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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
UNITED STATES OF AMERICA
AND STATE OF FLORIDA
ex rel. ANGELA RUCKH,
Plaintiffs,
v.

CASE NO. 8:11-cv-1303-T-23TBM

SALUS REHABILITATION, LLC
et al.,
Defendants.
__________________________________/

ORDER
The Federal False Claims Act and the Florida False Claims Act permit the
federal government and the state government, respectively, acting through a relator,
to recover damages for a material and knowing misrepresentation to the government
about a product or service sold to the government. Rather than claim that the
defendants — the owners and operators of fifty-three specialized nursing facilities —
billed the government for unnecessary, inadequate, or incompetent service, the
relator asserts that the failure to maintain a “comprehensive care plan,” ostensibly
required by a Medicaid regulation, renders fraudulent the defendants’ Medicaid
claims. Also, the relator asserts that a handful of paperwork defects (for example,
unsigned or undated documents) compel the decisive inference that the defendants
never provided the therapy evidenced by the paperwork and billed to Medicare. In

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other words, the relator won judgments for almost $350 million based on the theory
“that upcoding of RUG levels and failure to maintain care plans made [the
defendants’] claims to Medicare and Medicaid false or fraudulent.” (Doc. 454 at 2)
But the relator offered no meaningful and competent proof that the federal
or the state government, if either or both had known of the disputed practices
(assuming that either or both did not know), would have regarded the disputed
practices as material to each government’s decision to pay the defendants and,
consequently, that each government would have refused to pay the defendants. Not
only did the relator fail to prove that the governments regarded the disputed practices
as material and would have refused to pay, but the relator failed to prove that the
defendants submitted claims for payment despite the defendants’ knowing that the
governments would refuse to pay the claims if either or both governments had known
about the disputed practices. In fact, both governments were — and are — aware of
the defendants’ disputed practices, aware of this action, aware of the allegations,
aware of the evidence, and aware of the judgments for the relator — but neither
government has ceased to pay or even threatened to stop paying the defendants for
the services provided to patients throughout Florida continuously since long before
this action began in 2011. For these and for each of the other reasons argued by the
defendants, the judgments cannot stand.

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THE MATERIALITY AND SCIENTER DEFECT
After suffering adverse judgments for $347,864,285, the defendants move
(Docs. 452 and 455) under Rule 50 for judgment as a matter of law and move under
Rule 59 for a new trial. The relator responds (Doc. 454) in opposition. The
defendants’ motion includes a particularized and careful “overview” of the evidence,
which this order will not repeat (the record is already sorely overburdened). The
balance of the defendants’ forty-page motion details the reasons for entering
judgment as a matter of law or for granting a new trial or remittitur.
The defendants argue persuasively that the relator failed to offer evidence of
materiality, defined unambiguously and required emphatically by Universal Health
Services, Inc. v. Escobar, 136 S. Ct. 1989 (2016). In fact, the evidence and the history of
this action establish that the federal and state governments regard the disputed
practices with leniency or tolerance or indifference or perhaps with resignation to the
colossal difficulty of precise, pervasive, ponderous, and permanent record-keeping in
the pertinent clinical environment. The evidence shows not a single threat of nonpayment, not a single complaint or demand, and not a single resort to an
administrative remedy or other sanction for the same practices that result in the
enormous verdict at issue.
Also, the defendants argue persuasively that the relator failed to offer
competent evidence that the defendants knew that the governments regarded the
disputed practices as material but, despite the defendants’ guilty knowledge, the

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defendants requested money from the governments. Of course, with no evidence that
the governments regarded the disputed practices as material, establishing the
defendants’ knowledge of materiality seems at least impractical, if not impossible
(after all, until one proves, say, that the moon is green cheese, one cannot prove that
someone else knows that the moon is green cheese). As the defendants correctly
state:
Relator’s evidence proves the contrary: Medicaid and Medicare
consistently paid “in the mine run of cases” despite Medicare’s routine
audits and Medicaid’s knowledge of billing and documentation
deficiencies . . . .

(Doc. 452 at 21)
Since Escobar appeared, several circuit courts have elaborated and faithfully
applied Escobar’s instructions. See, e.g., United States ex rel. Harman v. Trinity Indus.,
Inc., 872 F.3d 645 (5th Cir. 2017); United States ex rel. Petratos v. Genentech, Inc.,
855 F.3d 481 (3d Cir. 2017); Abbott v. BP Expl. & Prod., Inc., 851 F.3d 384 (5th Cir.
2017); United States ex rel. Kelly v. Serco, Inc., 846 F.3d 325 (9th Cir. 2017); D’Agostino
v. ev3, Inc., 845 F.3d 1 (1st Cir. 2016). Escobar is the unquestionably controlling and
guiding authority on materiality and scienter under the False Claims Act.
Escobar overtly undertakes “to clarify some of the circumstances in which
the False Claims Act imposes liability” for “implied false certification.” 136 S. Ct.
at 1995. Writing for the unanimous court in Escobar, Justice Thomas at the outset
explicitly confirms that “implied false certification theory can be a basis for
liability” (1) if a claim for payment “makes specific representations about the
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goods or services provided”; (2) if the defendant “knowingly fails to disclose the
defendant’s non-compliance with a statutory, regulatory, or contractual
requirement”; and (3) if the “omission renders those representations misleading.”
136 S. Ct. at 1995. Escobar concludes that the False Claims Act transforms the
defendant’s material and knowing “omission” — the “failure to disclose” the noncompliance — into a compensable misrepresentation for which a relator can
maintain an action. Conversely, Escobar necessarily means that if a service is noncompliant with a statute, a rule, or a contract; if the non-compliance is disclosed to,
or discovered by, the United States; and if the United States pays notwithstanding the
disclosed or discovered non-compliance, the False Claims Act provides a relator no
claim for “implied false certification” (although some other claim, maintainable by
the United States in its own name, or some regulatory authority, exercisable by the
United States, might attach under other law).
Also at the outset, Justice Thomas pointedly emphasizes Escobar’s holding that
liability for “implied false certification” depends not on the government’s label —
“condition of payment” or “condition of participation” or the like — but that “to be
actionable under the False Claims Act” a “misrepresentation about compliance . . .
must be material to the Government’s decision to pay”:
What matters is not the label the government attaches to a
requirement, but whether the defendant knowingly violated a
requirement that the defendant knows is material to the Government’s
payment decision.

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136 S. Ct. at 1996. In other words, the False Claims Act requires the relator to prove
both that the non-compliance was material to the government’s payment decision
and that the defendant knew at the moment the defendant sought payment that the
non-compliance was material to the government’s payment decision.
More particularly, Escobar addresses whether a vendor’s failure to disclose the
violation of “statutory, regulatory, or contractual requirements constitutes . . . an
actionable misrepresentation.” 136 S. Ct. at 1999. Escobar again encapsulates the
holding:
Accordingly, we hold that the implied certification theory can be a
basis for liability, at least where two conditions are satisfied: first, the
claim does not merely request payment, but also makes specific
representations about the goods or services provided; and second, the
defendant’s failure to disclose noncompliance with material statutory,
regulatory, or contractual requirements makes those representations
misleading half-truths.

136 S. Ct. At 2001. Because of the centrality of the “materiality inquiry,” which
Escobar describes also as “the False Claims Act’s materiality requirement,” Escobar
expounds further the attributes of the required materiality.
First, Escobar rejects any notion that “materiality” requires the violation of an
express condition of payment or the violation of some other “express signal” from
the buyer about “the importance of the qualifying information.” 136 S. Ct. at 2001.
Next, Escobar explains that a misrepresentation subjects a defendant to liability
under the False Claims Act only if “material to the other party’s course of action.”
136 S. Ct. at 2001. Also, Escobar confirms that a supplier is not entitled to “deliberate
ignorance” of, or to “reckless disregard” of, the materiality of a representation about
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the goods or services; the law imputes to a vendor the knowledge of a reasonable
person situated as the vendor is situated.
Escobar illustrates the latter principle with an instructive example:
If the Government failed to specify that guns it orders must actually
shoot, but the defendant knows that the Government routinely
rescinds contracts if the guns do not shoot, the defendant has “actual
knowledge.” Likewise, because a reasonable person would realize the
imperative of a functioning firearm, a defendant’s failure to appreciate
the materiality of that condition would amount to “deliberate
ignorance” or “reckless disregard” of the “truth or falsity of the
information” even if the Government did not spell this out.

136 S. Ct. at 2001–02. Escobar’s defective gun example is informative. The featured
defect wholly defeats a gun’s primary purpose and entirely deprives the government
of the value and utility of the gun. As Escobar explains, the defect is so fundamental
and the consequence of the defect is so readily perceptible that the law imputes to the
seller knowledge of the materiality of the defect. No reasonable government
purchases for a soldier a gun that won’t shoot, and no reasonable seller of guns thinks
otherwise.
Escobar concludes by prescribing how the “materiality requirement should be
enforced.” 136 S. Ct. at 2002. In beginning the enforcement explanation, Escobar
unmistakably characterizes both the materiality and the scienter requirement as
“rigorous.” 136 S.Ct. at 2002. Escobar specifies that a “rigorous” and “demanding”
standard for materiality and scienter precludes a False Claims Act claim based on a
“minor or unsubstantial” or a “garden-variety” breach of contract or regulatory
violation. 136 S. Ct. at 2003. Instead, Escobar assumes and enforces a course of
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dealing between the government and a supplier of goods or services that rests
comfortably on proven and successful principles of exchange — fair value given for
fair value received. Escobar rejects a system of government traps, zaps, and zingers
that permits the government to retain the benefit of a substantially conforming good
or service but to recover the price entirely — multiplied by three — because of some
immaterial contractual or regulatory non-compliance. A principal mechanism to
ensure fairness and to avoid traps, zaps, and zingers is a rigorous standard of
materiality and scienter. For this reason (among others), as Escobar emphasizes, the
government’s payment to a vendor despite knowledge of a defect “very strongly”
evidences the defect’s immateriality. 136 S. Ct. at 2003.
Escobar reinforces this understanding of the False Claims Act by
acknowledging the “essentially punitive” effects of the False Claims Act’s remedial
mechanism: treble damages plus a civil penalty “of up to $10,000 per false claim.”
136 S. Ct. at 1996. Treble damages plus $11,000 (after adjusting for inflation) per
false claim is not a remedy lawfully imposed on a supplier who delivers substantially
compliant goods or services that are received and accepted by a government with
knowledge of, or with indifference toward, some immaterial, formalistic, or technical
non-compliance. At an irreducible and necessary minimum, the “essentially
punitive” False Claims Act requires proof that a vendor committed some noncompliance that resulted in a material deviation in the value received and requires

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proof that the deviation would materially and adversely affect the buyer’s willingness
to pay.
The dispute in Escobar exemplifies the requirement of a “rigorous and
demanding” inquiry about materiality. In Escobar the government paid for mental
health services and medication for a teenager. The providers of the health care were
unlicensed and mostly unqualified. Although identifying “herself as a psychologist
with a Ph.D.,” the provider who diagnosed the teenager as bi-polar and who
prescribed the medicine that led to the teenager’s death was a nurse with a “degree”
from an “internet college.” 136 S. Ct. at 1997. No reasonable purchaser would
accept or pay for psychiatric or psychological diagnosis and treatment from, or accept
or pay for psychotropic medication prescribed by, an array of charlatans and quacks.
With predictable and sound reciprocity, the law charges the charlatans and quacks
with knowledge of their own disrepute, that is, with knowledge that the information
they have designed to misrepresent, hide, and distort would, to say the least,
materially influence the decision of the party deciding whether to pay.
Escobar concludes with a paragraph characterized as “rules” — not
characterized as advice or as recommendations but as “rules” — to apply “when
evaluating materiality under the False Claims Act”:
[T]he Government’s decision to expressly identify a provision as a
condition of payment is relevant, but not automatically dispositive.
Likewise, proof of materiality can include, but is not necessarily
limited to, evidence that the defendant knows that the Government
consistently refuses to pay claims in the mine run of cases based on
noncompliance with the particular statutory, regulatory, or contractual
requirement. Conversely, if the Government pays a particular claim in

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full despite its actual knowledge that certain requirements were
violated, that is very strong evidence that those requirements are not
material. Or, if the Government regularly pays a particular type of
claim in full despite actual knowledge that certain requirements were
violated, and has signaled no change in position, that is strong
evidence that the requirements are not material.

136 S. Ct. at 2003–04.
Controlled by the imperatives of Escobar, an objective and a “rigorous and
demanding” evaluation of the evidence in this action confirms the validity of the
defendants’ assault on the judgments. Much about the evidence in the present action,
evidence assembled and presented by lawyers recognized as among the nation’s elite
in prosecuting a False Claims Act action, attests to the relator’s inability to meet the
“rigorous and demanding” standard of Escobar. The record fatally wants for evidence
of materiality and scienter; the evidence that exists gravitates contrary to materiality
and scienter. The defendants delivered the services for which the governments were
billed; the governments paid and continue to pay to this day despite the disputed
practices, long ago known to all who cared to know.
The record suffers an entire absence of evidence of the kind a disinterested
observer, fully informed and fairly guided by Escobar, would confidently expect on
the question of materiality: evidence of how government has behaved in comparable
circumstances. For example, one might expect evidence of whether record-keeping
deficiencies have resulted in the sudden and indefinite discontinuation of payment to
providers of health care services to elderly, disabled, dependent, and other especially
vulnerable patients; evidence of whether, when, and to what extent, especially in
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dealing with a large organization that serves thousands of acute-care patients,
an administrative remedy, rather than a sudden and unexpected refusal to
pay, is required or preferred to address administrative non-compliance, including a
record-keeping deficiency; evidence of whether governments are content — assisted
by a regime of rigorous and regular inspections, audits, and accounting — to permit
record-keeping practices that largely achieve the ends of, but differ from, the
prescribed record-keeping; or evidence otherwise establishing the historical response
of government to a long-standing non-compliance by a large provider of services in a
pervasively regulated and monitored industry with a slim profit margin that,
nonetheless, provides essential service to a large and vulnerable population without
an available, alternative, health care provider.
The fraud in Escobar — unqualified mental health providers and substandard
mental health care — profoundly and manifestly affects a government’s willingness
to pay, a fact undoubtedly obvious to the provider. Also to emphasize and clarify,
Escobar offers the hypothetical but instructive example of a vendor selling to the
government a gun that will not shoot, a defect that renders the weapon useless and
valueless, as the vendor well knows.
But would the result in Escobar differ — that is, would Escobar countenance
complete disgorgement times three plus punitive penalties — if the properly and
currently licensed vendor of the mental health services was fully qualified and had
prescribed and treated correctly but had failed, say, to attach to each patient’s file a

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required proof of current licensure? Would the result in Escobar’s gun example differ
if the gun actually shot as represented but if the gun manufacturer failed to retain a
required copy of the results of a required test firing of each weapon (even though the
test occurred and the gun passed the test)? Escobar is silent on the answer to each of
these illustrative hypotheticals, but Escobar indisputably requires that, before a party
can employ the False Claims Act to effect a disgorgement of the entire price times
three for the unqualified mental health services or for the hypothetical defective gun,
the relator must prove (1) that, if informed that the proof of licensure was not
attached to the file or if the certificate of test firing was not retained, the government
would have chosen the remedy of a refusal to pay and (2) that the vendor knew or
reasonably should have known the government would refuse entirely to pay but,
nonetheless, remained silent, invoiced the government, and accepted the money.
In the present action, the relator’s burden was to show that the federal
government and the state government did not know about the record-keeping
deficiency but, had the governments known, the governments would have refused to
pay the operators of fifty-three specialized nursing facilities for services rendered,
products delivered, and costs incurred. More specifically, the required proof likely
would need to exclude the governments’ choosing to resort to a more moderate,
more proportional, more efficacious remedy, such as delivery of a “notice of noncompliance,” accompanied by a stern demand for, and a fair deadline for,
compliance. Or to exclude the governments’ choosing to resort to some mediated

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solution or to an administrative hearing or to an order to show cause. Or perhaps the
governments’ offering a price adjustment. Who knows? The record is effectively
barren of evidence on how the governments might have addressed the disputed
practices and, as the parties were notified timely by the trial judge, the dearth of
evidence left the jurors to guess. The resulting verdict, which perpetrates one of the
forbidden “traps, zaps, and zingers” mentioned earlier, cannot stand. The judgments
effect an unwarranted, unjustified, unconscionable, and probably unconstitutional
forfeiture — times three — sufficient in proportion and irrationality to deter any
prudent business from providing services and products to a government armed with
the untethered and hair-trigger artillery of a False Claims Act invoked by a heavily
invested relator.
The relator acknowledges that “[d]efendants’ principal argument is that the
record does not contain sufficient evidence of materiality to support a verdict for false
claims . . . .” (Doc. 454 at 12) The relator includes a brief discussion of Escobar but
repairs promptly to several district court decisions and to a few isolated and
incompetent items of testimony in an attempt to confine and dilute Escobar’s
“rigorous and demanding” materiality requirement. At most, the relator is able to
raise from the fatally deficient record only a faint and formless specter of the
necessary materiality. This will not do.
First, the relator cites three district court decisions, none of which approaches
resolving the issue that controls the present action. In U.S. ex rel. Brown v. Celgene

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Corp., 226 F. Supp. 3d 1032 (C.D. Cal. 2016), Celgene sought and received payment
for “off-label” uses of certain drugs, a practice that (the court finds) renders the
resulting claim “statutorily ineligible for reimbursement.” Celgene denies a motion for
summary judgment and holds that evidence of a statutory prohibition on the
government’s paying for an off-label use is sufficient to create a genuine dispute of
material fact on materiality, even though the record showed other instances of
knowing off-label reimbursement, showed more than ten years of knowledge by
Medicare of off-label prescriptions disclosed by Celgene, and showed continued
reimbursement by Medicare during the six years of the False Claims Act action.
Whether right or wrong (likely wrong on a fair application of Escobar), the district
court ruled nothing other than that a factual issue precludes summary judgment on
materiality if a statute prohibits payment.
Next, the relator cites United States v. Planned Parenthood of the Heartland, Inc.,
2016 WL 7474797 (S.D. Iowa 2016), which has little or no bearing on the present
dispute and which assesses the sufficiency of a pleading challenged by a Rule 12(b)(6)
motion. Planned Parenthood summarizes the challenged complaint:
First, [the complaint] alleges that Defendant knowingly
violated multiple laws and regulations in its prescription and
distribution of [birth control pills] and birth control patches, resulting
in the submission of false claims and receipt of unwarranted
reimbursement, as well as its failure to return money owed to the
Government. Second, [the complaint] alleges that Defendant
knowingly sought reimbursement for abortion-related services that are
outside the scope of Medicaid coverage. Finally, [the complaint]
alleges that Defendant failed to reduce its requests for reimbursement
for the amount of donations Defendant solicited and received from
patients.

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2016 WL 7474797 at 7. Unremarkably, Planned Parenthood finds (only) that the
allegations of Counts I and II are sufficient to defeat a motion to dismiss. The relator
in the present action unhelpfully transports from Planned Parenthood the
unexceptional observation that a valid prescription from a licensed physician
“represents the heart of prescription medication regulation.” In fact, this observation
accords strongly with the discussion in Escobar of medical fakery and deception. To
say the least, Planned Parenthood says little, if anything, about the proof of materiality
required to sustain judgments of about $350 million entered on a jury’s verdict after a
month-long jury trial.
The relator mentions another district court opinion, United States v. Crumb,
2016 WL 4480690 (S.D. Ala. 2016) (Steele, C.J.), an excellent opinion about the
requirements of pleading but an opinion with only, at most, a tangential relation to
the present circumstance (a fact tacitly conceded by the “see also” signal).
With no help from the Supreme Court or the courts of appeals, and only trivial
support from the district courts, the relator turns for comfort to “common sense,” in
praise of which the relator cites United States ex rel. Beauchamp v. Academi Training
Center, Inc., 220 F. Supp. 3d 676 (E.D. Va. 2016), an opinion that avowedly resolves
only “whether relator’s second amended complaint adequately alleges an implied
false certification claim under 31 U.S.C. § 3729(a)(1)(A), as required by [Escobar].”
220 F. Supp. 3d at 677. The defendant, a private security company, contracted to
provide protection for diplomats and the like in Afghanistan. The defendant

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allegedly submitted “false weapons qualifications” — carefully note this distinction,
among other distinctions, from the present case — “for the services of [protective
services personnel] who had not fulfilled the WPPS contract’s weapons qualifications
requirement.” 220 F. Supp. 3d at 678. The contractor billed the government for both
the unqualified personnel and the weapons training, testing, and qualifications that
never occurred (but evidence of which was fabricated and presented to the United
States). The district court analyzed the allegations and found close parallels to
Escobar :
Indeed, the similarities are striking. Just as the clinic in Escobar
submitted “claims for payment using payment codes that corresponded
to specific counseling services,” defendant used payment codes (such
as “PSS”) indicating that defendant’s PRSs provided particular
services, such as weapons instruction. Id. at 2000. Just as the clinic’s
employees used identification numbers “corresponding to specific job
titles,” defendant’s invoice in this case repeatedly refers to job titles
such as “shift leader” or “firearms instructor.” Further, just as the
clinic’s use of the payment codes represented “that it had provided
[various medical services],” defendant’s use of the “PSS” billing code
represented that defendant had staffed fully qualified, weapons-trained
PRSs on its security assignments. Id. And just as “[a]nyone informed
that a social worker at a Massachusetts mental health clinic provided a
teenage patient with individual counseling services would probably —
but wrongly — conclude that the clinic had complied with core
Massachusetts Medicaid requirements,” so, too, anyone informed that
PRSs providing armed protection for governmental officials in a
high-risk country or warzone like Afghanistan would probably — but
wrongly — conclude that the PRSs were qualified to handle the very
firearms they needed to protect those officials.

220 F. Supp. 3d at 681. The district court correctly found that, if a reasonable
purchaser knew that the guards who carried machine guns and whose ability to
capably fire the guns might mean the difference between life or death for Americans
in Afghanistan, the reasonable purchaser would refuse to pay if the guards were
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actually not qualified, a conclusion that the district court found within the scope of
“common sense.” But, more to the present point, actually not qualified is decisively
different from fully qualified but not in possession of a certificate.
The leap of logic and the gap in “common sense” is too great to apply the
otherwise unimpeachable ruling in Beauchamp to the decisively different facts of the
present action. The defendants in the present action used qualified providers who
ably provided services in accord with orders issued by qualified professionals but
who, for example, could not — years later — identify a “comprehensive care plan”
for each patient. “Common sense” falls far, far short of dictating that in the later
event a reasonable purchaser would abruptly refuse to pay those providing
continuing and sustaining health care to a mass of highly vulnerable and mostly
elderly and frail patients.
Next, the relator reprises some of the usual arguments that might have worked
before Escobar. The relator cites to opinion testimony from a few witnesses, none of
whom were competent or qualified to testify or disclosed as experts to testify — and
none of whom in fact testified — on the controlling question, that is, on the actual
and expected conduct of the federal or state government when confronted with a
record-keeping deficiency or any other deficiency by a health care provider engaged
actively in providing qualified and essential health care to thousands of aged, infirm,
and dependent patients at scores of residential facilities throughout the third largest
state in the United States. Neither these witnesses nor any other witnesses in the trial

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answered that question and, as a result, no one is able to do more than the jury did —
launch a wild guess. (My guess is that under these circumstances no government
answerable to the people would refuse to pay, especially in Florida and especially in
the pertinent patient population, unless every administrative and other remedy was
exhausted and until an alternative provider was identified and prepared to capably
serve the same patients without interruption.)
The question presented in this action is not, for example, whether a written
and retained comprehensive care plan is “important” or “essential” or “prescribed”
or the like to an extent that in some hypothetical or generic circumstance a
government might refuse to pay one or two or several invoices or even the invoices
from a facility or two or a physician or two. The question is not that simple because
the relator aggressively “ramped up” and immeasurably escalated the present
dispute — albeit a “ramping up” and an escalation effected by the diciest possible
form of sparse and attenuated statistical sampling — into a systemic dispute that
forces a systemic challenge that requires systemic answers (and that offers the
prospect of a systemic judgment creating a systemic danger with public
consequences).
In other words, the controlling question is not whether on a small scale — a
patient or a few patients or a facility or even a few facilities or one physician, one
therapy, or one pharmaceutical — but whether on a large scale, on the scale of a
major statewide provider of a scarce health care resource in a large and potent state,

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the federal government or the state government would refuse to pay the provider
because of a dispute about the method or accuracy of payment after the government
has permitted a practice to remain in place for years without complaint or inquiry.
Or, on the other hand, would the government have insisted on a new modus operandi
for the future? Or would a new form of computing RUGs have emerged or a new
kind of “comprehensive care plan”? The record is silent. One can only launch ones
best guess.
Every day that the government continues to pay for a good or service,
notwithstanding some known or unknown non-compliance and, consequently, the
greater the proposed repayment times three in the event of a successful False Claims
Act action, the greater the practical impediment to proof of materiality. Why? If a
non-compliance is found quickly and remains small, the government might likely
demand perfect performance and full accounting. If a non-compliance is larger and
lingers longer and the repayment times three becomes a burden that threatens the
vitality of the vendor and threatens the public interest, the government might not
demand repayment times three. For example, if (this is hypothetical) the only
manufacturer of the only booster that can launch the United States’ nuclear warheads
is found to have failed to maintain metallurgical test results (the metals passed the
tests) required by the Department of Defense and if the repayment times three for the
price of the booster powering each American ICBM would cripple or kill the only
available manufacturer, would the government demand the payment (or, more to the

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point, would the government allow a private party to demand the payment in
exchange for a percentage of the take)? To answer that inquiry, Escobar demands
proof of materiality in the circumstances as they are at the time for which the proof is
offered and in the place, in the industry, and in the other regnant circumstances that
attend the moment for which the proof of materiality is offered. That proof is
manifestly absent in the present action, despite a month of opportunities to offer the
proof and a basketful of warnings that the proof was lacking.
OTHER DEFECTS
Also, the defendants argue that the evidence was insufficient to support False
Claims Act liability against the “Management Entity” under Medicaid and Medicare
and under a “presentment,” “caused to be presented,” or “false record or statement”
theory of False Claims Act liability. By the “Management Entity,” the defendants
mean the now-defunct Sea Crest Health Care Management, LLC, and the successorin-interest, CMC II, LLC. A review of the voluminous record confirms the validity
of this argument. In fact, the record confirms that the Management Entity submitted
no claims at all; each of the fifty-three specialized nursing facilities directly and
individually submitted claims through a common electronic portal, a practice known
and approved by the governments. And the defendants argue persuasively that the
evidence fails to support a “caused to be presented” claim against the Management
Entity. As the defendants observe, a “corporate scheme” not embodied in some
identified person or persons who could and did hatch, direct, and implement the

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scheme is not sufficient to support a False Claims Act “caused to be presented”
claim. Stated somewhat differently, a scattering of claims in a smattering of facilities
is a wholly insufficient basis from which to infer the existence of a massive,
authorized, cohesive, concerted, enduring, top-down, corporate scheme to defraud
the government. As the defendants argue, the relator attempts retrospectively to
convert evidence offered and received for a limited and different purpose into
evidence to support the existence of a corporate scheme. Although the success of this
sleight-of-hand conversion is essential to sustain the relator’s claims and the resulting
judgments against the Management Entity, the attempted conversion must fail. As
the defendants explain with admirable clarity:
The “cause to be presented” theory, however, requires some evidence
of a connecting causal link between the defendant’s actions and the
submission of a specific false claim[.] Neither Relator’s expert
statistical extrapolation nor her evidence of a “corporate scheme” are
relevant to the existence of such a link. The Court stated that Relator
had the burden, “by somehow, some means, [to] spread the knowledge
and the scheme throughout the 53” Florida SNFs. Relator’s evidence
fails to meet this burden, and her inability to connect corporate
knowledge with a directive and, in turn, a specific false claim cannot
establish [a False Claims Act] violation, and therefore cannot support
the jury’s verdicts.

(Doc. 452 at 33) The defendants correctly conclude that the evidence fails to support
a verdict against the Management Entity and correctly argue that the relator fails
entirely to connect the testimony about “RUG budgets,” “LaVie meetings,” and
“corporate profits” to any particular claim “actually submitted” to the governments.
Similarly, the evidence fails to show that the Management Entity produced, or
caused the production of, a “false record or statement” material to a false claim.
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CONCLUSION
In his recent opinion in Harman, which (especially Part IV(C)) I commend to
the reader’s focused attention, the estimable Judge Patrick Higginbotham considers
at length Escobar’s “rigorous and demanding” materiality requirement. After toiling
with Escobar and with several recent circuit court opinions that apply Escobar, Judge
Higginbotham concludes that “continued payment by the federal government after it
learns of the alleged fraud substantially increases the burden on the relator in
establishing materiality.” 872 F.3d at 663. A closer reading of Harman persuades the
disinterested reader that Judge Higginbotham finds the government’s continued
performance after non-compliance more consequential than his words explicitly
reveal. (Undoubtedly His Honor’s many years of judicial experience effectively
cautioned against announcing a more exacting rule than resolution of the dispute-athand requires.)
But certainly the government that continues to pay full fare for a product or
service despite knowledge of some disputed practice, some non-compliance, or some
other claimed defect, relentlessly works itself into a steadily tightening bind that at
some point becomes disabling because the government (or the relator, who sues in
the government’s stead) must prove that had the government known the facts the
government would have refused to pay. In other words, at some point, this burden,
growing incrementally more formidable each day, presents to the government the
insurmountable burden of proving that the government would not do exactly what

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history demonstrates the government in fact did (and continues to do until this
moment). In this action, I find the relator’s claims fatally ensnared in that intractable
bind.
The defendants’ renewed motion (Docs. 452 and 455) for judgment as a matter
of law is GRANTED. Alternatively, the request (Doc. 452 at 37–40) for a new trial
is conditionally GRANTED for the reasons explained above and for the reasons
identified and satisfactorily explained in the defendants’ motion. The judgments
(Docs. 432 through 436) against the defendants are VACATED. The clerk is
directed (1) as to all claims to enter judgment for the defendants and against Angela
Ruckh, the United States, and the State of Florida and (2) to close the case. The
defendants’ motion for remittitur is DENIED AS MOOT.
ORDERED in Tampa, Florida, on January 11, 2018.

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