Articles Posted in Government Contracts

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Cincinnati ordinances provide guidelines for selecting the “lowest and best bidder” on Department of Sewers projects to “ensure efficient use of taxpayer dollars, minimize waste, and promote worker safety and fair treatment of workers” and for bids for “Greater Cincinnati Water Works and the stormwater management utility division,” to employ skilled contractors, committed to the city’s “safety, quality, time, and budgetary concerns.” Allied alleged that the Employee Retirement Income Security Act (ERISA) preempted: a requirement that the bidder certify whether it contributes to a health care plan for employees working on the project as part of the employee’s regular compensation; a requirement that the bidder similarly certify whether it contributes to an employee pension or retirement program; and imposition of an apprenticeship standard. Allied asserts that the only apprenticeship program that meets that requirement is the Union’s apprenticeship program, which is not available to non-Union contractors. The ordinances also require the winning contractor to pay $.10 per hour per worker into a city-managed pre-apprenticeship training fund, not to be taken from fringe benefits. The district court granted Allied summary judgment. The Sixth Circuit reversed. Where a state or municipality acts as a proprietor rather than a regulator, it is not subject to ERISA preemption. The city was a market participant here: the benefit-certification requirements and the apprenticeship requirements reflect its interests in the efficient procurement of goods and services. View "Allied Construction Industries v. City of Cincinnati" on Justia Law

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Community, the nation’s largest for-profit hospital system, obtained about 30 percent of its revenue from Medicare reimbursement. Instead of using one of the systems commonly in use for determining whether Medicare patients need in-patient care, Community used its own system, Blue Book, which directed doctors to provide inpatient services for many conditions that other hospitals would treat as outpatient cases. Community paid higher bonuses to doctors who admitted more inpatients and fired doctors who did not meet quotas. Community’s internal audits found that its hospitals were improperly classifying many patients; its Medicare consultant told management that the Blue Book put the company at risk of a fraud suit. Community attempted a hostile takeover of a competitor, Tenet. Tenet publicly disclosed to the SEC, expert analyses and other information suggesting that Community’s profits depended largely on Medicare fraud. Community issued press releases, denying Tenet’s allegations, but ultimately corroborated many of Tenet’s claims. Community’s shareholders sued Community and its CFO and CEO, alleging that the disclosure caused a decline in stock prices. The district court rejected the claim. The Sixth Circuit reversed. The Tenet complaint at least plausibly presents an exception to the general rule that a disclosure in the form of a complaint would be regarded, by the market, as comprising mere allegations rather than truth. The plaintiffs plausibly alleged that the value of Community’s shares fell because of revelations about practices that Community had previously concealed. View "Norfolk County Retirement System v. Community Health Systems, Inc." on Justia Law

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Abilify is approved to treat schizophrenia, Bipolar Disorder, major depressive disorder and irritability associated with autism. There are no disapproved treatments for elderly patients, but the FDA has included a warning since 2007 that Abilify is associated with increased mortality in elderly patients with dementia-related psychosis. Relators, former BMS employees, alleged in a qui tam suit that BMS and Otsuka engaged in a scheme to encourage providers to prescribe Abilify for unapproved (off-label) uses and improperly induced providers to prescribe Abilify in violation of the Anti-Kickback Statute. Nearly identical allegations were leveled against the companies years earlier. In 2007-2008, the companies each entered into an Agreement as part of a settlement of qui tam actions concerning improper promotion of Abilify. Relators allege that, despite those agreements, the companies continued to promote Abilify off-label and offer kickbacks, causing claims for reimbursement for the drug to be submitted to the government, in violation of the False Claims Act (FCA), 31 U.S.C. 3729. The district court dismissed in part. The Sixth Circuit affirmed; the complaint did not satisfy Rule 9(b)’s requirement that relators adequately allege the entire chain to fairly show defendants caused false claims to be filed. As sales representatives, relators did not have personal knowledge of provider’s billing practices.The alleged plan was to increase Abilify prescriptions through improper promotion, which does not amount to conspiracy to violate the FCA. View "Ibanez v. Bristol-Myers Squibb Co." on Justia Law

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Circle, a family-owned general contractor, built 42 Army warehouses. Over a period of seven years, a subcontractor, Phase, paid two electricians about $9,900 less than the wages mandated by the Davis-Bacon Act, rendering false some compliance statements that Circle submitted to the government with its invoices. The government pursued Circle for nearly a decade of litigation, although Phase had paid $15,000 up front to settle the underpayment. The government sought $1.66 million, of which $554,000 was purportedly “actual damages” under a theory that all of Phase’s work was “tainted.” The Sixth Circuit rejected that theory, reversed an award of $763,000 to the government, and remanded for an award of $14,748, stating that “in all of these warehouses, the government turns on the lights every day.” Circle has paid its attorneys $468,704. The Equal Access to Justice Act provides that, if a court awards damages to the federal government, but the government’s original demand for damages was both “substantially in excess of the judgment finally obtained” and “unreasonable when compared with such judgment,” the court must “award to the [defendant] the fees and other expenses related to defending against the excessive demand,” 28 U.S.C. 2412(d)(1)(D). The Sixth Circuit held that Circle was entitled to an award unless it “committed a willful violation of law or otherwise acted in bad faith, or special circumstances make an award unjust.” The government did not establish either exception. View "Wall v. Circle C Construction, LLC" on Justia Law

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The Oak Ridge, Tennessee uranium-enrichment facilities for the Manhattan Project, the World War II effort to build the first atomic bomb, have been inactive since the mid-1980s. The Department of Energy has worked to clean up the hazardous waste and hired Bechtel, a global engineering and construction firm. Bechtel hired Eagle to help decontaminate the complex, which required the demolition of buildings and equipment across the 2,200-acre complex and removal of radioactive nuclear waste, followed by decontamination of the soil and groundwater to make the site safe for redevelopment. Eagle’s work proved significantly more challenging and expensive than either party anticipated. Their contract allowed Bechtel to make changes; if those changes caused Eagle’s costs to increase, Bechtel was to make equitable adjustments in price and time for performance. Eight years after completing its work, Eagle filed suit, seeking compensation for its extra work and for excess waste that Eagle removed. The district court awarded Eagle the full amount of each request, plus interest and attorney’s fees. The Sixth Circuit affirmed the award of damages and attorney’s fees, but remanded so that the court can recalculate the interest to which Eagle is entitled under the Tennessee Prompt Pay Act. View "Eagle Supply & Manufacturing L.P. v. Bechtel Jacobs Co." on Justia Law

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Parrino worked as a pharmacist for NRS. He was responsible for preparing medications, mainly inhalers. After leaving NRS, Parrino was contacted by the FDA and FBI, which were investigating reports that NRS was filling prescription medications for Pulmicort, a steroid used for the treatment of asthma, with a sub-potent amount of the active ingredient. Parrino cooperated and pleaded guilty to introducing misbranded drugs into interstate commerce, 21 U.S.C. 331(a), 352(a), and 18 U.S.C. 2, a strict liability misdemeanor. Parrino was sentenced to one year of probation and ordered to pay $14,098.24 in restitution for Medicaid and Medicare payments. The Department of Health and Human Services notified Parrino that it was required to exclude him from participation in any capacity in the Medicare, Medicaid, and all federal healthcare programs for at least five years, under 42 U.S.C. 1320a-7(a). Rejecting Parrino’s argument that he lacked any mens rea to commit a crime and was convicted of a strict liability misdemeanor, an ALJ and the Appeals Board upheld HHS’s decision. The Sixth Circuit affirmed dismissal of Parrino’s suit, finding that HHS’s action affected no substantive due process right because “health care providers are not the intended beneficiaries of the federal health care programs” and that the decision to exclude Parrino was “not so shocking as to shake the foundations of this country.” View "Parrino v. Price" on Justia Law

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Critical Access Hospitals are reimbursed by Medicare for the reasonable and necessary costs of providing services to Medicare patients. The Medicaid program requires states to provide additional (DSH) payments to hospitals that serve a disproportionate share of low-income patients, 42 U.S.C. 1396a(a)(13)(A)(iv). In Kentucky, DSH payments are matched at 70% by the federal government. Kentucky’s contribution to DSH programs comes from payments from state university hospitals and Kentucky Provider Tax, a 2.5% tax on the revenue of various hospitals, including Appellants, The amount of DSH payments a hospital receives is unrelated to the amount of KP-Tax it paid. During the years at issue, DSH payments covered only 45% of Appellants' costs in providing indigent care. Appellants filed cost reports in 2009 and 2010 claiming their entire KP-Tax payment as a reasonable cost for Medicare reimbursement. Previously, they had received full reimbursement; for 2009 and 2010, however, the Medicare Administrative Contractor denied full reimbursement, offsetting the KP-Tax by the amount of DSH payments Appellants received. The Provider Reimbursement Review Board and Centers for Medicare and Medicaid Services upheld the decision. The Sixth Circuit affirmed, reasoning that the net economic impact of Appellants’ receipt of the DSH payment in relation to the cost of the KP-Tax assessment indicated that the DSH payments reduced Appellants’ expenses such that they constituted a refund. View "Breckinridge Health, Inc. v. Price" on Justia Law

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Hirt, owner of Andy’s Pharmacies, alleged that Walgreen Company distributed kickbacks ($25 gift cards) to Medicare and Medicaid recipients when they transferred their prescriptions to Walgreens, in violation of the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b). Hirt claimed that Walgreens violated the False Claims Act, 31 U.S.C. 3729, by sending these fraudulent insurance claims to the government. The Sixth Circuit affirmed dismissal of his qui tam suit. Individual plaintiffs cannot bring qui tam complaints based upon information already in the public domain and must state with “particularity the circumstances constituting fraud or mistake.” Hirt’s complaint described the unlawful distribution of gift cards in general but not the submission of any claims obtained with those gift cards. He did not identify customers, dates on which they filled prescriptions at Walgreens, dates on which Walgreens filed reimbursement claims with the government, or even say that these unnamed customers filled any prescriptions at Walgreens at all, let alone that Walgreens processed them and filed reimbursement claims with the government. He did not allege personal knowledge of Walgreen’s claim submission procedures or allege facts “from which it is highly likely that a claim was submitted to the government.” View "Hirt v. Walgreen Co." on Justia Law

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The State of Michigan contracted with E.L. Bailey to construct a prison kitchen. After delays, the parties sued each other for breach of contract. Bailey had obtained surety bonds from Great American Insurance Company (GAIC) and had agreed to assign GAIC the right to settle claims related to the project if Bailey allegedly breached the contract. Exercising that right, GAIC negotiated with the state without Bailey’s knowledge, then obtained a declaratory judgment recognizing its right to settle. The Sixth Circuit affirmed, rejecting, for insufficient evidence, a claim that GAIC settled Bailey’s claims against the state in bad faith. Although “there can be bad faith without actual dishonesty or fraud,” when “the insurer is motivated by selfish purpose or by a desire to protect its own interests at the expense of its insured’s interest,” “offers of compromise” or “honest errors of judgment are not sufficient to establish bad faith.” There was no evidence that GAIC’s settlement of Bailey’s claims was undertaken with selfish purpose at Bailey’s expense. GAIC and Bailey shared an interest in securing the highest settlement possible from the state. Even if GAIC misunderstood Michigan law, leading it to miscalculate its liability and accept a lower settlement, “honest errors of judgment are not sufficient to establish bad faith.” View "Great American Insurance Co. v. E.L. Bailey & Co." on Justia Law

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Brookdale Senior Living hired Prather to review documentation related to thousands of Brookdale residents who had received home-health services from Brookdale. Medicare claims regarding those patients were on hold and Brookdale faced possible recoupment of payments it had received if it did not review and submit final Medicare claims. Prather noticed that the required certifications stating that the doctor had decided that the patient needed home-health services, established a plan of care, and met with the patient, were signed long after care was provided. Prather repeatedly raised this issue, but was rebuffed. Brookdale, facing financial disaster, began paying doctors to complete the paperwork months after treatment was provided. Prather thought that Brookdale was not just asking treating physicians to complete forgotten paperwork, but had provided the services without physician involvement and then found doctors willing to validate the care after-the-fact. Prather's suit under the False Claims Act, 31 U.S.C. 3729, was dismissed. The Sixth Circuit reversed as to unlawful retention of payments. Completing certifications months after the fact was not “as soon as possible” after the plan was established, as required by regulations. Prather provided a detailed description of the alleged fraudulent scheme and her personal knowledge. Affirming dismissal of her false-records claim, the court concluded that Prather failed to plead with particularity the use of government forms to certify falsely that care had been provided under a doctor’s orders, or that unnecessary care had been provided. View "Prather v. Brookdale Senior Living Communities, Inc." on Justia Law