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.

Court Sanctions Attorneys for Relator in Frazier v. IASIS Healthcare For Failing to Promptly Seek Ruling on Privileged Documents Obtained from Relator

The U.S. District Court in Arizona recently sanctioned the attorneys for the relator in the qui tam case of United States ex rel Jerre Frazier v. IASIS Healthcare Corporation, Case 2:05-cv-766-RCJ as a result of their failure to promptly seek a ruling from the Court concerning privileged documents of the defendant that they had received from the relator.  In an Order entered on January 10, 2012, the Court found that the relator, Frazier, had “copied and removed approximately 1,300 pages of documents, emails and other . . . proprietary materials” from the the defendant, IASIS Healthcare. After years of litigation and the dismissal of the third amended qui tam complaint in June 2011, the Court handed down its ruling in response to the Defendant's Renewed Motion for Sanctions against the relator and his counsel.

The Court denied as moot the Motion for Sanctions against the relator as the parties had settled their claims.

As to the relator's "Qui Tam Counsel," however, the Court found they "were aware that they had potentially privileged documents in the Fall of 2004," before they filed suit, but once Qui Tam Counsel filed suit, they "delayed and did not seek a ruling from the Court on what to do with IASIS’s privileged documents" until it had served the unsealed qui tam complaint. The Court further falted Qui Tam Counsel for appearing to "play dumb as to what privileged documents IASIS was talking about" once IASIS requested its docuuments  The Court explained that "[a]lthough Qui Tam Counsel were obligated to acquire Frazier’s consent before returning the documents back to IASIS, Qui Tam Counsel should have told IASIS that or should have waited for Frazier’s consent. Instead, Qui Tam Counsel feigned ignorance with respect to the Sealed Box of privileged documents in their offices." The Court found that Qui Tam Counsel breached an ethical duty to seek a ruling from the Court about the privileged documents and breached their duty to contact IASIS about the documents after the complaint was unsealed."

Though finding that sanctions were appropriate, the Court explained that the "circumstances in this case do not warrant dismissal" nor did the facts establish that Qui Tam Counsel acted in "bad faith"  In light of these considerations, the Court imposed the sanction of requiring Qui Tam Counsel to repay the "attorneys’ fees and costs expended by IASIS in its attempt to get its privileged documents back from Qui Tam Counsel."  Additionally, the Court disqualified the relator's counsel from further assisting or representing the relator "or any other party adverse to IASIS."

The Court denied Defendant's request that Qui Tam Counsel be sanctioned even more broadly for fees and costs pursuant to 28 U.S.C. § 1927.   28 U.S.C. § 1927 provides that the Court may award attorneys' fees and costs against an attorney who "unreasonably and vexatiously" . . . . . "multiplies the proceedings in any case."  The Court rejected  Defendant's request on the grounds that Qui Tam Counsel had not acted in bad faith "nor is there any evidence to establish that they knowingly raised a frivolous argument."

7th Circuit Ruling Permits Whistleblower to Bring Civil RICO Against Employer for Retaliation

Called a “landmark” ruling by Whistleblowers Protection Blog, a recent 7th Circuit case appears to have substantially expanded the rights of whistleblowers to sue their employers.  In DeGuelle v. Camilli, et al., (7th Cir. Dec. 15, 2011), the 7th Circuit held that a former employee could bring a Civil RICO action against his former employer and several of its managers who he alleged had engaged in tax fraud on behalf of the employer, S.C. Johnson & Son, Inc., for losses he had suffered as result of their alleged retaliatory conduct against him. To bring a Civil RICO claim pursuant to 18 U.S.C. § 1964(c), the plaintiff must suffer an injury in his “business or property” as a result of the “pattern of racketeering activity.”  The former employee, a whistleblower, alleged that he was injured in his business or property by the defendants “retaliatory actions,” in terminating him from his employment, being sued by his employer, and defamed in the media.  These retaliatory actions, he claimed, constituted a violation of the Sarbanes Oxley Act which made it a crime to intend to retaliate and “take any action harmful to any person” for “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense.” 18 U.S.C. § 1513(e)(part of the statute prohibiting retaliation against witness, victim or informant).

The District Court had dismissed the former employee’s Civil RICO complaint on the grounds that the alleged retaliation against him an unrelated separate scheme from the tax fraud scheme which purportedly gave rise to the Civil RICO.  The District Court appeared to be following other courts who found that retaliation could not give rise to Civil RICO.  See, e.g., Hoatson v. N.Y. Archdiocese, No. 05 Civ. 10467, 2007 WL 431098, at *6 (S.D.N.Y. Feb. 8, 2007) (“Retaliatory firing is clearly not a listed predicate act or ‘racketeering activity.’ ”), aff’d, 280 F. App’x 88 (2d Cir. 2008); Herrick v. South Bay Labor Council, No. C-04-02673, 2004 WL 2645980, at *3 (N.D. Cal. Nov. 19, 2004) (whistleblower terminated in retaliation for reporting her concerns could not bring RICO claim because her injuries stemmed from wrongful discharge, not alleged racketeering activity).

The 7^th Circuit overturned the District Court, declaring “[r]etaliatory acts are inherently connected to the underlying wrongdoing exposed by the whistleblower.”  The Court observed  that the predicate acts of the tax scheme were related to the retaliation scheme, and it noted one link between the two schemes in that the three of the managers who allegedly had sought to “corruptly persuade” the employee from disclosing the company’s alleged wrongdoing by offering “an increase in salary and payment of attorney’s fees if he agreed to sign an confidentiality agreement and release all claims” were the same “three actors responsible for [the employee’s] termination.”  A so called “second act of tampering” occurred when one of the managers offered the employee “the opportunity to resign with pay and benefits if he signed a confidentiality agreement and release of claims.”

An Insider's View of Florida ex rel FX Analytics v. Mellon Bank Qui Tam: Florida Attorney General Releases Hundreds of Confidential Documents Provided by Relator

As reported by the The Wall Street Journal and other news sources last week, documents released by the Florida Attorney General's Office provide an insider's glimpse into the Florida state qui tam action against Bank of New York Mellon Corporation (Mellon Bank).  That suit, State of Florida ex rel FX Analytics v. Bank of New York  Mellon Corporation, was initially filed by a foreign currency trader and whistleblower at the bank, Mr. Grant Wilson, in 2009 and the Florida Attorney General intervened in 2011.  In this qui tam case, the Florida Attorney General alleged that Mellon Bank conducted foreign currency trades on behalf of the Florida Retirement System Trust Fund, and in so doing, fraudulently "added hidden spreads . . . to these foreign exchange trades rather than pricing the trades at the exchange rates at which it actually executed the transactions, causing the [Trust Fund] to pay far more than it should have for buys and receive much less than it should have for sells."

The Florida Attorney General released "hundreds of pages of confidential documents" that Mr. Wilson had obtained while working at Mellon Bank.  According to the Wall Street Journal, the documents reportedly show "how the bank allegedly scrambled to contain the fallout from a fast-growing government investigation," and included "company materials, emails and observations."  As described in a Huffington Post article, the documents reflected the important role played by the relator's counsel.  For example, Wilson's lawyers provided "a question-and-answer tutorial so the Florida Attorney General's office knows the right questions to ask BNY Mellon employees;" and in another memo, the lawyers discredit Mellon's claims that "difficulty in production" delayed its document productions because, according to Wilson, documents are "centrally stored" and can be "easily obtained."  In another released memo, Wilson's "legal team provided detailed biographies of fellow traders and employees at BNY Mellon to help determine whether they might be helpful in the whistleblower legal effort."

Beyond the insight into the qui tam against Mellon Bank, these articles prompt several observations:  First, the Florida Attorney General's release of these documents show that there is far less confidentiality surrounding relators and the documents they provide in state qui tams than in federal qui tams.  This difference is especially stark when dealing with states like Florida, which have public records laws that permit the public broad access to government records.  The case is ongoing, with the State having intervened only months ago, and yet hundreds of pages of internal confidential documents, both from Mellon and the relator's lawyers have been released.  It is not clear that Wilson, his lawyers, or Mellon wanted these documents released.

Second, the experience of Mr. Wilson as a whistleblower shows just how lucrative the role of a relator can be.  The Wall Street Journal reports that Wilson, a foreign trader with Mellon for more than a decade, "walked away from deferred bonuses totaling roughly $5 million."  Clearly, he anticipates making much more than that from the qui tam.

Third, from these articles, you can see the important role that whistleblower counsel can play in ensuring a successful qui tam suit and in pressing for a vigorous prosecution against the defendant.  In Wilson's case, counsel apparently went so far as to "provide intimate snapshots of [Wilson's] colleagues, including details about their families, personal problems and financial standing."

Finally, where was the bank's compliance officer?  Wilson reportedly worked for two years as an informant, allegedly detailing the bank's scheme to overcharge its clients for whom it made foreign exchange trades.  He was, documents appear to show, not the only one who knew about these suspect practices. If that is true, how could such conduct be kept from the bank's compliance officers?

Supreme Court Passes on Opportunity to Clarify False Claims Act's Implied False Certification Theory of Liability

The blog Health Law & Policy Matters ("Health Policy") reports that the Supreme Court recently turned down a chance to clarify and define the contours of how and when a claimant seeking payment from the government may be subject to False Claims Act liability for an "implied false certification"  “Implied false certification,"  the blog explained, "generally means that a claim for payment to the government (i.e. to Medicare, Medicaid, or CHIP) is legally false if that party had, and failed to meet, an ongoing obligation to comply with an underlying law — regardless of whether that party submitted a claim that was false on its face or expressly certified compliance with that law when it submitted the claim."  Health Policy previously highlighted two petitions for certiorari filed this fall that sought to bring this matter to the Supreme Court:  Amgen Inc. et al., v. State of New York et al. and  Blackstone Medical Inc., v. U.S. ex rel. Hutcheson, No. 11-269.  Health Policy reports, however, that the Supreme Court recently denied certiorari in Hutcheson and that the Court will likely not hear Amgen since the company informed the Court that it had settled the False Claims Act claims

False Claims Act liability based on an implied false certification can be quite broadly applied, and the circuit courts, as the blog False Claims Alert noted, have not applied a consistent test for implied false certification liability.  We recently discussed United States ex rel. Wilkins v. United Health Group, Inc.,  659 F.3d 295 (3^rd Cir. 2011) and the Third Circuit's adoption of the implied certification theory of  liability.  In Wilkins, the Third Circuit found the False Claims Act was not a “blunt instrument” to enforce compliance with all regulations, just those “regulations that are a precondition to payment.”  In that case, as in other circuits, the Court found that the claimant's violation of the Anti-Kickback Act legally tainted its claims for payments, regardless of whether the services billed were actually rendered. See e.g., McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005).

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.

U.S. Tax Court Rules that IRS Whistleblower Claimant May Remain Anonymous but Refuses to Seal Case

As discussed previously, courts increasingly refuse the request of relators to seal their False Claims Act (“FCA”) cases when the government declines to intervene and they seek to dismiss.  See blog entries 11/14/11, 10/31/11. The U.S. Tax Court recently addressed this issue of protecting the identity of a tax whistleblower in a Tax Court case and arrived at a very different conclusion:  the tax whistleblower may remain anonymous but it refused to seal the case. See Whistleblower 14106-10W v. Commissioner of Internal Revenue, United States Tax Court, 137 T.C. No. 15.   The Tax Court based its decision in large part on the fact that the Internal Revenue Service’s Whistleblower Program does not protect whistleblowers from retaliation and that the Internal Revenue Service (“IRS”) treats whistleblowers as confidential informants.

The case arose out of claim made to the IRS by a whistleblower that his former employer had underpaid its tax.  The IRS denied the petitioner’s claim for a whistleblower award, and the whistleblower challenged that denial in Tax Court.  

As described on its website, the IRS has a “Whistleblower Program,” 26 U.S.C. § 7623(b), that “pays money to people who blow the whistle on persons who fail to pay the tax that they owe. See 26 U.S.C. § 7623(b).  If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.”  The IRS program further provides that if “the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court.”  Unlike the False Claims Act, however, if the IRS declines to pursue the claim, the whistleblower does not have an independent right to proceed with the claim against the defendant. 

In the Tax Court case, the Whistleblower filed a motion for protective order requesting the court to protect his identity and to seal the tax case.  The Whistleblower alleged that even though he no longer worked for the taxpayer, he feared retaliation by his former employer.  He also claimed that he would be professionally ostracized if his identity as a whistleblower were disclosed.  

In a lengthy and well-reasoned decision, the Tax Court surveyed federal law on whether and when courts can permit litigants to remain anonymous and can seal a case.  The Tax Court further noted that the IRS treats whistleblowers as “confidential informants” and that courts frequently protect the identify of informants.

The Tax Court granted the Whistleblower’s request to protect his identity, remain anonymous, and to redact identifying information, noting:

petitioner has demonstrated a risk of harm that far exceeds in severity mere embarrassment or annoyance. The retaliation, professional ostracism, and economic duress which petitioner reasonably fears are, we believe, no less severe than the harm posed to attorneys and doctors suing to enjoin disciplinary proceedings, unsuccessful job applicants suing to protect their reputation, public aid recipients, or Native Americans joining in a lawsuit pitting their personal interests against those of their communities--all cases in which plaintiffs have been allowed to proceed anonymously.

A key consideration that the Tax Court cited in protecting the Whistleblower’s identity was that the IRS Whistleblower program does not have an anti-retaliation protections like other whistleblower statutes have, such as the False Claims Act.  As the Tax  Court observed: 

the False Claims Act contains an antiretaliatory provision. See 31 U.S.C. sec. 3730(h). Moreover, almost all the States have enacted statutes protecting employees in the public and/or private sectors who report illegal conduct.  In stark contrast, section 7623 contains no antiretaliatory provisions.

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.

Implied False Certification : Not Every Regulatory Violation Gives Rise to FCA Liability

This week I came across United States ex rel. Wilkins v. United Health Group, Inc.,  659 F.3d 295 (3^rd Cir. 2011) which was decided in late June and just published in F.3d.  In Wilkins, the Third Circuit joined several other circuits in holding that an “implied false certification” made by a provider in conjunction with its claim for payment to the government may give rise to False Claims Act (“FCA”) liability.  “Implied false certification the Court explained, “attaches when a claimant seeks and makes a claim for payment from the government without disclosing that it violated regulations that affect its eligibility for payment.” Id. at 305.  The Wilkins Court found that FCA liability could be based on a claimant seeking payment when it knew it had violated the Anti-Kickback Statute. Id. at 313.  FCA Alert and Whistleblower Qui Tam Law Blog both analyzed Wilkins, and I commend their analyses to you.  Additionally, take a look at FCA Alert’s discussion of Amgen’s recent Petition for Writ of Cert to the Supreme Court wherein Amgen challenges the implied false certification theory and discusses the differences in the Circuits that apply it.

I found the more interesting portion of Wilkins to be where the court found that violations by the Medicare Advantage provider of marketing rules contained in provider’s contract with the Centers for Medicare and Medicaid (“CMS”) did not give rise to an implied false certification FCA violation even though the provider had certified that it complied with all CMS guidelines. Id. at 299-300.  The relator in Wilkins alleged that the provider had violated  several “marketing rules” including “using  marketing flyers and forms that CMS did not approve” in making presentations, “ “using an excessive number of  sales representatives at presentations,” and “giving out door prizes” at presentations to prospective clients in “excess of $15 in value contrary to CMS guidelines.”  The Court, however, rejected FCA claims based on these alleged violations of regulations that were not preconditions to the provider’s claim for payment.