related discovery motion as moot).

Deedrich v. Danville Redevelopment & Housing Authority 2026 WL 1398780 (U.S.D.C., W.D. Virginia, May 19, 2026) — Granted the employer summary judgment on the plaintiff’s § 3730(h) constructive-discharge retaliation claim.

Young v. Rector & Visitors of the University of Virginia 2026 WL 1557470 (U.S.D.C., W.D. Virginia, June 2, 2026) — Granted in part motions to dismiss physician-plaintiffs’ claims arising from alleged fraudulent-billing pressure, dismissing their FCA and Virginia FATA claims (and RICO claims) without prejudice.

Akindutire v. Northrop Grumman Systems Corp. 2026 WL 1661915 (U.S.D.C., D. Minnesota, June 9, 2026) — Granted the employer’s motion to compel arbitration of the plaintiff’s claims, including his FCA retaliation claim (Count III).

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This summary is provided for general informational purposes and is not legal advice.

This post collects False Claims Act decisions from three quarters — 2025Q3 through 2026Q1 — organized by the statutory provision each decision construes. Westlaw citations, courts, and decision dates follow each case name.

Coverage focuses on decisions that bear on an FCA legal question: liability elements, qui tam procedure, relator awards and fees, the public-disclosure bar, and retaliation. Purely ancillary rulings in FCA cases (routine discovery, sealing, and similar) are omitted. Quarterly updates continue with the 2026Q2 summary.

2025Q3 (July 1 – September 30, 2025)

31 U.S.C. § 3729(a)(1)(A) and (B) — Liability for False Claims and Statements

United States ex rel. Gomez v. Koman Construction, LLC 2025 WL 2437197 (U.S.D.C., W.D. Texas August 22, 2025) — The court discussed how factually false claims misrepresent the goods or services provided, while legally false claims involve an express or implied false certification of compliance with legal or contractual obligations.

United States ex rel. Streck v. Eli Lilly and Company 2025 WL 2618821 (U.S.C.A, Seventh Circuit, September 11, 2025) — The court evaluated drug pricing calculations submitted to Medicaid, determining that excluding subsequent price increases from Average Manufacturer Price calculations contradicted the plain text of statutes, rendering the claims false as a matter of law.

United States ex rel. O’Laughlin v. Radiation Therapy Services, P.S.C. 2025 WL 2417089 (U.S.C.A, Sixth Circuit, August 21, 2025) — The court analyzed the “false certification” theory of liability. The relator alleged that the defendants billed Medicare for radiation services without the required supervision of a qualified physician. The court dismissed the claims because the relator failed to prove that compliance with state-level supervision requirements was a material prerequisite to obtaining payment from Medicare.

United States ex rel. Folse v. Napper 2025 WL 2585680 (U.S.D.C., M.D. Tennessee September 5, 2025) — This case examines how violations of the Anti-Kickback Statute (AKS) predicate FCA liability. The court emphasized the “resulting from” requirement of the statute, interpreting it as a strict but-for causation standard—meaning the submitted false claims must have actually resulted from the underlying AKS violation.

31 U.S.C. § 3729(a)(1)(C) — Conspiracy

United States ex rel. Gomez v. Koman Construction, LLC 2025 WL 2437197 (U.S.D.C., W.D. Texas August 22, 2025) — The court outlined the two requirements to state a conspiracy claim: an unlawful agreement to obtain payment for a false claim, and an overt act in furtherance of it.

United States ex rel. O’Laughlin v. Radiation Therapy Services, P.S.C. 2025 WL 2417089 (U.S.C.A, Sixth Circuit, August 21, 2025) — The court noted that the only evidence pleaded in support of the conspiracy claim was that all defendants committed FCA violations. Because the relator failed to provide sufficient proof of underlying false claims, the derivative conspiracy claim was also dismissed.

United States ex rel. Leslie Carico v. Veterans Guardian VA Claim Consulting, LLC 2025 WL 2588895 (U.S.D.C., M.D. North Carolina September 8, 2025) — The court found that a relator failed to allege any circumstances constituting fraud on the part of the defendants with respect to a conspiracy to fraudulently obtain a PPP loan.

31 U.S.C. § 3729(a)(1)(G) — Reverse False Claims

Island Industries, Inc. v. Sigma Corporation 2025 WL 2422455 (U.S.C.A, Ninth Circuit, August 21, 2025) — The court confirmed that an importer becomes liable for antidumping duties as soon as goods arrive, creating an actionable “obligation” to the government under the FCA even before the exact amount is fixed. It also held that the FCA’s reverse false claims provision can coexist alongside the Tariff Act.

31 U.S.C. § 3729(b) — Definitions of “Knowing” (Scienter) and “Material”

United States ex rel. Streck v. Eli Lilly and Company 2025 WL 2618821 (U.S.C.A, Seventh Circuit, September 11, 2025) — Evaluating scienter, the court emphasized that Congress intended to reach the “ostrich” type situation where an individual buries their head in the sand. Regarding materiality, the court found that the government’s continued payment after learning of the fraud is “evidence of immateriality” but is not on its own “dispositive”.

Island Industries, Inc. v. Sigma Corporation 2025 WL 2422455 (U.S.C.A, Ninth Circuit, August 21, 2025) — The court rejected an objective reasonableness defense to scienter, reaffirming that the FCA focuses on whether the defendant acted with actual knowledge, deliberate ignorance, or reckless disregard, not what a hypothetical reasonable person might have believed.

United States ex rel. Gomez v. Koman Construction, LLC 2025 WL 2437197 (U.S.D.C., W.D. Texas August 22, 2025) — The court interpreted the scienter standard to conclude that the relators successfully alleged that the defendants acted with actual knowledge when they submitted bids knowing they would pass the work through to non-compliant entities to illegally secure set-aside contracts.

31 U.S.C. § 3730(b) — Actions by Private Persons (Qui Tam)

United States v. Gilead Sciences, Inc. 2025 WL 2627686 (U.S.D.C., E.D. Pennsylvania September 11, 2025) — The court addressed a constitutional challenge to the FCA’s qui tam provisions. It rejected the argument that relators violate the Appointments Clause of Article II, noting that relators lack the tenure, duration, and continuous duties required to be considered “Officers of the United States”.

Joel Mahl v. City of New York 2025 WL 2696441 (U.S.D.C., E.D. New York September 22, 2025) — The court noted that because a relator brings an action on behalf of the United States, a non-attorney layperson cannot proceed pro se under the FCA.

Michael Buxbaum v. Walt Disney Co. 2025 WL 2676487 (U.S.D.C., S.D. New York September 18, 2025) — Reaffirmed that because a relator brings an action on behalf of the United States, a non-attorney pro se litigant cannot prosecute a qui tam action.

United States ex rel. STF, LLC v. True Health Diagnostics, LLC 2025 WL 2600012 (U.S.D.C., E.D. Texas September 5, 2025) — The court utilized 31 U.S.C. § 3730(b)(1), which dictates that a qui tam action may only be dismissed if the court and the Attorney General give written consent to approve a joint stipulation of dismissal.

In re Webb 2025 WL 2629846 (U.S.D.C., N.D. Ohio September 12, 2025) — The court rejected a Rule 27 petition to preserve evidence for an anticipated qui tam action, noting that the petitioner failed to identify any actionable fraudulent demand for payment that injured the federal government.

31 U.S.C. § 3730(d) — Award to Qui Tam Plaintiff

United States ex rel. Scott v. Humana Inc. 2025 WL 2603057 (U.S.D.C., W.D. Kentucky September 9, 2025) — The court analyzed a prevailing relator’s petition for attorneys’ fees and expenses following a settlement, determining it was reasonable to award out-of-town specialist rates due to the highly specialized nature of the litigation.

31 U.S.C. § 3730(e)(4) — The Public Disclosure Bar

United States ex rel. Smith v. Odom 2025 WL 2424425 (U.S.C.A, Eleventh Circuit, August 22, 2025) — The court elaborated on the “original source” exception, finding that a relator does not “materially add” to public disclosures by merely supplying background information or details that contextualize the core fraud hypothesis already available in the news media.

United States ex rel. Sorgi v. Jazz Pharmaceuticals 2025 WL 2701928 (U.S.D.C., D. Massachusetts September 23, 2025) — It barred the relator’s suit, finding that the relator lacked insider knowledge, relied entirely on information in the public domain, and merely added “color” to previously disclosed facts.

31 U.S.C. § 3730(h) — Relief From Retaliatory Actions

Evans v. Individual Advocacy Group, Inc. 2025 WL 2651242 (U.S.D.C., District of Columbia September 16, 2025) — The court interpreted the elements of a retaliation claim, holding that an employee who refused to backdate training documents to prevent her employer from defrauding a government agency had plausibly engaged in protected preventative activity.

Reinhardt v. Guidehouse Inc. 2025 WL 2603688 (U.S.D.C., District of Columbia September 9, 2025) — Discussing the scope of claims subject to mandatory arbitration, the court confirmed that employment-related whistleblower retaliation claims brought under the FCA are arbitrable.

United States ex rel. Gomez v. Koman Construction, LLC 2025 WL 2437197 (U.S.D.C., W.D. Texas August 22, 2025) — The court held that to satisfy the “protected activity” element of a retaliation claim, the relator’s conduct must raise a “distinct possibility” of an FCA action or otherwise seek to stop fraud against the government.

2025Q4 (October 1 – December 31, 2025)

31 U.S.C. § 3729(a)(1)(A) and (B) — Liability for False Claims and Statements

United States ex rel. Arehart v. U.S. Medical Management, LLC 2025 WL 3677743 (U.S.D.C., E.D. Wisconsin December 18, 2025) — The court reaffirmed that an FCA presentment claim requires pleading with particularity, dismissing the complaint for providing no details on when, how many, or by whom specific false claims were actually submitted.

Jensen v. Genesis Laboratory Management, LLC 2025 WL 3763951 (U.S.D.C., D. New Jersey December 30, 2025) — The court found that while the relators adequately pled when the fraud occurred, they failed to plead how it occurred with “reliable indicia” that false claims were actually submitted to the government.

Natasha Dixon v. Volunteers of America 2025 WL 3244391 (U.S.D.C., W.D. Louisiana November 20, 2025) — The court allowed a presentment claim to survive, noting the relator identified specific supervisors who instructed employees to falsify Medicaid assessments to ensure coverage, providing reliable indicia of fraud.

Jevarien Z. Dunlap v. Bay Area Rapid Transit 2025 WL 3146412 (U.S.D.C., N.D. California November 11, 2025) — The court identified the four general elements necessary to state a claim under § 3729(a)(1)(A)-(B).

United States ex rel. Breslow v. JP Pharma, LLC 2025 WL 3640892 (U.S.D.C., W.D. Virginia December 16, 2025) — The court found the relator adequately pled falsity regarding a patient inducement scheme where claims were submitted for medically unnecessary treatments tainted by kickbacks.

United States ex rel. Souza v. Embrace Home Loans, Inc. 2025 WL 3072653 (U.S.D.C., D. Rhode Island November 4, 2025) — The court noted that FCA liability under these sections may arise where a defendant falsely certifies compliance with a material requirement of a federal statute or regulation.

United States ex rel. Devarapally v. Ferncreek Cardiology, P.A. 2025 WL 3565506 (U.S.D.C., E.D. North Carolina December 12, 2025) — The court evaluated the “implied certification theory” for medically unnecessary laboratory tests and testimony from physicians regarding their belief of medical necessity at the time they engaged in the treatment and billing.

United States ex rel. Thomas v. Premier Home Health Care Services, Inc. 2025 WL 3002967 (U.S.D.C., S.D. New York October 27, 2025) — The court evaluated the “more relaxed” Rule 9(b) pleading standard concluding that a relator without access to specific bills must still make plausible allegations that the invoices were uniquely within the defendant’s control.

United States ex rel. Relator, LLC v. iLink Employers Company 2025 WL 3066301 (U.S.C.A, Ninth Circuit, November 3, 2025) — The court reversed a dismissal, finding the relator plausibly alleged with particularity that the defendants made false statements and submitted false certifications on federal Paycheck Protection Program (PPP) loan applications.

United States ex rel. Gentry v. Encompass Health Rehabilitation Hospital 2025 WL 3063921 (U.S.C.A, Fifth Circuit, November 3, 2025) — The court dismissed false presentment and false records claims because the relator failed to accompany conclusory allegations with details of an actually submitted false claim.

31 U.S.C. § 3729(a)(1)(C) — Conspiracy

United States ex rel. Arehart v. U.S. Medical Management, LLC 2025 WL 3677743 (U.S.D.C., E.D. Wisconsin December 18, 2025) — The court dismissed a conspiracy claim because the relator failed to adequately allege an underlying FCA violation.

Jensen v. Genesis Laboratory Management, LLC 2025 WL 3763951 (U.S.D.C., D. New Jersey December 30, 2025) — The court reiterated that without an underlying violation of the FCA, there can be no derivative liability for conspiracy.

Natasha Dixon v. Volunteers of America 2025 WL 3244391 (U.S.D.C., W.D. Louisiana November 20, 2025) — The court dismissed a conspiracy claim because it requires at least two legally distinct actors, and after one defendant was dismissed for lack of jurisdiction, no second conspirator remained.

31 U.S.C. § 3729(a)(1)(G) — Reverse False Claims

Natasha Dixon v. Volunteers of America 2025 WL 3244391 (U.S.D.C., W.D. Louisiana November 20, 2025) — The court held that potential penalties falling within a discretionary range cannot serve as the basis for an “obligation” under a reverse false claim theory.

Christopher A. Feduccia v. I.C.E. Services, Inc. 2025 WL 3251221 (U.S.D.C., D. Alaska November 21, 2025) — The court dismissed a reverse false claim related to the retention of PPP loan funds because the relator failed to plead with specificity exactly how the defendant knowingly concealed or avoided its obligation to return the funds.

United States ex rel. Thomas v. Premier Home Health Care Services, Inc. 2025 WL 3002967 (U.S.D.C., S.D. New York October 27, 2025) — The court dismissed reverse false claims because they mirrored the relator’s direct false claims, noting that reverse false claims cannot be premised on the same conduct.

31 U.S.C. § 3729(b) — Definitions of “Knowing” (Scienter) and “Material”

United States ex rel. Schutte v. SuperValu Inc. 2025 WL 3048985 (U.S.D.C., C.D. Illinois October 31, 2025) — The court reaffirmed the Supreme Court’s standard that “knowingly” focuses on subjective beliefs—whether the defendant actually knew, intentionally avoided learning, or submitted claims despite a substantial and unjustifiable risk of falsity.

United States of America and State of Minnesota ex rel. Ashley Mothershed v. Mayo Clinic Ambulance 2025 WL 3043342 (U.S.D.C., D. Minnesota October 31, 2025) — The court emphasized that a relator must show the defendant acted knowingly with respect to the particular false claim at issue.

United States ex rel. Breslow v. JP Pharma, LLC 2025 WL 3640892 (U.S.D.C., W.D. Virginia December 16, 2025) — Reaffirming Schutte, the court reiterated that the scienter element refers to defendants’ subjective beliefs, not an objectively reasonable person.

United States ex rel. Souza v. Embrace Home Loans, Inc. 2025 WL 3072653 (U.S.D.C., D. Rhode Island November 4, 2025) — The court noted that materiality is a “fact-intensive and context-specific inquiry”.

United States ex rel. Omni Healthcare Inc. v. MD Spine Solutions LLC 2025 WL 3442574 (U.S.C.A, First Circuit, December 1, 2025) — The court evaluated the scienter requirement for laboratories performing “medically unnecessary” tests, holding that a laboratory can generally rely on a doctor’s order to show that a test is medically necessary.

31 U.S.C. § 3730(b) — Actions by Private Persons (Qui Tam)

United States ex rel. Goebel v. Anchorage SNF, LLC 2025 WL 2898087 (U.S.D.C., D. Maryland October 10, 2025) — Interpreting the first-to-file bar, the court held that an earlier-filed lawsuit that alerts the government to the essential facts of a fraudulent scheme completely bars a later action, even if the new action names entirely different defendants.

Ronetta Smith v. Respiro, LLC 2025 WL 3140610 (U.S.D.C., N.D. Illinois November 10, 2025) — The court ruled that a relator’s complete failure to comply with the procedural requirements of § 3730(b)(2)—by filing on the public docket and failing to serve the government—inherently harms the government and mandates dismissal with prejudice.

Jevarien Z. Dunlap v. Bay Area Rapid Transit 2025 WL 3146412 (U.S.D.C., N.D. California November 11, 2025) — Reaffirmed that a non-attorney pro se litigant cannot prosecute a qui tam action.

United States ex rel. Gentry v. Encompass Health Rehabilitation Hospital 2025 WL 3063921 (U.S.C.A, Fifth Circuit, November 3, 2025) — Touched on constitutional issues with unaccountable private actors exercising core executive power.

Michael Hunter v. Doctor Haas 2025 WL 2830261 (U.S.D.C., D. South Dakota October 6, 2025) — Non-attorney pro se litigant cannot prosecute a qui tam action.

Terasa DeMarinis v. Southern New Hampshire University 2025 WL 3012854 (U.S.D.C., D. Massachusetts October 28, 2025) — Non-attorney pro se litigant cannot prosecute a qui tam action.

United States ex rel. Relator LLC v. Pape (The Articom Group) 2025 WL 3707557 (U.S.D.C., N.D. California December 22, 2025) — Discussed constitutional and public disclosure limits on private actions.

31 U.S.C. § 3730(d) — Award to Qui Tam Plaintiff

United States ex rel. Jahr v. Tetra Tech EC, Inc. 2025 WL 3124335 (U.S.D.C., N.D. California November 7, 2025) — The court noted that arguments regarding the extent to which relators “substantially contributed to the prosecution of the action” under § 3730(d)(1) must be made claim-by-claim with specific evidentiary support.

BNSF Railway Company v. The Center for Asbestos Related Disease 2025 WL 3004741 (U.S.D.C., D. Montana October 27, 2025) — Following a jury finding that the defendant committed 337 violations of the FCA, the court awarded the relator 25% of the total proceeds.

31 U.S.C. § 3730(e)(4) — The Public Disclosure Bar

Christopher A. Feduccia v. I.C.E. Services, Inc. 2025 WL 3251221 (U.S.D.C., D. Alaska November 21, 2025) — Confirmed that data hosted on federal websites regarding PPP loans constitute “federal reports” that trigger the public disclosure bar.

United States v. William Allan Jones 2025 WL 3240804 (U.S.D.C., N.D. California November 20, 2025) — Consistently confirmed that data hosted on federal websites regarding PPP loans constitute “federal reports” that trigger the public disclosure bar.

United States ex rel. Relator LLC v. Pape (The Articom Group) 2025 WL 3707557 (U.S.D.C., N.D. California December 22, 2025) — Evaluated whether the Small Business Administration’s website disclosing a company’s PPP loan triggered the bar, concluding it did not because the website only disclosed the misrepresented facts.

31 U.S.C. § 3730(h) — Relief From Retaliatory Actions

United States ex rel. Thomas v. Premier Home Health Care Services, Inc. 2025 WL 3002967 (U.S.D.C., S.D. New York October 27, 2025) — Distinguished retaliation claims from substantive fraud claims, holding that an FCA retaliation claim need not be plead with particularity.

United States v. Alabama Psychiatry LLC 2025 WL 3213480 (U.S.C.A, Eleventh Circuit, November 18, 2025) — Affirmed a grant of summary judgment in favor of a former employer regarding an FCA retaliation claim.

2026Q1 (January 1 – March 31, 2026)

31 U.S.C. § 3729(a)(1)(A) and (B) — Liability for False Claims and Statements

United States ex rel. Sedona Partners LLC v. Able Moving & Storage, Inc. 2026 WL 492402 (U.S.D.C., S.D. Florida February 23, 2026) — Interpreted the presentment claim requirement, ruling that a relator must offer indicia of reliability or actual submission of a false claim.

Mary Bixler Wood v. Siemens Medical Solutions USA, Inc. 2026 WL 504530 (U.S.C.A, Second Circuit, February 24, 2026) — Dismissed FCA claims because the relator failed to plead under Rule 9(b) that the allegedly malfunctioning medical devices were actually sold to or paid for by the government.

United States ex rel. Camburn v. Novartis Pharms. Corp. 2026 WL 864529 (U.S.D.C., S.D. New York March 30, 2026) — Ruled that a relator successfully pled fraud with particularity by utilizing a representative sample exhibit detailing specific doctors, the exact number of tainted claims, and exact Medicare reimbursement amounts resulting from illegal kickbacks.

Calvin Andrews v. Spokane Housing Authority 2026 WL 851989 (U.S.D.C., E.D. Washington March 27, 2026) — Briefly defined a false or fraudulent claim for payment as the imposition of civil liability on anyone who knowingly presents or uses a false record or statement material to a claim to the United States government.

United States ex rel. Scarbrough v. Alabama Cancer Care, LLC 2026 WL 208627 (U.S.D.C., N.D. Alabama January 27, 2026) — Elaborated that presentment requires specific information about the submission of claims.

United States ex rel. Adventist Health System of West v. AbbVie Inc. 2026 WL 743495 (U.S.C.A, Ninth Circuit, March 17, 2026) — Held that a relator adequately stated claims by alleging drug manufacturers fraudulently inflated drug prices in violation of the Section 340B Program.

Adam Josephs v. Amentum Services Inc. 2026 WL 183543 (U.S.D.C., D. Maryland January 23, 2026) — Addressed an interlocutory appeal request over pleading an implied false certification claim.

United States ex rel. Koehler v. United Site Services, Inc. 2026 WL 865782 (U.S.D.C., E.D. New York March 30, 2026) — In a non-intervened qui tam alleging false claims tied to a GSA Multiple Award Schedule contract for portable-restroom and related services, the court granted the defendant’s motion to dismiss the relator’s federal and state FCA claims under Rules 9(b) and 12(b)(6) for failure to plead the alleged fraud with the required particularity.

United States ex rel. Segura v. Surgical Care Affiliates, LLC 2026 WL 872445 (U.S.D.C., D. Kansas March 31, 2026) — In an FCA suit alleging that ambulatory surgery centers ran an illegal upcoding scheme, the court granted in part and denied in part the defendants’ motion to dismiss—allowing the presentment and false-statement claims under § 3729(a)(1)(A) and (B) to proceed while dismissing the conspiracy claim under § 3729(a)(1)(C) as resting on only a formulaic recitation of an agreement.

United States ex rel. Hennessey v. UPMC Altoona 2026 WL 878755 (U.S.D.C., W.D. Pennsylvania March 31, 2026) — In a qui tam alleging that UPMC hospitals fraudulently upcoded emergency-room visits billed to Medicare and Medicaid, the court granted the defendants’ motion to dismiss the amended complaint, holding the relator failed to plead the alleged fraud with Rule 9(b) particularity and failed to plausibly allege scienter.

31 U.S.C. § 3729(a)(1)(G) — Reverse False Claims

United States v. LabQ Clinical Diagnostics, LLC 2026 WL 787460 (U.S.D.C., S.D. New York March 20, 2026) — Determined that the Affordable Care Act’s requirement that a provider report and return overpayments imposes an immediate, self-executing obligation sufficient to support a reverse false claim action.

United States ex rel. Frey v. Health Management Systems, Inc. 2026 WL 637725 (U.S.C.A, Fifth Circuit, March 6, 2026) — Evaluated reverse false claims allegations, finding the summary-judgment record did not contain evidence that the defendant actually failed to bill even a single claim under its contracts.

31 U.S.C. § 3729(b) — Definitions of “Knowing” (Scienter) and “Material”

United States ex rel. Scarbrough v. Alabama Cancer Care, LLC 2026 WL 208627 (U.S.D.C., N.D. Alabama January 27, 2026) — Interpreted the FCA’s “scienter” requirement—demanding actual knowledge, deliberate ignorance, or reckless disregard—and found it adequately alleged.

United States ex rel. Sheldon v. Allergan Sales, LLC 2026 WL 706428 (U.S.C.A, Fourth Circuit, March 13, 2026) — Applying the subjective scienter standard, the court noted that the ambiguity of a statute does not defeat scienter if the defendant was subjectively aware of a substantial risk that the government interpreted the statute differently.

31 U.S.C. § 3730(b) — Actions by Private Persons (Qui Tam)

United States ex rel. Adventist Health System of West v. AbbVie Inc. 2026 WL 743495 (U.S.C.A, Ninth Circuit, March 17, 2026) — Evaluating the purpose of the qui tam provision, emphasized that a relator uses the FCA as an independent mechanism, not barred by the 340B statute lacking a private right of action.

United States v. Lockheed Martin Corporation (Ferguson) 2026 WL 656046 (U.S.C.A, Fifth Circuit, March 9, 2026) — Distinguishing the first-to-file bar, ruled it does not apply if the later complaint alleges a different mechanism or scheme of perpetrating the fraud, rather than merely adding details or new locations.

Alana Sullivan v. Murphy Medical Center 2026 WL 657192 (U.S.D.C., E.D. Tennessee March 9, 2026) — Clarified that when the government intervenes on only some claims within an action, the relator is not precluded from independently proceeding with the non-intervened claims.

Michael J. Izquierdo v. United States 2026 WL 626731 (U.S.D.C., N.D. Ohio March 6, 2026) — Reaffirmed that because a relator brings an action on behalf of the United States, a non-attorney pro se litigant cannot prosecute a qui tam action.

Adam Josephs v. Amentum Services Inc. 2026 WL 183543 (U.S.D.C., D. Maryland January 23, 2026) — Addressed an interlocutory appeal regarding constitutionality.

Corey Spaulding v. Pamela Bondi 2026 WL 189488 (U.S.D.C., D. Massachusetts January 23, 2026) — Dismissed a pro se plaintiff’s FCA complaint entirely because the plaintiff failed to comply with statutory relator procedures.

United States ex rel. McDermott v. Haworth Apothecary 2026 WL 836604 (U.S.D.C., D. New Jersey March 26, 2026) — In a qui tam action alleging a hospice-billing scheme in which the United States and New Jersey declined to intervene, the court denied the relator’s third motion for leave to amend the complaint under Rules 15 and 16 given the advanced stage of the litigation, declining to reach the defendant’s futility arguments.

United States ex rel. Pepe v. Fresenius Medical Care Holdings 2026 WL 875240 (U.S.D.C., E.D. New York March 31, 2026) — In a partially-intervened qui tam against dialysis providers, the court granted the relators’ motion for leave to file a Fifth Amended Complaint reviving previously-dismissed non-intervened claims, rejecting the defendants’ futility arguments—including their contention that the FCA public-disclosure bar barred the relators from relying on information in the government’s intervention complaint.

31 U.S.C. § 3730(d) — Award to Qui Tam Plaintiff

United States ex rel. David Perry v. First Psychiatric Planners, Inc. 2026 WL 412327 (U.S.D.C., D. Massachusetts February 13, 2026) — Interpreted § 3730(d)(3) to mean that if a relator is convicted of criminal conduct arising from his role in the underlying FCA violation, he is barred from recovering any share.

31 U.S.C. § 3730(e)(4) — The Public Disclosure Bar

United States ex rel. Scarbrough v. Alabama Cancer Care, LLC 2026 WL 208627 (U.S.D.C., N.D. Alabama January 27, 2026) — Applied the public disclosure bar to dismiss claims against a doctor because his status and Medicare billing history were publicly disclosed on the CMS database.

United States ex rel. St. Paul’s Foundation v. Timothy Wipperman 2026 WL 622771 (U.S.D.C., M.D. Tennessee March 5, 2026) — Noted that following the 2010 amendments to the FCA, the public disclosure bar is no longer a jurisdictional hurdle, and must be evaluated under Rule 12(b)(6).

United States ex rel. Relator LLC v. David O’Rourke 2026 WL 799601 (U.S.D.C., E.D. New York March 23, 2026) — Confirmed that data hosted on federal websites regarding PPP loans constitute “federal reports” that trigger the public disclosure bar.

31 U.S.C. § 3730(h) — Relief From Retaliatory Actions

United States ex rel. Quintin J. Schwartz Sr. v. Document Reprocessors 2026 WL 795590 (U.S.D.C., W.D. New York March 23, 2026) — Analyzed the 2009 amendments to the FCA, concluding that the deletion of the word “employer” did not expand retaliation liability to include individual supervisors; liability may only be imposed on the employer entity.

United States ex rel. Sargent v. Collins 2026 WL 171536 (U.S.C.A, First Circuit, January 22, 2026) — Held that the FCA does not contain an express waiver of federal sovereign immunity for retaliation claims, meaning a federal employee cannot sue the United States government for retaliation under this section.

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This summary is provided for general informational purposes and is not legal advice.

Executive Summary

Decided on the same day, United States ex rel. Sheldon v. Allergan Sales, LLC and United States ex rel. White v. Gainwell Technologies LLC are two district-court opinions applying the Supreme Court’s landmark False Claims Act (FCA) scienter decision, United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023). Schutte held that the FCA’s “knowing” requirement is subjective: it turns on what the defendant actually knew or believed, not on what an objectively reasonable person would have understood. The Sheldon court applied that standard to move a twelve-year-old Medicaid drug-rebate case — that had previously been dismissed on the theory that the manufacturer’s reading of an ambiguous statute was objectively reasonable — to discovery. In contrast, in White, the same subjective standard was not enough to save the relators, whose complaint against a Medicaid fiscal agent failed to plead non-conclusory facts about that defendant’s own knowledge, and the case was dismissed with prejudice. Read together, the two decisions show that Schutte‘s holding denies FCA defendants the “reasonable interpretation” shield, but it does not relieve relators of pleading concrete, plausible facts about the particular defendant’s state of mind.

Why It Matters

For anyone advising healthcare providers, drug manufacturers, pharmacy-benefit managers, and claims processors, these cases are examples of where the FCA scienter battle now takes place. After Schutte, a defendant can no longer win dismissal simply by showing that its reading of an ambiguous legal requirement was objectively reasonable — the question is what the defendant subjectively believed, which is rarely resolvable on the pleadings. That raises the litigation and settlement exposure of any FCA defendant relying on an “everyone read it that way” defense, as Sheldon vividly shows. At the same time, White confirms that the subjective standard is not a free pass for relators: conclusory allegations that a defendant “knew” or “recklessly disregarded” the truth will still be dismissed, especially against downstream intermediaries whose role is processing someone else’s claims. For settlement counsel and neutrals, the practical upshot is that valuing an FCA case now turns less on the reasonableness of the legal position and more on the strength of the evidence of the specific defendant’s knowledge — a fact-intensive inquiry that rewards early, candid evaluation.

Detailed Discussion of the Facts

These cases are good examples of how the district courts are applying Schutte v. SuperValu Inc., where the Supreme Court construed the FCA’s scienter element — “actual knowledge,” “deliberate ignorance,” or “reckless disregard” of the truth or falsity of a claim. The Court held that this standard is subjective, referring to “the defendant’s knowledge and subjective beliefs — not to what an objectively reasonable person may have known or believed.” Schutte thereby abrogated the widely used defense — drawn from Safeco Insurance Co. of America v. Burr — that a defendant who adopted an objectively reasonable interpretation of an ambiguous requirement could not have acted “knowingly,” regardless of its actual beliefs.

Sheldon is a qui tam action under the Medicaid Rebate Statute alleging that Allergan misreported its drug “Best Price” — omitting price concessions — to reduce the rebates it owed state Medicaid programs. The case has a long history. The district court originally dismissed it, and the Fourth Circuit affirmed (Sheldon II, 24 F.4th 340 (2022)), holding that Allergan’s interpretation of the ambiguous Best Price requirement was objectively reasonable and therefore defeated scienter. After Schutte, the Supreme Court vacated that judgment and remanded; on remand the Fourth Circuit (Sheldon VII, 170 F.4th 227 (2026)) applied the subjective standard and revived the case, holding that statutory ambiguity does not defeat scienter where a defendant may have subjectively known its reading was wrong. Back in the district court — now in the case’s twelfth year — Allergan asked, under Rule 54(b), for leave to file a third motion to dismiss.

White is a qui tam action against Gainwell Technologies, the private fiscal agent that processes Medicaid claims for Rhode Island. The relators alleged that Gainwell facilitated a years-long scheme by Eleanor Slater Hospital (ESH) — a Rhode Island state hospital — to submit false and inflated Medicaid bills. The United States declined to intervene. The court had dismissed the first amended complaint and allowed a single narrow theory to proceed on amendment; on the second amended complaint it had earlier found the relators plausibly alleged reckless disregard, while noting that “the facts point to the state of Rhode Island, not Gainwell, as the source of ESH’s fraud.” Gainwell again moved to dismiss.

Legal Analysis

Applying Schutte‘s subjective standard, the two courts reached opposite conclusions — a contrast that maps the post-Schutte terrain:

• The subjective standard is the common ground. Both courts applied Schutte‘s rule that FCA scienter turns on the defendant’s own knowledge and beliefs. The question is no longer whether a hypothetical reasonable person could have read the requirement the defendant’s way, but whether this defendant actually knew, was deliberately ignorant of, or recklessly disregarded the truth.
• Sheldon: ambiguity no longer ends the case at the pleadings. Because Schutte removed the objective-reasonableness shield, whether Allergan subjectively believed its Best Price reporting was correct is a fact question that cannot be resolved on a motion to dismiss. The court denied Allergan’s Rule 54(b) request to file a third motion to dismiss, holding that a twelve-year-old case should proceed to discovery rather than absorb another round of pre-discovery motion practice, and declined to let Allergan re-litigate Rule 9(b) falsity at this late stage.
• White: the subjective standard still demands particularized facts. The relators’ complaint “failed to plausibly allege that Gainwell possessed the requisite scienter under the subjective standard established by the Supreme Court in SuperValu.” It pleaded no non-conclusory facts about Gainwell’s subjective knowledge of the adequacy of the hospital’s billing, and no particularized facts showing a scheme to defraud by Gainwell rather than by the hospital or the State.
• Causation compounds the problem for intermediaries. As the recipient and processor of the hospital’s claims — with no substantive input into them — Gainwell could not have “knowingly caused” the submission of false claims. The scienter and causation inquiries converged: without facts showing Gainwell’s own culpable state of mind, there was no basis to hold the fiscal agent liable for the hospital’s fraud.
• Opposite procedural outcomes. Sheldon proceeds to discovery, its scienter question preserved for a factual record; White was dismissed with prejudice, the relators having neither sought nor warranted further amendment.
• The synthesis — Schutte focuses on facts. Post-Schutte, the decisive FCA question has migrated from “was the defendant’s interpretation reasonable?” — a legal issue courts could resolve on the pleadings — to “what did this defendant actually know or believe?”, a fact-specific inquiry. That migration makes ambiguity-based dismissals far harder for defendants, but it puts a premium on the relator’s ability to plead the specific defendant’s knowledge with particularity.

Holding

In Sheldon, the court denied Allergan’s Rule 54(b) motion and refused to permit a third motion to dismiss, holding that under Schutte the subjective-scienter question could not be resolved on the pleadings and the case should proceed to discovery. In White, the court held that the second amended complaint failed to plausibly allege that Gainwell acted with the subjective scienter Schutte requires — or that it knowingly caused the submission of false claims — granted the motion to dismiss, and entered judgment dismissing the case with prejudice.

John Libby is a mediator and arbitrator focused on healthcare and commercial disputes, including False Claims Act, Stark Law, and Anti-Kickback matters. This summary is offered for general informational purposes and does not constitute legal advice.

Executive Summary

In United States ex rel. Kyer v. Thomas Health System, Inc., the Fourth Circuit Court of Appeals affirmed the dismissal of a qui tam False Claims Act (FCA) suit brought by a former hospital nurse against a nonprofit health system, its two hospitals, its employed-physician group, and a former executive. The relator alleged that the defendants submitted Medicare claims tainted by violations of the Stark Law and the Anti-Kickback Statute (AKS), so that the system’s certifications of compliance rendered those claims false. Reviewing an 83-page amended complaint supported by roughly 30 pages of billing tables, the court held that the complaint failed to plead fraud with the particularity Rule 9(b) requires. At the heart of the decision is a clean legal line: paying physicians for their own productivity — measured in work relative value units (wRVUs) for services they personally perform — is not the same as paying them for referrals, and does not, by itself, create the prohibited financial relationship the Stark Law requires.

Why It Matters

This decision is a meaningful win for health systems, employed-physician groups, and the compliance teams that advise them. It confirms that widely used wRVU productivity compensation does not, standing alone, create Stark Law exposure, because the statute excludes a physician’s personally performed work from the definition of a “referral.” The ruling also cabins the Fourth Circuit’s landmark Tuomey decision — distinguishing ordinary productivity pay from a “collections” formula that captured the hospital’s facility fees — and it reaffirms rigorous Rule 9(b) gatekeeping: a relator cannot dump thousands of billing codes into an appendix and ask the court to find the fraud, but must connect those codes to Medicare’s “designated health services” and to a concretely pleaded self-referral or kickback scheme. For settlement counsel and neutrals, it is a useful marker of how pleading-stage vulnerabilities drive the realistic value of a healthcare FCA case.

Detailed Discussion of the Facts

Thomas Health System, Inc. is a nonprofit corporation in South Charleston, West Virginia, that owns two hospitals — Thomas Memorial Hospital and St. Francis Hospital — and controls THS Physician Partners, Inc. (THSPP), a multi-specialty group employing physicians and nonphysician providers such as physician assistants and nurse practitioners (who, under West Virginia law, generally must practice under physician supervision). The hospitals participate in Medicare and, on enrollment and in annual cost reports, must certify compliance with the Stark Law and the Anti-Kickback Statute. The relator, Liesa Kyer, was a former nurse at Thomas Memorial.

THSPP paid its physicians based on their wRVU totals — a work-based measure of the time, skill, and effort a procedure requires — with a minimum target to earn a base salary and a bonus that scaled with wRVUs above the target; some physicians also received credit for a share of the wRVUs generated by nonphysicians they supervised, and a handful were paid at or above the 90th percentile of national benchmarks. In early 2015, the system adopted a “provider-based billing” structure, converting certain physician offices into hospital departments. That change “unbundled” billing so that THSPP billed the professional-services component while the hospital separately billed a higher facility fee, leaving THSPP to run operating losses that the parent backfilled through transfers — while the integrated system captured more Medicare revenue overall.

Kyer filed her qui tam complaint under seal in November 2020; the government obtained five seal extensions over nearly three years before declining to intervene. Her March 2024 amended complaint asserted four counts — presenting false claims, false statements material to false claims, conspiracy, and a reverse false claim. Rather than sue to recover any overcharges itself, she pursued the claims on the government’s behalf. The district court (S.D. W. Va., Judge Goodwin) dismissed the complaint under Rule 9(b) and denied post-judgment vacatur and leave to amend; Kyer appealed both rulings, which the Fourth Circuit reviewed together as a single judgment.

Legal Analysis

The district court dismissed the complaint for failing to plead fraud with the particularity Rule 9(b) requires — a standard that, where FCA liability hinges on an underlying Stark or Anti-Kickback violation, demands that the underlying scheme itself be pleaded with particularity. The relator’s billing tables established the who, what, where, and when, but not the “how,” or indeed “whether,” any claim was actually false. Affirming, the Fourth Circuit detailed several key points:

• wRVU productivity is not referral-based compensation. The dispositive Stark element was the “financial relationship.” An indirect compensation arrangement requires physician pay that “varies with, or takes into account, the volume or value of referrals,” and wRVU compensation rewards the physician’s own personally performed work — which the statute expressly excludes from the definition of a “referral.” A formula “takes into account” referrals only if it includes referrals as a variable; a wRVU formula contains no such input.
• Distinguishing Tuomey. In Tuomey II, the unlawful formula was based on “collections” that included the hospital’s facility fees, tying physician pay directly to referral revenue. wRVUs, by contrast, track only the physician’s labor — so Tuomey does not sweep in ordinary productivity pay.
• Supervision credit and high pay did not bridge the gap. Crediting a physician for supervising nonphysicians rewards the physician’s own (legally required) work, not referrals. Pay above the 90th percentile, standing alone, does not show variation with referrals — by definition, ten percent of physicians exceed it — distinguishing Bookwalter, where compensation ran two-to-three times that benchmark with other red flags.
• The Anti-Kickback theories failed. The hospitals’ transfers covering THSPP’s operating deficit were at least as consistent with lawful explanations — maintaining unprofitable service lines or the accounting consequence of provider-based billing — as with a kickback, and facts equally consistent with lawful and unlawful conduct do not survive Rule 9(b). A $5,000 marketing stipend cut the other way entirely: it induced THSPP physicians to attract patients to their own practices, making them the inducers of outside referrals rather than parties induced to refer to the hospitals.
• The derivative counts collapsed. Because no claim was rendered false, there was no unlawful agreement to support the conspiracy count, and the reverse-false-claim count necessarily failed as well.
• Denial of leave to amend was no abuse of discretion. Having filed in 2020, amended in 2024 with the benefit of more than 500,000 pages of pre-amendment discovery and the roadmap of a motion to dismiss, and still offered no proposed cured complaint, the relator gave the district court ample basis to deny another round for undue delay and repeated failure to cure.

Holding

The Fourth Circuit affirmed, holding that the complaint failed to plead FCA fraud with Rule 9(b) particularity: it alleged neither a Stark Law violation — because wRVU-based productivity compensation is not compensation tied to the volume or value of referrals — nor a plausible Anti-Kickback Statute violation. The derivative conspiracy and reverse-false-claims counts failed with the substantive claims, and the district court did not abuse its discretion in denying post-judgment vacatur and leave to amend. The judgment was affirmed.

John Libby is a mediator and arbitrator focused on healthcare and commercial disputes, including False Claims Act, Stark Law, and Anti-Kickback matters. This summary is offered for general informational purposes and does not constitute legal advice.