United States of America ex rel. Steven J. Hartpence v. Kinetic Concepts, Inc. et al.

False Claims Act

Central District

U.S. District Judge Christina A. Snyder

Plaintiff's lawyers: Cypress LLP, Mark I. Labaton; Hirst Law Group PC, Michael A. Hirst

A former employee of Kinetic Concepts Inc., which makes advanced negative pressure wound dressings, sued after he was fired, alleging Kinetic violated the False Claims Act by affixing the wrong billing code to Medicare reimbursement requests.

Lawyers at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates attained summary judgment for Kinetic by being among the first defense firms to apply the U.S. Supreme Court's 2016 ruling that announced heightened materiality and scienter requirements in False Claims Act cases. The high court opinion in Universal Health Services Inc. v. U.S. ex rel Escobar, 15-7, held that allegations of false claims must meet rigorous standards because the act is not intended to police minor regulatory and contract infractions.

"The Supreme Court said that regardless of the details of the fraud allegations, the fraud itself had to be material to the government's decision to pay the contested claim," said Skadden's lead partner on the defense, Gregory M. Luce.

Matthew E. Sloan

Along with co-lead counsel Matthew E. Sloan and others, the Skadden team showed that its client disclosed to the Medicare contractors who administered the claims how it billed, and that the contractors knowingly took no action. The team showed how the relatively new Escobar rule applied to the Hartpence allegations: the relevant government decisionmakers reimbursed Kinetic's claims despite Kinetic's candor that it was not strictly following the billing guidelines. U.S.A. ex rel. Steven J. Hartpence v. Kinetic Concepts Inc. et al., 2:08-cv-01885 (C.D. Cal., filed March 20, 2008).

U.S. District Judge Christina A. Snyder of Los Angeles granted Skadden's summary judgment motion.

The case endured multiple challenges. It was dismissed and previous plaintiff's counsel disqualified in 2013. In 2015 attorney Mark I. Labaton took it over, appealed the dismissal and won an en banc reversal at the 9th U. S. Circuit Court of Appeals. Labaton, of Cypress LLP, is again appealing the dismissal of the case.

"In large part, our opening brief now highlights factual matters," Labaton emailed. "Based on representations recently made by Kinetic's lawyers to us and in a recent status conference in a related matter, we expect defendants will raise a number of legal issues in their Answering Brief based on two Supreme Court decisions, one decided several years ago and another case more recently decided."

-- John Roemer