The Escobar Hurdle – False Claims, Materiality, and Dismissal

U.S. ex rel. Ruckh v. CMC II LLC et al. (“Ruckh”) was a closely followed False Claims Act case, because a Florida Federal Court opted to vacate a nearly $350 Million FCA verdict involving a nursing home operator. The case is significant because it demonstrates the ongoing impact of a party’s failure to meet the Escobar materiality standard.

For many months, we have followed the U.S. Supreme Court decision in case of Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”). Back in August 2016, we noted that it appeared neither side won a decisive victory, but time would tell.

Starting with a case involving Genentech, we have seen the Escobar standards used to curtail false claims liability. Fast forward to 2018 and we can now say with some authority that Escobar and its progeny have created a significant hurdle restricting what up to now seemed to be the unlimited reach of the Federal False Claims Act (“FCA”) in the healthcare context. Most recently, the case of United States ex. rel. Ruckh v. CMC II LLC et al. in the U.S. District Court in Florida’s middle district involving a nursing home operator continues the trend.