Middle District of Florida Employs Unique Provisions for False Claims Act Settlements with Compounding Pharmacies

During the last three years, the U.S. Attorney for the Middle District of Florida ("the District") settled a number of False Claims Act investigations relating to "compounding pharmacies" that sold and marketed compounded pain cream medications that were reimbursed by Tricare. See here and here. The allegations against these pharmacies and their owners were very similar: compounding pharmacy paid kickbacks of one kind or another to marketers and/or physicians to generate prescriptions for compounded pain cream medications that were, in turn, filled by the same pharmacy who profited handsomely due to Tricare's very high rate of reimbursement. The District announced in October 2016 that it had "recovered almost $70 million" from these FCA settlements.

The FCA settlements for WELLHealth, Topical Specialists, and North Beaches compound pharmacies included settlement provisions that are rarely, if ever, seen. In these settlements, the District agreed to accept payment over five years of "50% of net profits" from each of these pharmacies. Normally, the Government only permits an FCA defendant three years to pay its settlement obligations. Additionally, I have never seen an FCA settlement where the Government agreed to accept a defendant's pledge of future net profits to pay off an FCA settlement obligation.

For example, the District's FCA settlement agreement with WELLHealth pharmacy of Jacksonville also provided:

• No admission of liability;
• Payment of approximately $1.9 million at the time of settlement;
• Payment of proceeds from the liquidation by WELLHealth's shareholders of their interest in another pharmacy; 
• Payment of proceeds from a future sale of a property owned by a third party after paying off the initial investment of the investors who purchased the property;
• Payment of net proceeds from the future sale of a second property; 
• Payment of 50% of the pharmacy's net profits over the next five years; and 
• In the event the defendant defaults on the settlement, the Government has options (1) to enter a consent judgment in the amount of $28 million, which includes treble damages; and (2) to exclude the pharmacy and its current or former owners, officers or directors during the covered conduct period from participating in all federal health care programs.

To obtain this ability to pay settlement, WELLHealth not only had to provide financials so that the Government could evaluate its ability to pay but also had to swear to and warrant the accuracy of its financial statements. Additionally, WELLHealth promised to provide yearly balance sheets for the business, so the Government could evaluate the pharmacy's net profit calculation.

From the perspective of FCA defendants, such ability to pay settlements as these are a combination of good news and bad news. Good news because such settlements permit longer repayment periods, the ability to sell properties in the future, and the ability to apply a portion of future profits to pay off settlement obligations. Bad news because the financial obligations and the disastrous exposure from a consent judgment resulting from a default extend years into the future. Notwithstanding the mixed message, such settlements show that the Government is sometimes willing to go outside its comfort zone of "this is the way we always do it" in order to secure an FCA settlement.

A. Brian Albritton

May 2, 2017

DOJ Announces New Policy Regarding Individal Accountability and Corporate Cooperation for False Claim Act Cases

Dear Readers:

Acting Associate Attorney General Bill Baer spoke at the ABA's 11th National Institute on Civil False Claims Act and Qui Tam Enforcement last week in Washington, D.C. AAG Baer addressed how the U.S. Department of Justice (DOJ) will focus on individual accountability in civil False Claims Act (FCA) cases and in light of that focus, what steps corporations must undertake to earn "cooperation credit" in settling FCA cases. These new DOJ policies announced by AAG Baer are very important for practitioners in qui tam/FCA cases and will certainly impact how corporate defendants investigate, report, and settle FCA cases.

DOJ published AAG Baer's remarks, which are found here. I highlight below those portions of his remarks that I found to be most interesting.

First, AAG Baer addressed how the DOJ policy of holding individuals accountable for corporate misdeeds, announced in the Yates memo, would be "implemented" in FCA cases. He stated:

• DOJ is committed "to the notion that individual accountability applies with equal force and logic to the department's civil enforcement."

• In applying the Yates memo, DOJ starts "by asking department attorneys to make sure they are examining the potential liability of individual actors at the outset of an investigation into corporate wrongdoing" and it is "department policy to pursue civilly those individuals who are responsible [for FCA violations] and hold them accountable in addition to pursuing our civil case against the organization."

FCA practitioners will see a concrete difference in FCA government investigations and intervened cases because

• "At the very outset of any FCA investigation into a corporate scheme, [DOJ] attorneys are instructed to focus on both the company and individuals who may be responsible for bad conduct . . . . Our inquiry into individual misconduct now proceeds in tandem with the underlying corporate investigation."

In a "departure from past practice," FCA settlements and releases will no longer automatically include a release of corporate executives and employees: that is, DOJ will investigate companies and their executives together, but DOJ will not necessarily "negotiate[] outcomes" for these defendants at the same time. Rather, DOJ will "often" settle FCA claims with companies first. But, the fact that it does so will not end DOJ's "inquiry into whether and which individuals will be pursued."  In fact, whereas in the past DOJ's FCA settlements released both the corporation and its executives, it may not do so in the future:  "you should not assume we will be amenable to releasing individuals from [FCA] liability when we settle with the organization."

If individual liability is not resolved together in a corporate settlement, DOJ expects its lawyers "to have a plan for how to proceed in the investigation with respect to those responsible" individuals. While "recognizing" that "claims against individuals may not always be appropriate," DOJ will now require its attorneys to affirmatively "memorialize" any recommendation not to pursue an individual. Overall, AAG Baer noted that "we are disciplining ourselves to assess individual responsibility at the beginning of and throughout our FCA investigations."

Second, AAG Baer addressed how DOJ's new emphasis on civil accountability for corporate executives implicates companies seeking cooperation credit in FCA cases. As an initial matter, the AAG announced a "threshold requirement" whereby DOJ will not credit any company with cooperation in a settlement unless the corporation "disclose[s] all facts related to individuals involved in the wrongdoing."  He elaborated: 

• "[U]nderstanding who did what is a necessary component" for DOJ to determine the nature and extent of any FCA violation. Essentially, a company seeking credit in an FCA settlement for its cooperation cannot withhold "critical" information that identifies those who should be held responsible.

• A corporation demonstrates its commitment to "transparency" and cooperation by "disclosing the facts, including telling us what you know about who did what."

Cooperation, AAG Baer explained, "is not demonstrated by doing what the law requires" such as "compliance with subpoenas or other lawful demands." Rather, "genuine cooperation" involves a "focused presentation of relevant information demonstrating the actual conduct that is the subject of the investigation" and "stretches beyond the precise information that may have been requested by the government." The AAG provided the following examples of "full cooperation:" (i) a company's acknowledgement of responsibility, including in some instances "detailed and complete admissions;" (ii) remediation efforts; (iii) whether a company "reports information that might otherwise not have been discovered in the ordinary course of an investigation or that saves the government time and resources;" (iv) making available "current or former officers and employees for meetings, interviews, depositions;" and (v) disclosing facts gathered in an internal investigation.  

Internal investigations, the AAG went on, must be "tailored to the scope of wrongdoing" and cooperating companies must "make their best efforts to determine all the facts with the goal of identifying the individuals involved." That said, AAG Baer stated that companies do not need to wait until they have finished their internal investigations to self report. Rather, "timing . . . is of the essence," and companies "should come in as early as possible" even if they don't "quite have all the facts yet."

As for the attorney-client privilege, AAG Baer "emphasized" that "nothing in the individual accountability policy" requires the privilege to be waived.

As the reward for satisfying this "threshold requirement" and cooperating with the government's investigation, AAG Baer stated that "the department will use its significant enforcement discretion in FCA matters to recognize that cooperation." There is "no magic formula" or "equation," he explained, as to how much credit a cooperator might receive. Having eschewed any formula for earning cooperation, AAG Baer nevertheless analogized the "downward departures" for cooperation given by the government in federal guideline sentences to how DOJ should accord cooperation in FCA matters. Overall, he said, DOJ is "committed to taking into account the disclosures and other cooperation provided by defendants and to resolve matters for less than the matters would otherwise have settled for based on the applicable law and facts."

DOJ's new policy on individual accountability represents a significant change in FCA cases. Corporations -not individuals- have been the primary focus of most FCA cases in the past. There have been lots of exceptions, of course, especially for physicians accused of submitting false claims to Medicare or Medicaid. Yet, the past emphasis on corporations reflects the reality that it is largely corporations that contract with the government, submit false claims, and who most directly profit from them. The emphasis on corporate liability further reflects the fact that corporate entities are where the money is. Corporations, such as Big Pharma, defense contractors, and hospitals, have the resources to pay large FCA settlements.

Focusing on individual accountability likely will have a profound impact on government FCA investigations, interventions, and settlements. I anticipate that corporate internal investigations will be more involved and complicated. Individuals will lawyer up more quickly, be more concerned about their own exposure, and as a result may be less forthcoming with their employers. FCA investigations and cases are likely to become more complicated if only because cases are likely to have more parties: a corporation and its executives. As for settlements, they too will become more complicated. In Medicare cases, for example, there will be an increased focus on possibly excluding named individual defendants. Also, if individuals are named as subjects of an investigation, I would think that increases the possibility that they will turn against their employers more readily in order to earn cooperation. And, of course, what if a corporate employer refuses to indemnify the executive and/or employee?  

Finally, it will be interesting to see if DOJ and U.S. Attorneys will follow through in promoting this policy of individual accountability given that FCA investigations and cases often move quite slowly and this policy will require more time and substantial resources to enforce.

A. Brian Albritton
June 15, 2016

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

Qui Tam Relators Objecting to Government Ability to Pay Settlements in False Claims Act Cases

Relators are increasingly objecting to "ability to pay" settlements negotiated by the government with defendants in qui tam cases, and in so doing, accuse the government of treating them unfairly and of sending a message of lax False Claims Act enforcement.  In an "ability to pay" settlement, the government permits the defendant to pay less than the amount of the False Claims Act loss due to the defendant's lack of financial resources. The False Claims Act provides for treble damages and a penalty of between $5,500 to $11,000 for each false claim. In many such cases, False Claim Act damages are nothing short of ruinous and can easily bankrupt a defendant. See e.g., Crowell and Moring table listing FCA settlements for 2000 - 2013.


In the Wellcare case, for example, a relator's counsel described the $137.5 million dollar qui tam civil settlement that was based on the company's limited ability to pay as "grossly inadequate," and claimed that his call for increased damages was only intended to "deter any effort by companies such as Wellcare to take advantage of the health care system or the people who should be served by this system."

Another recent case illustrates how bitter the relationship between relators and the government can become when the government settles for less than what relators believe they deserve. In United States ex rel Stone v. Hospice of the Comforter, 6:11-Cv-1498-Orl-22DAB, M.D. Fla., the government recently settled a case on ability to pay grounds over the objection of the relator. In that case, the government settled with the defendant for $3 million payable over five years and required that the defendant be subject to a Corporate Integrity Agreement. Payments accelerated in the event the company was sold. See settlement agreement, relator's objections, the government's brief.

The relator refused to sign the settlement agreement which he described as a "travesty." In his objections, the relator complained bitterly that damages caused by the defendant exceeded $30 million, that the government was "shoving" the defendant through a "loophole," and that the defendant was attempting to "pull the wool over everyone's eyes." "The proposed settlement," the relator argued, "will result in champagne corks popping" at the defendant's "receiving a 15% slap on the wrist amortized luxuriously over 5 years."

Relators have some recourse to the court when they object to the government's settlement of a qui tam that they filed. The False Claims Act provides that the government may settle an action with the defendant over the relator's objections "if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." 31 U.S.C. 3730(c)(2)(B). The circuit courts, however, have not passed on the standard to be applied to determine whether a settlement of a False Claims Act qui tam case is fair, adequate, and reasonable. As the District Court observed in Hospice of the Comforter, only a handful of district courts have addressed the question on the standard to be used, and they "are aligned on opposite sides of a fault line over whether the government is entitled to any deference when it intervenes in a False Claims action and reached a settlement with the defendant." The Court explained that the "majority of courts seem to afford the government little, if any, deference" because they apply the standard used in evaluating and approving class action settlements. See Federal Rule of civil Procedure 23(e).  

Contrary to the class action standard, the government in Hospice of the Comforter argued that the Court should apply a "highly deferential standard" whereby the government's settlement will be affirmed as long as it can "articulate a legitimate government purpose that is rationally related to the proposed settlement." The government contended further that "standards governing class actions  . . . are inapplicable to qui tam actions. In class action litigation, the named plaintiff represents the interests of absent class members who have independent claims against the defendant. In FCA qui tam litigation, the relators has suffered no independent harm [and] . . . . . is merely advancing a claim on behalf of the United States for harm to the United States."  

In the end, the District Court in Hospice of the Comforter did not adopt a standard, but overruled the relator's objections on the grounds that that the settlement satisfied both standards. See Court's Order Overruling Objections.

It is said that the government loves its relators, and the relationship between them becomes quite close when an investigation commences as a result of a qui tam filing and the government intervenes. Yet, when the government settles a case on the basis of the defendant's ability to pay, the relator-government relationship often sours and relators may come to accuse the government of selling out and sending defendants the "wrong signal." With a bit of editorial license, it appears that William Congreve's maxim applies here: "Heav'n hath no rage like love to hatred turn'd, Nor Hell a fury, like a [relator] scorn'd." 

November 11, 2013
A. Brian Albritton

 

Abbott Labs $1.5 Billion Plea and False Claims Act Settlement: the Facts at Issue

By now, Readers, I am sure you have heard of the announcement this week by the U.S. Department of Justice that Abbott Labs has agreed to pay $1.5 billion  in a False Claims Act settlement and a criminal plea regarding its off-label promotion of its drug, Depakote. A number of blogs have covered it including Sidley's Original Source blog as well as MintzLevin's Health Law & Policy Matters blog, both of which I commend to you.  The four relators will receive $84 million of the $800 million paid for the False Claims Act portion of the settlement.

I suspect that some Readers may think this settlement --one of many settlements against pharma companies alleging the promotion of off-label drug usages-- may be just another instance in which the government has overreached and used it power to extract a ruinous settlement from the defendant.  A review of the facts admitted to by Abbott, however, shows that the company's conduct was reprehensible and that this settlement and the criminal charge against it could have been far worse.  The company clearly benefited from great counsel, including former Deputy Attorney General, Mark Filip.

According to the Agreed Statement of Facts for its plea, Abbott's gross sales of Depakote from 1998 - 2008 were roughly  $13.8 billion.  During an 8 year period, Abbot promoted the sale and use of Depakote primarily for the elderly suffering from dementia and for the treatment of schizophrenia, even though it knew that the drug was not effective for the treatment of such conditions.  For example, Abbott conducted a study of the effects of Depakote in 1998-99, but suspended the study due to an "increased incidence of adverse events in the Depakote treatment group," discontinuing it completely in 1999.  The study failed to show that Depakote was effective in treating mania in elderly dementia patients.  Abbott performed another clinical trial on dementia patients in 2000, but according to Abbott, the trial was "terminated for low enrollment  . . . . . [and was] seriously underpowered and definitive conclusions from the data were not possible."  Abbott conducted no other studies, but another 153 patient randomized study was done on the use of Depakote for treatment of elderly patients with dementia in 2000 - 2002, and it concluded that "treatment with [Depakote] did not show benefit over placebo in the treatment of agitation associated with possible or probable [Alzheimer's disease] . . . in nursing home residents included in this trial."

Notwithstanding the lack of evidence of Depakote's efficacy in the treatment of dementia, for several years Abbott engaged in widespread promotion of Depakote as effective for controlling agitation and aggression in elderly dementia patients. Abbott informed its own sales force that "Depakote had been shown effective  . . . to treat behavioral disturbances in dementia patients . . . " and developed "educational programs" to promote the drug's usage for the elderly.  It gave funds for speaker programs to promote the use of Depakote to control agitation and aggression in elderly patients with dementia. It sent out a letter to 4,000 prescribers of atypical antipsychotic drugs and to 1,000 prescribers of another drug to nursing home patients to "help increase overall the use of Depakote  . . . for patients with dementia related behaviors."  The Statement of Facts describes a whole host of things that Abbott did to market Depakote --a drug which had not been proven effective, and in fact appeared to be ineffective, for treating agitation and aggression in elderly dementia patients.  The Statement of Facts reflect similar conduct by Abbott in the marketing of Depakote as a treatment of for schizophrenia

The False Claims Act Settlement reflects Abbott's admission that Medicare and Medicaid paid "hundreds of millions of dollars for claims resulting from the use of Depakote for the control of the agitation and aggression of dementia patients" and paid "millions of dollars for claims resulting from the use of Depakote to treat schizophrenia."

The key documents relating to Abbott's plea and settlement can be found here at the Department of Justice's site.

A. Brian Albritton
May 9, 2012

Can DOJ Dismiss a Relator's Claim if the Relator Refuses Settlement?

Corporate Counsel at Law.com just featured an interesting an article, "Taking the Whistle Out of Her Hand," by Mike Scarcella, wihch highlights the case of Stephani Shweizer, a qui tam relator, who has appealed the District Court's dismissal of her qui tam claims based on the government's motion where she refused to approve the government's settlement with False Claims Act defendant.  The  DC Circuit held oral argument in the case, Stephanie Schweizer v. Oce N.V., (D.C. Cir.  No 11-7030), on January 13, 2012, and a decision is awaited.

In an order found here, the District Court noted that a co-relator and the United States reached a settlement with the defendant for approximately $1.2 million, and the relators were supposed to get 19% of that.  Ms. Schweizer, however, refused the settlement, and the government intervened in the case and moved to dismiss her.  The Court akncowledged that prior appellate rulings held that the government had an "unfettered right" to dismiss a qui tam suit and that the decision to do so is "beyond judicial review."  Neverthless, the District Court noted that the provision of the False Claims Act which permitted the govenment to dismiss a suit, 31 U.S.C. 3730(c)(2)(A), was "somewhat at odds" with the section that "envisions an active role for the Court in approving settlement," 31 U.S.C. 3730(c)(2)(B).  Where the government seeks to settlement, the Court must determine "whether the proposed settlement is fair, adequate, and reasonable under all circumstances. Whether that section of the statute can be reconciled with the Court of Appeals' interepretation . . . is uncertain."   Given the "law of the Circuit," the District Court believed that "there is no doubt that section 3730(c)(2)(B) may be circumvented" by the government dismissing the relator's claims.

At oral arument, the relator's counsel argued that the government does not have "unlimited authority" to dismiss a complaint where a whistleblower has rejected settlement, and he argued that the District Court should have evaluated the reasonableness of the proposed settlement.  The government, Scarcella reports, argued that a settlement hearing is "meant not to convince a judge to keep a case going, but . . . to get the government to change its mind about dismissing a suit."  Stated another way, such a hearing is meant to give the relator an opportunity to complain and voice that complaint, but it does not grant the court or the relator the power to keep the government from dismissing a qui tam claim.

The case is being watched because as Scarcella observed:  "A ruling against the government could erode the Justice Department's control of False Claims Act litigation, encourage plaintiffs to reject settlements, and create a potential separation-of-powers conflict in an area of the law that has seen explosive growth in recent years."

A. Brian Albritton

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.

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.