Carolina Liquid Chemistries Wins Summary Judgment, Defeating FCA Claims

Paul, Weiss, alongside co-counsel at Holton Law, won a major victory on behalf of Carolina Liquid Chemistries Corporation (CLC), securing summary judgment in a high-value, long-running False Claims Act case in the Northern District of California in which the relators sought treble damages.

North Carolina-based CLC is a leading provider of chemistry analyzers and reagents for drug testing and general chemistry testing. The company has been supplying laboratories for over 25 years. In their qui tam suit initially filed in 2013, two whistleblowers alleged that CLC engaged in so-called “upcoding”—overbilling Medicare and Medicaid by claiming that its urine drug test machines are capable of performing high-complexity quantitative drug testing, which is reimbursed at higher amounts, when instead the machines could perform only basic qualitative testing—thus costing the government millions of dollars. The relators also alleged that CLC’s devices lacked FDA approval and, thus, claims submitted to government payors for tests performed on these devices were false.

After the defense won the dismissal of two earlier versions of the complaint, the relators filed a third amended complaint in January 2020, which withstood a motion to dismiss. Following extensive discovery, the defense team moved for summary judgment in July 2022. On December 20, U.S. District Judge Jon Tigar granted the motion—a rare outcome in a federal FCA case in which company insiders purport to have direct, inside evidence of wrongdoing. Instead, the judge found that the relators “fail[ed] to identify any evidence linking Carolina Liquid to the submission of a false claim.”

The Paul, Weiss team included litigation partner Randy Luskey.