Qui Tam

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On June 16, 2023, the U.S. Supreme Court, in United States ex rel. Polansky v. Executive Health Resources Inc., held that the Government may seek dismissal of a False Claims Act (“FCA”) qui tam suit over a relator’s objection so long as it intervenes in the litigation, either during the initial seal period or afterward.  The Court also held that, when handling such a motion, district courts should apply Federal Rule of Civil Procedure (“FRCP”) 41(a), the rule generally governing voluntary dismissal of suits.  And in a dissent that—in the long run—may end up being more impactful than the Court’s holding, Justice Thomas (joined in a concurring opinion by Justices Kavanaugh and Barrett) questioned the constitutionality of the qui tam provisions themselves.  Continue Reading See(2)(A) You Later: Supreme Court Holds that DOJ Has Broad Dismissal Authority Even After Unsealing

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Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022).  The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.  

In Supervalu and Safeway, the Seventh Circuit joined several of its sister circuits in applying the scienter standard articulated by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) to the FCA, finding that a defendant’s conduct is not reckless when (1) acting under an objectively reasonable, albeit erroneous, interpretation of an ambiguous regulation or contract provision; and (2) no authoritative guidance existed to warn the defendant away from that interpretation. Continue Reading Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA

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In a prime example of the significant interplay between the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”), a federal jury has returned a verdict of more than $43 million in damages against Cameron-Ehlen Group, Inc., which does business as “Precision Lens,” and its owner.  The verdict in this long-running and closely watched fraud case out of the U.S. District Court for the District of Minnesota comes after a six-week trial, with the jury ultimately finding that the defendants paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare, resulting in the submission of 64,575 false claims between 2006 and 2015.  While the jury calculated damages at the massive sum of $43 million, that number may grow exponentially after the court applies the FCA’s treble-damages calculation (increasing the liability to $129 million) and statutory penalties of between $5,500 and $11,000 for each of the 64,575 claims (resulting in additional penalties of $355 million to $710 million).  All told, the total FCA liability is expected to range between $485 million and $839 million. Continue Reading Hundreds of Millions of Potential Liability Result from Federal Jury False Claims Act Verdict Against Ophthalmology Product Distributor

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In Tolliver Group, Inc v. U.S. (Jan. 22, 2020), the Court of Federal Claims granted summary judgment in favor of a contractor who sought reimbursement of legal fees incurred in successfully defending against a False Claims Act (FCA) suit filed by a relator. The qui tam action arose from a defect in the original contract—the…

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Announcing a new podcast feature – Ask Us Anything! Have questions you’d like answered anonymously? Want our thoughts in general on a particular topic? Send in questions and we’ll do our best to feature them in a future podcast. Email your questions to David at drobbins@crowell.com. Disclaimer: we cannot give legal advice unless …

The government has reiterated in no uncertain terms its proposed standard for particularity under the FCA: “a qui tam complaint satisfie[s] Rule 9(b) if it contains detailed allegations supporting a plausible inference that false claims were submitted to the government, even if the complaint does not identify specific requests for payment.”  Brief for United States as Amicus Curiae, United States ex rel. Nathan v. Takeda Pharmaceuticals, Petition for Certiorari No. 12-1349 (U.S. 2013).  While opining at some length about the state of case law in the lower courts, the Solicitor General ultimately asked the Supreme Court not to hear the case.

Many of us thought that Nathan was a good opportunity for the Supreme Court to resolve an apparent split among the circuits (an issue we discussed in posts from February and March of last year).  The point of contention is the particularity required in an FCA complaint under Rule 9(b): is it enough to allege a fraudulent scheme, or must a plaintiff also furnish details about the claims themselves?  The government finds concerns about this circuit split to be somewhat overstated.  See Br. at 10 (“[T]hose circuits that initially endorsed the per se rule [requiring identification of specific claims] have issued subsequent decisions that appear to adopt a more nuanced approach.”).  The government thus finds the extent of inter-circuit disagreement to be “uncertain,” suggesting that it “may be capable of resolution without the Court’s intervention.”  Id. at 10, 14.
Continue Reading Solicitor General Addresses Standard for Rule 9(b) in FCA Cases, Asks Supreme Court Not to

Just last week, the Department of Justice announced another large False Claims Act settlement with a GSA Schedule contractor – for $60.9 million. A review of the underlying qui tam complaint, filed by a former vice president of the contractor, reveals multiple alleged failures by Tremco Inc. and RPM International to comply with the basic – yet often very challenging – requirements of the contract: disclosure of commercial pricing and compliance with the Price Reduction Clause. Among a number of allegations, the complaint alleges that the roofing supplies and services contractor failed to disclose to GSA that it offered better pricing to its commercial customers than identified on its published price list. As a result, the complaint states that the government was disadvantaged by negotiating higher pricing than it would have, had it known about the contractor’s actual commercial pricing practices. The complaint also alleges that, during the course of performing the GSA Schedule contract, the contractor failed to provide price reductions to government customers when it provided discounted pricing to its commercial customers.
Continue Reading GSA Schedule Contracting: Does Your Company Have Sufficient Internal Controls to Minimize Noncompliance Risks?

In March, we published an article entitled “New Questions Regarding The Jurisdictionality Of The FCA’s Public Disclosure Bar: Potential Hurdles And Increased Costs In Defending Against Parasitic Qui Tam Actions,” The Government Contractor, Vol. 55, No. 12 (Mar. 27, 2013). We explored whether, given the 2010 amendments to the civil False Claims Act (FCA) under the Patient Protection and Affordable Care Act (PPACA), the public disclosure bar1 still implicated a federal court’s subject matter jurisdiction. See P.L. 111-148, title X, § 10104(j)(2), 124 Stat. 119 (2010); 31 USCA § 3729 et seq. (2012). Surveying the few cases to have addressed the issue, we concluded that it was largely an open question. The only opinion to have substantially analyzed the question at that time had concluded that the bar was still jurisdictional. See United States ex rel. Beauchamp v. Academi Training Ctr., No. 1:11-cv-371, 2013 WL 1189707, at *9 (E.D. Va. Mar. 21, 2013).2

Since then, several courts have reached the opposite conclusion. Two have made passing reference to the point in footnotes. See United States v. Chattanooga-Hamilton Cnty. Hosp. Auth., No. 1:10-cv-322, 2013 WL 3912571, at *7 n.6 (E.D. Tenn. July 29, 2013); United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., No. 1:11-cv-962, 2013 WL 2303768, at *8 n.15 (N.D. Ga. May 17, 2013). Another has been more direct, comparing the two versions of the public disclosure bar and concluding that “[a]fter the 2010 amendment, the bar does is [sic] not described as jurisdictional in nature; instead, the statute simply directs that the action or claim be dismissed . . . .” United States ex rel. Paulos v. Stryker Corp., No. 11-0041-cv, 2013 WL 2666346, at *3 (W.D. Mo. June 12, 2013).
Continue Reading The Growing Split Over Whether the FCA’s Public Disclosure Bar is Still a Jurisdictional Limitation

Crowell & Moring recently achieved two substantial victories for its client, Academi Training Center LLC (“ACADEMI”) in a qui tam False Claims Act case in the Eastern District of Virginia . The qui tam relators accused ACADEMI of billing for personnel who did not serve in the labor categories in which they were billed and for personnel who had not been qualified on belt-fed weapons as required under its contract. They also alleged that ACADEMI retaliated against them in violation of the FCA’s whistleblower protections, and sought to advance their claim in federal court instead of in arbitration. The court dismissed the false claim counts and referred the retaliation claims to arbitration.

The court dismissed the false labor billing allegations on two alternative grounds. First, the court held that the FCA’s first-to-file provision barred these allegations. That provision generally precludes a qui tam relator from bringing an action based on the facts underlying a pending case. Because the labor billing allegations had already been made in United States ex rel. Davis v. U.S. Training Ctr., No. 11-2180, 2012 WL 6052051 (4th Cir. Dec. 6, 2012), the court held that the first to file bar applied. Crowell & Moring won a jury verdict in the Davis case in 2011 and that outcome was recently affirmed by the Fourth Circuit. Second, the court also held that the FCA’s public disclosure bar precluded these claims. The court held that the public disclosure bar remained a jurisdictional one and found that the Davis complaint qualified as a public disclosure under the FCA, as did a witness declaration filed in that case. The court ruled that the relators’ knowledge did not materially add to the already disclosed allegations and that therefore they did not qualify under the “original source” exception to the public disclosure bar. The court dismissed the labor billing claims under both the first to file and public disclosure bars.Continue Reading Crowell & Moring Secures Two-Part Victory in Major False Claims Act Case

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On May 15-16, 2013, Crowell & Moring is hosting its annual Ounce of Prevention Seminar (OOPS). This year’s program, entitled Weathering the Rough Seas of Regulation, will once again provide the government contract community with a comprehensive review of the latest developments in federal contracting.

In the morning session on May 16, attorneys Andy Liu…