As Ye Sow: Vaccine Mandate Precedent Could Spell Trouble for Trump's Anti-DEI Order

Not what I expected

Trump's executive order using False Claims Act threats to eliminate contractor DEI programs may be invalid under recent precedents. The same red-state challenges that killed Biden's vaccine mandates established that presidential procurement power can't be used for broad policy goals unrelated to contract efficiency—a principle that could doom Trump's anti-DEI initiative.

For a long time, when I heard the phrase “hoist by his own petard,” I pictured some sort of medieval knight with a long lance, which somehow reached backward, hooking onto the seat of his pants and lifting him in the air with the force of his own jousting. I know I’m not the only one who imagined this.

But no—a petard is a type of small bomb. In the metaphor, the fool blows himself up.

I feel even more confident that many of those who celebrate President Trump’s incipient war on DEI were also very much against President Biden’s COVID-vaccine policies. How ironic it would be if their successful attacks on the latter helped Trump’s opponents defeat the former.

How Does Trump's Anti-DEI Order Weaponize the False Claims Act?

Trump’s executive order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” aims to use the threat of Department of Justice enforcement of the False Claims Act (FCA) to pressure federal contractors and grant recipients to abandon DEI programs. In essence, the order requires contractors to certify that their DEI policies do not violate federal anti-discrimination laws, particularly Title VII of the Civil Rights Act. If it turns out that they do, their certifications could be deemed “false,” and they could be exposed to ruinous FCA penalties. In addition, the law encourages whistleblowers in such companies to report violations, in return for a potential share of any DOJ recovery.

But it is not clear that President Trump has the authority to issue such an executive order. And it is a series of challenges to Biden’s vaccine mandates, as well as his minimum wage policy, that show why.

What Did Courts Say About Biden's Contractor Vaccine Mandates?

In 1949, Congress enacted the Federal Property and Administrative Services Act (FPASA) to create the modern system of federal government procurement. For decades afterwards, presidents issued executive orders directing that federal contractors comply with certain requirements, sometimes seemingly aimed at advancing policies rather afield of ordinary contract management concerns. And for decades, the courts allowed it.

But in the wake of the COVID pandemic, Biden issued Executive Order 14042, requiring contractors to have their employees vaccinated. Opponents of vaccine mandates—including a number of red state governments—filed challenges, asserting that the order exceeded the President’s authority under FPASA.

Several courts agreed. Reviewing the history of FPASA and executive orders regarding contracting, the Sixth Circuit concluded that the statute was meant to help in “making the government’s entry into contracts less duplicative and inefficient”—that is, that it was focused on “government efficiency, not contractor efficiency.” Then it gave that requirement teeth, holding that Biden’s order did not meet the standard because it was directed to the conduct of contractors, rather than that of the government. Thus, it held the order invalid.

In separate cases brought by other states, the Fifth and Eleventh Circuits went further. Both held that Biden’s vaccine order ran afoul of the “major questions doctrine,” which requires that policy changes of “vast economic and political significance” required specific Congressional authorization. That is, both courts determined that an executive order on government contracting could not be used to accomplish a broader policy goal that was not clearly aimed at efficiency at all.

More recently, several other red states challenged a separate executive order issued by President Biden, which imposed a $15 minimum wage on contractors. While the Tenth Circuit rejected the challenge, the Ninth Circuit held that the minimum wage order, like the vaccine orders, exceeded the president’s FPASA authority.

The Hoist: Why FPASA May Not Support Anti-Discrimination Requirements

Under those precedents, Trump’s anti-DEI order could suffer the same fate. Although another executive order dating from 1965 (which Trump rescinded) had long barred discrimination and required that contractors adopt certain affirmative action policies, the Sixth and Eleventh Circuit in the vaccine cases went out of their way to cast doubt on the notion that such anti-discrimination requirements related to “economy and efficiency” and were authorized by FPASA. In the process, they cited a comment in a 1979 Supreme Court decision pointing out that “nowhere in [FPASA] is there a specific reference to employment discrimination.”

As those courts held, it is arguable that anti-discrimination rules—and at least Trump’s battle against wokeness—are about something other than economy and efficiency. Meanwhile, the federal courts have increasingly moved to restrict the executive branch’s authority to set policy through rules binding on private actors—witness the Supreme Court’s disavowal of Chevron deference and adoption of the major questions doctrine. The same logic used to rein in executive rulemaking under Obama and Biden could well be harnessed to limit Trump’s ambitious vision for the presidency.

Of course, the jousting match doesn’t necessarily end there. Were pro-DEI plaintiffs to successfully challenge Trump’s order on these grounds and further entrench the precedent, it could prevent a future Democratic president from re-instituting rules aimed at promoting minority-owned contractors.

The moral for those who now inhabit the White House and those who hope to regain it: be careful where you put that petard.

Neither Fish Nor Fowl: RICO Claims Based on the Anti-Kickback Statute Fare Poorly

This might explain it.

Health insurers cannot use RICO's mail and wire fraud provisions to attack pharmaceutical kickback schemes without showing actual false statements. The First Circuit's rejection of Humana's "implied certification" theory shows the difficulty of mixing kickback allegations with fraud claims—and the danger of importing False Claims Act concepts into RICO litigation.

The platypus, it is said, looks “like God made it from spare parts”: duck bill, beaver tail, webbed feet, and poisonous spurs. When lawsuits try to mix kickback allegations with fraud claims, they often prove just as odd and unwieldy. And sometimes the judicial decisions they inspire do as well.  

The First Circuit’s recent decision in Humana v. Biogen, Case No. 24-1012 (Jan. 17, 2025), is just such a chimera. A health insurer sued a drug maker under RICO, claiming that the drug maker paid kickbacks to get patients to buys its drugs, then passed the costs onto the insurer without disclosing the kickbacks, and that this amounted to federal mail and wire fraud. The court rejected that theory, finding that the insurer had not described a false representation for purposes of the fraud statutes.

But while the court may well have reached the right conclusion, it took a strange route to get there, applying False Claims Act analysis and precedent to the mail and wire fraud statutes. It's almost as awkward as a mammal that lays eggs.

What Was Humana's RICO Theory Against Biogen?

Humana is a health insurer, Biogen a pharma company that makes multiple sclerosis drugs. Biogen sells its drugs to wholesalers, who sell them to pharmacies, who sell them to patients. Under Medicare Part D, patients pay a copay or deductible, and an insurer (such as Humana) pays for the rest of the drug cost.

Humana claimed that Biogen orchestrated a scheme in which Biogen provided the drugs free to uninsured patients, then “funneled” them into Humana Medicare plans, and then indirectly covered their co-pays through donations to certain non-profits. According to Humana, this violated the federal Anti-Kickback Statute and Medicare regulations. Humana ultimately paid for the resulting drug orders.

Humana sued Biogen under RICO, alleging that Biogen had engaged in a pattern of federal mail and wire fraud violations. Mail and wire fraud violations require, among other things, the making of false representations of material facts. A civil complaint alleging a RICO claim based on fraud must describe the false representations in detail, including explaining what the defendant said and why it was false.

Per Humana’s complaint, under Medicare regulations, “downstream” entities (like Biogen, the wholesalers, or the pharmacies) that contract to sell goods to Medicare Part D insurers (like Humana) must comply with federal laws and regulations and certify that certain claims data the suppliers provide is “true, accurate, and complete.” According to Humana, Biogen caused the pharmacies to submit claims for payment for the drugs along with a false “implied certification” that they were not tainted by kickbacks or other illegal conduct.

Why Did the First Circuit Reject the Fraud Claims?

The First Circuit rejected this theory, and found that Humana had not adequately alleged misrepresentations for purposes of the mail/wire fraud statutes and RICO. The court observed that the Supreme Court had recognized the “implied certification” theory as a basis for a claim under the False Claims Act in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016).

But the First Circuit distinguished Escobar in two ways. In Escobar, the defendant had submitted a claim for payment directly to the payer (i.e., Medicare).  Also, in Escobar, the defendant had made certain specific representations to Medicare about the services provided, without disclosing other information that rendered those statements misleading “half-truths.” By contrast, Biogen had not submitted any claims directly to Humana, and there was no allegation of “half-truths,” but rather a pure omission. The First Circuit found that this was insufficient for a RICO claim.

How Do Mail/Wire Fraud Requirements Differ from False Claims Act?

I think the First Circuit may have missed the mark in its analysis, if not its conclusion. First, the FCA and the mail/wire fraud statutes are different laws. Escobar and the “implied certification” theory arise from the FCA and decisions interpreting it, not from mail and wire fraud jurisprudence. Whether or not a complaint has properly alleged an implied certification theory or any other basis for FCA liability is not the issue. Instead, the question is whether the defendant has caused the mail or interstate wires to be used in a scheme to deprive someone else of property through false representations.

In many circuits, pure omissions can support charges of mail or wire fraud in some circumstances, such as where a specific law creates a duty to disclose the relevant information. It is not clear whether Humana alleged that the Medicare regulations specifically required Biogen or others to disclose the alleged scheme to Humana. But the First Circuit does not seem to have analyzed that issue, as it focused on the Escobar/FCA test instead.

Second, a RICO claim can be based on mail or wire fraud even where the false representations were not made directly to the plaintiff. In Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 (2008), the Supreme Court held that a company could bring a RICO claim against a competitor that made false representations to county officials in order to beat the plaintiff in an auction. Thus, the First Circuit’s emphasis on direct communications between the plaintiff and defendant, while perhaps relevant to an FCA analysis, are not necessarily appropriate in a fraud-based RICO case.

Can Kickback Schemes Ever Support RICO Claims?

It’s tricky to plead a RICO claim. It’s even trickier to plead one based on mail or wire fraud, where the fraud involves failure to disclose violations of a different law to someone other than the plaintiff. It may well be possible, but neither Humana’s complaint nor the First Circuit’s decision light the way.

*Like many, I had assumed that the plural of platypus is "platypi" or "platypae." Apparently, it is actually "platypuses" (or possibly "platypodes"), because the word derives from Greek, not Latin. This may be the most useful information in this post.

When Beef Goes Thermonuclear: Drake Tests Whether RICO Applies to Music Streaming Manipulation

Drake plans to sue Universal Music Group and Spotify under RICO for allegedly using bots and payola to inflate streams of Kendrick Lamar's diss track. While the alleged conduct may violate various laws, Drake faces significant hurdles: proving wire fraud, establishing standing, and showing how streaming manipulation amounts to criminal racketeering rather than aggressive marketing.

Some would say it’s not really a beef until the lawyers get involved. And these days, it’s not really a lawsuit unless someone claims a RICO violation.

At least that seems to be the view of one Aubrey Drake Graham, doing business as Drake, one of the top-selling musicians of all time and at the moment one of the most prominent plaintiffs in the country. On November 25, 2024, Drake’s company Frozen Moments filed a petition for pre-action disclosure in New York state court, seeking evidence to support a RICO lawsuit Drake plans to file against Universal Music Group, Spotify, and other unidentified defendants.

The subject of the planned lawsuit: Universal’s alleged scheming to inflate the reported popularity of Not Like Us, a “diss” track by rival rapper Kendrick Lamar that accuses Drake of pedophilia, among other things. The case has garnered massive attention online, which may be much of the point. It could also inspire copycat cases, and perhaps interest the FTC. But Drake may find that RICO litigation is not Child’s Play.

What Illegal Conduct Is Drake Alleging?

The RICO statute was enacted in 1970 to help take down the Italian mafia. It lists various types of state and federal crimes that count as “racketeering” offenses, and creates a new type of crime for operating an “enterprise” that engaged in a “pattern” of such racketeering. The sentence for a criminal RICO violation can be up to 20 years in prison. Separately, anyone whose “business or property” is harmed through a RICO violation can file a civil lawsuit against the members of the enterprise; if successful, the plaintiff can recover treble (triple) damages, plus attorney fees and costs.

Over the years since RICO took effect, it has been used as a “thermonuclear device” (in the words of one court) in business disputes, usually where one side is accusing the other of fraud. For example, in recent years, RICO claims have appeared in lawsuits by Elon Musk against OpenAI and its founders, by several artists against Chinese e-commerce giant Shein, and by Allstate insurance company against various New York-based pharmacies.

In Drake’s case, his company alleges that Universal, Spotify, and others engaged in a scheme to promote Not Like Us through several actions:

1.     License discount:  Drake claims that Universal has discounted its licensing fees to Spotify for the rights to Not Like Us by 30% from its standard rate, which he says amounts to paying Spotify to play the track.

2.     Bots:  Drake claims that Universal has used bots—software programs used to take actions online that imitate human behavior—to artificially increase the number of requests to stream Not Like Us on Spotify, thus artificially increasing its reported performance.

3.     Siri manipulation:  Drake claims that Universal paid Apple to cause the Siri digital assistant program on Apple devices to play Not Like Us when the user actually requested a different song (such as one of Drake’s).

4.     Radio station payola:  Drake claims that Universal secretly paid radio stations to play Not Like Us more frequently, an arrangement known as “payola.”

5.     Undisclosed influencer payments:  Drake claims that Universal secretly paid social media influencers and podcasters to promote Not Like Us.

How Can Streaming Manipulation Constitute Criminal Racketeering? 

A RICO violation requires a pattern of committing not just any crime, but one of a specified list of felonies under federal or state law, found at 18 U.S.C. § 1961(1). For example, payola—undisclosed payments to a broadcaster in return for playing particular music—is illegal under Section 507 of the Communications Act. But the crime is only a misdemeanor, and it is not listed as one of the types of “racketeering” crimes in the RICO statute. Thus, Drake could not bring a RICO lawsuit just by alleging violated that law.

Instead, as in most civil RICO lawsuits, Drake’s petition alleges that Universal and others committed federal mail or wire fraud under 18 U.S.C. §§ 1341 and 1343. To violate those statutes, one must engage in a “scheme or artifice” to defraud someone through deception—false statements or material omissions—in order to deprive them of money or property. In some jurisdictions, such as the Ninth Circuit, a mail or wire fraud claim cannot be based on a mere omission—a failure to provide information—unless the defendant had a special "relationship of trust" with the victim that required the defendant to disclose the information.

So what are the false or misleading statements here? One may be the claim that Universal’s alleged use of bots to request Not Like Us amounted to a false representation to Spotify that the requests were from actual, human users, thus causing Spotify to pay extra licensing fees. But if Drake is suing Spotify as well, it would be odd to describe Spotify as a victim of the scheme.

More likely, Drake would argue that the various actions misled consumers into believing the track was more popular than it is. The other potential claims mentioned in his petition are deceptive business practices and false advertising, and the petition discusses federal and state policies against payola as causing harm to consumers.

Why Drake's Wire Fraud Theory May Fail

But there is a problem with this theory. As the Supreme Court has made clear in several recent decisions, to commit mail or wire fraud, one must have as the “primary object” of one’s fraud scheme the deprivation of property from the relevant victim (Kelly v. United States). Also, the thing to be taken must entail traditionally-recognized property rights (Ciminelli v. United States). Simply depriving someone of economically-valuable information is not enough.

It isn’t clear whose property Drake thinks Universal and Spotify have taken through fraud. Again, if Spotify were the victim rather than an alleged co-schemer, the theory might make sense, because Spotify has paid Universal money to stream the track. But claiming that Spotify users have been deprived of money or other recognized property rights seems like a stretch. The idea that Spotify users’ subscription decisions would be based on how much of the popularity of Not Like Us was organic seems hard to believe, and in any case may not qualify as a recognized property right under Ciminelli. The same would be true of any theory that Apple users were tricked into paying for their own devices or subscriptions.

The petition also alleges that Drake’s company lost money as a result of the scheme, because Spotify users who would otherwise have streamed his song instead chose to use their limited free time on Not Like Us. But Drake does not claim that he or his company were misled, or that the misleading communications were directed to them. Thus, a mail or wire fraud theory with Drake or his company as the “victim” would not work.

Can Drake's RICO Claim Be Based on Bribery?

Drake’s petition also says that the racketeering activity involved “bribery.” Commercial bribery under state law is a type of racketeering under RICO, and usually involves paying or promising to pay an agent or employee, without the consent of the principal or employer, and with the intent to influence the agent/employee’s actions relating to their employment. Drake likely plans to argue that Universal’s alleged payments to Spotify, or to Apple, or to bot suppliers, radio stations, or influencers amount to commercial bribery.

But if so, it is not clear which “principals” or “employers” have been cheated. Consumers, the alleged victims in the scheme, have no employment or fiduciary relationship with any of the companies involved.

Does Drake Have Standing to Sue Under RICO?

Another problem for Drake is standing. Only a plaintiff that has suffered harm to its “business or property” as a result of the illegal racketeering can sue under RICO. The harm must involve a “concrete financial loss.” Again, Drake claims that his company lost money because the increase in streaming of Not Like Us meant less streaming of Drake’s tracks, and thus fewer licensing fees.

But a court may have trouble with Drake’s “zero sum” theory—one might find it equally plausible that the increased attention created by the diss track would drive more listeners to Drake’s songs, just as boxing promoters often seek to stir up interest in fights by playing up personal drama between the fighters.

The Lawsuit May Be a Publicity Tactic

Even if everything Drake alleges is true, it is not clear that he has a viable RICO claim, or a viable petition for pre-suit discovery. But that may not be the main point. The publicly-filed petition, which has been widely-publicized, lays out in detail Drake’s theory that the popularity of Lamar and his diss track are not what they seem to be. Directing attention to this theory could be part of a broader public relations strategy, aimed at undercutting the popular narrative that Lamar “won” the face-off with Drake by outselling him. Or it may be an attempt to influence future negotiations with Universal, which is the record label of both Drake and Lamar. Or it could just be a way to keep Drake in the headlines, as free marketing.

Whether such a strategy pans out, or instead backfires and undermines Drake’s image and credibility, remains to be seen. The RICO claims, on the other hand, are likely to face a rough road ahead.