The Lawyers' Corner: The Blog for the Qui Tam Attorney
Summaries of Recent, Significant, False Claims Act Court Rulings


Seventh Circuit Gives Green Light to Claims that Pharmacies Bilk Medicare Part D and Medicaid When They Fail to Offer Discount Program Prices


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In United States ex rel. Garbe v. Kmart Corp., 2016 U.S. App. LEXIS 9743 (7th Cir. May 27, 2016) the U.S. Court of Appeals for the Seventh Circuit upheld the district court’s summary judgment ruling that a pharmacy chain that fails to offer its prescription savings club prices to Medicaid and Medicare Part D violates the “usual and customary charge” billing requirement. The Court found that where discount program prices were “widely and consistently available,” a pharmacy chain should not be able to frustrate the “usual and customary charge” requirement by claiming that its discount savings club constitute a distinct “subset” of the population, rather than the “general public,” because participants were required to pay a fee, enroll in a program administered by a third party, and turn over private information for the administration of the program.

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Court Rejects “Taking Documents” Counterclaim Against FCA Relator


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In United States ex rel. Cieszysksi v. Lifewatch Services, Inc., 13-CV-4052 (N.D. Ill. May 9, 2016), the federal court for the Northern District of Illinois summarily rejected the defendant’s attempt to turn the tables on a qui tam relator by suing him for disclosing to his attorneys and the government the confidential corporate information that supported his qui tam allegations.  The Court explained that public policy protects whistleblowers from retaliation for actions taken to investigate and report fraud to the government, and that allowing the defendant’s counterclaims would “gut the strength and purpose of the public policy.”

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D.C. Circuit Rules no FCA Liability if Defendant “Reasonably” Interpreted Ambiguous Contract


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In United States ex rel. Purcell v. MWI Corporation, 807 F.3d 281 (D.C. Cir. 2015), the Court of Appeals for the D.C. Circuit held that if a False Claims Act defendant reasonably interpreted an ambiguous provision in a government contract, the defendant may not be held liable under the False Claims Act under a different interpretation of that provision.

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EDPA Court Rejects Government Rationale for Reducing Qui Tam Reward


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In United States ex rel. Ryan v. Endo Pharmaceuticals., Inc., 2015 U.S. Dist. LEXIS 91714 (E.D. PA July 15, 2015), the federal district court awarded False Claims Act relator Peggy Ryan 24% of the settlement proceeds in an intervened action that settled for $171,900,000, rejecting the government’s position that the relator share percentage should be inversely correlated to the absolute amount of a recovery and should be reduced when a case settles rather than proceeds through trial. Under the qui tam provisions of the False Claims Act, a relator is entitled to receive between 15 and 25 percent of the proceeds of any action she brings in which the government chooses to intervene (when the government elects not to intervene, a relator is entitled to receive between 25 and 30 percent of the proceeds of the action she brings). The Court in Ms. Ryan’s case decided that she was entitled to the 24 percent share that she had requested, as opposed to the 19 percent share that the government had offered her.

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Court Green Lights Qui Tam Case Based on Confidential Defendant Records


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The False Claims Act’s defense bar in recent years has intensified its use of a particularly unsavory tactic in an apparent effort to retaliate against and chill whistleblowing activities:  accusing relators of violating confidentiality agreements, fiduciary duties or patient privacy or other laws when they disclose internal company information to support their allegations of fraud.    In U.S. et al. ex rel. Ortiz et al. v. Mount Sinai Hospital et al., No. 13-4735 (S.D.N.Y. Nov. 9, 2015) (Decision and Order denying Motion to Dismiss), a case involving allegations of false radiology billings, the United States District Court for the Southern District of New York quickly disposed of such a tactic, rejecting the defendant’s motion to dismiss the relator’s complaint under Fed. R. Civ. Pr. 12(b)(6) on the ground that the complaint was based upon “improperly obtained” confidential patient records. READ MORE

 

Fifth Circuit Rebukes District Court For Overly General Application of the Public Disclosure Bar


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In U.S. ex rel. Little v. Shell Exploration, No. 14-20156, 2015 U.S. App. LEXIS 2824 (5th Cir. Feb. 23, 2015) the Court of Appeals for the Fifth Circuit chastised the court below for applying the public disclosure bar at too high a level of generality, and held that the bar does not apply unless the public disclosures not only “concern the fraudulent scheme alleged” but also are “as broad and as detailed” as the allegations in the relator’s complaint.

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Fourth Circuit Adopts Implied Certification Theory For Violations of Material Contract Terms and Rejects Challenge to Relator’s Standing Following Government’s Intervention


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In U.S. ex rel. Badr v. Triple Canopy, Inc., 773 F.3d 628 (4th Cir. Jan. 8, 2015) the Court of Appeals for the Fourth Circuit recognized that the knowing violation of a contractual term can lead to FCA liability for false claims under an implied certification theory if the “Government’s decision to pay . . . would be influenced” by knowledge that the contractual provision had been violated; and the Court relied in part on “common sense” to assess the materiality of the provision. Further, in applying the “false statement” liability provision, the court reiterated that, when assessing whether a false statement is material to the government’s decision on payment, materiality under the FCA should be assessed objectively, not subjectively. Finally, the Court rejected the contention that the relator loses standing when the government intervenes.

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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.

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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

 


* This blog reflects key decisions beginning September 2012.


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