by Author | Dec 10, 2014 | False Claims Act
Recently, a federal judge in Manhattan ordered a Relator To Pay Defense Attorney’s Fees in an FCA case. The case is United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., 2014 U.S. Dist. LEXIS 166493 (S.D.N.Y. Dec. 1, 2014).
What is noteworthy in Fox Rx is that after the government declined to join the case and before the relator amended the complaint, defense counsel made a power point presentation to relator’s attorney showing why the defendant could not possibly be liable under the FCA. Notwithstanding that showing, relator’s attorney went ahead and amended the complaint and then continued to proceed against the defendant. The amended complaint was subsequently dismissed by the judge. Thereafter, the defendant made an attorney fee application under 31 U.S.C. § 3730(d)(4) and the application was granted. The judge concluded that relator’s litigation conduct became “objectively unreasonable” after the defense counsel power point presentation.
Practice tip: Relators and relators counsel should anticipate that it will become increasingly more common for defense lawyers to propose meeting with them following government declinations in order to talk relators out of going forward on a non-intervened basis, presumably using a power point presentation that could well feature as Ex. A in a subsequent motion for attorney’s fees if the case is later dismissed. Such invitations will have to be thoughtfully considered. Relator’s counsel will have to balance the benefit of receiving information from defense counsel against the risk that relators may face an increased risk of liability for defense attorney’s fees under Section 3730(d)(4).
One way to balance these considerations is to make such a meeting conditioned on the parties signing an agreement that covers what the fact of the meeting and the information exchanged thereat can be used or not used for. The agreement should also require the defendants to agree to “open file discovery” on any factual assertions they make and allow relators access to such evidence before formulating a response to the defendant’s request that the relator voluntarily dismiss the lawsuit.
by Author | Dec 4, 2014 | False Claims Act, Qui Tam
A recent First Circuit appellate court decision makes it clear that “first” in the so-called “First To File Bar” of the False Claims Act, 31 U.S.C. § 3730(b)(5), means “first” not “best” or “better.” Section 3730(b)(5) states that, when a private party files a qui tam action under the False Claims Act, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” In the First Circuit case, the court ruled that a prior qui tam suit against Baxter Pharmaceutical, which had already been settled, barred a second law suit against the company by other relators. The court held that the two suits were similar enough to trigger the first to file bar and it did not matter that the second complaint had many more specific details than the first. The court’s reasoning focuses on whether the first complaint gave the Government sufficient information to start an investigation that could have uncovered the misconduct alleged in the second complaint. If it does the analysis ends there and the second suit must be dismissed.
Practice tip: If there was (or is pending) an FCA case against the same defendant that is similar to the one you are considering you may very well have to forego filing or at least go into it knowing that it is highly likely your second to file case will get tossed.
To read the Baxter opinion see UNITED STATES, EX REL. VEN-A-CARE OF THE FLORIDA KEYS, INC., Plaintiff, Appellee, v. BAXTER HEALTHCARE CORPORATION, Defendant, Appellee, v. LINNETTE SUN AND GREG HAMILTON, Appellants. UNITED STATES, EX REL. LINNETTE SUN; UNITED STATES, EX REL. GREG HAMILTON, Plaintiffs, Appellants, v. BAXTER HEALTHCARE CORPORATION, Defendant, Appellee. No. 13-1732, No. 13-2083, UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT, 2014 U.S. App. LEXIS 22564,December 1, 2014, Decided.
by Author | Nov 30, 2014 | False Claims Act
Are Job Applicants who have blown the whistle at a prior job protected under the False Claims Act from hiring discrimination by prospective employers? Not if they file their cases in Kentucky, Michigan, Ohio or Tennessee. On November 18, 2014, in a case of first impression, the United States Court of Appeals for the Sixth Circuit, in Vander Boegh v. Energysolutions, Inc., held that the FCA protects only current or former “employees” and not “applicants” for future employment. The appellate court reached this conclusion after first noting that the FCA’s anti-retaliation provisions contain only the word “employee” and not the term “employment applicant.” The judges then looked up the word “employee” in two dictionaries and saw that the definitions covered only people who work or have worked for someone, not people who are applying for work. Without saying so, the court in effect blamed Congress for not using more comprehensive terms for who gets whistleblower protection under the FCA. The judges noted that even though Congress had earlier said one of the goals of the FCA is to protect whistleblowers from “blacklisting,” they reasoned that this should be interpreted to mean that only former employers are barred from refusing to hire a person for trying to stop fraud against the Government. Prospective employers can do so with complete impunity—at least in the Sixth Circuit.
Practice tip: The conservative majority on the current U.S Supreme Court favors the “plain meaning” analysis used by the judges in the Vander Boegh case generally, and has relied on a similar dictionary-driven way of deciding cases to limit the scope of the False Claims Act in the past. See, e.g., Schindler Elevator Corp. v. United States ex rel. Kirk, No. 10-188 (May 16, 2011) (relying on a dictionary to define “report” and “investigation” to preclude FCA cases relying on FOIA requests). One should therefore expect Vander Boegh to become and remain the law of the land. That is, unless and until Congress decides to “fix” the FCA for the third time since 2009 to redress what it regards as wrong-headed Supreme Court decisions, by adding the phrase “job applicants” to the FCA’s list of protected persons.
To read the Boegh decision see Gary Vander Boegh, Plaintiff-Appellant, v. Energysolutions, Inc., Defendant-Appellee, No. 14-5047, (6th Cir., Nov 18, 2014), 2014 U.S. App. LEXIS 21810.
by Author | Nov 25, 2014 | False Claims Act
Justice Department Announces Receiving Nearly $6 Billion in FCA Recoveries in Fiscal Year 2014
On November 20, 2014, the Department of Justice announced it had recovered $5.69 billion dollars in recoveries under the False Claims Act (FCA) during fiscal year 2014, which ended on September 30. The largest categories were Mortgage and Housing Fraud involving federally insured loans ($3.1 billion), Healthcare Fraud involving hospitals and pharmaceutical companies ($2.3 billion), and the remainder arose from Defense Contractor Fraud and other Government Contractor Fraud.
Almost $3 billion of the FCA recoveries came from qui tam suits filed by whistle blowers (known as “relators”). For their assistance in helping the Government recover money on behalf of the American taxpayers, the relators received approximately $435 million.
To read the Government’s press release go to: http://www.justice.gov/opa/pr/justice-department-recovers-nearly-6-billion-false-claims-act-cases-fiscal-year-2014
by Author | Oct 9, 2014 | False Claims Act
Do you have to prove every single false claim in a large, complex qui tam False Claims Act case, or can you simplify your burden of proof by using EXTRAPOLATION EVIDENCE? This is a very important, hotly contested and evolving legal issue that appears to be heading in favor of relators and the Government.
Recently, this question was addressed by a federal district judge in the Eastern District of Tennessee, in US ex rel. Martin v. Life Care Centers of America, Inc., Case No. 1:08-cv-251. There, the Government wanted to use statistical sampling to show that the defendant, which owned 200 skilled nursing facilities (SNFs), was defrauding Medicare, Medicaid and TRICARE on a large scale by keeping patients in its facilities for longer than was medically necessary, and for other forms of billing misconduct. Specifically, the Government wanted to focus on only 400 patient admissions at 82 centers to establish both liability and damages across the board. Defendant Life Care Centers of America opposed the use of statistical sampling and extrapolation for liability purposes.
After reviewing the legal landscape of cases permitting or denying the use of extrapolation methodology, the Tennessee judge sided with the Government. He appears to be have been greatly influenced by the “sheer scale” of the Medicare program in terms of size and complexity, as well as “the large number of claims that can be submitted by a single entity to be reimbursed by Medicare.” According to the judge, it simply “is often not practicable to do a claim-by-claim review of each allegedly false claim in a complex FCA action.”
Practical pointer: In an appropriate case, it may make sense for relator’s counsel to retain an expert who can devise a sound method for obtaining a statistically representative sample of claims and then extrapolate from those samples to establish both liability and damages.
by Author | Oct 5, 2014 | False Claims Act
Can I threaten to expose False Claims Act fraud to get a settlement (or bigger settlement) on non-whistleblower claims, or would that be False Claims Act Extortion? A recent California appellate court decision shows how a pre-litigation threat to reveal FCA violations during early negotiations can be recast as Civil Extortion. In Stenehjem v. Sareen, 226 Cal. App. 4th 1405 (June 13, 2014), the Court of Appeal of California, Sixth Appellate District, held that an email which contained vague threats to report a former employer for violating the False Claims Act in connection with a Department of Defense contract –if the ex-employee’s demand to settle his potential claims of defamation and wrongful termination were not met– was an act of civil extortion as a matter of law. There, the ex-employee had repeatedly sought without success to obtain a large settlement payment via negotiations between his counsel and the former employer’s attorney. In apparent desperation after his own attorney resigned, the ex-employee wrote an email directly to the former employer’s lawyer trying to resolve his employment claims in a “gentlemanly” manner and noted that he did not want to involve the US Attorney General, US Department of Justice or DOD, or turn the matter into a “federal case.” The fired employee’s email also mentioned “false billing practices” and alluded to the term “Qui Tam” and the possibility of retaining a Qui Tam Attorney, but did not make any specific threats to go to the authorities or demand any specific amount of money in exchange for silence. Nevertheless, the appellate court found the email on its face to be an unprotected extortionate demand. In so ruling, the court denied the ex-employee’s motion under California’s anti-SLAPP statute to summarily dismiss the former employer’s civil extortion counterclaim, which had been filed in opposition to the ex-employee’s claim for defamation and wrongful termination.
Practical take away: A settlement demand to resolve an individual’s employment or other personal claims should never include any reference to possible Qui Tam, False Claims Act or other whistleblower matters. Additionally, the amount of any settlement demand should fairly reflect the actual damages for the individual’s claims and not be increased substantially to include any benefit to the employer for buying a “gag” provision in a settlement agreement.
