United States Ex Rel. Loughren v. Unum Group

United States Court of Appeals
For the First Circuit

No. 09-1606

UNITED STATES EX REL. PATRICK LOUGHREN,

Relator, Appellee,

v.

UNUM GROUP,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

Before

Torruella, Circuit Judge,
Souter, Associate Justice,*
and Stahl, Circuit Judge.

William J. Kayatta, Jr., with whom Catherine R. Connors,
Geraldine G. Sanchez, Mark Porada and Pierce Atwood LLP were on
brief for appellant.
Colette G. Matzzie with whom Claire M. Sylvia, Peter B.
Krupp, Phillips & Cohen LLP and Lurie & Krupp LLP were on brief
for appellee.

July 29, 2010

*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
 STAHL, Circuit Judge. Patrick J. Loughren ("Relator")

brought suit under the qui tam provisions1 of the False Claims Act

("FCA"), 31 U.S.C. §§ 3729 et seq., alleging its violation by Unum

Group ("Unum") and co-defendant Genex Services, Inc. ("Genex").2

On appeal, Unum challenges the district court's denial of its

motion for judgment as a matter of law, the court's exclusion of

certain evidence, and the court's instructions to the jury on the

element of scienter. After a thorough review, we affirm the

district court's denial of Unum's motion for judgment as a matter

of law, but find that the court abused its discretion in excluding

certain evidence that is highly relevant to one of the elements

necessary to prove Unum's liability. Consequently, we vacate and

remand for a new trial.

I. Background

Unum is a provider of long term disability insurance

("LTD") policies. In his complaint as ultimately amended, Relator

asserted that Unum and Genex were liable under the FCA for

knowingly causing their insureds to file baseless applications for

Social Security Disability Insurance ("SSDI"), thereby burdening

1
The qui tam provisions permit a private citizen (called a
relator) to bring a civil action under the statute "for the person
and for the United States Government . . . in the name of the
Government." 31 U.S.C. § 3730(b)(1).
2
At the time the complaint was filed, Genex was a wholly-owned
subsidiary of Unum, specializing in Social Security Administration
claims. Genex is not a party to this appeal.

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the Social Security Administration ("SSA" or "Agency") with the

time and expense required to deny such claims. Under 31 U.S.C.

§ 3730(b)(4), the government declined to prosecute the case.

At issue at trial were seven SSDI applications made by

six different Unum LTD benefits recipients. At the conclusion of

evidence, the district court denied Unum's motion for judgment as

a matter of law, save for a claim relating to one individual to

whom the SSA belatedly awarded SSDI benefits.

The jury returned a verdict against Unum on two of the

remaining claims, those filed by Unum LTD recipients named Jennine

and George, awarding damages of $425 "per proven false claim," for

a total of $850. With respect to the remaining four claims, the

jury returned a verdict in Unum's favor on three and deadlocked on

the fourth. The district court denied Unum's renewed motion for

judgment as a matter of law.

Rather than proceeding to try the Relator's claims

relating to 55 additional allegedly false claimants, the district

court directed entry of final judgment against Unum on the SSDI

applications filed by George and Jennine, trebling the $850 in

damages to $2,550 and awarding the maximum statutory penalty of

$11,000 for each of the two claims as provided under the FCA, 31

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U.S.C. § 3729(a); 28 C.F.R. § 85.3(a)(9), for a total award of

$24,550.3

II. Facts

A. Applying for SSDI

To receive disability insurance benefits under the Social

Security Act, an applicant must be suffering from a "disability,"

42 U.S.C. § 423(a)(1), that is, an "inability to engage in any

substantial gainful activity by reason of any medically

determinable physical or mental impairment which can be expected to

result in death or which has lasted or can be expected to last for

a continuous period of not less than 12 months." 42 U.S.C. §

423(d)(1)(A). The applicant's physical or mental impairment must

be

of such severity that he is not only unable to do his
previous work but cannot, considering his age, education,
and work experience, engage in any other kind of
substantial gainful work which exists in the national
economy, regardless of whether such work exists in the
immediate area in which he lives, or whether a specific
job vacancy exists for him, or whether he would be hired
if he applied for work.

42 U.S.C. § 423(d)(2)(A). An applicant is deemed able to engage in

"substantial gainful activity" if he is capable of doing any job

that pays above a specific dollar amount set by SSA regulations.

At the time of trial, that amount was $940 per month.

3
The issue of Relator's attorney's fees, which he has
estimated to be roughly $11 million, is yet to be ruled on by the
district court, and is not part of this appeal.

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 To obtain a disability determination by the SSA, an

individual must submit several related forms, including an

Application for Disability Insurance Benefits (Form SSA-16-F6) (the

"application form") and a Disability Report -- Adult (Form SSA-

3368-BK) (the "disability report"). The application form asks the

applicant to provide basic background information, employment

history, and family information. In question five, it asks the

applicant to specify the time period during which the applicant has

been "unable to work."4 The form instructs applicants that they

will be responsible for providing "medical evidence showing the

nature and extent of [their] disability." Though the application

form does not include a definition of "disability," the disability

report explains how the term "disability" is defined by the Agency.

It states:

You will be considered disabled if you are unable to do
any kind of work for which you are suited and if your
disability is expected to last (or has lasted) for at
least a year or to result in death. So when we ask,
"when did you become unable to work," we are asking when
you became disabled as defined by the Social Security
Act.

The application form explains that an applicant has the

responsibility to "promptly notify" the SSA of certain events which

"may affect [the applicant's] eligibility or disability benefits as

4
Specifically, question 5(a) asks: "When did you become unable
to work because of your illnesses, injuries or conditions?" The
form then instructs the applicant to write the appropriate month,
day, and year.

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provided in the Social Security Act." For example, if the

applicant "go[es] to work," or if his "medical condition improves

so that [he] would be able to return to work, even though [he has]

not yet returned to work," he must report that information to the

Agency. The application form further requires the applicant's

signature below the following warning:

I know that anyone who makes or causes to be made a false
statement or representation of material fact in an
application or for use in determining a right to payment
under the Social Security Act commits a crime punishable
under Federal law by fine, imprisonment or both. I
affirm that all information I have given in this document
is true.

B. Unum's Practices

Unum's LTD polices typically provide partial income

replacement to insureds who are unable to perform the material and

substantial duties of their "own occupation."

Evidence was introduced at trial that most of Unum's LTD

group policies had a 180-day elimination period, before which an

insured was not eligible for Unum's LTD benefits. At the end of

that 180-day period, Unum assessed whether a claimant was eligible

to receive benefits under the claimant's LTD insurance policy.

Unum made that assessment using an "own occupation" standard for

eligibility, asking whether the claimant was "able to perform [the]

occupation that [he was] doing at the date that [he] first had

[his] disability."

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 After the expiration of the "own occupation" period under

the policy (typically two years), a claimant needed to show that he

was incapable of performing "any occupation" in order to continue

to receive benefits. To assess whether a claimant was disabled

under its "any occupation" standard, Unum would ask whether, based

on the claimant's training, education, and experience, and given

his restrictions and limitations, the claimant was capable of

working in an occupation that could pay him sixty percent or more

of his predisability earnings. SSA's evaluation of whether an

applicant is capable of performing "substantial gainful activity"

is similar, and, in fact, was referred to as "the Social Security

Administration's 'any occupation' eligibility requirement" at

trial; however, Unum's "any occupation" analysis is less rigorous

than the SSA's "any occupation" analysis. When the SSA evaluates

whether an applicant is capable of performing "substantial gainful

activity," it does not limit the sphere of jobs which the applicant

is capable of doing based on the applicant's predisability

earnings.

The Unum policies at issue here provide that Unum could

reduce the amount it paid to an insured by, among other things, the

amount the insured received or was entitled to receive as

disability payments under the SSA. Under the language of Unum's

insurance contract, an insured need not have actually received (or

even applied for) an SSDI award in order for Unum to deduct the

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estimated amount of the award. Evidence at trial suggested that

Unum had a general practice of requiring claimants seeking LTD

benefits to file an application for SSDI as soon as they had been

disabled for six months.5 At that point, Unum would send claimants

a "Payment Option Form," which explained that the claimant should

apply for SSDI, and while his application was pending, he could

choose to (1) have approximately 50% of his Unum LTD insurance

benefits withheld as an offset against the award Unum estimated he

was entitled to receive from the SSA; or (2) receive full benefits

with the understanding that if he were awarded SSDI retroactively,

he would owe an overpayment to Unum. If a claimant decided not to

apply for SSDI, Unum could, and did, exercise its power to

immediately reduce the claimant's benefits by the amount of the

SSDI award Unum estimated he was entitled to receive.

Though Unum was familiar with the difference between its

own "own occupation" standard and the SSA's more rigorous "any

occupation" standard, Unum made no efforts to determine whether a

claimant met the SSA's "any occupation" standard of eligibility

before telling the individual that his benefits would be cut if he

did not apply for SSDI.

5
Some witnesses indicated this practice occurred after a five-
month period of disability.

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 1. George

George was a heavy equipment operator who was fifty-three

at the time he applied for long-term disability benefits. For

years, George had been legally blind in his left eye due to a

detached retina from an old football injury. He filed his claim

with Unum after he suffered a stroke in April 2004. The stroke had

caused blurred vision in the lower right quadrant of his right eye.

George's claim file contained an assessment from his

physician that George was unable to work around machinery, and,

more generally, that because he was unable to see clearly, he was

"unable to perform any duties." However, Unum also knew that even

with his impairment, George walked ten to twenty miles daily.

Additionally, Unum had information that George had graduated from

high school and gone on to attend college for a little over two

years, yet the claims handler who processed George's claim, Thomas

Brasel, had not determined whether the blurred vision in George's

right eye impaired his ability to read.

Brasel approved George's claim on August 23, 2004, under

Unum's "own occupation" standard, on the theory that "with

[George's] vision issues and the fact that he had to work heavy

machinery, those two weren't compatible." Brasel made no

assessment at that time of George's ability to do other

occupations.

-9-
 Initially, George advised Unum that he had already

applied for SSDI; however, when Brasel ultimately learned that

George had not applied, he told George that he had to do so.

Brasel testified that he believed, at the time, that George was

eligible for SSDI benefits.6 George filed for SSDI on October 21,

2004. SSA denied George's application on January 11, 2005, on the

ground that he had a capacity for substantial gainful activity.

2. Jennine

Jennine was a 38-year-old pediatric nurse who developed

left (non-dominant) arm, neck, and back pain after a car accident

with an 18-wheeler on May 10, 1999. Jennine had unsuccessful

carpal tunnel surgery three months later. Jennine was then

scheduled to have surgery on her shoulder on September 22, 1999.

In August prior to the surgery, Jennine's physician reported to

Unum that the prognosis for her recovery after the surgery was good

and that her condition was expected to improve in three to four

months.

6
Brasel stated that he "anticipated that [George] would be out
for at least a year, which would give him the minimal
qualifications for review. And then when you're looking at 'any
occ[upation]' capacity, I didn't believe that he had the capacity
to work in something else. . . . [H]e was fifty-three. He had been
doing one job for the last thirty odd years, and his job required
vision. He was legally blind in one eye. He had blurred vision
from a stroke. That being said, with his limited work history, I
didn't see it." Brasel later testified on cross-examination that
no assessment was ever made of George's ability to do occupations
other than his own.

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 On September 30, 1999, a week after Jennine's surgery,

Unum received a document from Jennine describing her symptomology.

Jennine indicated that she was having difficulty with the full

function of her left arm and stated that she was unable to work

because of what she described as "severe" pain. Nonetheless, that

same day, the Unum claims handler noted that Jennine "may improve"

with additional treatment and that Jennine "has work capacity now."

The claims handler requested a vocational review, and Unum's

vocational specialist added this notation to Jennine's file, also

dated September 30, 1999:

Please consider a rehab referral when appropriate as this
young individual would have non-patient care alternatives
once she recovers from shoulder surgery scheduled for
September 22nd and possibly even light patient care
alternatives depending on the extent of her recovery.

Also on that day, Unum approved Jennine's insurance claim

and sent her a Payment Option Form, instructing her to file for

SSDI or face a reduction in her benefits.

Jennine was familiar with SSDI eligibility requirements

because of her background as a nurse, and she told Unum that she

did not qualify for SSDI benefits. She further informed Unum of

her intention to return to work.

Nonetheless, Jennine applied for SSDI on October 20,

1999. When the clerk at the Social Security office asked her why

she was applying (because "it did not look like [Jennine was]

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qualified"), Jennine told her that her "disability insurance

company required [her] to apply."

Jennine returned to work as a pediatric nurse coordinator

in April 2000. After Jennine informed the SSA of her return to

work, the Agency denied her application for SSDI.

III. Analysis

The FCA "covers all fraudulent attempts to cause the

government to pay out sums of money." United States ex rel. Conner

v. Salina Regional Health Center, Inc., 543 F.3d 1211, 1217 (10th

Cir. 2008). While the government can bring an action under the

FCA, 31 U.S.C. § 3730(a), the Act also provides for a private

individual to file suit on a qui tam basis "in the name of the

Government." 31 U.S.C. § 3730(b)(1); see also United States ex

rel. Lissack v. Sakura Global Capital Markets, Inc., 377 F.3d 145,

152 (2d Cir. 2004).

At trial, the jury considered whether Unum violated two

provisions of the FCA, those which impose liability on:

[a]ny person who -
(1) knowingly presents, or causes to be presented, to an
officer or employee of the United States Government . .
. a false or fraudulent claim for payment or approval;
[or]
(2) knowingly makes, uses, or causes to be made or used,
a false record or statement to get a false or fraudulent
claim paid or approved by the Government . . . .

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31 U.S.C. § 3729(a)(1)-(2) (2008).7 The jury was instructed that

7
In 2009, Congress passed the Fraud Enforcement and Recovery
Act ("FERA"), Pub. L. No. 111-21, 123 Stat. 1617 (2009), which
amended and renumbered these provisions as §§ 3729(a)(1)(A) and
(a)(1)(B), respectively, see FERA § 4(a), 123 Stat. at 1621. The
amendment to section 3729(a)(2), but not the amendment to section
3729(a)(1), was made retroactive to June 7, 2008, applicable to
"all claims under the False Claims Act . . . that [were] pending on
or after that date." FERA § 4(f), 123 Stat. at 1625. There is
disagreement among our sister circuits as to whether Congress
intended the amended section 3729(a)(2) to be applied retroactively
to actions, like this one, pending as of June 7, 2008, see United
States ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 113
(2d Cir. 2010), or rather to pending "claim[s]" as defined by 31
U.S.C. § 3729(b)(2)(A) (i.e., "any request or demand . . . for
money or property"), see Hopper v. Solvay Pharm., Inc., 588 F.3d
1318, 1327 n.3 (11th Cir. 2009); United States v. Science
Applications Intern. Corp., 653 F. Supp. 2d 87, 106-07 (D.D.C.
2009). Under the prior definition, the amended section 3729(a)(2)
would apply in this case; under the latter definition, the former
version would apply.
We need not decide whether the FERA applies retroactively here
because under either the former or amended version of section
3729(a)(2), our analysis of Relator's claims against Unum will be
the same. As Unum notes, "under both versions, [Relator] was
required to prove falsity, materiality, and scienter."
Moreover, Unum was not harmed by the fact that the jury was
instructed under the prior version of the statute. The primary
difference between the former and amended versions of the provision
is the replacement of the phrase "to get" with the word "material."
As we discuss further in Section III.B.2, the FERA amendments to
the FCA were responding, in part, to the Supreme Court's suggestion
in Allison Engine Co., Inc. v. United States ex rel. Sanders, 553
U.S. 662, 128 S.Ct. 2123 (2008), that section 3729(a)(2) contained
an intent requirement, and by striking the words "to get," Congress
intended to eliminate that requirement. S. Rep. No. 111-10, at 11
(2009). That change is not particularly relevant here. The
"intent requirement" which Allison Engine read into section
3729(a)(2) was in the context of a party submitting a false
statement not directly to the government, but to a private third
party (as in the case of a subcontractor and prime contractor).
The Court explained that the subcontractor would only violate
section 3729(a)(2) if it had the intent that the statement be used
by the prime contractor to get the Government to pay its claim.
Id. at 2130. There is no question in this case that Unum caused
the statements at issue to be made directly to the government; thus

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to establish a violation of the FCA, Relator had to prove that a

false or fraudulent claim was submitted to the United States, that

Unum had the requisite scienter, and that Unum caused the

submission of the claim. The district court further instructed

that the Relator must prove that the allegedly false statement

contained within the claim (that the applicant was "unable to work"

or "disabled") was material to the SSA's decision whether to pay or

approve the claim.

A. Materiality

1. Materiality Requirement

We have long held that the FCA is subject to a

judicially-imposed requirement that the allegedly false claim or

statement be material. See United States v. Data Translation,

Inc., 984 F.2d 1256, 1267 (1st Cir. 1992) (citing Turner v. Johnson

& Johnson, 809 F.2d 90, 95 (1st Cir. 1986), for the proposition

that materiality is "established as an element of common law

fraud"). Recently, the Supreme Court found that a materiality

requirement applies in the context of sections 3729(a)(2) and

(a)(3). See Allison Engine Co., Inc., 128 S.Ct. at 2126, 2130.

Allison Engine's intent requirement and its abrogation by FERA, are
not relevant here.
For the remainder of this opinion, we will cite to the 2008
version of section 3729(a)(2). The elements of the provision, for
the purpose of this case, are the same, and as the 2008 version was
the version with which the jury was charged and on which it
evaluated Unum's liability, it is the more appropriate version
here.

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Though the Court did not consider the application of a materiality

requirement to subsection (a)(1), we see no reason why Allison

Engine should disturb our previous reading of a materiality

requirement into the statute more generally.8 See 1 John T. Boese,

Civil False Claims and Qui Tam Actions § 2.04, 2-171-72 (3d ed.

2006 & Supp. 2010).

As the Supreme Court has held, "[i]n general, a false

statement is material if it has 'a natural tendency to influence,

or [is] capable of influencing, the decision of the decisionmaking

body to which it was addressed.'" Neder v. United States, 527 U.S.

1, 16 (1999) (quoting United States v. Gaudin, 515 U.S. 506, 509

(1995)). Many of our sister circuits have employed that definition

in the FCA context, see, e.g., United States ex rel. Longhi v.

United States, 575 F.3d 458, 468-70 (5th Cir. 2009); United States

ex rel. Sanders v. North American Bus Indus., Inc., 546 F.3d 288,

297 (4th Cir. 2008) (citations omitted); United States v. Bourseau,

531 F.3d 1159, 1171 (9th Cir. 2008), and it is the definition

Congress recently adopted when it amended the FCA. See 31 U.S.C.

§ 3729(b)(4) ("the term 'material' means having a natural tendency

to influence, or be capable of influencing, the payment or receipt

of money or property."). It is also the standard that the district

8
We reach the same conclusion regarding Congress's 2009
amendment to the former section 3729(a)(2), incorporating an
explicit materiality requirement in place of the "to get" language
that the Supreme Court relied upon in its decision limiting
liability in Allison Engine.

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court employed in instructing the jury, and both parties agree that

standard was the correct one. Accordingly, we will find that the

statement reporting the date that the applicant was "unable to

work" was material if it had a natural tendency to influence or was

capable of influencing the SSA's decision whether or not to award

SSDI benefits.

2. Standard of Review

We review the denial of a motion for judgment as a matter

of law, including legal decisions made therein, de novo. Burke v.

McDonald, 572 F.3d 51, 57 (1st Cir. 2009) (citations omitted). As

for matters of fact, "we view the evidence in the light most

favorable to the verdict, asking only whether a rational jury could

on the basis of that evidence find as the jury has." Id. (citation

omitted). "[A] jury's verdict and factual findings 'must be upheld

unless the facts and inferences viewed in the light most favorable

to the verdict point so strongly and overwhelmingly in favor of the

movant that a reasonable jury could not have returned the

verdict.'" Mass. Eye and Ear Infirmary v. QLT Phototherapeutics,

Inc., 552 F.3d 47, 57 (1st Cir. 2009) (citations omitted).

Unum contends that our review on the issue of materiality

should "fall squarely on the non-deferential side of the review

continuum," arguing that materiality here involves "alleged

misrepresentations to public officers and parsing of the SSA

regulatory framework," and is thus a law-dominated question. In

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support of this argument, Unum cites United States ex rel. Berge v.

Board of Trustees of the University of Alabama, 104 F.3d 1453 (4th

Cir. 1997), in which the Fourth Circuit held that the determination

of materiality in the FCA context, "although partaking the

character of a mixed question of fact and law, is one for the

court."9 Id. at 1460.

As the Supreme Court has stated, the issue of materiality

is a mixed question of law and fact, "involving as it does the

application of a legal standard to a particular set of facts." TSC

Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976); see also

In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187, 209 (1st

Cir. 2005) (stating, in the securities fraud context, that the

materiality of a false statement is a question for the jury).10 As

9
Unum also cites United States ex rel. A+ Homecare, Inc. v.
Medshares Mgmt. Group, Inc., 400 F.3d 428 (6th Cir. 2005), in which
the Sixth Circuit affirmed the lower court's holding, in denying
summary judgment for defendant, that a false statement was material
as a matter of law. Id. at 441, 446-47.
10
We acknowledge that the Supreme Court has also observed that
"the characterization of a mixed question of law and fact for one
purpose does not govern its characterization for all purposes."
United States v. Gaudin, 515 U.S. 506, 522 (1995). In Gaudin, the
Court noted that mixed questions of law and fact have typically
been resolved by juries. Id. at 512 (citing TSC Industries, Inc.,
426 U.S. at 450; McLanahan v. Universal Ins. Co., 26 U.S. (1 Pet.)
170, 188-89, 191, 7 L.Ed. 98 (1828) (materiality of false
statements in insurance applications)). Yet the Court declined to
overrule its previous decision in Kungys v. United States, 485 U.S.
759 (1988), which "held that, in appellate review of a District
Court (nonjury) denaturalization proceeding, the appellate court's
newly asserted standard of materiality could be applied to the
facts by the appellate court itself, rather than requiring remand
to the District Court for that application." Gaudin, 515 U.S. at

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in the securities fraud arena, materiality in the FCA context

involves a factual determination of the weight that the

decisionmaker would have given particular information. See United

States v. Job Resources for the Disabled, No. 97 C 3904, 2000 WL

1222205, at *3 (N.D. Ill. Aug. 24, 2000). While a district court

may determine at the summary judgment stage that undisputed

evidence demonstrates that a false statement or claim is material

(or immaterial) as a matter of law, that is not the posture in

which this case is presented.

When Unum moved for judgment as a matter of law, it

argued that the statements at issue could not be viewed as material

to the SSA's decision whether to award benefits because (1) the

claimants had "disclosed fully and fairly the underlying facts upon

which the statement[s] [were] made"; and (2) "[t]hat decision is

made by the SSA alone, after a full review of all of the available

medical records." The district court heard those arguments and

rejected them, finding a legally sufficient evidentiary basis on

which a reasonable jury could find against Unum.11

We will uphold the jury's verdict unless "the facts and

inferences viewed in the light most favorable to the verdict point

522 (citing Kungys, 485 U.S. at 772).
11
We note that on remand the district court would be free to
reconsider, in light of previously excluded evidence, whether Unum
would be entitled to judgment as a matter of law on the issue of
materiality.

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so strongly and overwhelmingly in favor of [Unum] that a reasonable

jury could not have returned the verdict.'" Mass. Eye and Ear

Infirmary, 552 F.3d at 57.

Regardless, whether we employ de novo review on the issue

of materiality or a standard more deferential to the jury's

verdict, we find that on the evidence before the jury, the

statements at issue here were material to the SSA's payment

decision.

3. Evidence of Materiality12

The case was submitted to the jury on the theory that the

false statements alleged by Relator were the statements in the

application for SSDI that the applicant was "unable to work" or "is

disabled."13

Unum argues that the statements at issue cannot be

material because the SSA conducts an independent review of medical

and other evidence to determine the actual date that the applicant

became unable to work within the meaning of the Social Security

12
We note at the outset that our conclusions in this section
are based only on the evidence that was actually presented to the
jury.
13
The court instructed "I want to emphasize that the
plaintiff's position is that both the use of the words 'unable to
work' and 'I am disabled' are the alleged false statements and
false claims here, and those are both to be construed within the
meaning of the Social Security Act."

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Act.14 The date reported by the applicant, Unum argues, serves as

only a starting point for this independent review, and thus cannot

be "material evidence of disability." Unum argues that the

statement that an applicant is unable to work as of a particular

date is a "legal conclusion . . . not a factual representation

likely to influence the SSA's decision." In effect, Unum argues

that because the Agency conducts an independent review to determine

whether the applicant is unable to work as defined by the Social

Security Act, the applicant's own opinion that she is unable to

work is not material. We disagree.

Unum's argument misunderstands the definition of

materiality. As several of our sister circuits have held, the

14
Unum cites the SSA's Program Operations Manual System
("POMS"), the publicly available operating instructions for
processing Social Security claims, which differentiates between the
"alleged onset date" ("AOD") of the applicant's disability and the
"established onset date" ("EOD") of the disability. The AOD is
"the date the claimant alleges he or she became unable to work
because of his or her medical condition, regardless of whether or
not that date appears to be appropriate." POMS DI 25501.001(E)(1)
(2008), available at
https://secure.ssa.gov/apps10/poms.nsf/aboutpoms (last visited Jul.
19, 2010) (emphasis added). The EOD, by contrast, is determined by
the disability adjudicator "based on the medical and other evidence
in the case record." POMS DI 25501.001(E)(3). The AOD is "the
starting point in establishing the onset of disability," and "[i]f
the medical and other evidence is consistent with the AOD," the AOD
will also be the EOD. POMS DI 25501.011(A). However, "[m]edical
and other evidence is the primary consideration in determining the
EOD." POMS DI 25501.011(C). The POMS instructs disability
adjudicators that "[i]f the evidence supports a date other than the
AOD, establish the most accurate onset date (either earlier or
later than the AOD) that is consistent with the total evidence."
POMS DI 25501.021(C).

-20-
natural tendency test focuses on the potential effect of the false

statement when it is made. See Longhi, 575 F.3d at 470; Bourseau,

531 F.3d at 1171. In other words, all that the test requires is

that the false or fraudulent statement is capable of influencing

the Agency's decision.

Moreover, the fact that an allegedly false statement

constitutes the speaker's opinion does not disqualify it from

forming the basis of FCA liability. An opinion may qualify as a

false statement for purposes of the FCA where the speaker "knows

facts 'which would preclude such an opinion.'" United States ex

rel. Siewick v. Jamieson Science and Engineering, Inc., 214 F.3d

1372, 1378 (D.C. Cir. 2000) (quoting Harrison v. Westinghouse

Savannah River Co., 176 F.3d 776, 792 (4th Cir. 1999)).15 "Facts"

for this purpose are those which the applicant could "reasonably

classify as true or false" as opposed to "legal argumentation and

possibility." Id.

We note that Unum is not challenging the jury's

conclusion that the statements at issue were false, but merely the

conclusion that they were materially false. We find, on the

evidence before the jury, that an applicant's opinion regarding the

15
The Harrison court quoted Prosser for the proposition that
"an opinion or estimate carries with it 'an implied assertion, not
only that the speaker knows no facts which would preclude such an
opinion, but that he does know facts which justify it.'" Harrison,
176 F.3d at 792 (quoting W. Page Keeton, et al., Prosser & Keeton
on the Law of Torts § 109, at 760 (5th ed. 1984)).

-21-
date on which he became unable to work is material, in that it has

the potential to influence the Agency's determination of one's

eligibility for benefits. Cf. United States v. Pythian, 529 F.3d

807, 812-13 (8th Cir. 2008) (holding in the context of a 42 U.S.C.

§ 408(a)(3) prosecution that applicant's statements to the SSA that

she was not working and was unable to work were material in that

they had "'a natural tendency to influence' the SSA in making its

eligibility determination, as the ability to work is critical to

the SSA's determination.").

Unum calls to our attention a portion of the Code of

Federal Regulations, which states that a medical doctor's

determination that an applicant is "unable to work" as defined by

the Social Security Act is entitled to no "special significance".

20 C.F.R. § 404.1527(e). This is so because it is an opinion on an

issue that is "reserved to the Commissioner because [it is an]

administrative finding[] that [is] dispositive of a case." Id. We

do not believe, however, as Unum suggests, that the above provision

means that a statement by the applicant of an inability to work is

immaterial to the Agency's decision. Certainly, an applicant's

opinion that he is "unable to work" is not determinative of the

Agency's final decision, just as a doctor's opinion that an

applicant is "unable to work" is not conclusive, as the

responsibility for "making the determination or decision about

whether [the applicant] meet[s] the statutory definition of

-22-
disability" lies with the Commissioner. 20 C.F.R. §

404.1527(e)(1). Nonetheless, if an applicant were to fail to

answer question 5(a) on the application form, where he is asked to

provide the date when he became "unable to work," he would not

receive benefits. "An award cannot be processed" if an applicant

does not answer "all questions affecting entitlement." POMS GN

00205.001(B). Similarly, as Relator's expert Kenneth Nibali

testified at trial, a response of "not applicable" or "N/A" would

not be an appropriate response to question five.16

The trial testimony of Relator's and Unum's Social

Security experts established that the agency uses "all the

information" on the application form to begin to create a record in

evaluating an applicant's claim. Question 5(a) is a "starting

point" from which the agency starts making decisions on an

applicant's disability. As Nibali explained, the response to that

question is "a very critical piece of information for starting the

process" because "[i]t's [the applicant's] allegation as to when

[he] first became unable to work because of [his] illnesses, et

cetera."

16
Nibali stated "I know that the instructions, the program
operation manual that is the guidance for the employees filling
this out says where an answer is simply not available, that you may
put that kind of response in[, see POMS DI 11005.022(C)]; but I
know these instructions also very much say that this is something
that needs to be filled in, and you do your very best to get the
claimant's allegation about when they felt they were unable to
work."

-23-
 Though all three experts testified to the SSA's "open-

door policy" of encouraging all comers to apply, each also

testified that the SSA expects all applicants to be truthful. The

Code of Federal Regulations states that those who "believe [they]

may be entitled to benefits" should apply. 20 C.F.R. § 404.603

(emphasis added). While applicants are not required to self-assess

their eligibility and there is "no expectation of complete and

utter accuracy," an applicant must sign under penalty of perjury

that his application is truthful to the best of his knowledge and

ability. An applicant could face criminal and civil penalties if

he "makes or causes to be made any false statement or

representation of a material fact" in applying for SSDI. 42 U.S.C.

§ 408(a)(2); 42 U.S.C. § 1320a-8(a)(1).17

As Nibali explained, "it costs a lot of money to take in

claims and process them, that's taxpayer money . . . that we all

pay. So we would like to think that people have a belief that they

may have a disability that meets our definition if they're going to

come into our program."

Given the instructions presented to applicants on the

disability report and the signature requirement on the application

form, it is reasonable for the SSA to conclude that an applicant in

17
The Social Security Act defines "a material fact" as "one
which the Commissioner of Social Security may consider in
evaluating whether an applicant is entitled to benefits." 42
U.S.C. § 1320a-8(a)(2).

-24-
good faith believes that he may be eligible for SSDI benefits when

submitting an application. Specifically, when an applicant

provides a date on which he became unable to work in response to

question 5(a) on the application form (rather than leaving the

question blank or answering "not applicable"), the SSA may

reasonably conclude that, at the very least, the applicant believes

himself to be "unable to work" as he understands the Social

Security Act's definition of that term.

Though this belief, which may be inferred from an

affirmative response to question 5(a), can be no more than the

applicant's opinion since the SSA bears the responsibility of

evaluating the applicant's eligibility, as we have stated, an

opinion may be characterized as a false statement for purposes of

the FCA if its maker knows facts which would preclude it. Siewick,

214 F.3d at 1378. As we discuss further below, there was

substantial evidence presented at trial that Unum knew, or at the

very least should have known, facts about George and Jennine's

medical condition and work capacity that would preclude an opinion

that either was "unable to work."

Moreover, the fact that the Agency conducts an

independent evaluation of each applicant's eligibility does not

render the applicant's (or, in this case, Unum's) opinion

immaterial. As the Sixth Circuit opined in the Medicare context

"[a] party cannot file a knowingly false claim on the assumption

-25-
that the fiscal intermediary will correctly calculate the value in

the review process. Such a result would shift the burden of cost

calculation from the provider to the fiscal intermediary and

encourage the filing of false claims, which is directly at odds

with the stated goal of the FCA." A+ Homecare, Inc., 400 F.3d at

447 (citation omitted). Though an applicant for SSDI bears a

lesser burden of presenting accurate information than does a

provider under Medicare regulations, an SSDI applicant at least

bears the burden of being truthful and forthcoming in his responses

to the Agency. If he himself knows facts which would preclude a

belief that he is unable to work as defined by the Social Security

Act, and yet indicates on his application that he is unable to

work, then his false statement causes his application to move

forward through the Agency's evaluation process when it otherwise

would not have. Because the statement is capable of influencing

the Agency's decision to consider and ultimately pay the claim, it

is thus material under the FCA.

B. Scienter

1. Standard of Review

Again, we review de novo the denial of a motion for

judgment as a matter of law. Burke, 572 F.3d at 57. We will

uphold the jury's verdict on scienter "unless the facts and

inferences viewed in the light most favorable to the verdict point

-26-
so strongly and overwhelmingly in favor of the movant that a

reasonable jury could not have returned the verdict." Id.

2. FCA's Definition of Scienter

To be found liable under the FCA, an individual must act

"knowingly" in submitting a false claim. 31 U.S.C. § 3729(a)(1)-

(2) (2008).18 The statute defines "knowing" and "knowingly" as

having "actual knowledge" of information or acting in "deliberate

ignorance" or "reckless disregard" of the truth or falsity of the

information. 31 U.S.C. § 3729(b)(1)-(3) (2008).19

Unum argues that in order to establish the requisite

scienter, the relator must show not only that Unum acted knowing

that the statements at issue were false, but knowing that they were

materially false. In support of its argument, Unum quotes Allison

Engine, which, in its introductory section states that "a plaintiff

asserting a section 3729(a)(2) claim must prove that the defendant

intended that the false record or statement be material to the

Government's decision to pay or approve the false claim." Id., 128

S.Ct. at 2126 (emphasis added). But the Allison Engine court

expressly distinguished its holding as to intent from section

3729's scienter requirement, explaining that the intent requirement

that the Court discerned in section 3729(a)(2) did not derive from

18
The FERA amendments did not alter the statute's scienter
requirement. See 31 U.S.C. § 3729(a)(1)(A)-(B).
19
The amended version of the statute defines "knowingly" in
precisely the same manner. 31 U.S.C. § 3729(b)(1)(A)(i)-(iii).

-27-
the term "knowingly," but rather from the infinitive phrase "to

get" in "knowingly makes, uses, or causes to be made or used, a

false record or statement to get a false or fraudulent claim paid

or approved by the Government." Id. at 2130 n.2. The Court

further distinguished its holding from the FCA's definition of

"knowingly," explaining that its holding "refers to a defendant's

purpose in making or using a false record or statement" while

section 3729(b) "refers to specific intent with regard to the truth

or falsity of 'information.'" Id.

In other words, it appears that while affirming the

existence of a materiality requirement for section 3729(a)(2),

Allison Engine did not alter the FCA's scienter requirement.

Unum's claim that the FCA requires that a defendant have knowledge

that a claim was materially false is a misreading of the statute

and of Allison Engine.

3. Evidence of Scienter

Unum argues that it cannot be found to have the requisite

scienter as a matter of law because its conduct was entirely

consistent with the SSA's established practices. It argues that no

SSA regulations or policy require that private disability insurers

"prescreen" an application, and therefore it could not have known

that it had a duty to screen applicants for some minimal likelihood

-28-
of success.20 Unum presented these arguments to the district court

as well as the jury, and they were rejected. We find that the jury

was not unreasonable in this conclusion.

Unum argues that it acted reasonably in viewing the

regulations and practice of the SSA as allowing any individual who

meets the non-disability requirements of Title II to apply. In

support, Unum cites the POMS, which explicitly states that "[e]very

individual who meets the necessary nondisability requirements of

title II . . . is entitled to a substantive determination about

whether he/ she is under a disability." POMS DI 22501.003. Unum

notes that the POMS also instructs SSA employees that when it

appears during a preclaim interview that a claimant does not meet

the eligibility requirements for SSDI, the employee should inform

the claimant of that fact but still advise him of the right to file

an application "in spite of apparent ineligibility." POMS DI

11005.005.B.2. Unum further cites the testimony of SSA's Rule

20
Unum proffers that the SSA knowingly allows state agencies
and the federal FERS program to routinely require individuals to
apply for SSDI without making any pre-determination that those
individuals are so entitled. Unum argues that the SSA's "well-
known and published acceptance" of this practice by state agencies
and the federal FERS program lends support to its argument that it
had no reason to believe that it was required to prescreen insureds
before requiring them to apply for SSDI. As Unum explains it,
"[i]t hardly would be unreasonable to conclude that, if those
individuals were not submitting a false claim simply by supplying
the dates they were unable to work when the SSA would conclude
otherwise, neither would it be a false claim when one of Unum's
insureds does the same thing." We discuss the issue of excluded
"FERS evidence" in more detail in Section III.C.

-29-
30(b)(6) designee, presented at trial, that "there's currently no

published policy out there that requires . . . private disability

insurers to quote/unquote 'prescreen' an application before a

claimant comes and files."

In effect, Unum argues that because the SSA's own

regulations did not appear to disapprove of Unum's practice of

requiring insureds to apply for SSDI after they had been disabled

for six months, Unum could not have "known" that it was causing

false claims to be submitted because it was reasonable to think

that the Agency welcomed such claims. In support, Unum cites

decisions from several of our sister circuits noting, "[t]o take

advantage of a disputed legal question . . . is to be neither

deliberately ignorant nor recklessly disregardful." United States

ex rel. Hagood v. Sonoma Cnty. Water Agency, 929 F.2d 1416, 1421

(9th Cir. 1991); see also United States v. Southland Mgmt. Corp.,

326 F.3d 669, 682 n.7 (5th Cir. 2003) (Jones, J., concurring);

United States ex rel. Hochman v. Nackman, 145 F.3d 1069, 1074 (9th

Cir. 1998).

But this is not a case of a "disputed legal question."

Though the SSA has an "open-door policy" encouraging all comers to

apply, SSA regulations state that those who "believe [they] may be

entitled to benefits" should file an application, 20 C.F.R. §

404.603, implying, as discussed above, that those who do not in

good faith believe that they may be entitled, should not apply.

-30-
Though the SSA has not promulgated any guidance as to whether a

private disability insurer has any obligation to prescreen

claimants for SSDI eligibility before requiring them to apply, it

appears clear from the evidence in the record that the Agency does

not invite applications from those who have no basis for a good

faith belief that they are eligible for SSDI benefits. The jury

heard evidence that justified a reasonable conclusion that George

and Jennine's applications fell into that category. Not only did

Unum have a clear understanding of the difference between its own

"own occupation" standard and the SSA's more rigorous "any

occupation" standard, but it also had knowledge of Jennine and

George's capacity for work as reflected by the information in their

claims files. Given that evidence, it was not unreasonable for the

jury to conclude that Unum at least had "reckless disregard" for

the falsity of George and Jennine's statements that they were

"unable to work" within the meaning of the Social Security Act.

Other cases which Unum cites in support of its position

are inapposite. This is not a case in which Unum "did merely what

the [SSA] bid it do." Hagood, 929 F.2d at 1421; see also United

States ex rel. Durcholz v. FKW Inc., 189 F.3d 542, 545 (7th Cir.

1999) ("We decline to hold FKW liable for defrauding the government

by following the government's explicit directions."); United States

ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284,

288-89 (4th Cir. 2002) (affirming defendant's motion for summary

-31-
judgment, noting that agency had "instructed" defendant to make

representations which relator alleged were false). SSA did not

direct Unum to require its six-months'-disabled insureds to submit

claims for SSDI.

Nor can Unum claim that the SSA had prior knowledge that

the claims Unum caused to be submitted were false. See Durcholz,

189 F.3d at 545 ("If the government knows and approves of the

particulars of a claim for payment before that claim is presented,

the presenter cannot be said to have knowingly presented a

fraudulent or false claim.") (emphasis added); Southland Mgmt.

Corp., 326 F.3d at 682 (Jones, J., concurring) ("Where the

government and a contractor have been working together, albeit

outside the written provisions of the contract, to reach a common

solution to a problem, no claim arises."); United States ex rel.

K&R Ltd. P'ship v. Mass. Housing Finance Agency, 530 F.3d 980, 984

(D.C. Cir. 2008); Wang v. FMC Corp., 975 F.2d 1412, 1421 (9th Cir.

1992). The jury heard testimony that the SSA was unaware of the

specifics of Unum's practices. Unum attempts to bolster its

"government knowledge" argument by noting that it knew that the SSA

would engage in an independent gathering and assessment of the

facts underlying each claim, but that is not evidence that the SSA

knew of any deficiencies in the claims at issue before they were

filed.

-32-
C. FERS Evidence

Next, Unum argues that the district court excluded

evidence which precluded Unum from mounting its "principal scienter

argument." Unum sought to show that the federal government under

the Federal Employee Retirement System ("FERS") and state

governments under comparable programs regularly require applicants

to apply for SSDI as a condition of applying for other forms of

federal and state benefits (generally, "FERS evidence"). Unum

contends that this evidence was critical to its defense that it did

not knowingly cause the submission of false claims because it would

have shown that the federal and state programs did not engage in

any prescreening before requiring employees to file for SSDI, that

the SSA was aware of that practice and affirmatively took no

position as to whether it was inappropriate or not, and that the

SSA's "well-known and published acceptance" of that practice gave

Unum good cause to think that its own conduct was lawful.

We review the district court's ruling excluding the

proffered evidence for abuse of discretion. United States v.

Rodriguez-Velez, 597 F.3d 32, 40 (1st Cir. 2010). "In deference to

a district court's familiarity with the details of the case and its

greater experience in evidentiary matters, [we] afford broad

discretion to a district court's evidentiary rulings."

Sprint/United Mgmt. Co. v. Mendelsohn, 552 U.S. 379, 384 (2008).

-33-
 We find that the district court abused that discretion in

this case. The district court found, without elaboration, that it

had "an inadequate basis for comparing FERS to Unum." Because the

court did not explain its ruling, we are left to guess at its

reasoning. What is clear, however, is that the court appeared to

disregard a highly relevant "basis for comparing" FERS to Unum: the

SSA's practices in evaluating claims for SSDI benefits which each

of those entities caused to be submitted.

Evidence that FERS and comparable state programs require

applicants to file for and pursue SSDI claims as a condition of

applying for other forms of federal and state benefits is not

necessarily relevant in and of itself to Unum's defense. What is

relevant is the SSA's knowledge that FERS and state programs

imposed such requirements on their applicants and the SSA's

inability (or refusal) to differentiate between FERS applicants and

Unum applicants. By excluding this evidence, the court prevented

the jury from considering evidence that was highly relevant to the

issue of materiality.21

21
As detailed above, Unum focuses its argument on the relevance
of the excluded evidence to the issue of Unum's scienter; we do not
find that argument to be compelling and thus do not address it
here.
However, Unum's argument also implicates the element of
materiality. As discussed in Section III.B.2, Unum argues that it
could not have had scienter that it was causing material false
statements to be made. In effect, Unum argues that it could not
have known the statements were material since it knew that the SSA
was aware that even the government (FERS) caused such statements to
be made routinely through a claims process in which FERS claims

-34-
 The excluded evidence supports the conclusion that the

statement that a claimant is "unable to work" is not capable of

influencing the agency's decision to approve the claim. Though it

would appear from the face of the SSDI application form and

disability report and the evidence presented at trial that such a

statement is material to the SSA's decision, as discussed in

Section III.A. supra, excluded evidence of the Agency's practices

appears to belie that conclusion.

The excluded evidence would have demonstrated that the

SSA was aware that under FERS, every federal employee seeking FERS

disability retirement benefits must file an application for SSDI

benefits as well. See 5 C.F.R. §§ 844.201(b)(1), 844.201(b)(2),

844.203(a).22 It would have also demonstrated that the SSA knew

were not separately identifiable. Unum seeks to base this argument
on evidence indicating that the SSA could not have treated
disability statements as material, i.e., evidence helping to show
that they were not material. Thus, Unum is making a materiality
argument as part of a scienter argument, and it is on that basis
that we consider the relevance of the FERS evidence.
We note, as well, that Unum argued directly to the district
court that the FERS evidence was relevant to the issue of
materiality, and we explored this point thoroughly with Relator's
counsel at oral argument.
22
We note that in order to receive a disability annuity under
FERS, the individual's "disabling medical condition" must be
expected to continue for at least one year from the date the
application for disability retirement is filed. 5 C.F.R. §
844.103(a)(3). Though that provision suggests that FERS
requirements for eligibility are more closely aligned with SSDI's
eligibility requirements than Unum's, it does not change our
conclusion. An individual can receive FERS benefits without
meeting a definition of disability as stringent as SSDI's "any
occupation" standard, see 5 U.S.C. §§ 8451(a)(1)(B), 8451(a)(2)(A),

-35-
that not only the federal government, but also the "states keep .

. . dumping people on SSA that they know may not be eligible." The

record reflects that the SSA cannot differentiate between a FERS

applicant and any other applicant. It follows that the Agency must

necessarily assume that on any given application, the response to

question 5(a) could be false in the same way that George and

Jennine's assertions of disability were determined to be false --

that the applicant is applying only because he was required to do

so by FERS and therefore does not necessarily have a good faith

belief that he may be "unable to work" under the statute. In light

of the FERS evidence, a jury could reasonably conclude that the SSA

has no reason to believe that any applicant is implying, through an

affirmative answer to that question, that he may be eligible for

benefits.

Thus, the excluded evidence tends to support the

conclusion that an affirmative answer to question 5(a) carries no

implied opinion as to potential eligibility, and that therefore, it

could not have been capable of influencing the SSA's decision to

initially process or eventually pay the claims at issue; i.e., it

could not have been material.

By excluding from the jury evidence of the SSA's

knowledge, and apparent acquiescence in, the requirement by FERS

5 C.F.R. §§ 844.103(a)-(b), so it cannot be presumed that an
applicant meeting FERS's eligibility requirements will also be
eligible for SSDI.

-36-
and comparable state programs that all claimants apply for SSDI

without regard to potential eligibility, the district court

prevented the jury from considering evidence that was highly

relevant to the essential element of materiality. The probative

value of the evidence outweighs any potential it may have had to

mislead the jury, Fed. R. Evid. 403, especially if it were

appropriately cabined to bear on the issue of materiality rather

than on Unum's scienter.

IV. Conclusion

For these reasons, the exclusion of the FERS evidence was

not harmless, and while we affirm the district court's denial of

Unum's motion for judgment as a matter of law, we must vacate the

jury's verdict and remand for a new trial.23

Judgment vacated. Remanded for further proceedings

consistent with this opinion. Costs in favor of Unum Group.

23
In light of this outcome, we need not address Unum's
contentions that the district court erred in instructing the jury
on scienter and in refusing to give several additional instructions
that Unum requested.

-37-