Monday, February 2, 2015

Eleventh Circuit Makes Key Ruling on Public Disclosure Bar: US ex rel. Osheroff v. Humana

In the case of U.S. ex rel. Osheroff v. Humana, Inc., et al., 2015 WL 223705 (Jan. 16, 2015 11th Cir), the Eleventh Circuit clarified a number of key issues concerning the "public disclosure bar" of the False Claims Act, as amended by the Patient Protection and Affordable Care Act (2010), 31 U.S.C. 3730(e)(4). See a helpful redline of the pre/amended versions of the public disclosure bar, 31 U.S.C. 3730(e)(4), found at the HelmerMartins blog entry, "False Claims Act Redline." 
  • The Eleventh Circuit applied the pre-amendment version of the public disclosure bar to conduct occurring before the amendment’s effective date (which the Court stated was March 23, 2010) and the post-amendment version to conduct occurring after the effective date of the amendment.
  • The Eleventh Circuit decided that the amended version of the public disclosure provision is no longer jurisdictional.
  • As the amended version of the public disclosure bar is no longer jurisdictional, the Court held that a motion to dismiss under Rule 12(b)(6) is the appropriate vehicle for asserting the public disclosure bar regarding conduct subject to the amended version of the statute rather than a motion under Rule 12(b)(1).
  • In considering a Rule 12(b)(1) motion regarding conduct that is subject to the pre-amendment version of the provision, the district court is permitted to look at extrinsic documents.
  • While the Court found that a district court generally may not look beyond the pleadings in considering a Rule 12(b)(6) motion for conduct that is subject to the post-amendment version of the statute, district courts may consider extrinsic documents if they are central to a relator’s claim and their authenticity is not challenged. 
  • For example, the Court found that in deciding a 12(b)(6) motion to dismiss, the district court properly took judicial notice of newspaper advertisements, and publicly available websites in determining whether there was a prior public disclosure of the relator's allegations. The Court explained that the term "news media as used in 3730(e)(4)" has a "broad sweep" and as a result "newspaper advertisements and the [defendant] clinics' publicly available websites qualify as news media for the purposes of the public disclosure provision." These advertisements and websites, like the newspaper articles, discussed the clinics' "free services" which the relator claimed gave rise to violations of the Anti-Kickback Statute.
  • The Court found that the "significant overlap between the [relator's] allegations and the public disclosures is sufficient to show that the disclosed information forms the basis of this lawsuit and is substantially similar to the allegations of the complaint."
  • The Court held that the relator was not an original source even though the relator argued that he "conducted his own investigation of the programs offered at the clinics", and his complaint included "some details that are not present in the public disclosure." The Court found that such allegations, "at most" add "background information and details relating to the value of the services offered." Such background information, the Court observed, only "helps one understand or contextualize a public disclosure" but is "insufficient" to grant original source status to a relator under either the pre-amendment or post-amendment versions of the False Claims Act.
Overall, Osheroff joins an increasing number of courts that find the amended 2010 version of the public disclosure bar NOT to be jurisdictional and subject to attack only by a 12(b)(6) motion to dismiss. Though the Court made it look easy in this case to take judicial notice of newspaper articles and websites in applying the public disclosure bar, the Court's ruling will make it much harder in practice to assert this defense if only "undisputed" evidence can be introduced at the motion to dismiss stage. To deal with this, defendants will likely have to seek early summary judgments on the public disclosure defense.

A. Brian Albritton
February 2, 2015

Wednesday, January 14, 2015

Kellogg Brown and Root v. U.S. ex rel Carter: Justices dubious of government's broad reading of False Claims Act

Argument analysis: Justices dubious of government's broad reading of False Claims Act

Dear readers: I commend to you the excellent analysis by Ronald Mann of SCOTUSblog of the oral argument held today at the Supreme Court in the case of Kellogg Brown and Root v. U.S. ex rel Carter. That case raised two questions for the Supreme Court to decide: (1) whether the Wartime Suspension of Limitations Act applies to the False Claims Act; and (2) "whether . . . the False Claims Act’s so-called 'first-to-file' bar, 31 U.S.C. § 3730(b)(5) . . . functions as a 'one case-at-a-time' rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing." 

A. Brian Albritton
January 14, 2015

Wednesday, November 12, 2014

The Computer Sciences Corporation Qui Tam – A Warning for North Carolina Medicaid Providers

Those of us who have followed the tumultuous roll out of NCTracks, North Carolina’s Medicaid Management Information System (“MMIS”), are familiar with the headaches it has caused Medicaid providers and the resulting class action lawsuit against the North Carolina Department of Health and Human Services (“NCDHHS”).  Today I’m writing to highlight a potentially more serious problem, one that poses a far greater risk to providers than the delayed and/or erroneous payments that followed the inception of NCTracks. Specifically, two recent headlines should serve as warning signs for North Carolina Medicaid providers.  

First, there’s: “New York City Agency and Vendor Bilked Medicaid, U.S. Says.”  On October 27 the United States Attorney’s Office for the Southern District of New York announced that it had filed a Complaint in Intervention in a $100 million qui tam (whistleblower) lawsuit accusing Computer Sciences Corporation, Inc. (“CSC”) and the City of New York (the “City”) of civil health care fraud.  U.S. ex rel. Vincent Forcier v. Computer Sciences Corporation, No. 1:12 Civ.01750 (S.D.N.Y. unsealed Oct. 27, 2014).  The Complaint accuses CSC and the City of violating the False Claims Act by using the City’s MMIS, developed and managed by CSC, to submit fraudulent billing data to Medicaid.  In a statement last Monday, United States Attorney Preet Bharara summarized the Complaint stating, “[a]s alleged, CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible.”  

Mr. Bharara then went on to praise the U.S. Department of Health and Human Services Office of the Inspector General (“DHHS OIG”) for its work investigating the case.  This brings me to the second headline: “HHS Watchdog Details 2015 Plans to Scrutinize Medical Billing.”  Lest you assume that the CSC case is an anomaly, on October 31 DHHS OIG released its Fiscal Year 2015 Annual Work Plan.  This year’s plan, which summarizes the priorities DHHS OIG will pursue with regard to DHHS programs this fiscal year, vows to scrutinize the billing, payment, and reimbursement practices of Medicaid providers. These include billing practices for adult day health care services, Medicaid payments for dental services, and state use of provider taxes to generate federal funding.  Thus, providers should expect (and prepare for) additional scrutiny in the coming fiscal year from government regulators and investigators.  

Further, in light of the CSC case, providers in states utilizing MMIS engineered and managed by CSC would be wise to complete a thorough review of their Medicaid billing practices and corporate compliance programs.  Followers of NCTracks know that North Carolina is one such state (Maryland is another).  In December 2008, CSC was awarded a $265 million contract to create the MMIS that is now known as NCTracks.  Since its launch on July 1, 2013, NCTracks has been plagued by glitches and complaints and has yet to be certified by the federal government.  Although NCDHHS may be making progress on these issues, if recent headlines are any indication, North Carolina Medicaid providers will continue to have cause for vigilance.  

Guest Blogger
Nathan A. Huff
November 7, 2014

Nathan A. Huff is an associate in the Raleigh Office of Phelps Dunbar LLP.  A former federal prosecutor, Mr. Huff is a member of Phelps Dunbar’s white collar defense and government investigations practice group.  

Monday, October 13, 2014

DOJ Criminal Division's "New Qui Tam Process" - Attempting to Share in the Civil Division's Success

Dear Readers:

Sorry to have been away so long.  There is much to catch up about. 

The recent remarks by Leslie R. Caldwell, Assistant Attorney General for the U.S. Department of Justice's (DOJ) Criminal Division, at the Taxpayers Against Fraud Education Fund Conference, about the "New Qui Tam Process" merit a closer examination than many other blogs or articles have provided. Upon closer examination, AAG Caldwell's invitation to Relators to bring their qui tam cases to the Criminal Division appears to be more an effort by the Criminal Division to share in the success of DOJ's Civil Division than a real effort to increase the criminal enforcement of health care fraud cases that have a parallel qui tam.

  • First, let's be clear: AAG Caldwell is head of the Criminal Division. It is not at all clear what, if any, impact her remarks will have on the Civil Division at the Justice Department or the U.S. Attorneys' Offices throughout the country. I have not heard of complaints by the Civil Division or the U.S. Attorneys' Offices that they wish DOJ Criminal Division would do more or become more involved in qui tams. Rather, her announcement reflects a department that is seeking to share in the successes of the Civil Division.
  • In appealing to Relator counsel, AAG Caldwell states, we "encourage you to reach out to criminal authorities in appropriate cases, even when you are discussing cases with civil authorities." All I can say is, Relator counsel beware! Involving the Criminal Division may slow a government decision on your qui tam case even more than the usual slow pace. Sharing information between DOJ's Criminal and Civil Divisions is often only a one way street: Civil gives to the Criminal Division and not vice versa. And, the agents and assistant U.S. Attorneys working those criminal investigations often slow the civil investigation by asking Civil to wait on the criminal investigation. In turn, defendants and probable criminal targets lawyer-up even more, assert the Fifth, and the civil investigation and any hoped for speedy qui tam recovery can grind to a halt.  
  • So what does AAG Caldwell mean when by "appropriate cases"? She doesn't say. Since the Criminal Division's Fraud Section consists only of "100" lawyers and its Health Care Fraud Section only has "40" lawyers, there are not a whole lot of personnel to devote to the several hundred qui tam cases that are filed each year. Moreover, AAG Caldwell did not announce that the law enforcement agencies -- the people who actually investigate these cases such as the FBI, HHS-OIG, Postal, etc. -- have agreed to devote additional resources and manpower to investigating all these new qui tams. Without those additional investigative resources, it is hard for the Criminal Division or any U.S. Attorney to pursue complex white collar fraud cases requiring investigative expertise. So what is the "appropriate case"? Most likely, this will be an easy to investigate obvious case of wrong doing of a solvent corporation that can actually pay massive criminal fines -- probably like the Big Pharma cases.
  • AAG Caldwell cites the example of the Medicare Fraud Strike Forces operating in several cities throughout the United States that are "hot spots" for Medicare fraud. These Strike Forces really have done a lot to focus on and successfully prosecute what the AAG refers to as the "worst offenders" and the "most pervasive fraud." Yet, based on the example of the Health Care Fraud Unit in the Miami Division of the U.S. Attorney's Office, these strike forces were never intended to take on the lengthy and sophisticated investigations seen in many civil qui tam cases. Rather, they were started to address the worst abuses in the health care industry, many of which could be found among durable medical equipment suppliers and home health care providers in Miami. In turn, at least initially, many of these abuses were uncovered by tracking huge statistical disparities that reflected fraudulent health care billings. In short, the Strike Forces are not really the model for increased qui tam/criminal cooperation and prosecution.
  • AAG Caldwell announces that "executives at health care providers such as hospitals are also a high priority for us" -- woe to the executive who gets caught up in one of these investigations. When agencies make announcements like this, they often look far and wide to make cases to justify their public statements. In the face of invited public scrutiny and pressure, prosecutors and agents can sometimes make really bad judgements, prosecuting cases that never should have been brought or treating defendants far more harshly than they deserve. Hopefully, DOJ's zeal to prosecute executives won't affect their prosecutorial judgment.
  • Finally, I applaud AAG Caldwell's wish to prosecute more health care fraud cases, and she rightfully looks to the whistleblowers and other insiders who often are best positioned to come forward with evidence. Yet, given the few resources that DOJ's Criminal Division really has in attorneys and agents and the already vigorous enforcement of health care cases, both civil and criminal, by the U.S. Attorneys' Offices throughout the country, I do not see how AAG Caldwell's invitation to Relators' counsel will result in more parallel criminal prosecutions or better results for Relator counsel.
A. Brian Albritton
October 13, 2014

Wednesday, July 30, 2014

Worth the Read: "Meet the Serial Whistleblowers" by the WSJ

I recommend the Wall Street Journal's recent article, "Meet the Serial Whistleblowers," by Peter Loftus, WSJ, July 24, 2014. The article profiles a serial relator, Dr. William LaCorte, who brought 12 qui tam False Claims Act suits against health care companies. Dr. LaCorte's qui tam suits have obtained recoveries in 5 cases (2 are currently pending), including a $250 million payout from Merck. He has earned $38 million from his suits. Essentially, the article uses the example of Dr. LaCorte to illustrate the tension in False Claims Act cases: whistleblowing and protecting the government and taxpayer against fraud versus being motivated by large payouts to bring claims that may not have merit.

Though generally worth the read, I take issue with the article on two major points. First, the article claims that relators do not have a good track record when the government does not intervene. Citing figures from 1988 to 2010, it states that when the government failed to intervene, 94% of all claims brought by relators were dismissed. This high percentage of relator dismissals is not representative of False Claims Act practice today. Though I do not know the exact figures, based on what I have observed and read about the percentage of dismissed non-intervened cases is far less during the last 4 years. There are fewer dismissals in recent years because relator counsel today are generally engaging in better pre-suit investigations and bringing more well-founded qui tam claims. Moreover, whereas relators used to rarely go forward with suits if the government declined to intervene, this is no longer the general practice. Second, the article fails to appreciate just how draconian False Claims Act penalties can be, especially for health care companies, and the role such enormous penalties can have in inducing settlements in health care cases. With penalties ranging between $5,500 to $11,000 for each alleged false claim --each bill-- submitted for payment to Medicare, penalties in health care cases can easily reach into the millions, even billions, thus making heath care defendants far more likely to settle claims of dubious merit.

A. Brian Albritton
July 30, 2014

Tuesday, July 1, 2014

Worth the Read: The Third Circuit Adopts a Lenient Application of Rule 9(b)

I commend to you the recent blog post, "Third Circuit Adopts More Lenient Application of Rule 9(b) in FCA" by Robert Conlan, Jr. of Sidley Austin's Original Source False Claims Act blog. Rule 9(b) of the Federal Rules of Civil Procedure is crucial for defendants in staving off the numerous False Claims Act suits which lack merit by requiring the relator to plead a defendant's alleged fraud "with particularity." The blog post highlights the Third Circuit's recent case, U.S. ex rel. Foglia v. Renal Ventures Mgmt., LLC, 2014 U.S. App. LEXIS 10549 (3d Cir. June 6, 2014), which addressed the application of Rule 9(b) to False Claims Act cases. Mr. Conlan explains how the Court rejected the more restrictive Rule 9(b) pleading standard of the Fourth, Sixth, Eighth, and Eleventh Circuits and instead sided with the "less restrictive approach" found in the First, Fifth and Ninth Circuits. (I think, however, Foglia is even more lenient than the less restrictive approach.) Indeed, Foglia, Mr. Conlan points out, is no surprise, given that the Court drew its interpretation of Rule 9(b) in part from a "Solicitor General's amicus curiae brief" wherein the government argued that "the more rigid pleading standard is unsupported by Rule 9(b)" because it "undermines the FCA's effectiveness as a tool to combat fraud against the United States." As Mr. Conlan observes, Foglia is further evidence that the Supreme Court needs to resolve this circuit split.

A. Brian Albritton
July 1, 2014

Wednesday, June 25, 2014

Defendant's Breach of Ambiguous Government Contract Prevents Court from Finding the Defendant Knowingly Submitted a False Claim for Payment

Relators frequently bring qui tam cases based in large part on allegations that a defendant violated some obscure government regulation. These alleged regulatory violations become the basis for a False Claim Act qui tam when the defendant "certifies" to the government its compliance with regulations in conjunction with submitting a request for payment to the government. Yet, what if the underlying regulations were ambiguous, unclear, or simply had not been previously applied in the manner urged by the relators? Can the alleged violation of such ambiguous regulations give rise to a False Claims Act case? More often, courts are answering "no" and refusing to permit the False Claims Act to be used to police violations of unclear or ambiguous regulations.

A good example can be found in the recent Third Circuit case, U.S. Department of Transportation ex rel Arnold v. CMC Engineering, Inc., et al., __ Fed. Appx.__, 2014 WL 2442945 (3rd Cir. June 2, 2014). In this qui tam case, the Third Circuit affirmed the entry of summary judgment in favor of the defendant on the grounds that the defendant could not have "knowingly" submitted a false claim because the contractual terms it allegedly violated were so ambigious that no reasonable jury could have found a knowing violation.

In CMC Engineering, the defendant was a contractor who provided inspection services to the Pennsylvania Department of Transportation ("PennDOT") in support of federally funded highway projects. PennDOT contracted with the defendant for several different classes of inspectors, and the PennDOT contract set forth different credential and experience requirements for the inspectors. The relator, a construction engineer for PennDOT, alleged that CMC's inspectors who worked on the project did not have the contractual qualifications that entitled CMC to the pay rates it billed to PennDOT which were ultimately paid by the federal government. The relator contended that defendant "submitted factually and legally false claims by knowingly requesting payments at certain rates for inspectors it knew did not meet credentialing requirements." As to what the acceptable credentials were for the inspectors, the relator argued that those were set forth in the only "reasonable" interpretation of the CMC's contract with PennDOT.

The Court found, however, that the "language of the contracts . . .  undermines [relator's] assertion that the contract is susceptible to only one reading" and that "the contracts themselves are ambiguous concerning the credentials required for particular positions that justify particular pay rates." The Court noted further that PennDOT employees acknowledged that the contract terms were "open to interpretation" and that PennDOT had subsequently taken steps to make them clearer. "As a result of this ambiguity," the Court observed, "there is no evidence from which a reasonable jury could find CMC 'knowingly' made a factually false claim or false certification . . . by requesting reimbursement for inspectors at rates for which [the relator] contends they were unqualified."

In short, given that many government regulations are often as clear as mud, cases like CMC Engineering represent a welcome trend among courts who are skeptical of relators who try to use the False Claims Act either to police technical regulatory violations or to enforce ambiguous and unclear government regulations.

A. Brian Albritton
June 25, 2014

Tuesday, June 10, 2014

Whistleblower's False Claims Act Case Does Not Toll Statute of Limitations If Relator Seeks to Later Add a Retaliation Claim

When a relator files a False Claim Act case and seeks to later add a claim that his or her employer retaliated against them, is the three-year statute of limitations for retaliation claims "tolled" during the time the relator's False Claims Act claims are pending? And, if a relator seeks to amend his or her False Claims Act case to add a retaliation claim, does the retaliation claim "relate back" in time to when the relator originally filed their False Claims Act case? In a thoughtful opinion, the Court in Hayes v. Department of Education of the City of New York, __ F.Supp. 2d__, 2014 WL 2048196 (May 16, 2014 S.D.N.Y.) addressed both of these questions and found that a relator's attempt to amend her False Claims Act complaint long after she had filed it in order to add a retaliation claim was futile and barred by the statute of limitations.

In Hayes, the relator's attorney withdrew from relator's False Claims Act case. After several attempts to obtain new counsel, the Court granted the defendant's motion to dismiss the case on the grounds that the relator could not bring the case without an attorney or pro se. Relator sought to amend her False Claims Act complaint to add a claim of retaliation, a claim for which she did not need an attorney to pursue. Relator's proposed retaliation claim was more than three years after the events in question.

The Court considered the question of "when a relator herself tolls the statute of limitations for her own claim." While the relators' filing of the False Claims Act complaint may toll the statute of limitations for claims pled in that complaint, the Court concluded that the statue is not tolled for relator's claims which are not brought in the original complaint. The statute of limitations for a retaliation claim related to an underlying False Claims Act case would continue to run, the Court found, even if the case were under seal for a period.

Finding the relator's claim to be barred by the statute, the Court next considered whether the relator may be permitted to amend her complaint to add a retaliation claim pursuant to Federal Rule of Civil Procedure 15. After undertaking a lengthy analysis, the Court found that "an amended pleading adding a retaliation claim may not relate back to the original complaint filed here: neither Rule 15(c)(1)(A) nor 15(c)(1)(B) permits it."

This decision prevents relators from trying to belatedly salvage their False Claims Act cases by trying to add a retaliation claim more than three years after the events at issue. It is not clear, however, how much effect this case will have: False Claims Act cases by ex-employees almost invariably contain retaliation claims and such claims are frequently the bases for settlements when relators' False Claims Act cases fail.

A. Brian Albritton
June 10,2014

Monday, May 26, 2014

A Corporate Plaintiff May Not Bring Suit for False Claims Act Retaliation

Retaliation claims are increasingly commonplace in False Claims Act cases. The issues as to who may bring a retaliation claim -- an individual or corporate relator -- and whether they may sue just the employer accused of retaliation or also individual co-workers or supervisors as well have not been definitively determined by the courts.

For example, I recently learned that only people -- not corporations --  can bring retaliation claims under the False Claims Act. In US ex rel Fryberger v. Kiewit Pacific Company, 2014 WL 1997151 (N.D. Cal. 5/14/2014), the Court held that the False Claims Act (FCA), 31 USC 3730(h), does not permit a relator or plaintiff that is a corporation to sue for retaliation: only an individual "employee, contractor, or agent" may bring a claim that he or she was "discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts" done by the individual in furtherance of an FCA action or in an "effort to stop one or more violations of" the FCA.

Prohibiting a corporate relator from bringing a retaliation claim appears to be an issue of first impression as the Court observed that "[n]either party cites any case law on this question, and the Court has not located any." In making its ruling, the Court looked to the language of the FCA's anti-retaliation provision and the legislative history which accompanied its amendment in 2009. First, the Court noted that the relief provided by sec. 3730(h) for retaliation such as reinstatement and back pay "are directed to individual plaintiffs, not entities." The Court explained further that the 2009 legislative history which added the "contractor or agent" references to the prohibition against retaliation against an employee was "in response to court decisions limiting retaliation plaintiffs to employees and not independent contractors . . . .  Nothing suggests it was Congress's intent to broaden the retaliation entitlement to entity plaintiffs as well as individual plaintiffs."

The Fryberger Court also joined the increasing number of district courts that have held that a relator/plaintiff may only bring retaliation claims against an "employer or entity with whom the plaintiff has a contractor or agency relationship." Prior to the 2009 amendment to the retaliation provision, sec 3730(h), the retaliation provision was generally interpreted only to apply to employers and the Court found that the 2009 did nothing to change that. The Court cited a recent Arizona decision Wichansky v. Zowine, 2014 WL 289924, at *3-5 (D. Ariz. Jan. 24, 2014) as a thorough and persuasive decision along with a number of other cases. (See also an interesting article which discusses this issue, J. Tyler Robinson and Roger R. Clayton, "Beware the Whistleblower: Whether Congress’s Omission of the Term 'Employer' from Section 3730(h) of the False Claims Act Was Intended to Extend Liability to a Whistleblower’s Individual Supervisors," IDC Quarterly Volume 24, Number 1).

A. Brian Albritton
May 26, 2014

Monday, April 21, 2014

First to File Bar Based on Comparing Complaints and Not Settlements

Speaking of the first-to-file rule, 31 USC 3730(b)(5), a first-to-file relator in Texas sought to share in the qui tam settlement of a subsequent relator who filed suit against the same defendant as the first realtor but alleged a different scheme. See U.S. ex rel Smart v. Christus Health, et al, 2014 WL 1474282 (5th Cir. April 16 2014). In a case that was not selected for publication, the 5th Circuit, not surprisingly, rebuffed the first relator's attempt, pointing out that the two suits were very different with the exception that they named the same defendant: the first suit alleged that the hospital engaged in a scheme to induce doctors to refer patients to it by renting the doctors office space at below market, and the second suit alleged that the same hospital committed billing fraud by improperly using inpatient codes for outpatient procedures.

What is interesting about this case is that the first relator sought a share of the settlement proceeds because the settlement in the second filed suit released the defendant from any claims the government may have, including Stark/Anti-Kickback type of claims similar to those raised in the first filed suit (though not the same claims). The 5th Circuit noted, however, that "[w]hen deciding whether the first-to-file bar applies, this Court compares the complaints -- not the settlement agreements."

The first-to-file relator had also sought discovery to demonstrate that he was entitled to a share of the proceeds from the second filed suit, but the 5th Circuit was having none of that.

Though the 5th Circuit gave short shrift to the first relator, I think the relator deserves some sort of prize for creative argument.

A. Brian Albritton
April 21, 2014