Health Law Daily Relator fails to allege cheese seller meant to defraud government
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Tuesday, March 20, 2018

Relator fails to allege cheese seller meant to defraud government

By Amy Berger, J.D.

A United States Department of Agriculture (USDA) Field Inspector’s complaint under the False Claims Act (31 U.S.C. §3729 et seq.) that cheese products sold to the U.S. government did not conform to regulations was dismissed when the court found that the complaint failed to adequately plead knowledge of falsity. The court held that allegations were conclusory and speculative and without sufficient explanations of circumstances to constitute fraud (U.S. ex rel. Simpson v. Leprino Foods Dairy Products Company, March 19, 2018, Arguello, C.).

Ingredients. To qualify as mozzarella, the cheese must originate from dairy plants that have been inspected by the USDA and awarded a C17 plant code. This code may only be awarded when the plant produces cheese that strictly conforms to FDA regulatory requirements, including standard of identity requirements. FDA standards provide for six ingredients that may be used to make mozzarella.

The Field Inspector alleged that the seller added the ingredient sodium hexametaphosphate (sodium hex) directly into molten mozzarella cheese that was sold to the U.S. government under contract. He pointed out that sodium hex was not one of the six ingredients that may be used to make mozzarella cheese under the FDA standards. He alleged that due to sodium hex’s inclusion, the seller’s processes and ingredients were non-compliant with the FDA regulations, and therefore that seller violated the FCA by fraudulently concealing its production methods and ingredients and selling cheese to the U.S. that did not meet the FDA’s standard of identity regulations.

Knowingly making false statements. The Field Inspector alleged that over ten years of correspondence demonstrated that seller was aware of non compliance and yet falsely continued to certify compliance. However, the court noted that correspondence showed that seller had open dialogue with the FDA about seller’s use of sodium hex, and the government continued to execute purchasing agreements with seller. The court held that the correspondence clearly showed seller was permitted to add sodium hex combined with salt directly into its cheese and there was no correspondence to indicate that the FDA had changed its position. Similarly, the submitted correspondence showed that seller had consistently informed both the USDA and the FDA of its process of adding salt to its sodium hex prior to injecting it into cheese and therefore, the complaint did not identify that the seller knowingly made false statements to the government in violation of the FCA.

The case is Civil Action No. 16-cv-00268-CMA-NY.

Attorneys: Jasand Patric Mock, U.S. Attorney's Office, for the United States. Carl J. Nichols (Wilmer Cutler Pickering Hale & Dorr, LLP) and Michael James Hofmann (Bryan Cave LLP) for Leprino Foods Dairy Products Co.

Companies: Leprino Foods Dairy Products Co.

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