Courts Continue to Diverge on How Post-Complaint Government Conduct Affects Materiality Analysis Under Escobar

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Two recent decisions by district courts in the Third Circuit illustrate the continued divide among courts regarding the extent to which the government’s declination decision bears on the materiality analysis set forth in Escobar and also underscore the challenges defendants can face in defeating materiality at the motion to dismiss stage.

In United States v. Andover Subacute & Rehabilitation Center Services One, Inc., a court in the District of New Jersey held that the government’s decision not to intervene and its continued payment of claims weighed against a finding of materiality. In contrast, a court in the Eastern District of Pennsylvania recently decided, at least at the motion to dismiss stage, that a relator adequately pled materiality where he alleged that CMS has twice in the past denied payments to providers “found to have significant and pervasive staffing violations of the kind” described in the relator’s complaint, without actually identifying whether those past violations were in fact the same or sufficiently similar to the conduct alleged in this case.

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