Vanessa Absher, et al v. Momence Meadows Nursing Center, et al

Filing

Filed opinion of the court by Judge Manion. The judgment entered for the plaintiffs is VACATED in both their individual and relator capacities in this case on February 16, 2013, and the case is REMANDED to the district court with the directions that judgment be entered for the defendants. Daniel A. Manion, Circuit Judge; Diane S. Sykes, Circuit Judge and William C. Griesbach, Chief District Court Judge*. *Hon. William C. Griesbach, Chief Judge for the Eastern District of Wisconsin, sitting by designation. [6599449-1] [6599449] [13-1886, 13-1936]

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In the

United States Court of Appeals
For the Seventh Circuit
Nos. 13-1886 & 13-1936
UNITED STATES OF AMERICA ex rel.
VANESSA ABSHER, et al.,
Plaintiffs-Appellees, Cross-Appellants,
v.
MOMENCE MEADOWS NURSING
CENTER, INC. and JACOB GRAFF,
Defendants-Appellants, Cross-Appellees.
Appeals from the United States District Court for the
Central District of Illinois.
No. 04-CV-02289 — Harold A. Baker, Judge.

ARGUED JANUARY 9, 2014 — DECIDED AUGUST 20, 2014

Before MANION and SYKES, Circuit Judges, and GRIESBACH,*
District Judge.
MANION, Circuit Judge. This appeal and cross-appeal arise
from jury verdicts and a judgment against Momence Meadows
*

Hon. William C. Griesbach, Chief Judge for the Eastern District of
Wisconsin, sitting by designation.

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Nursing Center, Inc., and its president and part owner, Jacob
Graff.1 The plaintiffs and cross-appellants are two nurses who
were formerly employed by Momence. The nurses alleged that,
during their employment at Momence, they uncovered
evidence that Momence knowingly submitted “thousands of
false claims to the Medicare and Medicaid programs” in
violation of the False Claims Act (“FCA”) and the Illinois
Whistleblower Reward and Protection Act (“IWRPA”). The
nurses filed this qui tam action on behalf of the government.
They also sued in their personal capacities and alleged that
Momence retaliated against them for reporting evidence of
Momence’s fraud.
Following trial, a jury reached verdicts against Momence on
both the qui tam claims and the retaliation claims. The jury
awarded the United States over $3 million in compensatory
damages and imposed about $19 million in fines for the qui tam
claims. Pursuant to the FCA, the compensatory damages were
trebled to over $9 million. However, the district court set aside
the fines on the grounds that they violated the Excessive Fines
Clause of the Eighth Amendment. The jury also awarded the
nurses $150,000 and $262,320, respectively, on their retaliation
claims.
On appeal, Momence contends that the district court lacked
jurisdiction over the qui tam claims, and that the qui tam and
the retaliation claims fail as a matter of law. With support from
the United States as amicus curiae, the nurses cross-appeal the
set-aside of the fines. For the reasons discussed below, we

1

For simplicity’s sake, we refer to both defendants as “Momence.”

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vacate the judgment, and remand with directions that judgment be entered for the defendants.
I. Facts
The FCA prohibits any person from knowingly submitting
a false or fraudulent claim to the United States for payment or
approval or knowingly making any false statement material to
such a false or fraudulent claim. 31 U.S.C. § 3729(a).2 Civil
penalties and treble damages are available remedies for each
violation. Id. The Attorney General may bring actions under
the FCA directly in the name of the United States. Id. Alternatively, a private person—known as a “relator”—may bring a
qui tam action “for the person and for the United States
Government.” 31 U.S.C. § 3730(b)(1); see U.S. ex rel. Eisenstein
v. City of N.Y., 556 U.S. 928, 932 (2009). If such a qui tam action
results in a recovery for the government, the relator shares in
the award. See 31 U.S.C. § 3730(d).
During the time period relevant to the instant action
(1998–2006), Momence owned a 140-bed long-term care facility
located in Kankakee County, Illinois. Jacob Graff, Momence’s
president and part owner, was the “designated person[]
functioning as [Momence’s] governing body.” See 42 C.F.R.
§ 483.75(d); A-913. Thus, he was legally responsible “for
establishing and implementing policies regarding the management and operation of the facility.” 42 C.F.R. § 483.75(d). He

2

The statutory language was altered—and the precise subsection was
renumbered—after the relators brought this action, but the changes are not
material to this appeal. Compare 31 U.S.C. § 3729(a) (2003) with 31 U.S.C.
§ 3729(a) (Supp. 2014).

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also appointed the administrators who were responsible for
managing the facility. Id.
At the time, almost all of Momence’s residents were
supported by Medicare or Medicaid. Both programs reimbursed Momence on a “per patient day” basis, meaning that
the programs paid Momence a flat per diem amount for each
resident and did not reimburse the facility separately for
specific services provided. A-257–59. To receive reimbursement, Momence was required to provide government regulators with a completed Minimum Data Sheet (“MDS”) form on
behalf of each resident.3 A-257, 734–43. The form is both a
billing document and a care assessment certification for
Medicare and Medicaid, and had to be submitted at 5-, 14-, 30-,
60- and 90-day intervals after admission. A-258, 891. The MDS
forms used by Momence were lengthy and contained sections
for inputting health assessment and tracking information for
the patient, including disease diagnoses and health conditions,
inter alia. A-734–40. Each form contained the following text:
I certify that the accompanying information accurately
reflects resident assessment or tracking information for
this resident and that I collected or coordinated collection
of this information on the dates specified. To the best of
my knowledge, this information was collected in accordance with applicable Medicare and Medicaid requirements. I understand that this information is used as a
basis for assuring that residents receive appropriate and

3

At trial, the relators introduced one blank MDS form, but did not
introduce billing records for any of the individual residents at Momence.

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quality care and as a basis for payment from federal
funds. I further understand that payment of such federal
funds and continued participation in the government
funded health care program is conditioned on the accuracy and truthfulness of this information and that I may
be personally subject to or may subject my organization
to substantial criminal, civil, and/or administrative
penalties for submitting false information.
A-734; see also A-952.
Momence (as a long-term care facility caring for Medicare
or Medicaid patients) also was required to comply with a wide
variety of regulations and standards of care that are part of
Medicare and Medicaid’s complex regulatory scheme. See 42
C.F.R. pt. 483; Ill. Admin. Code tit. 77, subch. C, pt. 300. This
regulatory scheme is enforced by the Centers for Medicare &
Medicaid Services (“CMS”), a federal agency, and the Illinois
Department of Public Health (“IDPH”). Under the regulations,
a facility provides deficient or non-compliant care when the
care does not meet a participation requirement specified in the
controlling statutes or regulations. See 42 C.F.R. § 488.301. The
provision of non-compliant care can result in a variety of
remedies or sanctions, including fines or even termination from
the Medicare and Medicaid programs. See 42 C.F.R. §§ 488.406,
488.408. Additionally, payments may be suspended if there are
credible allegations of fraud against a facility. 42 C.F.R.
§ 405.371. To ensure that Momence was providing adequate
care, the facility was subject to inspection (“surveys”) by
government regulators. See A-712–16. Between 1998 and 2006,
government regulators surveyed Momence 117 times. A-551.

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When deficiencies were discovered, the regulators required
Momence to take remedial action, which involved completing
and implementing plans of correction, and to pay administrative fines.
Vanessa Absher and Lynda Mitchell—the “relators”—are
nurses who were formerly employed at Momence’s nursing
facility. Absher, a licensed practical nurse, worked for
Momence from December 1997 to February 2003 (with some
breaks in between). A-297. On February 8, 2003, Absher
resigned her position with Momence. A-372. Mitchell, a
registered nurse, worked for Momence from the beginning of
2001 to 2003. A-93. In February 2003, Momence terminated
Mitchell’s employment. A-93.
On September 29, 2004,4 the relators filed this action and
alleged that Momence knowingly submitted “thousands of
false claims to the Medicare and Medicaid programs” in
violation of the FCA, 31 U.S.C. § 3729 et seq., and the IWRPA,
740 ILCS 175/1 et seq. (1993, amended and re-codified 2010).5
4

The operative complaint (the relators’ sixth amended complaint) was
filed in 2009 and extended the time period covered by the relators’ qui tam
claims through 2006, and alleged violations beginning as far back as 1989.

5

The IWRPA closely mirrors the FCA, and the parties do not contend that
there are any differences between these statutes that are material to the
parties’ arguments or the relators’ claims in this case. See Scachitti v. UBS
Fin. Servs., 831 N.E.2d 544, 557 (Ill. 2005); see also U.S. ex rel. Humphrey v.
Franklin-Williamson Human Servs., Inc., 189 F. Supp. 2d 862, 867 (S.D. Ill.
2002) (noting that the IWRPA “is virtually identical in all relevant aspects
to the FCA”). After this action was filed, the IWRPA was amended and

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Relators alleged that Momence also violated these statutes by
retaliating against them by terminating Mitchell and constructively terminating Absher for reporting evidence of Momence’s
fraud. Pursuant to the FCA, the relators’ complaint was filed
under seal to allow the government the opportunity to
intervene. 31 U.S.C. § 3730(b)(2). The United States and Illinois
declined to intervene, and so the district court unsealed the
relators’ complaint and allowed the lawsuit to proceed.6
Thereafter, Momence moved for summary judgment, but the
district court denied that motion.
At trial, the relators presented evidence of numerous
instances of non-compliant care provided at Momence and
harm that resulted therefrom. Specifically, they presented
evidence of problems relating to infection and pest control
(including scabies7 outbreaks), pressure sore management,
medication, food and water temperatures, the facility’s
5

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re-codified effective July 27, 2010, and now is known as the Illinois False
Claims Act. See 740 ILCS 175/1 (2010).
6

In Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr.,
Inc., 566 F.3d 689 (7th Cir. 2009), we held that Momence’s insurer had no
duty to defend against the action that ultimately matured into the judgment
we consider in the present appeal. In that decision, “[w]e t[ook] no position
on the merits of the underlying suit’s FCA and IWRPA claims.” Id. at 695
n.7.

7

Scabies is “[a] parasitic infestation that causes intense itching and a rash.”
American Medical Association, Complete Medical Encyclopedia 1091 (2003)
(noting that “[c]hildren and elderly people in nursing homes are particularly susceptible” to scabies).

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cleanliness, wheelchairs and other medical equipment, accidents such as falls, and patient trust accounts. The relators also
offered evidence of incidents where an administrator struck a
resident, a resident wandered away from the facility, a resident
was scalded in a bath, and a resident died from malfunction of
his colostomy bag. Additionally, the relators offered expert
witness testimony that Momence systemically violated
Medicare and Medicaid regulations concerning the duties of
personnel at the facility, the protocols for addressing patient
care issues, and the standard of care provided. A-907–21
(Arbeit); A-988–1003 (Warner-Maron).
The relators also presented evidence that Momence actively
concealed the extent of its non-compliant care from government regulators. Specifically, the relators offered testimony at
trial that Momence supervisors directed employees not to chart
symptoms of scabies or pressure ulcers (or, at least, to chart the
symptoms as something other than scabies or pressure ulcers),
and hid any charts where such symptoms had been documented. See A-206; A-227; A-898, at pp. 9–10. The relators also
offered testimony that Momence generally was under-staffed
and did not use proper blankets, pajamas, nightgowns,
diapers, or briefs, yet would increase staffing levels and
temporarily use new linens and nightgowns while government
surveyors were present. A-99–100, 107–09, 150–53, 934.
Additionally, during unscheduled surveys, Momence’s
administrator would broadcast a coded message to alert staff
to the presence of regulators. A-964, 980.
At the close of the evidence, Momence moved for judgment
as a matter of law, but the district court denied that motion.
After deliberating, the jury concluded that Momence submitted

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1,729 false claims, imposed an $11,000 penalty for each false
claim (amounting to $19,019,000 in fines), and awarded
compensatory damages in the amount of $3,030,409. The jury
also awarded $150,000 to Absher and $262,320 to Mitchell on
their retaliation counts. The district court entered judgment for
the United States in the amount of $9,091,227, trebling the
damages award, but vacated the statutory penalties, concluding that they violated the Eighth Amendment’s Excessive Fines
clause. The district court awarded nothing to Illinois. Momence
moved for a new trial and renewed its motion for judgment as
a matter of law. The district court denied those motions as well
as the relators’ motion to amend the judgment to reimpose the
statutory penalties.
Momence appeals and contends that the district court
lacked subject-matter jurisdiction over the qui tam claims, and
that the qui tam as well as the retaliation claims fail as a matter
of law. The relators cross-appeal the district court’s decision to
vacate the statutory penalties. The government filed an amicus
curiae brief in support of the relators’ cross-appeal.
II. Jurisdiction
On appeal, Momence first argues that two statutory
provisions contained in the FCA action deprived the district
court of jurisdiction over the relators’ FCA claims. See 31 U.S.C.
§ 3730(e)(3), (e)(4). In 2007, the Supreme Court held that one of
these provisions, § 3730(e)(4), is a jurisdictional requirement
that must be addressed before a court can reach the merits of
the FCA claims. See Rockwell Int’l Corp. v. United States, 549 U.S.
457, 467–70 (2007) (“we may, and indeed must, decide whether
[the FCA plaintiff] met the jurisdictional requirement”); Fednav

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Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 837 (7th Cir. 2010) (“‘we
are bound to evaluate our own jurisdiction, as well as the
jurisdiction of the court below’” (quoting Int’l Union of Operating Eng’rs, Local 150 v. Ward, 563 F.3d 276, 282 (7th Cir. 2009))).8
The Supreme Court’s reasoning was based on the fact that, at
the time, § 3730(e)(4) contained the language “‘[n]o court shall
have jurisdiction over an action under this section … .’”
Rockwell, 349 U.S. at 467 (quoting 31 U.S.C. 3730(e)(4)(A)).
However, in 2010, § 3730(e)(4) was amended and the
quoted language was replaced with the following language:
“The court shall dismiss an action or claim under this section
… .” See The Patient Protection and Affordable Care Act, Pub.
L. No. 111-148, 124 Stat. 119 (2010); U.S. ex rel. Heath v. Wis.
Bell, No. 12-3383, 2014 WL 3704023, at *2 n.1 (7th Cir. Jul. 28,
2014). So it is no longer clear that Rockwell’s holding is still
good law. Regardless, the 2010 amendments to § 3730(e)(4) are
not retroactive. Heath, No. 12-3383, 2014 WL 3704023, at *2 n.1
(citing Schindler Elevator Corp. v. U.S. ex rel. Kirk, 131 S. Ct. 1885,
1889 (2011)). Thus, because the conduct underlying this action
and the filing of the action itself all occurred well before the
2010 amendments to § 3730(e)(4), we apply that section as it
8

Before Rockwell, we remarked in dicta that the Supreme Court had held
that § 3730(e)(4) presents issues of substantive law rather than jurisdiction.
U.S. ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 494 (7th Cir. 2003)
(citing Hughes Aircraft Co. v. United States, 520 U.S. 939, 950–51 (1997)). But
the Court actually said that the bar speaks “not just to the power of a
particular court [i.e., jurisdiction] but to the substantive rights of the parties
as well.” Hughes, 520 U.S. at 951 (emphasis added). Regardless, Rockwell
made clear that § 3730(e)(4) must be addressed before a court can reach the
merits of the underlying FCA claims. 549 U.S. at 467–70.

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existed before 2010. Consequently, Rockwell compels us to
address whether § 3730(e)(4) bars the relators’ qui tam claims
before addressing the merits of those claims.
However, there is an additional wrinkle: Momence also
invokes § 3730(e)(3) as a jurisdictional limit on the district
court’s power to entertain the relators’ qui tam claims. But
§ 3730(e)(3) does not contain the language relied upon by
Rockwell in concluding that § 3730(e)(4) was jurisdictional.
(Section 3730(e)(3) was untouched by the 2010 amendments.)
So it is not clear that § 3730(e)(3) imposes a true jurisdictional
limitation. Regardless, as discussed below, Momence’s argument based on § 3730(e)(3) fails for the same reason that the
argument based on § 3730(e)(4)—which we clearly must
address—fails.
Prior to the 2010 amendments, § 3730(e)(4) provided:
(A) No court shall have jurisdiction over an action
under this section based upon the public disclosure
of allegations or transactions in a criminal, civil, or
administrative hearing, in a congressional, administrative, or Government Accounting Office report,
hearing, audit, or investigation, or from the news
media, unless the action is brought by the Attorney
General or the person bringing the action is an
original source of the information.
(B) For purposes of this paragraph, “original source”
means an individual who has direct and independent knowledge of the information on which the
allegations are based and has voluntarily provided
the information to the Government before filing an

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action under this section which is based on the
information.

(Footnote omitted). Thus, under § 3730(e)(4), the district court
must determine whether the relators’ allegations have been
“publically disclosed,” and whether the qui tam action is “based
upon” those publically disclosed allegations. Glaser v. Wound
Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009). If so,
§ 3730(e)(4) will preclude the action unless “the relator is an
‘original source’ of the information upon which his lawsuit is
based.” Id.
Section 3730(e)(3) provides: “In no event may a person
bring an action under subsection (b) which is based upon
allegations or transactions which are the subject of a civil suit
or an administrative civil money penalty proceeding in which
the Government is already a party.”
We review de novo challenges made pursuant to the FCA’s
bars. U.S. ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492,
494–95 (7th Cir. 2003). But we review findings of fact considered in determining jurisdiction only for clear error. Bowyer v.
Dep’t of Airforce, 875 F.2d 632, 636 (7th Cir. 1989). “At each
stage of the jurisdictional analysis, the [relators bear] the
burden of proof.” Glaser, 570 F.3d at 913; see also John T. Boese,
Civil False Claims and Qui Tam Actions §4.02[A], at 4-56 (4th ed.
Supp. 2014) (“Relators bear the burden of proving on a claimby-claim basis that subject-matter jurisdiction exists by a
preponderance of the evidence.”).
Both § 3730(e)(3) and § 3730(e)(4) share a common
feature—the phrase “allegations or transaction.” These
statutory bars operate only when the qui tam FCA action is

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“based upon allegations or transactions” which either are the
subject of a governmental civil action or penalty proceeding,
§ 3730(e)(3), or already have been “publically disclosed,”
§ 3730(e)(4). Although we have never had occasion to interpret
the phrase “allegations or transactions” within the meaning of
these sections of the FCA, the District of Columbia Circuit has
held that the phrase refers to allegations or transactions of
fraudulent conduct. U.S. ex rel. Springfield Terminal Ry. Co. v.
Quinn, 14 F.3d 645, 653–54 (D.C. Cir. 1994). The other circuits
to interpret the phrase “allegations or transactions” have come
to the same conclusion. See U.S. ex rel. Found. Aiding The Elderly
v. Horizon W., 265 F.3d 1011, 1015 (9th Cir. 2001) (adopting
Quinn’s analysis); U.S. ex rel. Dunleavy v. Cnty. of Del., 123 F.3d
734, 741 (3d Cir. 1997) (same), abrogated on other grounds by
Graham Cnty. Soil & Water Conservation Dist. v. U.S. ex rel.
Wilson, 559 U.S. 280 (2010); Costner v. URS Consultants, Inc., 153
F.3d 667, 676 (8th Cir. 1998) (“The present suit is based upon
allegations of fraud involving the submission of false claims for
payment for environmental remediation work completed at the
Vertac site. Such allegations or transactions have never before
been the subject of a FCA suit or any other suit or proceeding
brought by the government or anyone else.” (emphasis
added)).9 Thus, the two bars “prohibit qui tam actions only

9

In declining to apply § 3730(e)(3), the First Circuit observed that the
government had “not proceed[ed] against the defendants to this action, for
fraud or otherwise … .” U.S. ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24
F.3d 320, 328 (1st Cir. 1994) (emphasis added). It appears that the First
Circuit is merely emphasizing that the government had not proceeded

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when either the allegation of fraud or the critical elements of
the fraudulent transaction themselves” are the subject of a
governmental civil action or penalty proceeding or already
have been “publically disclosed.” Quinn, 14 F.3d at 654. If an
allegation of fraud has already been made, the analysis is
straightforward. But even if no allegation of fraud has been
made, the bars contained in § 3730(e)(3) and § 3730(e)(4) may
still apply so long as facts disclosing the fraud itself are in the
government’s possession or the public domain. In this latter
case, the court must determine whether facts establishing the
essential elements of fraud—and, consequently, providing a
basis for the inference that “fraud has been committed”—are
in the government’s possession or the public domain. Id.
Here, no prior allegations of fraud—arising from the
provision of non-compliant care at the facility—had been
leveled against Momence (either by the government or other
publically disclosed source). However, as Momence contends,
the relators’ FCA claims were based extensively upon incidents
of non-compliant care documented in government survey
reports that gave rise to administrative penalty proceedings.
Specifically, after a November 1998 survey revealed issues with
resident hygiene and pressure sore management, Momence
developed a plan of correction and was found to have resolved
the issue by February 1999. To remedy the interim period,
IDPH imposed civil monetary penalties of $4,850 and $3,050.
Likewise, after a March 2003 report found issues with scabies
and infection control, Momence adopted a new infection
9

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against the defendant in any way.

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control policy and assessed all residents for possible skin
problems. In April 2003, the facility was found to have resolved the problem. In addition to the monetary penalties
already mentioned, IDPH imposed a penalty of $50 per day for
the period from July 16, 2003, through September 26, 2003, and
CMS imposed a penalty of $2,600 for the period from May 6,
2005, through May 18, 2005. In addition, for violations found
on February 16, 2006, CMS imposed a penalty of $5,000, while
IDPH imposed a separate penalty of $10,000.
Momence contends that these facts tend to establish one of
the essential elements of fraud—namely, that Momence
provided non-compliant care to its residents—and were
already “publically disclosed” (within the meaning of
§ 3730(e)(4)(A)) prior to the relators filing this action. See
Graham Cnty., 559 U.S. at 283 (“The question before us is
whether the reference to ‘administrative’ reports, audits, and
investigations in [§ 3730(e)(4)(A)] encompasses disclosures
made in state and local sources as well as federal sources. We
hold that it does.”); Feingold, 324 F.3d at 496 (“Administrative
reports are publicly disclosed because, by their very nature,
they establish the relevant agency’s awareness of the information in those reports.”). And these facts were the subject of
administrative penalty proceedings within the meaning of
§ 3730(e)(3).
However, the relators also offered evidence that Momence
refused to chart incidents of scabies, pressure ulcers, and
rashes. Momence does not offer evidence that the government
survey reports disclosed this misconduct. Moreover, the
surveys’ disclosure of Momence’s provision of non-compliant
care and the related administrative penalty proceedings are not

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enough to trigger either § 3730(e)(3) or § 3730(e)(4) because the
surveys did not disclose facts establishing that Momence
misrepresented the standard of care in submitting claims for
payment to the government. See Horizon W., 265 F.3d at 1016
(“[T]he surveys must disclose both ‘a misrepresented state of
facts and a true state of facts.’” (quoting Quinn, 14 F.3d at 655)).
The government survey reports do not disclose this essential
element of a fraud claim under the FCA.10 Therefore, the
relators’ FCA claims are not barred by § 3730(e)(3) or
§ 3730(e)(4). See Horizon W., 265 F.3d at 1016–17.
III. Qui Tam Claims
Momence also argues that the relators’ qui tam claims fail as
a matter of law. We review a district court’s ruling on a motion
for judgment as a matter of law de novo. May v. Chrysler Grp.,
LLC, 716 F.3d 963, 970 (7th Cir. 2013). The jury found in the
relators’ favor, so we must determine whether the jury had a
legally sufficient evidentiary basis for its verdict. Id. at 971. In
making this determination, we must construe the evidence in

10

Of course, as soon as the government learned that Momence was
providing non-compliant care, it necessarily knew that at least some of
Momence’s claims for payment were for the provision of non-compliant
care. See Quinn, 14 F.3d at 656 (“Knowledge of the allegedly misrepresented
state of affairs—which does not necessarily entail knowledge of the fact of
misrepresentation—is always in the possession of the government.”). But
this is not enough. The government must also have access to facts disclosing
that Momence had the scienter required by the FCA. See id. (“[T]he entire
qui tam regime is premised on the idea that the government’s knowledge of
misrepresented claims against the federal fisc (without knowledge that they
are misrepresented) does not in itself translate into effective enforcement
of the laws against fraud.”); Horizon W., 265 F.3d at 1015–16.

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the relators’ favor and disregard all evidence that was favorable to Momence but that the jury was entitled to discredit. Id.
So long as the jury’s verdict was supported by sufficient
evidence under at least one valid theory of liability presented
to the jury, we must affirm. Thomas v. Cook Cnty. Sheriff’s Dep’t,
604 F.3d 293, 305 n.4 (7th Cir. 2010).
At trial, the relators presented two overarching theories of
liability under the FCA—namely, “worthless services” and
false certification. We address both in turn.
A. “Worthless Services”
The relators’ arguments to the jury were primarily focused
on the theory that Momence violated the FCA by providing
woefully inadequate care to the facility’s residents. This
argument was based on the “worthless services” theory of FCA
liability. The district court’s jury instructions stated that
“[s]ervices can be worthless, and the claims for those services
can, for that reason be false, even if the nursing facility in fact
provided some services to the patient. To find the services
worthless, you do not need to find that the patient received no
services at all.” A-56. The court offered the following example
to illustrate his understanding of the “worthless services”
theory: “if Uncle Sam paid Momence 200 bucks and they only
got $120 worth of value, [then] Momence defrauded them of
$80 worth of services.” A-527.
The district court’s jury instruction was incorrect. The
“worthless services” theory of FCA liability, which a few of our
sister circuits have adopted, allows a qui tam relator to bring
claims for violations of the FCA premised on the theory that
the defendant received reimbursement for products or services

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that were worthless. See Mikes v. Straus, 274 F.3d 687, 703 (2d
Cir. 2001); U.S. ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d
1048, 1053 (9th Cir. 2001); see also Chesbrough v. VPA, P.C., 655
F.3d 461, 468–69 (6th Cir. 2011); U.S. ex rel. Roop v. Hypoguard
USA, Inc., 559 F.3d 818, 824 (8th Cir. 2009). But “the performance of the service [must be] so deficient that for all practical
purposes it is the equivalent of no performance at all.” Mikes,
274 F.3d at 703; see also Chesbrough, 655 F.3d at 468–69; Roop,
559 F.3d at 824. It is not enough to offer evidence that the
defendant provided services that are worth some amount less
than the services paid for. That is, a “diminished value” of
services theory does not satisfy this standard.11 Services that
are “worth less” are not “worthless.”
Truly worthless services may be evidence that a claim for
reimbursement is false or fraudulent (under a false certification
theory of liability). See Luckey v. Baxter Healthcare Corp., 183
F.3d 730, 731–32 (7th Cir. 1999) (observing that a certification
that “all appropriate tests” were performed may be false if the
tests were known to be worthless). But we have not addressed
the validity of the “worthless services” theory as a separate

11

Another circuit has observed that, “in calculating FCA damages, the
fact-finder seeks to set an award that puts the government in the same
position as it would have been if the defendant’s claims had not been false.”
United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1278 (D.C. Cir.
2010). And, consequently, that the diminishment in value of a service may
be a proper measure of damages. Id. But even this decision does not hold
that “diminished services” can support liability under the FCA.

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theory of liability under the FCA.12 We need not do so today
because the relators failed to offer evidence establishing that
Momence’s services were truly or effectively “worthless.”
Indeed, any such claim would be absurd in light of the undisputed fact that Momence was allowed to continue operating
and rendering services of some value despite regular visits by
government surveyors. The surveyors would certainly have
noticed if Momence was providing no or effectively no care to
its residents. Indeed, Absher’s mother resided at Momence
from 1995–2002 (i.e., during four of the years covered by this
action). A-343. At trial, when Absher was asked whether she
felt that her mother received “good care” at Momence, she
responded, “Yes.” A-373.
Even if we were to recognize the “worthless services”
theory of FCA liability (a question best saved for another day),
no reasonable jury could have found that Momence provided
truly or effectively worthless nursing services to its residents.
Accordingly, as a matter of law, the “worthless services”
theory cannot support the jury’s verdict on the qui tam claims.

12

The relators point to our decision in United States v. Rogan, wherein a
provider of medical services violated the FCA by billing the government for
medical services while paying kickbacks for illegal referrals. 517 F.3d 449,
451–52 (7th Cir. 2008). In rejecting a challenge to the monetary award, we
observed that the government was entitled to recoup all that it had paid to
the provider, regardless of whether some medical services were provided,
because the conditions triggering payment had not been met. Id. at 453. That
ruling, though, addresses the proper measure of damages. We did not hold
that liability could be established under the FCA merely based on evidence
that the government received less than it had bargained for.

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B. False Certification

The district court also instructed the jury that it could find
Momence liable based on the false certification theory of FCA
liability. Under this theory, the relators bore the burden of
proving by a preponderance of the evidence that Momence
certified that it had complied with particular statutes or
regulations that were conditions of, or prerequisites to,
government payment, that Momence did not actually comply
with those conditions, and that Momence knew that it had
failed to comply with those conditions. U.S. ex rel. Gross v.
AIDS Research Alliance-Chi., 415 F.3d 601, 604 (7th Cir. 2005).
The relators contend that Momence violated the FCA by
knowingly making false statements on MDS forms and plans
of correction as well as by impliedly certifying that Momence
was still eligible for continued participation in Medicare and
Medicaid by accepting daily payments for their patients while
violating Medicare and Medicaid regulations.
i. Implied Certification
We begin with the relators’ implied certification theory. The
relators contend that Momence impliedly certified that it was
in compliance with Medicare and Medicaid regulations by
accepting daily payments for their patients when, in fact, the
facility was systemically violating a number of these regulations concerning the duties of personnel at the facility, the
protocols for addressing patient care issues, and the standard
of care provided.
Momence counters that the relators’ implied certification
theory of liability is not valid under the FCA. We need not

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resolve whether qui tam plaintiffs may advance an implied
certification theory in our circuit because the relators did not
argue to the jury that the purported implied certifications were
conditions of payment.13
On appeal, the relators argue that Momence’s implied
certifications were conditions of payment because government
regulators could have immediately suspended payments to
Momence if the regulators had suspected the facility of fraud
(that is, that Momence was impliedly certifying compliance
while knowingly not complying). See Appellees’ Response Br.
50 (citing 42 C.F.R. §§ 405.371(a)(2), 1001.2). But the relators
never presented this theory to the jury. Indeed, the relators’
experts testified only that Momence violated regulations

13

As noted, Momence argues that it cannot be held liable under the FCA
for merely implied certifications. Cf. U.S. ex rel. Crews v. NCS Healthcare of Ill.,
Inc., 460 F.3d 853, 858 (7th Cir. 2006) (holding that the FCA “specifically
requires a claimant to point to a specific [false] claim.”). However, several
of our sister circuits have permitted FCA claims to proceed under an
implied certification theory. See, e.g., U.S. ex rel. Wilkins v. United Health
Grp., Inc., 659 F.3d 295, 306 (3d Cir. 2011); U.S. ex rel. Hutcheson v. Blackstone
Med., Inc., 647 F.3d 377, 387 (1st Cir. 2011); Sci. Applications, 626 F.3d at
1267–70; Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 996 (9th Cir. 2010); U.S.
ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir.
2008); U.S. ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d 409, 415
(6th Cir. 2002); Mikes, 274 F.3d at 699–700. And we previously upheld an
FCA verdict against a defendant who violated the Stark Amendment to the
Medicare Act and the Anti-Kickback Act. Rogan, 517 F.3d at 451–52. The
Stark Amendment forbids federal reimbursement for services that stem
from illegal referrals (that is, kickbacks). Id. at 452. But the defendant did
not explicitly certify that he was refraining from accepting illegal referrals.
Id. (referring not to any express certification but instead to “omissions”).

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concerning the duties of personnel at the facility, the protocols
for addressing patient care issues, and the standard of care
provided. The experts did not testify that Momence violated
any regulations by committing fraud. As one of the relators’
experts explained, she was retained for the purpose of determining whether the care provided by Momence was appropriate and whether there was evidence that the care was so
inadequate that it amounted to “worthless services.” A-990–91.
Therefore, because the relators did not argue to the jury that
Momence committed fraud by impliedly (but falsely) certifying
compliance with applicable regulations, this theory is waived
on appeal. See Staub v. Proctor Hosp., 560 F.3d 647, 655 (7th Cir.
2009) (holding that a party waives any theory not presented to
the jury even if the theory is legally sound and supported by
the evidence at trial), rev’d on other grounds, 131 S. Ct. 1186
(2011); Sinclair v. Long Island R.R., 985 F.2d 74, 78 (2d Cir. 1993)
(“[T]he verdict … cannot be sustained on a theory that was
never presented to the jury.”); Boggan v. Data Sys. Network
Corp., 969 F.2d 149, 152 (5th Cir. 1992) (“[T]he verdict can only
be sustained on appeal based on the fraud theory submitted to
the jury … .”); Charles Woods Television Corp. v. Capital Cities/ABC, Inc., 869 F.2d 1155, 1160 (8th Cir. 1989) (“[T]heories …
not before the jury … may not provide the basis for upholding
the jury verdict.” (internal quotation marks omitted)).
The relators also appear to argue that compliance with the
various regulations was a condition of payment because
Momence’s failure to comply could result in its termination
from the Medicare and Medicaid programs and, consequently,
the facility would receive no future payments. But, again, this
theory was not presented to the jury. Moreover, under the

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relators’ theory, even a single regulatory violation would be a
condition of any and all payments subsequently received by the
facility inasmuch as the regulators could terminate the facility
for practically any deficiency. See 42 C.F.R. § 488.408(b). Such
a result would be absurd. Because the relators offer no other
argument for why Momence’s implied certifications were
conditions of payment, the relators’ evidence in support of the
implied certification theory is insufficient to support the jury’s
verdict.
ii. Express Certification
Next, we address the relators’ evidence that Momence
violated the FCA by knowingly making false statements on
MDS forms and plans of correction.
a. Plans of Correction
The relators argue that Momence violated the FCA by
certifying, in plans of correction, that it would remedy deficiencies found during government surveys, when in fact it had no
intention of doing so.14 But the relators never offered this
theory to the jury. Indeed, the relators’ attorneys did not
mention Momence’s plans of correction even once during their
14

A statement about one’s present intent to perform some act in the future
can be false. But the mere fact that the promised act is not subsequently
performed does not necessarily mean that the promisor did not intend to
perform the act at the time of making the promise. See U.S. ex rel. Main v.
Oakland City Univ., 426 F.3d 914, 917 (7th Cir. 2005) (“[F]ailure to honor
one’s promise is (just) breach of contract, but making a promise that one
intends not to keep is fraud.”); Price v. Highland Cmty. Bank, 722 F. Supp.
454, 459–60 (N.D. Ill. 1989) (Posner, J., sitting by designation) (“A change of
mind can be … a breach of contract, but it is not fraud.”).

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opening statements and closing arguments to the jury. The
relators did offer evidence at trial that Momence failed to
improve its documentation procedures and provide in-service
training as promised in the plans of correction. See A-667–72,
400, 402, 408, 412, 416, 418, 422, 424, 432, 435, 442, 877, 938. But
this evidence was offered to show that Momence provided
inadequate care to its residents. The relators never articulated
to the jury the theory that the Momence violated the FCA by
promising to fulfill the terms of the plans of correction without
actually intending to do so. Consequently, the relators’ express
certification theory based on the plans of correction is waived
on appeal. See Staub, 560 F.3d at 655; Sinclair, 985 F.2d at 78;
Boggan, 969 F.2d at 152; Charles Woods Television Corp., 869 F.2d
at 1160.
b. MDS Forms
Finally, the relators argue that Momence violated the FCA
by certifying that the MDS forms accurately reflected the
conditions and treatment of the patients, when in fact the
forms did not properly document the symptoms, diagnosis, or
treatment of scabies, pressure ulcers, and rashes. It is not clear
that the relators even presented this theory to the jury. At
closing arguments, the relators’ attorneys only mentioned the
MDS forms in the context of arguing that the care provided by
Momence was worthless. On the other hand, in their opening
statements, the relators’ attorneys did tell the jury that
Momence refused to allow nurses to chart symptoms of scabies
and failed to report these symptoms to the government
regulators (presumably, via the MDS forms). And, at closing
arguments, the relators’ attorneys argued to the jury that
Momence refused to acknowledge that the facility had a

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problem with scabies and directed nurses not to document
symptoms of scabies.
Assuming that the relators preserved the false certification
theory of FCA liability based on the certifications in the MDS
forms, a reasonable jury could certainly find that these MDS
forms were conditions of payment because they specifically
affirm that reimbursement is “conditioned on the accuracy and
truthfulness of [the] information” contained in the forms. And
such a certification of accuracy is required by the Medicare and
Medicaid regulations. See 42 C.F.R. § 483.20. Nevertheless, the
relators’ case premised on the MDS forms still fails because of
a fatal lack of evidence. The relators did not offer any evidence
regarding how many, even roughly, of the MDS forms contained false certifications.
The jury found that Momence made 1,729 false certifications. As stated above, the question for us is whether the
evidence presented to the jury, construed in the relators’ favor,
is sufficient to support a finding that Momence filed 1,729 false
certifications. The jury’s determination must be based in
evidence—it cannot be based on mere speculation. See, e.g.,
Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264 (1946) (“Even
where the defendant by his own wrong has prevented a more
precise computation, the jury may not render a verdict based
on speculation or guesswork.”).
At trial, the relators offered evidence that Momence created
approximately 2,070 MDS forms per Medicare and Medicaid
patient per year during the relevant time period. But how
many of these contained false certifications? In their brief, the
relators point to the following evidence:

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First, an outbreak of scabies occurred at Momence’s facility
between March and November 2002. A-1196. But Ilene WarnerMaron, a health services professor, testified that Momence’s
records reflected no correlation between how many residents
had symptoms of scabies, diagnoses of scabies, and treatment
for scabies. A-1000. This indicates that not all residents with
scabies were properly diagnosed or treated. But the relators
offer no evidence regarding (even roughly) how many residents likely had scabies symptoms without diagnoses or
treatment.
Second, Momence documented no pressure ulcers during
certain months interspersed between months wherein
Momence documented numerous pressure ulcers. A-996, 1003,
1197. Because it is unlikely that the number of pressure ulcers
at the facility so frequently dropped from a high number to
zero one month and then jumped back up to a high number the
very next month, a jury could reasonably conclude that
Momence failed to document some pressure ulcers that
occurred during the months with no reported pressure ulcers.
But again, the relators offer no evidence regarding even
approximately how many such pressure ulcers were not
documented.
Finally, relators point out that one government survey
report concluded that Momence failed to track the development of rashes among certain residents. A-730. And the
relators offered testimony that Momence instructed nurses to
exclude the word “scabies” from residents’ charts. But, again,
the relators offer no evidence allowing the jury to find (even
approximately) how many times Momence did not document
rashes or scabies.

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The problem is not simply that the relators failed to come
forth with evidence that particular MDS forms contained false
certification or evidence of precisely how many of the MDS
forms contained false certifications. Rather, the relators have
failed to offer evidence establishing that even a roughly
approximate number of forms contained false certifications.
Tellingly, when pressed at oral argument, counsel for the
relators was only able to identify evidence in the record
regarding how many MDS forms were created by Momence.
But counsel was unable to tell us, even approximately, how
many MDS forms contained false certifications.15
The relators point to Rogan’s dicta that a judge, in ruling in
a bench trial, need not specifically address (in its factual
findings) each form (of 1,812 forms) in concluding that those
forms were false. See 517 F.3d at 453. Rather, Rogan states,
“[s]tatistical analysis should suffice.” Id. But there has to be
some evidence—statistical or otherwise—from which the jury
could determine (at least approximately) how many of
Momence’s documents contained false certifications. (Of
course, because Rogan involved violations of the Stark Amendment to the Medicare Act and the Anti-Kickback Act, each and
every form filed by the defendant was false. Thus, in Rogan
unlike here, evidence of how many forms were filed was
sufficient to establish how many of those forms were false.)

15

The relators’ implied certification theory would suffer from the same
fatal defect even assuming the evidence at trial established that Momence’s
implied (but false) certifications were conditions of Medicare and Medicaid
reimbursement.

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At best, a reasonable jury might be able to say that some of
Momence’s claims were false. But that is not enough to satisfy
the relators’ burden of proof. Of course, the relators’ difficulty
in coming forward with evidence supporting even an approximate finding regarding how many of Momence’s claims were
false may be partly attributed to Momence’s wrongdoing. But,
under the FCA, the plaintiff must “prove all essential elements
of the cause of action, including damages, by a preponderance
of the evidence.” 31 U.S.C. § 3731.16 A defendant’s wrongdoing
does not shift the burden of proof to the defendant under the
FCA. Crews, 460 F.3d at 857; see also Bigelow, 327 U.S. at 264.
In conclusion, the relators’ false certification theory fails as
a matter of law either based on the lack of evidence at trial or
on waived theories of materiality (that is, whether the certification is a condition of payment). Because, as explained above,
the relators’ “worthless services” theory also fails as a matter
of law, the relators’ cross-appeal regarding the district court’s
set-aside of the $19 million in fines necessarily fails.
IV. Other Claims
Lastly, Momence argues that the relators’ retaliation claims
and claims against Jacob Graff, in his individual capacity, fail
as a matter of law. We apply the standards enunciated in the
prior section.

16

Again, the precise subsection was renumbered after the relators brought
this action, but the changes are not material to this appeal. Compare 31
U.S.C. § 3731(c) (2003) with 31 U.S.C. § 3731(d) (Supp. 2014).

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A. Retaliation Claims
We now turn to the retaliation claims. To prove retaliation,
the relators must offer evidence from which the jury could find
that the relators’ actions were taken in furtherance of an FCA
or IWRPA enforcement action (and were therefore protected
by the statutes); that Momence had knowledge that they were
engaged in this protected conduct; and that their discharge was
motivated, at least in part, by the protected conduct. Fanslow v.
Chi. Mfg. Ctr., Inc., 384 F.3d 469, 479 (7th Cir. 2004); see also 31
U.S.C. § 3730(h); 740 Ill. Comp. Stat. 175/4(g) (1996, amended
2012).
Momence terminated Mitchell’s employment in February
2003. A-93,127. At trial, the relators offered evidence that
Mitchell reported concerns to her supervisors about the neglect
of patients, the lack of bedding and adequate staffing, and
apparent scabies. A-107–09. In 2002, Mitchell twice reported
scabies to IDPH, and one of her superiors threatened to
terminate her employment if she did so again. A-164–66,
236–37. In February 2003, Mitchell called IDPH to report the
circumstances surrounding the death of a resident. A-170–87.
Mitchell testified that her superior, Sue Cavender, upon
learning of the call, called her a “stupid bitch” and told her not
to call IDPH again. Cavender also ordered Mitchell to alter the
patient’s chart to reflect that the doctor had been called, but
Mitchell refused to do so. A-201–02. The next day, Momence
terminated Mitchell’s employment.17

17

Momence offered evidence that Mitchell was terminated for her role in

(continued...)

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Unfortunately for Mitchell, she has failed to offer evidence
from a which a reasonable jury could find that she engaged in
protected conduct under the FCA or the IWRPA. The FCA
protects conduct performed “‘in furtherance of an action under
this section, including investigation for, initiation of, testimony
for, or assistance in an action filed or to be filed.’” Fanslow, 384
F.3d at 479 (quoting 31 U.S.C. § 3730(h)). Although an employee need not have actual knowledge of the FCA, the
employee must undertake the protected conduct with the
actual and reasonable belief “that the employer is committing
fraud against the government.” Id. at 480 (internal quotation
marks omitted). Mitchell’s complaints demonstrate her concern
about the standard of care provided at Momence, but there is
nothing to suggest that she was trying to investigate or report
suspected fraud on Momence’s part. And although Mitchell’s
superior’s command that she alter a chart smacks of fraud, that
command occurred after Mitchell’s last call to IDPH. Therefore,
Mitchell’s retaliation claims fail as a matter of law.18

17

(...continued)

the resident’s death after an internal investigation found that she mismanaged his care and falsified documents in his medical chart. A-207. But,
again, we cannot rely upon evidence favorable to Momence but that the jury
was entitled to reject.
18

Perhaps the evidence would support a retaliation claim under a more
general whistle-blower statute. After all, Mitchell did call a state agency to
report problems of substandard care. See, e.g., 5 U.S.C. § 2302(b) (“Any
employee who has authority to take, direct others to take, recommend, or
approve any personnel action, shall not, with respect to such authority …

(continued...)

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Unlike Mitchell, Absher’s employment was not terminated.
Rather, she resigned her position with Momence, but contends
that she did so because she was constructively discharged by
Momence inasmuch as she could not bear to continue working
at the facility in light of the poor care being provided. At trial,
the relators offered evidence that Absher complained to her
supervisors about a number of substandard conditions at
Momence, including infected catheters, inadequate patient
nutrition, and undocumented scabies. A-314–18. Instead of
addressing the problems, her superiors frequently responded
to her complaints with hostility. A-324–25. In 2002, Absher
made 10–20 calls to IDPH to report scabies, under-staffing, and
incidents wherein the facility lacked hot water. A-377, 394–95.
When Cavender learned of the call, she asked Absher if she
was crazy. A-395–96. Her supervisors did promise to address
her concerns, A-354–55, but then one of her supervisors
suggested that she apply for mental health leave in January
2003. A-355. Although Absher did request such leave, she
continued to work until February 2003 when a resident died
18

(...continued)

(8) take or fail to take, or threaten to take or fail to take, a personnel action
with respect to any employee or applicant for employment because of– (A)
any disclosure of information by an employee or applicant which the
employee or applicant reasonably believes evidences--(i) any violation of
any law, rule, or regulation … .”); 740 ILCS 174/15(b) (“An employer may
not retaliate against an employee for disclosing information to a government or law enforcement agency, where the employee has reasonable cause
to believe that the information discloses a violation of a State or federal law,
rule, or regulation.”). But the relators only brought their allegations under
the FCA and the IWRPA, and they never moved to amend the pleadings to
conform them to the evidence. See Fed. R. Civ. P. 15(b)(2).

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(the same death involved in Mitchell’s termination). Absher
testified that this death was the last straw for her, and she
resigned on February 8, 2003. A-356, 372.
The initial problem with Absher’s retaliation claims is that
Momence did not terminate her employment. Absher invokes
the doctrine of constructive discharge, but she offered no
evidence at trial that Momence did anything to make her
employment unbearable. See Tutman v. WBBM-TV, Inc./CBS,
Inc., 209 F.3d 1044, 1050 (7th Cir. 2000) (“Working conditions
for constructive discharge must be even more egregious than
the high standard for hostile work environment … .”). Supervisors’ hostility towards an employee’s complaints is not
enough. And, although it must be frustrating for a nurse to
work in a healthcare facility that she believes provides substandard care, Absher does not contend that Momence provided
substandard care in order to push Absher to resign. Moreover,
even if Absher could establish that she was constructively
discharged, she (like Mitchell) offers no evidence from which
a reasonable jury could infer that she was trying to investigate
or report suspected fraud on Momence’s part. See Fanslow, 384
F.3d at 479–80. Therefore, Absher’s retaliation claims also fail
as a matter of law.
B. Claims Against Jacob Graff
Because the relators’ claims fail on the merits as a matter of
law, we need not address Graff’s additional arguments for
reversal of the judgment against him in his individual capacity.

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V. Conclusion

Although the relators’ qui tam claims are not barred by
§ 3730(e)(3) or § 3730(e)(4), they fail as a matter of law. Consequently, the relators’ cross-appeal regarding the district court’s
set-aside of the $19 million in fines necessarily fails. Additionally, the relators’ retaliation claims fail as a matter of law.
Therefore, we VACATE the judgment entered for the
plaintiffs—in both their individual and relator capacities—in
this case on February 16, 2013, and REMAND to the district
court with the directions that judgment be entered for the
defendants.