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False Claims Act’s Materiality Standard Strikes Again

Posted in Fraud and Abuse, Litigation, State Matters

Day Pitney’s October 2017 White Collar Roundup included the following item:

False Claims Act’s Materiality Standard Strikes Again

The “rigorous” materiality requirement in False Claims Act cases post-Universal Health Servs., Inc. v. United States ex rel. Escobar just cost a relator millions of dollars. The U.S. Court of Appeals for the Fifth Circuit recently vacated a $663 million False Claims Act verdict in United States of America ex. rel. Harman v. Trinity Industries Inc. The court found the fraud allegations could not stand because materiality was lacking. In Harman, the government did not intervene in the relator’s case and even gave a pretrial statement supporting the defendant, Trinity. Nevertheless, the jury found the government had been defrauded and awarded Joshua Harman $663 million. The Fifth Circuit noted the case should never have made it to the jury because the materiality standard for the falsity to the government was not met.

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