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Summaries of Recent, Significant, False Claims Act Court Rulings

Third Circuit Rules that Plaintiffs Don’t Need to Provide a Representative Sample of Actual False Claims

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In United States ex rel. Foglia v. Renal Ventures Management, Inc., 2014 U.S. Dist. LEXIS 10549 (3d Cir. June 6, 2014), the United States Court of Appeals for the Third Circuit joined the First, Fifth and Ninth Circuits and ruled that a “nuanced” reading of the Federal Rule of Civil Procedure 9(b) applies to False Claims Act cases, requiring only that the plaintiff provide details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted, without necessarily providing a representative sample of the actual false claims.




Fourth Circuit Holds in FCA Bid-Rigging Case That 8 to 1 Ratio of Penalties to Actual Government Loss Does Not Violate 8th Amendment

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In United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., 2013 U.S. App. LEXIS 25225 (4th Cir. Dec. 19, 2013), the Court of Appeals for the Fourth Circuit held that imposing a $24 million civil penalty did not violate the Eighth Amendment because the penalty was not “grossly disproportionate” to the gravity of the harm—about $3 million in damages. Further, the Court of Appeals held that courts have the flexibility to accept a plaintiff’s request for a reduced judgment when rigidly imposing the FCA’s $5,500-per-claim minimum penalty might violate the Eighth Amendment. READ MORE



W.D. PA. Rules Qui Tam Claims not Tolled by Wartime Suspension of Limitations Act

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In United States ex rel. Emanuele v. Medicor Assocs., 2013 U.S. Dist. LEXIS 104650 (W.D. Pa. July 26, 2013), the Western District of Pennsylvania held in a non-intervened case that a private relator cannot rely on the Wartime Suspension of Limitations Act (WSLA) to toll the limitations statute for FCA claims. In so holding, the court decided not to follow an earlier 2-1 decision by the Fourth Circuit on the issue. READ MORE


Court Rules Breach of Fiduciary Duty Counterclaim in False Claims Act Case Impermissibly Seeks Indemnification

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In United States ex rel. Nehls v. Omnicare, Inc., 2013 U.S. Dist. LEXIS 102543 (E.D. Ill. July 23, 2013), the Eastern District of Illinois dismissed an FCA defendant’s state-law breach of fiduciary duty counterclaim against a relator because it implicitly and impermissibly sought a contribution from the relator in the event that the defendant was found liable. READ MORE


Court Holds Relator’s “Unclean Hands” is Irrelevant to Defendant’s Liability for False Claims Act Violations

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In United States ex rel. Gale v. Omnicare, Inc., 2013 U.S. Dist. LEXIS 102658 (N.D. Ohio July 23, 2013), the Northern District of Ohio rejected a qui tam defendant’s “unclean hands” defense on the ground that the defendant lacked standing to assert the relator’s possible wrongdoing as a shield to its own liability. READ MORE


D.C. District Court Applies 5 Factors to Assess Fairness of False Claims Act Settlement

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In United States ex rel. Schweizer v. Océ N.A., Inc., 2013 U.S. Dist. LEXIS 101419 (D.D.C. July 19, 2013), the District Court for the District of Columbia permitted the United States to settle a non-intervened case despite the relator’s objection after applying a five-factor test to determine that the settlement was fair, adequate, and reasonable. READ MORE


E.D. Pa. District Court Undertakes Granular Inquiry into First-to-File Challenge in False Claims Act Lawsuit

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In U.S. ex rel. Galmines v. Novartis, 2013 U.S. DIST LEXIS 83100 (E.D. Pa. 2013), the United States District Court refused to dismiss the off-label marketing allegations by the relator, a former Novartis sales representative, when an earlier case alleging off-label marketing of the very same dermatological drug  – Elidel – focused on a “different off-label promotion scheme”.   In so deciding, the district court relied heavily on the 3rd Circuit Court of Appeals’ ruling in United States ex rel. LaCorte v. Smithkline Beecham Clinical Laboratories, Inc., 149 F.3d 227 (3d Cir. 1998), which separately analyzed  each claim of each relator to see whether a claim in the second action restated “all the essential facts” of a previously-filed claim and consequently was barred by the first-to-file rule. READ MORE


District Court Finds no Seal Breach if Relator Didn’t Reference “Qui Tam” Filing

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In U.S. ex rel. Gale v. Omnicare, Inc. , 2013 US DIST LEXIS 80436 (N.D. Ohio June 7, 2013), the district court denied a motion by defendant to disqualify the relator, a former Omnicare employee, for breaches of the seal during the government’s investigation, including, in particular, alleged discussions about his qui tam action with his spouse and communications  with work colleagues referencing a “whistle” and visits to a lawyer’s office. READ MORE


S.D Florida Holds Government’s Consent Not Needed for Settlement of Declined Qui Tam

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In United States ex rel. Osheroff v. MCCI Grp. Holdings, LLC, 2013 U.S. Dist. LEXIS 108741 (Aug. 2, 2013), the Southern District of Florida held in a non-intervened case that a relator could enforce a settlement in principle with a defendant even though the settlement agreement had not yet been reduced to a writing approved by the United States. READ MORE


1st Circuit Rules Relator’s Discovery Initially May be Limited to Particularized Allegations

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In U.S. ex rel. Duxbury v. Ortho Biotech Products, 719 F.3d 31 (1st Cir. 2013),  the Court of Appeals for the First Circuit affirmed the district court’s decision to deny relator’s requests for discovery of defendant’s practices throughout the nation and over a seven year period when relator had failed during prior discovery to uncover any evidence of the misconduct that she alleged with particularity in the complaint – - misconduct that involved only the Western region of the United States and a two year period. READ MORE


Federal Circuit Rejects “Fraud in Inducement” Theory in Kickback Case

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In Kellogg Brown & Root Svcs., Inc. v. United States,, 2013 U.S. App. LEXIS 18447 (Fed. Cir. Sept. 5, 2013), the Court of Appeals for the Federal Circuit rejected “fraud in the inducement” as a viable theory for finding all claims submitted under a contract obtained through kickbacks to be false and also refused to presume that the kickbacks inflated the amount of the contractor’s invoices. READ MORE


District Court Finds Fees Paid to Qui Tam Counsel in 2003 are Deductible

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In Bagley v. United States, 2013 U.S. Dist. LEXIS 109801 (C.D. Cal. Aug. 5, 2013), the US District Court for the Central District of California held that a qui tam relator who diligently assisted the government throughout  the litigation of two federal False Claims Act (FCA) cases against  the defense contractor, TRW, Inc., investing almost 6,000 hours of his time over 9  years,  could deduct his attorney’s fees from the taxes owed on his recoveries in the actions because they were “ordinary and necessary expenses” relating to a “trade or business” within the meaning of 26 U.S.C. § 162(a) . READ MORE


D.C. District Court Rules FCA Claims Survive Relator’s Death

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In a case involving allegations by two relators that a government subcontractor submitted false invoices for information technology services, the United States District Court for the District of Columbia joined the resounding chorus and held that the claims that a qui tam plaintiff asserts on behalf of the United States survive his death. U.S. ex rel. Hood v. Satory Global, Inc., 2013 U.S. Dist. LEXIS 73114 (D.D.C. May 23, 2013). READ MORE


1st Circuit Rules Non-Specific Complaint Can Trigger First-to-File Bar

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Agreeing with the decision by the D.C. Circuit in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 ( 2011), and rejecting the reasoning of the 6th Circuit in Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005),  the 1st Circuit Court of Appeals ruled in  U.S. ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28 (1st Cir.  May 13, 2013), that a qui tam complaint need not meet the “particularity” requirements of Rule 9(b) of the Federal Rules of Civil Procedure in order to bar a later-filed complaint under the False Claims Act’s first-to-file provision, 31 U.S.C. ‘ 3730( b)(5).   The U.S. Courts of Appeals have now ruled 2-1 in favor of an interpretation of the first-to-file provision that allows even a complaint subject to dismissal under Rule 9(b) to bar a later qui tam complaint. READ MORE


Qui Tam Counsel may Receive Contingent Interest Plus Statutory Fees, District Court Rules

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In US ex rel. DePace v. Cooper Health Systems, 2013 WL 1707952 (D.N.J. April 22, 2013), the United States District Court for the District of New Jersey soundly rejected a relator’s challenges to the provisions in his retainer agreement that provided for counsel to be compensated for services both through a contingency interest in any relator share award and any statutory fees recovered from defendant. READ MORE



4th Circuit Rules Wartime Suspension of Limitations Act Tolls Qui Tam Claims

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In a case in which the U.S. Supreme Court has now accepted certioriari, the 4th Circuit Court of Appeals ruled in March 2013 that a qui tam plaintiff may rely upon the five year tolling provision in the Wartime Suspension of Limitations Act (WSLA) even when the United States has declined to intervene in the action.  U.S. ex rel. Carter v. Halliburton, 710 F.3d 171 (4th Cir. 2013).   The Court of Appeals held that the relator could bring a False Claims Act (FCA) case against the defendant for knowingly overbilling U.S. military forces in Iraq after the date when the FCA’s statute of limitations (SOL) would otherwise expire. READ MORE


Seventh Circuit Rejects Broad Interpretation of False Claims Act’s Public Disclosure Bar

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In Leveski v. ITT Educational Services, Inc., the Court of Appeals for the Seventh Circuit denounced a district court’s dismissal of a whistleblower complaint as “yet another instance” of a court applying the False Claims Act’s public disclosure bar at “too high a level of generality.” 2013 U.S. App. LEXIS 13722, at *43 (7th Cir. July 8, 2013). In its decision, the court reiterated its view that the public disclosure bar must be interpreted narrowly if the FCA is to effectively incentivize whistleblowers to report fraudulent transactions. READ MORE


* This blog reflects key decisions beginning September 2012.

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