This week I came across two articles on the web concerning the False Claims Act which I commend to readers.
First, I recommend the "2012 Mid-Year False Claims Act Update" recently published by Gibson Dunn as it provides a good, succinct summary of False Claims Act highlights thus far in 2012. The Update addresses such topics as (i) legislative action, both federal and state, and discusses several states that recently amended their statutes as well as numerous other proposed state bills; (ii) surveys recent significant False Claims Act settlements in health care, mortgage and financial services, and procurement and defense industries; and (iii) case law developments and trends, discussing many of the cases highlighted in the blog such as Davis and Schweizer along with recent cases addressing the False Claims Ac "first to file" bar and "public disclosure" bar.
Second, I commend to you the article,"False Claims Act Investigations: Time for a New Approach?" published in October 2011 by John Bentivoglio, Jennifer Bragg, Michael Loucks, and Gregory Luce, all partners at Skadden Arps. The article observes that companies subject to False Claims Act investigations are hampered in their ability to defend themselves since most such investigations are conducted under seal, and the government is able to investigate and use its limited resources at a timetable that suits it. While a qui tam is under seal, the article point out "the government and the whistle-blower have an advantage" because "a company does not know the precise nature of the allegations pending against it and does not have the power of discovery and the right to defend that it is afforded by the federal court system once the suit has been disclosed and the litigation engaged." During this time, the article argues, government and the whistleblower can use the all-to-common extended seal period to keep the defendant in the dark as to precise nature of the allegations against it and to gather the evidence they need.
Given the advantages to the government and whistleblower of an extended seal period, the article asserts that "companies presently faced with a pending false claims investigation might consider whether a more aggressive strategy of forcing the government’s disclosure of the litigation (the unsealing of the complaint and other documents in the file) will better inform the company’s ability to defend itself: to engage in the process of discovery permitted by the Federal Rules of Civil Procedure." In turn, the article contends that several cases and legislative history permit defendants to challenge the government's justification for keeping a qui tam matter sealed.
Companies faced with False Claims Act investigations have a hard choice, and most prefer, as the article acknowledges, to settle or where possible, to dispose of the matter while under seal, thereby controlling the effects of bad press as well as other collateral damage. At the same time, I think that every False Claims Act defense counsel has experienced the frustration of trying to defend a qui tam that is under seal because they are in the dark as to the allegations against the client and the government refuses to disclose the substance of the alleged fraud it is investigating. From the vantage of the defendant, the government appears to employ a lengthy seal period to build a case at its leisure and to avoid having to actually litigate the matter. I would certainly be interested in hearing of any instances where defendants sought to unseal a matter on behalf of their client in order to force the matter into civil litigation as the article suggests.
A. Brian Albritton
July 18, 2012