Two key representatives of the U.S. Department of Justice - Joseph “Jody” Hunt, Assistant Attorney General for Civil Division, and Michael Granston, Deputy Assistant Attorney General for the Commercial Litigation Branch of the Civil Division – recently addressed the Federal Bar Association’s (FBA) National “Qui Tam” Conference, held on Feb. 27 and 28. Hunt and Granston provided insight as to DOJ’s priorities for False Claims Act (FCA) enforcement, application of the so-called “Granston Memo,” how defendant “cooperation” is evaluated and addressed a number of other topics of importance to FCA practitioners.
Hunt began by reaffirming the importance of the FCA as the government’s primary civil tool for addressing fraud against the government and that FCA enforcement remains a “top priority” for DOJ. Hunt noted that DOJ had $62 billion in FCA recoveries and judgments since 1986, of which $45 billion resulted from qui tam suits. The past year, 2019, was another good year for qui tam filings. Hunt said 636 of the 782 FCA cases filed last year were qui tams. Most FCA enforcement continues to be in health care.
One notable fact that Hunt spoke about was the number of settlements and judgments that gave rise to nearly $3 billion dollar recovered in 2019: 213 settlements and judgments. According to Hunt, 2019 was the seventh year in which FCA settlements and judgments exceeded 200 for the year.
Addressing DOJ’s enforcement policies, Hunt listed three areas of focus in health care:
- Medicare Part C/Managed Care Organizations: Hunt said that “plans and providers” have been “taking advantage” of the Part C program by manipulating risk adjustments.
- Prevent fraud pertaining to electronic health records (“EHS”): Hunt mentioned the example of kickbacks paid to EHS providers that “subvert physician decision making.”
- Nursing home cases, especially those cases concerning unnecessary and/or substandard care: Hunt said such enforcement represented “no better use of resources to protect the most vulnerable.” He further cited to the DOJ’s “Elder Justice Initiative” which aimed at pursuing the nation's worse nursing homes. (On March 3, DOJ formally announced its “National Nursing Home Initiative.”)
Hunt along with several Conference speakers discussed the Granston Memo, now incorporated into the Department of Justice Manual at Section 4-4.111, and its enumerated factors that can prompt the government to dismiss a qui tam pursuant to 31 USC 3730(c)(2)(A). Granston Memo dismissals, Hunt explained, are a “small fraction” of the overall number of FCA cases. In the last two years, 45 cases were dismissed compared to 1,200 qui tams filed during this same period. The policy to dismiss qui tams as expressed in the memo will continue to be exercised “judiciously” he emphasized. Hunt made clear that while the government’s “potential burdens” of discovery in a qui tam are one factor in evaluating dismissal, “such burdens will not cause an otherwise meritorious case to be dismissed.”
Hunt further explained that DOJ will evaluate the merits of a qui tam and its impact on other important interests in light of the “statutes, regulations, and contracts” at issue. Here, Hunt appears to be saying that DOJ will evaluate the alleged violation of legal duties at issue in a qui tam in light of the black letter law and contracts, as opposed to non-controlling regulatory guidance – a position first expressed by DOJ in its 2018 “Brand Memo” and now codified in the Department of Justice Manual Section 1-20.100. Hunt noted that DOJ reserved the right to reassess an initial Granston decision against dismissal if “new facts” subsequently emerge during the course of the matter.
The Conference’s panel on “Dismissals” shed further light of the 45 Granston dismissals filed since July 2018. These 45 motions to dismiss qui tams were filed in 30 judicial districts: 12 cases related to pro se litigants; 14 cases related to repeat relators, and 10 cases were effectively voluntary dismissals since the motions to dismiss were not opposed. The 45 Granston motions to dismiss, one speaker noted, were not limited to qui tam cases filed in the last two years but applied to cases as far back as 2012. The result, the speaker explained, is that Granston motions to dismiss were filed in 45 instances out of roughly 6,000 qui tams filed during this period.
Hunt also discussed the merits of defendant “cooperation” in FCA investigations. He explained that a “range of actions may qualify for cooperation” and gave examples such as voluntarily making witnesses and documents available without a subpoena, improving corporate compliance and replacing offending corporate officers.
In contrast to Hunt’s prepared speech, Michael Granston made his remarks in the context of questions posed to him by DOJ attorney David Finkelstein, co-chair of the Qui Tam Conference. Granston spoke about the following:
- He stressed that application of the so called Granston factors only arises when the continuation of a qui tam is not in the public interest as opposed to the interest of the defendant.
- Addressing “factor 6,” of the Granston memo, which he referred to as the “cost/benefit evaluation” of a qui tam, Granston emphasized that for all “non de minimis” cases, “burden does not overcome [a meritorious case] under any circumstances.” Cost/benefit “is not a singular consideration.”
- Asked about whether the FCA has a “self-disclosure” plan similar to that of other agencies (such as HHS’ Self-Disclosure Protocol), Granston noted, without apology, that the FCA “has its own voluntary self disclosure” plan right in FCA statute itself which provides for “double damages” to those prospective defendants who disclose false claims to “responsible government officials” within 30 days of their discovery.
- Granston stressed that aside from settlement discounts attributable to “litigation risk,” defendants now have an “additional opportunity” to obtain a discount based on their “cooperation” with an FCA investigation.
- When asked if and when DOJ will “veto” the dismissals of qui tams that might otherwise be subject to dismissal under FCA’s public disclosure bar, 31 USC 3730(e)(4), Granston suggested that the government might do so when such qui tams “are in the public interest” or “in the government’s best interest.” Such a determination, he added, would “look beyond the merits of the case itself.”
- Explaining who, DOJ and/or US Attorneys, handle qui tams, Granston explained that DOJ handles cases where the damages are in excess of $10 million and cases below that would be delegated to the District. If I heard him correctly, Granston said that DOJ handles around 25% of qui tam filings, the US Attorneys handle 60%, and another 15% are done jointly. Granston also added that there are exceptions whereby DOJ will keep a case instead of delegating it.
- Speaking of the US Attorney Districts, Granston noted that qui tam cases are “much more evenly distributed” across districts. Only one District (which he did not identify) had more than 5% of the qui tams filed. He identified that top districts for qui tam filings as Middle District of Florida, Central District of California, Southern District of New York, District of Columbia, and Eastern District of Pennsylvania.
- Granston addressed the “policy on providing claims data” to relators in declined qui tams. Once declined, Granston explained, they treat relators and defendants as third parties and DOJ does not provide claims data to them. Rather, they are directed to the agency at issue to try to obtain claims data there, which that agency may decline to do. Granston stressed that in declined cases, the government is a “third party” as described in United States ex rel. Eisenstein v. City Of New York.
- As for “trends” beyond those identified by AAG Hunt, Granston identified (i) fraudulent schemes in telemedicine, such as those that are part of other schemes; (ii) non-compliance with trade restrictions and trade duties; (iii) using data analytics in Medicare to analyze claims data which helps DOJ to analyze the qui tam cases it receives.
- Granston noted that what is “falsity” remains a central question in FCA cases.
- The question arose regarding a party seeking a meeting with Michael Granston or other senior DOJ official overseeing FCA cases: what can one expect if they ask for a meeting? Granston stated that if you are trying to seek a meeting above the “case team” about a case, such meetings really should be directed to addressing the “broader legal and policy questions” posed by a case. By contrast, he added, case-specific fact issues are usually best addressed by the case team and not by “upper levels.” That said, the legal and/or policy issues should first be addressed by the case team as that focuses and narrows the issues. If a litigant obtained an audience with Michael Granston, he counseled that for such a meeting to be most effective the person seeking the meeting should “engage early” with the government, “be fully transparent” with “full disclosure on both sides,” and both sides should be candid about the strength of the case. Do not, Granston added, push arguments that don’t work.
Along with the remarks by AAG Hunt and DAAG Granston, the sold out Qui Tam Conference had several very good and informative panels about different facets of FCA and qui tam practice. The leader of the FBA’s Qui Tam Section, Scott Oswald, together with the conference co-chairs, Katherine Seikaly from Reed Smith and David Finkelstein from DOJ, did a great job with the Conference overall. I look forward to next year’s conference which will be co-chaired by Jennifer Short of KaiserDillon and Natalie Waites of DOJ.
A. Brian Albritton
March 18, 2020