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