Orrick White Collar Team Secures Dismissal of False Claims Act Case Against Carolina Liquid Chemistries

July.16.2019

Siding with the arguments of an Orrick white collar and securities team, a California federal judge today dismissed a False Claims Act complaint filed against medical device company Carolina Liquid Chemistries Corp. and two of its senior executives. U.S. District Judge Jon Tigar granted our team’s motion to dismiss without prejudice.

The complaint was first filed in the Northern District of California in 2013 by two Carolina Liquid competitors, who alleged that Carolina Liquid violated the False Claims Act and multiple state false claims acts by marketing certain urine drug testing machines as being capable of performing high complexity quantitative drug testing when they were allegedly capable only of more basic qualitative testing.  The competitors’ theory was that Carolina Liquid’s marketing practices caused medical providers to submit “upcoded” reimbursement claims to Medicare and Medicaid.

In his order, Judge Tigar agreed with our argument that the complaint failed to plead sufficient details about the allegedly fraudulent marketing on which the complaint was based.  Finding that the marketing was the “essential link” in the case’s theory, the court dismissed the entire complaint.  The court also dismissed the complaint as to two senior executives.

Reuters called the decision a “victory for Greensboro, North Carolina-based Carolina Liquid and its lawyers.”

In late 2018, the U.S. Department of Justice also agreed with our position in declining to intervene in the lawsuit.

The Holton Law Firm of Winston-Salem, North Carolina partnered with us on the case. Orrick partner Randy Luskey and associate Alexander Porcaro led the Orrick team.