Partially Intervened Qui Tam Cases Cannot Have Two Masters: Court Bars Relators From Proceeding With Their Non-intervened Claims

Dear Readers,

I commend to you a remarkable case, U.S. ex rel. Wride v. Stevens-Henager College, Inc., 2019 U.S. Dist. LEXIS 6783, 2019 WL 186663 (D. Utah 2019), which addresses the question of whether a qui tam in which the government has partially intervened has “two masters,” the government and the relator, each controlling their own sphere of the litigation, or just one. The District Court held that only one master — the government — can conduct the litigation in a partially intervened qui tam and relator cannot proceed with its own non-intervened claims or amend to bring new claims. The Court specifically found that where the government has intervened in a qui tam “action,” including where the government has intervened in only some but not all of the relators’ qui tam claims, the False Claims Act (FCA) provides that the government alone has the “primary responsibility for conducting the action” and the relators do not have the right to “amend his or her complaint to add defendants and claims to the government’s action.”

In Wride, two relators filed a FCA qui tam against a for-profit school and its successor (herein “for profit schools”). The government intervened in some but not all of their claims against the for-profit schools and filed its own complaint in intervention, which it later amended. Subsequently, relators filed amended complaints (four in all) adding new claims and new defendants. The Court observed that the complaint against the for-profit schools had “two masters,” the government and the relators. Additionally, relators had also been pursuing its separate claims against the for-profit schools and other defendants. The defendants moved to dismiss, and in the process of considering that motion, the Court asked the parties to brief whether the FCA permitted the relators to independently pursue claims against the defendants after the government elected to intervene in the lawsuit. Finding that the relator cannot maintain a separate complaint against the defendant, the Court struck all of the relators’ post-intervention complaints.

The Court observed that nothing in the FCA or its legislative history suggests that “a relator can maintain the non-intervened portion of an [qui tam] action. In fact, the plain language of the statute suggests otherwise.” The FCA, the Court concluded, “is clear that the Government either ‘elect[s] to intervene and proceed with the action,’ sec. 3730(b)(2), or it ‘declines to take over the action,’ sec. 3730(b)(4)(B). There is no in-between.”

The government contended that 31 USC 3730(b)(1) “allows a realtor to maintain the non-intervened portion of the action in the name of the United States.” (Emphasis added.) The references to “the action” here and in other parts of the FCA, the government argued, mean “cause of action” as opposed to “civil action.” The Court rejected that argument and conducted a plain language analysis of the FCA references to “action.” The Court found that the FCA’s text and “its structure” undermine the government’s interpretation because the FCA “unambiguously uses ‘action’ to mean ‘civil action.’”

The government’s chief argument was that Congress’ silence in the FCA as to whether a relator may prosecute the non-intervened portion of an action “suggests that the relator retains a right to do so.” In support of its argument, the government cited 31 USC 3731(c) which in discussing government intervention provides “the Government may file its own complaint or amend the complaint of [the relator] to clarify or add detail to the claims in which the Government is intervening and to add any additional claims. . . .” The Court did not read the provision to permit the relator the right to proceed with claims of its own once the government intervenes. Congress, the Court asserted, “would not have given relators the primary responsibility for prosecuting the non-intervened claims in such a cryptic fashion. . . .[its] silence as to the relator’s right to prosecute non-intervened claims leads to the conclusion that no such right exists.”

Analyzing the portion of the FCA that deals with awards to relators, 31 USC 3730(d), the Court found that “[n]either the statute nor the legislative history suggests that a relator can pursue claims that are separate from the Government’s to recover an increased award” which “undermines the idea that the relators can pursue non-intervened claims.” Key to the Court’s conclusion was that the FCA provides only limited rights to the relator to “continue as a party to the [intervened] action” which the Court distinguished from the government’s right to “conduct the action” when it intervened. Once the government intervenes, the relator has only limited rights and according to the FCA, the Court can limit the relator’s “participation” in the intervened case. In sum, once the government intervened in the qui tam, its complaint “superseded the relators’ complaint and became the operative pleading. The relators then lost the right to add defendants and claims to the action” and “any pleading filed by the relators” thereafter “lacked legal effect.”

This interesting case and the Court’s exhaustive analysis sheds light on an area of FCA litigation that has long needed closer review:  just who controls FCA claims and what is the role of the relator? The FCA appears to provide that a relator’s qui tam must be moored to his or her original disclosure statement. Section 3730(b)(2) requires that at the beginning of the case, the relator “serve” the government with a “written disclosure of substantially all material evidence and information the person possesses.” Presumably when his or her claim is filed, the relator is blowing the whistle on that alleged misconduct about which she or he has knowledge and is presenting their knowledge to government for its investigation.

When relators start bringing in new parties, asserting new theories and new claims beyond the scope of their disclosures, however, then relators are transforming the qui tam provision into an independent vehicle — like a search warrant — that they can use to search for and assert new claims and add new parties about which they may know little or nothing. That is what occurred in Wride. Relators essentially used their “right” to bring a qui tam to independently bring new claims that were unmoored from their original disclosure statement to the government and without first submitting their new claims under seal to the government. When the government argued that relators’ new complaints simply “added detail to the fraudulent schemes already described and thus did not have to filed under seal,” the Court described that argument as “at best, a misstatement.” Indeed, ruling on alternative basis, the Court struck the relators’ fourth amended complaint as a sanction for the relators’ failure to first file it under seal in violation of 31 USC 3730(b)(2).

Unfortunately, I give the Court’s decision in Wride a 50/50 chance of surviving. My prognosis does not result from the decision running afoul of any case law already out there, but simply because it violates that most powerful rule, “this is the way we’ve always done things.”

A. Brian Albritton

January 23, 2019

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

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

Refusing to Extend the Seal: Court Refuses Requests to Extend Seal of Qui Tams for Informal Discovery or Settlement Negotiations

Section 3730(2), Title 31, of the False Claims Act ("FCA") provides that when a qui tam relator files an FCA complaint under seal, the case may remain under seal for "at least 60 days" while the government investigates and decides on whether or not to intervene. It is the rare case that remains under seal only 60 days, however, and in some cases, the government keeps the qui tam under seal for years, even over the objection of the relator. For example, one case in the Middle District of Florida, the Wasserman case, was filed under seal in 2004, but the government did not unseal it until 2010.

Ben Vernia at False Claims Counsel blog recently wrote about one federal district court judge in South Carolina who has given notice that the court will no longer agree to these automatic extensions of the seal for qui tams. In a recent "standing order," U.S. District Court Judge Joseph Anderson, Jr. observed that in "recent years, this court has extended the seal period, at the request of the government, on eight occasions in two actions," only to be informed by the government after all that time that it was not going to intervene in those cases.

Judge Anderson noted that the 4th Circuit observed that there are four reasons why Congress adopted the sixty-day seal period: "(1) to permit the United States to determine whether it already was investigating the fraud allegations (either criminally or civilly); (2) to permit the United States to investigate the allegations to decide whether to intervene; (3) to prevent an alleged fraudster from being tipped off about an investigation; and, (4) to protect the reputation of a defendant in that the defendant is named in a fraud action brought in the name of the United States, but the United States has not yet decided whether to intervene." Am. Civil Liberties Union v. Holder, 673 F.3d 245, 250 (4th Cir. 2011). Judge Anderson, however, noted that "none of the foregoing reasons for extending the seal period involve discovery of documents from the putative defendant or settlement negotiations." In turn, the Court observed further that the FCA's legislative history provides that "with the vast majority of cases, 60 days is an adequate amount of time to allow Government coordination, review and decision."

In light of these considerations, Judge Anderson stated that in deciding whether "good cause" exists to continue the seal after 60 days, "henceforth, the court will no longer consider informal discovery and/or settlement negotiations as sufficient grounds for extending the seal period."

If widely adopted, Judge Anderson's position would radically change FCA practice both for relators and qui tam defendants.

A. Brian Albritton
December 16, 2013

Employment Arbitration Rulings, Qui Tam Retaliation Claims, and Collateral Estoppel

I recently came across an interesting case that further illustrates the perils to False Claim Act relators who split their employment and FCA retaliation claims. In the unpublished case of Kalyanaram v. New York Institute of Technology, 2013 WL 6482578 (2nd Cir., December 11, 2013), the Court dismissed the relator's retaliation claim against his employer on the grounds that it was barred by the doctrine of collateral estoppel. Collateral estoppel is the common law rule that prevents a party from re-litigating an issue or fact that has previously been decided, even if that issue or fact was decided in a different case, as long as there was "full and fair opportunity" to litigate the issue in the prior proceeding.  

In Kalyanaram, the relator's employer, a technical school, fired the relator, a teacher, on the grounds that he was engaging in professional misconduct. The relator contested his firing in an arbitration proceeding pursuant to a collective bargaining agreement. While that case was pending, the relator also filed a qui tam against his employer alleging that the school submitted false financial aid information so that its students would get federal and state financial aid and that the school retaliated against him for complaining about it.

The relator argued in his employment arbitration that the school retaliated against him for his complaints about the school's alleged deceptive and fraudulent practices. The relator, however, did not allege in the arbitration that the school retaliated against him because he had been either a qui tam whistleblower or had filed a False Claims Act suit. The arbitrator rejected his retaliation claims, such as they were, and found that the relator had engaged in professional misconduct by authoring pseudonymous emails "in order to convey unsubstantiated and potentially scurrilous innuendos and accusations to the detriment" of his employer. When the federal court that was hearing the relator's qui tam heard about the relator's adverse arbitration decision, the Court on its own motion ordered briefing on whether the relator's retaliation claim was barred by collateral estoppel and ultimately dismissed the retaliation claim on that ground.

The Second Circuit upheld the District Court's dismissal of the relator's retaliation claim. The Court observed that "collateral estoppel turns not on whether a prior adjudication found that an employer had a reasonable basis to discipline an employee, but on whether an employee raised a claim that behind the veil of reasonableness lay an impermissible motivating factor." Though the relator did not ever raise that he had filed a qui tam suit in the arbitration, given the relator's complaints about retaliation in that forum, the Court found that the arbitrator "actually and necessarily decided . . . that [the school] had not disciplined [the relator] in retaliation for his critiques of the school's fraudulent practices." Stated more simply, once the arbitrator found that there was a legitimate basis for discharging the relator and that the employer's reason for firing the relator was not a pretext for some other impermissible reason, that arbitration decision served to estopp and prevent the relator from claiming in the qui tam proceeding that he had been retaliated against by his employer for a different reason.

The relator complained in his appeal that he "never had a full and fair opportunity to present a compete picture of his whistleblower activities," but the Court found "he had only himself to blame." Essentially, the relator chose not to tell his arbitrator about the qui tam, even though the federal court permitted him to reveal it to the arbitrator and to "respond to any questions" about in it in that proceeding.

Of course, this case also appears as an application of that sometime informal rule of procedure known as the "bad man rule." That informal rule of procedure is normally found only in criminal cases, and frequently appears as the "real reason" for many otherwise unexplained court rulings. Though it did not explicitly reference the bad man rule, the Second Circuit did observe that the relator "repeatedly lied under oath," "presented an elaborate, fabricated defense," and "clung to this strategy through almost a year." In short, he was a "very bad man" who lied to the arbitrator and the Court and got what he deserved.

A. Brian Albritton
December 16, 2013

Update - DOJ Will Join Qui Tam Filed Against Lance Armstrong

The U.S. Department of Justice (DOJ) announced today that it will intervene in the qui tam False Claims Act suit filed by relator Floyd Landis against Lance Armstrong and others: United States ex rel. Landis v. Tailwind Sports Corporation, et al.  According to the DOJ press release, the Government "notified the court that it was joining the lawsuit’s allegations as to Armstrong, Bruyneel, and Tailwind" and that it will file a formal complaint within 60 days.  DOJ, however, stated that it will not be intervening as to all the defendants named in the case.  The U.S. Attorney for the District of Columbia, Ronald C. Machen Jr., stated:  “Lance Armstrong and his cycling team took more than $30 million from the U.S. Postal Service based on their contractual promise to play fair and abide by the rules – including the rules against doping . . . . . The Postal Service has now seen its sponsorship unfairly associated with what has been described as ‘the most sophisticated, professionalized, and successful doping program that sport has ever seen.’ This lawsuit is designed to help the Postal Service recoup the tens of millions of dollars it paid out to the Tailwind cycling team based on years of broken promises. In today’s economic climate, the U.S. Postal Service is simply not in a position to allow Lance Armstrong or any of the other defendants to walk away with the tens of millions of dollars they illegitimately procured.”

The DOJ press release announcing its decision to intervene may be found here.

A. Brian Albritton
February 22, 2013

NBC Reports That DOJ Will Intervene Today in Qui Tam Against Lance Armstrong

NBC News along with other sources reports on its website that U.S. Department of Justice (DOJ) will notify the Court today that it is intervening in the qui tam/False Claims Act suit brought by relator and ex-teamate Floyd Landis against Lance Armstrong and other defendants.

The Landis qui tam against Armstrong and others was unsealed by the U.S. District Court for the District of Columbia just last month.  As previously featured here in the blog, the Wall Street Journal reported in mid-January 2013 that DOJ officials had recommended that the Government intervene.

NBC reports that Armstrong's attorney Robert Luskin has released a statement saying, in effect that the Postal Service had no losses deserving of compensation: "Lance and his representatives worked constructively over these last weeks with federal lawyers to resolve this case fairly, but those talks failed because we disagree about whether the Postal Service was damaged . . .The Postal's Services own studies show that the Service benefited tremendously from its sponsorship -- benefits totaling more than $100 million."

A. Brian Albritton
February 22, 2013

DOJ Officials Reportedly Recommended Intervening in Qui Tam Against Lance Armstrong

The Wall Street Journal reports that U.S. Department of Justice "officials recommended joining" the sealed qui tam False Claims Act filed against former cyclist Lance Armstrong by his former teammate, Floyd Landis. Mr. Landis was the Tour de France winner in 2006, but was stripped of his title due to doping charges.

Though widely discussed in the press, the qui tam suit has not been unsealed, and neither DOJ nor Landis have confirmed its existence. The Wall Street Journal reports that a source who has seen the suit states that Landis alleges that Armstrong and team managers of the U.S. Postal Cycling Team "defrauded the U.S. government when they accepted money from the U.S. Postal Service." From what can be gleaned, the suit appears to be based on a false certification theory because the U.S. Postal Team contract "required that the team refrain from using performance enhancing drugs." Landis and other former team members are alleged to have testified that "Armstrong was at the center of a sophisticated doping ring and knowingly flouted the contract." The Journal reports further that the U.S. Postal Team received $30.6 million in sponsorship funds from the Postal Service, and the contract is reported to have provided that "negative publicity due to alleged possession, use or sale of banned substances by riders or team personnel would constitute an event of default as would a failure to take action if a rider violates a morals or drug clause."

According to the Wall Street Journal, Armstrong's legal team has been in settlement negotiations" with DOJ, but have been unable to reach an agreement thus far. Along with Armstrong, Landis also allegedly sued Johan Bruyneel, the U.S. Postal Team's director, and Thom Weisel, the former chair of the management company that owned the U.S. Postal Cycling Team.

This is an interesting suit. On the one hand, DOJ purportedly alleges that the Postal Service was defrauded because the Team promised not to let cyclists dope and failed to do so, while continuing to collect sponsorship money. On the other hand, the events at issue occurred many years ago -- the Postal Service sponsorship of the team ended in 2004 -- and given the success of the Team at the time, the Postal Service reaped the benefits and good will of its sponsorship during that period. According to U.S. ex rel Davis v. District of Columbia, did the government in fact receive the benefit of its bargain at the time?

A. Brian Albritton
January 17, 2013

False Claims Act Complaint Against Armstrong Unsealed

Kudos to the Pietragallo firm blog that first posted the Landis qui tam/False Claims Act Complaint against Lance Armstrong:  US ex rel Floyd Landis v. Tailwind Sports Corporation, et al, Case 1:0-cv-976 (D. D.C.).  Here is the complaint.  The complaint does not reflect that the U.S. Department of Justice has intervened.    Along with Lance Armstrong, the complaint lists 8 other defendants, including unidentified defendants, "Does 1 -50."

A. Brian Albritton
January 18, 2013

What Was the Relator Thinking? Court Sanctions Relator and Counsel for Frivolous Qui Tam Claim

Under the "what were they thinking" column, a recent U.S. District Court case from the Eastern District of Wisconsin shows that relators and their counsel who bring frivolous or unfounded qui tam claims will be subject to sanctions. USA ex rel Watson v. King-Vassel, et al., 2012 WL 5272486 (E.D. Wis. Oct. 23, 2012).

In the King-Vassel case, the relator, a physician, brought a qui tam against another physician and two companies with whom she was affiliated that provided mental health services alleging that the physician violated the False Claims Act and the Wisconsin False Claims Act when she allegedly "prescrib[ed] medications to a minor patient receiving Medicaid assistance for reasons that are not medically accepted." The state and federal governments decline to intervene, and the relator proceeded with the case, though he was grossly unprepared to do so.

First, the Court observed that the relator got the idea of bringing a qui tam suit as a result of meeting an attorney at a conference and researching how to bring a qui tam claim through a website, "psychrights.org".

Second, the relator found his alleged false claim by placing an ad in the the newspaper seeking minor Medicaid patients who had received certain medications and got his "lead" when a patient responded. The doctor obtained that patient's records using a "borderline-fraudulent release" that failed to mention that the records would be used to bring suit.

Based on these patient records, the relator filed suit against the physician alleging that she had improperly prescribed psychotropic drugs to the minor patient for four years since the drugs at issue were not approved by the FDA for such indications. By doing do, the relator alleged that the physician caused false claims for reimbursement to be submitted to Medicaid. The relator further sued the two companies that the physician was affiliated with on the grounds that they employed the physician. After several months of discovery, the defendants moved for summary judgment.

Third, though it had been apparent from early in the case that the defendant companies did not employ the physician and were not responsible for her alleged conduct on the grounds of respondeat superior, the relator did not move to dismiss them until after the summary judgment was filed. At that point, however, one of the corporate defendants had moved for sanctions on the grounds that it should not have been sued since it was not the employer of the physician defendant. The Court granted sanctions against the relator and his attorney pursuant to 28 U.S.C. 1927 and its inherent powers, finding that the attorney waited far too long after she should have known better to withdraw the claim against the corporate defendant. As a result of relator counsel's failure to conduct an "appropriate investigation" after becoming aware of the "serious flaw" in his claim against the corporate defendant, the defendant "was forced to proceed through the entire discovery process and file an extensive summary judgment brief, all to combat a claim that could have been readily dismissed after a minor inquiry."

Fourth, the Court granted summary judgment against the relator who failed to provide any expert testimony or competent evidence to show that the defendant physician's prescribing of certain drugs in fact caused the submission of a false claim to Medicaid or even to show that the prescribed drugs were improper for that patient.

Overall, the Court observed that the relator's "attack here on a single doctor's prescriptions to a single patient does not provide the government with substantial valuable information, as intended by the qui tam statutes. Instead of providing the government with valuable information, [the relator] seemingly sought only to cash in on a fellow doctor's attempts to best address a patient's needs. In return, [the physician] was treated to a lawsuit, the proceeds of which would be split three ways between [the relator, his counsel, and the patient's parent]."

One question that remains is why the government did not dismiss this case or at least dismiss the corporate defendants pursuant to 31 U.S.C. 3730(2)(c)(2). This case was frivolous, and this should have been apparent as to the corporate defendants even at the sealed stage: the corporate defendants were not subject to respondeat superior liability because the physician was an independent contractor and not an employee of defendants. 

A. Brian Albritton
October 31, 2012

Do Public Disclosures Have to Satisfy a Rule 9 Like Test for the Public Disclosure Bar to Apply?

In "District Court Dismisses Whistleblower's Case Against Humana for Public Disclosure," 9/30/12, attorney Ben Vernia and his blog, www.falseclaimscounsel.com, recently highlighted an interesting decision from the Southern District of Florida on the application of the "public disclosure bar" and whether the bar applies when the facts or allegations underlying the claim are publicly disclosed in newspaper articles and a lawsuit, even when those facts are innocently characterized and not presented as violating the False Claims Act.

In US ex rel Osheroff v. Humana, Case no. 10-24486-cv-Scola (SDFL, 9/28/12), the Relator brought a case against Humana, a Medicare Advantage provider, and several so called "Cuban-style medical clinics" with whom it contracted alleging that the Defendants "conspired to induce patients to enroll in Medicare Advantage Plans . . . by offering them improper benefits in violation of anti-kickback and anti-inducement laws." Along with standard "primary and specialty medical care," the Clinics offered patients "wellness programs and social activities, along with free transportation, meals, massages, salon services, and entertainment." The Relator alleged that these benefits constituted improper inducements and that offering patients such benefits caused Defendants to present false claims to Medicare and to falsely certify their compliance with the AntiKickback Act.

Defendants moved to dismiss the Relator's claims on the grounds that they were barred by the "public disclosure bar." Modified in 2010, the public disclosure bar provides that the Court shall dismiss claims brought by a relator "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed - (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information." 31 U.S.C. 3730(e)(4)(A).

Defendants contended that the public disclosure bar precluded the Relator's claims because newspaper articles and advertisements, Defendants' websites and print brochures, and Florida state court litigation "disclose[d] information that is substantially the same as the allegations and transactions described in the Amended Complaint." For example, Defendants pointed to articles in the Miami Herald about the "Cuban-style" medical clinics which described how the clinics "offer their patients free social activities and meals" and that over half of clinic clients "arrive by van—at no charge.” They also pointed to advertisements about the Clinics and their services as well as disclosures made about the Clinics in a state court case. The Court found that the articles and advertisements as well as the state court litigation (though only for the pre-2010 version of the statute) qualified as public disclosures.

What is interesting about the case is that the Relator argued that for the public disclosure bar to apply, media disclosures must "reveal Defendants’ participation in the alleged fraud with the same specificity as would be required pursuant to Rule 9(b) of the Federal Rules of Civil Procedure; generalized, 'innocuous' information about the subject matter of the suits . . . will not suffice." Stated another way, the Relator argued that the public disclosures must not only reveal the facts which would constitute a violation of the AntiKickback Act, but must also show that the Defendants were knowingly engaged in wrongdoing. In fact, the Relator went so far as to argue that the bar did not apply because the articles had not shown that the inducements offered by the Defendants fell outside the "safe harbors" permitted by Medicare for limited patient inducements.

The Court rejected the Relator's arguments. Instead, the Court found that the articles and advertisements revealed facts sufficient to show that Clinics were offering remuneration to existing and prospective Medicare recipients and that such revelations were "sufficient to bring the Defendants' alleged fraud to the Government's attention." In turn, the Court found that Relator's claims were "based upon" and "substantially the same" as facts disclosed in the public disclosures, and since the Relator did not have "independent knowledge" of and was not an "original source" for his claims, the Court dismissed his claims against Humana and the Clinics with prejudice.

A. Brian Albritton
October 7, 2012

False Claims Act News from the AHLA Annual Meeting

Joe Carlson of ModernHealthcare.com recently reported on some of the news about the False Claims Act and qui tams that came up at the jointly held annual conference of the American Health Lawyers Association and the Health Care Compliance Association: "Shift Seen in False Claims Whistle-Blower Suits," 10/2/2012.

According to relator counsel and HHS speakers at the conference, relators increasingly are continuing to litigate qui tam suits even when the government declines to intervene.

Dan Anderson, deputy director of Commercial Litigation for DOJ's Civil Division, told the conference that DOJ has been "roundly criticized for taking too long" to make intervention decisions in healthcare cases and that it will now try to make an intervention decision "within nine months."

Anderson went on, reports Carlson, to note that the "hospital industry has reason to be concerned now . . . And there is reason to think there will be an uptick in the number of qui tam cases that are filed . . . We had a record-setting year last year, and this year we are going to blow right past that."


A. Brian Albritton
October 7, 2012

Recents Blog Posts and Articles of Interests

I have recently come across of a number of blog posts and articles which I commend to you:

• Seventh Circuit Rejects Constructive Knowing As Basis for Retaliation Claim

Scott Stein at Sidley Austin's Original Source blog writes about the case Halasa v. ITT Educational Services, Inc., 8/14/12, wherein the Seventh Circuit recently dismissed a False Claims Act retaliation claim and rejected the plaintiff's claim that "constructive knowledge" on the part of those who discharged him was sufficient to prove retaliation. The Court found that without actual knowledge of plaintiff's protected activities, plaintiff had not established a "causal link" between the plaintiff's reports of irregularities and his termination. 

• DOJ Brings Suit Against Gallup Organization

 Under the column of interesting qui tams, the Department of Justice recently announced it had intervened in a qui tam suit filed against none other than the polling organization, Gallup.  "According to the whistleblower’s complaint, Gallup violated the False Claims Act by giving the government inflated estimates of the number of hours that it would take to perform its services, even though it had separate and lower internal estimates of the number of hours that would be required.   The complaint further alleges that the government paid Gallup based on the inflated estimates, rather than Gallup’s lower internal estimates."

• Qui Tam Relator Not Original Source; U.S. ex rel. Repko v. Guthrie Clinic

Ellyn Sternfield at MintzLevin's Health Law & Policy Matters blog writes about the Repko case, wherein the Third Circuit dismissed the qui tam brought against Guthrie Healthcare System by its former general counsel and executive VP, Rodney Repko, on the grounds that Repko was not an original source such that he could avoid the public disclosure bar of the False Claims Act.  Repko had been charged with trying to steal two million dollars from Guthrie after he left the company and had pled guilty.  As part of his plea agreement, he was required to provide the government with "information concerning the unlawful activities of others."  As the article points out, the Third Circuit "was persuaded by the fact Repko had initially disclosed the challenged arrangements to the government under his plea agreement; the disclosure was bargained-for consideration which enabled Repko to obtain a lower sentence on his bank fraud charges.  While never mentioning the word 'voluntarily,' the court found that since the plea agreement compelled his disclosures to the government, Repko was essentially estopped from invoking the original source exception."

•  District Court Rules That Wartime Suspension of Limitations Act Suspends False Claims Act's Six-Year Statute of Limitations

Douglas Baruch and John Boese of Fried Frank recently wrote a "FraudMail Alert®" on the case of United States v. BNP Paribas SA, No. H-11-3718, 2012 WL 3234233 (S.D. Tex. Aug. 6, 2012), wherein a federal court in Texas applied the Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (2008) (“WSLA”) and held that the statute of limitations in a False Claims Act case had been suspended  due to the Iraq and Afghanistan conflicts. In addition, Baruch and Boese write "the district court’s ruling makes clear that the WSLA’s suspension is not limited to FCA cases arising out of wartime contracting or even Defense Department contracting in general, meaning that the FCA’s statute of limitations would be rendered ineffective in all sorts of cases, including those involving allegations arising out of the financial and healthcare industries."  Finding the case to run "counter to the plain meaning of the WSLA as well as the clear intent of Congress," they analyze the case in detail and declare it to be just plain "wrong."

A. Brian Albritton
August 30, 2012









 

GlaxoSmithKline to Pay Largest Health Care Fraud Settlement in US History

In the largest health care fraud settlement in U.S. history, the U.S. Department of Justice announced today that "global health care giant" GlaxoSmithKline LLC ("GSK") agreed to plead guilty and to pay $3 billion to resolve "its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices."

Deputy Attorney General James Cole described the plea and settlement with GSK as follows:  "GSK will plead guilty to criminal charges and pay $1 billion in criminal fines and forfeitures for illegally marketing and promoting the drugs Paxil and Wellbutrin for uses not approved by the FDA – including the treatment of children for depression, and the treatment of other patients for ailments ranging from obesity, to anxiety, to addiction and ADHD – and for failing to report important clinical data about the drug Avandia to the Food and Drug Administration.  GSK will pay an additional $2 billion to resolve civil allegations that it caused false claims to be submitted to federal health care programs for these and other drugs as a result of the company’s illegal promotional practices and payments to physicians.  This settlement also resolves a civil investigation of the company’s alleged underpayment of rebates that were required under the Medicaid Drug Rebate Program."

As with previous criminal and False Claim Act settlements with Big Pharma discussed in the blog, GSK's conduct as detailed in the plea and the allegations of the False Claim Act complaint is disturbing and reprehensible.  For example, the factual allegations of the Information detail GSK's marketing of the prescription drug Paxil for use in treating depression in children and adolescents even though the drug had not been found to have any efficacy for such a population. 

Paxil had been approved by the FDA for the treatment of depression in adults, and it was one of the top 10 selling drugs in the U.S., with sales surpassing $1.8 billion a year in 2001-2002.  Paxil, however, was never approved by the FDA "for any purpose" in the treatment of children and adolescents.  In fact, GSK conducted three placebo-controlled studies in the safety and efficacy of using Paxil to treat depression in children and adolescents, and those studies failed to demonstrate any "efficacy" for the treatment of this population between the "patients in the study who received the drug being studied and patients in the study who received a placebo."  After these studies, a GSK contractor hired to write an article about one of the studies misrepresented the study's findings as being favorable for the treatment of children and adolescents with Paxil, going so far as to say that "the findings of this study provide evidence of the efficacy and safety of [Paxil] in the treatment of adolescent depression."

With the article in hand, GSK then forwarded it to its 1900 sales representatives who sold Paxil with a cover letter stating, "Paxil demonstrates REMARKABLE efficacy and safety in the treatment of adolescent depression." This was just the beginning of GSK's marketing of Paxil.  In addition, the Information reflects that GSK created a "150 person neuroscience specialty sales force to promote Paxil to psychiatrists."  The Company also promoted Paxil's use in adolescents at Paxil "Forum Events," dinner programs, lunch programs, and spa programs. GSK had their sales personnel target those physicians --including physicians who only treated patients under age 18-- who prescribed the most antidepressants and provide free samples of Paxil in the hope that they would shift their patients to using Paxil.

GSK, however, did not inform its sales personnel that the FDA had not approved Paxil for the treatment of children or adolescents, and it continued to conceal that its studies did not support its claims for Paxil's efficacy in this population.  In fact, the FDA later recommended that Paxil "not be used to treat depression in patients under 18" and later recognized that antidepressants, such as Paxil, "increased the risk of suicidal thinking and behavior in . . . patients under age 18." 

Paxil was not the only drug that GSK unlawfully promoted:  it unlawfully promoted Wellbutrin and Avandia as well.  As a result of the criminal plea, GSK will pay fines and forfeiture totaling $1 billion.  The "civil settlements" resolve claims relating to these three drugs and others and will require GSK to pay $2 billion. 

One of the civil settlements reported that relators had filed 4 qui tams against GSK and that the U.S. had intervened in them in 2011.  The settlements explicitly did not address the whether any relator was entitled to any share of the proceeds or whether in fact they had filed valid qui tams.

DOJ has posted the  key documents in the criminal and civil matters, and they can be found here.

A. Brian Albritton
July 2, 2012

This Week in the False Claims Act: McKesson's $190 Million Settlement and the Government Intervenes Against Toyo for Failing to Pay Antidumping Duties

It has been a slow week for Qui Tams and False Claims Act matters.

The government has just announced its most recent settlement against another drug company last week: McKesson Corporation for $190 million.  The government alleged that McKesson reported "inflated mark-up percentages" to a publisher of drug prices, First Databank, for a "wide variety of brand name drugs," which in turn caused many state Medicaid programs to overpay for the drugs.  Overall, the DOJ proudly announces that more than "$2 billion" has been recovered from other drug manufacturers that were alleged to have engaged in the same type of conduct.

The most interesting qui tam I found this week was the Department of Justice's announcement  that it is intervening in US ex rel  Dickson v. Toyo Ink Manufacturing Co., Ltd et al.  Filed under seal in 2009 in the Western District of North Carolina, the case alleges that "Toyo Ink companies," a leading provider of printing inks, "knowingly misrepresented the country of origin on [import] documents presented to U.S. Customs and Border Protection to avoid paying antidumping and countervailing duties on" what appears to be an imported ink: "the colorant carbazole violet pigment number 23 (CVP-23)."   According to DOJ, the Department of Commerce assesses antidumping and countervailing duties, which are collected by U.S. Customs, to protect U.S. businesses by offsetting unfair foreign pricing and government subsidies" for certain imports, such as CVP-23, "from China and India."  Toyo is alleged in the suit to have "misrepresented Japan and Mexico as the countries of origin for its CVP-23 imports to avoid these duties."   According to the Complaint, which has not yet been released on Pacer, "Toyo’s CVP-23 imports from China and India underwent a finishing process in Japan and Mexico," but that  "process was insufficient to change the country of origin." 

I find this most recent announcement interesting only because it further shows the breadth of the False Claims Act and the different kind of industries and settings to which it can apply: anywhere there is a payment obligation to the United States, including as shown here, Customs' duties for imports.

A. Brian Albritton

May 2, 2012

Government Threats to 'Come Down and Look Around' to Force Settlement in Qui Tam Cases

In my experience, health care executives often believe that a U.S. Attorney wields unlimited power when investigating a health care provider for False Claims Act violations and, in some instances, the government counsel conducting such investigations have certainly fostered that impression as well.  Last year, I came across an article in Modern Healthcare.com where a hospital executive acknowledged that his hospital had reluctantly settled a qui tam investigation which was then under seal because the Assistant United States Attorney conducting the investigation threatened to widen the civil investigation far beyond the allegation at issue if the hospital did not settle.  Though it did not unearth any evidence of fraudulent billing, the hospital settled the investigation in the face of threats that if it did not settle the investigation, the government would "come down and look" at every one day hospital admission. I subsequently spoke with two other counsel who had similar experiences wherein the Assistant United States Attorney threatened to "come down and look around" if their clients did not settle more limited qui tam investigations, both of which were still under seal.

These experiences prompted the question:  Can the government do that?  Can they threaten to "come down and look around" in order to force settlement in qui tam cases?  I answered that question in an article that the ABA's Health Lawyer magazine was kind enough to publish last month:  Can They Do That?  Government Threats to 'Come Down and Look Around' to Force Settlement in Qui Tam Cases.  As I found, a U.S. Attorney has broad, though limited, powers when conducting a civil investigation of qui tam allegations while the matter remains under seal, and even more limited powers once the matter is unsealed.  In health care investigations, however, Congress has granted the U.S. Department of Health and Human Services broad powers to investigate the records of Medicare and Medicaid providers.  As I point out, though agents may have such broad authority, practical considerations will limit when and where such investigative powers will be used.

Court Rejects Halifax Health's Preliminary Injunction Against Relator's Alleged Violation of Its Attorney Client Privilege

How do courts react when faced with a defendant’s allegations that a qui tam relator has misappropriated its attorney-client information, disclosed it to the government and relator’s counsel, and used it to bring a qui tam? Last week, I highlighted the case of U.S. ex rel Frazier v. IASIS Healthcare where the Court sanctioned the relator’s counsel for failing both to notify the defendant, IASIS, of the relator’s possession of IASIS’s attorney client privileged documents and to timely seek the court’s direction as to what should be done with the documents. The sanctions were limited, however, and granted only at the end of the case. The Court required that relator’s counsel pay IASIS the fees and costs it incurred in attempting to get its documents back, though it also disqualified relator’s counsel from representing the relator or any other party adverse to IASIS.

We find another instructive example of a qui tam defendant seeking sanctions against a relator and her counsel for allegedly taking and using defendant’s attorney client documents in the case of U.S. ex rel Elin Baklid-Kunz v. Halifax Hospital Medical Center d/b/a Halifax Health, M.D. Florida Case No. 6-09-cv-1002. In Halifax, the Court gave short shrift to the defendant’s motion for preliminary injunction against the realtor, and it did not demonstrate any alarm at the defendant’s claims of prejudice and irreparable harm.

In that case, the defendant, Halifax, alleged that relator and her counsel had engaged in the “deliberate, unauthorized collection, retention and use of Halifax’s privileged documents” which had caused it “irreparable harm.” As a result of the alleged breach of its privilege by the disclosure of 31 allegedly privileged documents, Halifax sought a preliminary injunction wherein it asked the Court, among other things, to dismiss the relator’s claims with prejudice, disqualify the relator’s counsel, and exclude any evidence derived from relator’s counsel’s use of the allegedly privileged documents. Copies of Halifax’s Motion for Preliminary Injunction and Memorandum in Support are linked here.

In its Opposition, the relator disputed Halifax’s claim that its documents were privileged, and claimed further that even if the documents were privileged at some point, Halifax had waived its privilege.

In a two and half page Order, the Court found that “at least some the documents may have been subject to attorney-client privilege or the work-product doctrine.” The Court, however, found that the Halifax “made no showing whatsoever that they face a substantial threat of irreparable injury if the case is not dismissed with prejudice or opposing counsel are not disqualified and so forth.” Again, the Court faulted Halifax for failing to show how the realtor utilized the purportedly privileged documents “in the preparation of the instant case against them” or whether any of the “damaging information” was set forth in the complaint.” In the end, the Court found that even if Halifax “ had demonstrated that some actual harm had occurred, a “showing of past harm would not satisfy the requirement of a substantial threat of irreparable injury” in the future necessary to obtain a preliminary injunction.

These cases show that courts are cautious of defendants who attempt to use sanctions motions offensively to punish relators and dismiss their qui tam actions. To entertain such punitive sanctions, these cases demonstrate that courts require clear evidence of bad faith by the relator and their counsel and the relator’s use –and not just their possession-- of a defendant’s privileged information.

Department of Justice and Health & Human Services Officials Speak Out About Record False Claims Act Recoveries and Cutting Waste in Federal Spending

False Claims Act recoveries, the government's promise of more enforcement, and the crucial role played by whistleblowers in enforcing the False Claims Act have been making the news these last ten days. 

First, the departing head of the Centers for Medicare and Medicaid Services, Dr. Donald Berwick, told the New York Times in a December 3rd interview that "20-30%" of all health care spending is "waste."  Dr. Berwick listed "five reasons" for the “extremely high level of waste” in health care spending:  "overtreatment of patients, the failure to coordinate care, the administrative complexity of the health care system, burdensome rules and fraud."  Overtreatment of patients can be cast as unnecessary treatment, akin to fraud, and can give rise to claims under the False Claims Act.  Indeed, Dr. Berwick observed that "Much is done that does not help patients at all, and many physicians know it.”

Second, Deputy Attorney General James Cole recently spoke at a December 13th press conference on the subject of cutting waste in federal spending.   The Department of Justice, Cole noted, "recovered over $5.6 billion in criminal and civil fraud proceeds," which is "more than has ever been recovered in a single year in the history of the Department of Justice."  The $5.6 billion in fraud recoveries included everything from "healthcare fraud to grant fraud, from mortgage fraud to procurement fraud."  Fraud recoveries, Cole explained, occurred across the nation:  "Between fiscal years 2008 and 2011, the Department has doubled fraud recoveries in twenty-one states, as well as the District of Columbia and the Virgin Islands."   Health care fraud enforcement not only resulted in significant recoveries  --$900 million from 8 drug companies alone-- but generated revenue as well:  Cole noted that "[f]or every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven."

Finally, today Assistant Attorney General Tony West of the Department of Justice, Civil Division, announced  $3 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2011.   Of the$3 billion total, West explained, $2.8 billion "came from suits filed under the qui tam, or whistleblower, provisions of the False Claims Act."  West went on to state that in the last 25 years "whistle blowers have filed more than 7,800 actions under the qui tam provisions" and  "qui tam suits hit a peak of 638 this past year, after hovering in the 300s and low 400s for much of the decade."  Of the $3 billion recovered, nearly $2.2 billion came from in civil claims against the pharmaceutical industry.

In short, the message is clear: the federal government will continue to target waste in federal spending, with special enforcement devoted to health care spending.  Whistleblowers and the qui tam suits they file will continue to play a crucial role in investigating fraud and obtaining recoveries against those who commit fraud against the federal government.  We can expect False Claims Act suits to continue to grow.

Settling with Prospective Qui Tam Relators: The Normal Rules of Settlement Do Not Apply

A recent court opinion here in the Middle District of Florida illustrates that normal rules for settlement do not apply to qui tam relators, even if a relator has purportedly induced a defendant into entering a settlement based in part on the relator’s false representation to the defendant that they have not filed a qui tam against the defendant.

 In United States ex rel. Scott v. Cancio, 2011 WL 5975782 (M.D.Fla. 11/28/11),  the Court refused to grant a motion to dismiss the relator from the qui tam suit she had filed against the defendant and in which the Government had declined to intervene, even though the relator (1) had previously entered into a settlement agreement with the defendant in an employment discrimination matter which contained a broad release and a representation that she had not filed a “any complaint, claim, or charge” against the defendant in any “state or federal agency or court;” (2) had received compensation from that settlement; and (3) had failed to reveal to the defendant that she had filed a qui tam three weeks before she signed the settlement agreement.  The Court refused to dismiss citing the “plain language” of 31 U.S.C. § 3730(b)(1) which provides: 

A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

Essentially, the Court held that absent the Attorney General’s “written consent,” the relator could not voluntarily dismiss a filed qui tam case, even if the relator had previously released the defendant.  In turn, the Court relied on United States ex rel. Dillahunty v. Chromalloy Oklahoma, 2011 WL 227648, at * 1 ( W.D.Okla. Jan. 21, 2011), which also held that the relator was not permitted to waive his qui tam claim without the Government's and court's consent.

Several facts make this case and its holding especially troubling for defendants and others who enter into settlements on collateral issues with persons who may have secretly filed a qui tam.

First, though not reflected in its Order, while not opposing the motion to dismiss, the Government apparently could not bring itself to actually consent to dismissal or even break its silence on a matter in which an action was brought on its behalf.  Rather, the Government informed the defendant that the U.S. Attorney’s Office did not take a position on the Defendant’s Motion to Dismiss, and the defendant related the Government’s position to the Court. See Defendant’s Motion to Dismiss at 3 n. 2.  

Second, the Government's refusal to take a position along with its silence is all the more strange since the defendant only sought to dismiss the relator’s claim “and not the Government’s claim.”  Acknowledging that the defendant sought dismissal without prejudice to the Government,  the Court stated that it was bound by the plain language of § 3730(b)(1) which “requires the Attorney’s General’s written consent to a qui tam action’s dismissal and does make a distinction on whether the dismissal is without prejudice to the Government’s interest.”

Third, faced with what defendant termed as the “duplicity” of the relator in signing an agreement in which she made “blatant misrepresentations and clearly false, and likely made . . . to induce [defendant] to agree to the confidential settlement amount,” neither the Government nor the Court expressed any reservation about the plaintiff’s conduct.  The Court did observe that defendant could seek “appropriate relief in the separate employment action to set aside the Settlement Agreement . . . based on any misrepresentations or fraud.”  As to defending its own court and docket from such alleged conduct, however, it said nothing.  The Government, as noted above, did not file anything, thus giving the appearance that it was untroubled by a relator engaging in such conduct in a matter brought on behalf to the United States.

In her response to the Motion to Dismiss, the relator explained her silence and representations in the settlement as a result of the seal pending in her recently filed qui tam.  Additionally, the relator relied on the adage that the "False Claims Act is principled on 'setting a rogue to catch a rogue,'" and she further relied on Mortgages, Inc. v. U.S. District Court for the District of Nevada, 934 F.2d 209, 213 (9th Cir. 1981), which provides that the False Claims Act is "in no way intended to ameliorate the liability of wrongdoers by providing defendants with a remedy against a qui tam plaintiff with 'unclean hands.'" Seeking relief from the settlement she signed, the relator amended her qui tam complaint to add a count for declaratory judgment and obtain a determination of her qui tam rights in light of the settlement that she signed. 

The Cancio case and the issue of settlement merit further analysis and reflection, and I will return to this in my next blog entry.

Qui Tam Relator's Vague But Real Fears Not Enough to Justify Seal in False Claims Act Case

Just days ago, I characterized courts as being “skeptical” of relators’ requests to seal their dismissed False Claims Act qui tams cases when the government declines to intervene. See 10/31 entry.   Skepticism, however, is an understatement.  As seen in this recent case, the relator is treated like any other litigant, and the Court dismisses her vague, though real, fears of  possible retaliation and never being able to find work as a result of having filed a qui tam suit as insufficient to justify maintaining the seal of a dismissed case.

In US ex rel Ruble v. Skidmore, 2011 WL 5389325 (S.D. Ohio), issued 11/8/2011, the Court again denied a relator’s request to continue the seal of her qui tam suit which she had brought against her former employer, an orthopedic surgeon, and which she now sought to dismiss since the government declined to intervene.  In pleading with the Court to continue the seal of her case, the relator expressed her fears that she would be ostracized for having filed suit, saying:  “If my role in this case becomes public, I will be forever be viewed with suspicion and distrust in the local medical community  . . . . . [which is] quite small and tight knit. . . . I believe my job prospects . . . would be substantially curtailed . . . and doctors who know I reported one of their colleagues to the Government will be leery of trusting me.  . . . .  I have no other professional training . . . .  . It is imperative that I be able to continue working in this medical community.”  The relator went on to add that her husband was elderly and unable to work and that she feared “physical retaliation” from her former employer because she had received numerous “hang up” calls and once had been pushed by her former employer’s wife.

The Court denied her request to continue the seal as well as her alternative request to redact her name if the complaint were unsealed.  The “primary purpose,” the Court explained, for sealing a complaint is to permit the government to decide whether to intervene, and the False Claims Act “expressly contemplates” the unsealing of the complaint.  Only the “most compelling reasons,” the Court noted, “can justify non-disclosure of judicial records,” and “harm to reputation” is not one of those reasons.  The Court acknowledged that the relator’s ability to practice her professional locally does “depend[] in part on her reputation in the local community,” but “[e]ven under these circumstances . . . Relator has not demonstrated her privacy interest is sufficient . . .”

I do not mean to harp on about these cases, but I am truly surprised at these opinions.  Readers, is this how relators are treated in your districts?  For those readers who represent qui tam plaintiffs, in light of these cases are you having to counsel your relator clients more now about the possibility of their complaints becoming unsealed even if dismissed?