In my post of February 7, 2012, I discussed a District of Columbia's District Court's opinion in U.S. ex rel Schweizer v. OCE N.V., wherein the District Court found that the Department of Justice ("DOJ") can dismiss a relator's claim pursuant to 31. U.S.C. 3730(c)(2)(A) if the relator refuses the DOJ's settlement with the defendant of the relator's qui tam claims. Section 3730(c)(2)(A) provides that the "Government may dismiss [a qui tam] action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion." This provision has been cited as providing the Government with an "unfettered right to dismiss" qui tam cases. Swift v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003)
In an important ruling on April 20, 2012that favors relators, the D.C. Circuit ruled in U.S. ex rel Schweizer v. OCE N.V., 2012 WL 1372219 (C.A.D.C.) and reversed the District Court, holding (1) that the Government does not have an unfettered right to dismiss a relator's qui tam where there is a settlement pending between the Government and the Defendant as the settlement requires the Court's approval to be finalized if a relator objects; (2) if the relator objects, the Government cannot settle a qui tam with a Defendant unless the Court first determines, in compliance with 31 U.S.C. 3730(c)(2)(B), "after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." Additionally, the Court reversed the District Court's order granting summary judgment in favor of the Defendant on the relator's retaliation claim, holding that although the relator's job was to ensure compliance with government contracts, summary judgment was precluded because the relator acted outside her normal job activities and notified corporate personnel outside her usual chain of command of her protected conduct.
In this case, the relator was a "GSA contracts manager" who was hired to monitor the Defendant's supply contracts to provide copying and printing products to the Government. These contracts provided that the Goverment was to enjoy the same discounted pricing as the Defendant offered to other private sector purchasers. Additionally, the contracts required the Defendant to only sell goods made in the United States or in countries designated under the Trade Agreements Act. The relator discovered that the Defendant was not providing the Government with the agreed discounts and that it was selling the Government products that were not made by countries with the scope of the Trade Agreements Act. The relator took her concerns that the company was violating the False Claims Act to her immediate supervisor, and after he forbid her from investigating the matter and attempted to obstruct her, to other executives and company counsel. The company discharged the relator not long after. The relator sued the Defendant under the False Claims Act, conspiracy to violate the False Claims Act, and for retaliation under 31 U.S.C. 3730(h).
The Government did not intervene, but it eventually "settled" the relator's qui tam case with the Defendant for $ 1.2 million and to set aside 19% of the recovery for the two relators. In turn, the Government's settlement promised to dismiss the two False Claims Act counts and to provide the Defendant with a partial release of liability. The Government then sought to dismiss the case, which the relator opposed, and for the reasons outlined in my February 27, 2012 blog post, the Court dismissed the case over the relator's objections, pursuant to Section 3730(c)(2)(A) and without a "fairness" hearing as required by Section 3730(c)(2)(B) of the False Claims Act.
In overturning the District Court, the D.C. Circuit observed: "We reject the government's argument. Section 3730(c)(2)(B) contains no opt-out clause for rare cases or unusual circumstances. It does not permit the Attorney General to decide when there shall be a hearing on the settlement: the statute says that the government 'may' settle a matter over a relator's objection 'if the court" holds a hearing and finds the' proposed settlement" reasonable. The meaning is clear. The government may not settle a case when the relator objects unless the court approves the settlement."
A. Brian Albritton
April 23, 2012
Monday, April 23, 2012
Thursday, April 19, 2012
Unclaimed Property Laws and State False Claims Acts: The Qui Tam Suits Are Coming
The company, Total Asset Recovery Services, Inc., a Michigan "asset recovery" company, appears to have found a valuable niche in state False Claims Act matters: it has brought qui tam suits under the Illinois and Minnesota False Claims Acts against MetLife, Inc. and Prudential Life Insurance Co. for allegedly failing to turn over unclaimed life insurance funds. In the Illinois case which was filed in January of this year, Total Asset alleges that these two companies failed to turn over the proceeds from 4,766 unclaimed life insurance policies. In the Minnesota suit which was filed last month, Total Asset alleges that these same two companies failed to turn over the proceeds from 600 Minnesota unclaimed life insurance policies. The Minnesota Attorney General declined to intervene but is reported to be investigating according to the Minnesota Star Tribune.
The attorney for Total Asset Recovery in the Minnesota suit is former Southern District of Florida U.S. Attorney Jeffrey Sloman, who has been in private practice for the last three years after a distinguished career as a federal prosecutor. Sloman is quoted by the Minnesota Star Tribune as saying that the "the magnitude of the life insurance fraud committed on the states is in the billions of dollars . . . the numbers are mind-boggling."
I predict that in the next five years we will see an exponential increase in qui tam suits alleging that business are failing to pay the state unclaimed property. From my own experience in advising clients about state unclaimed property laws, most businesses, especially retailers and any business that issues gift cards, are simply unaware of the incredible breadth and application of these unclaimed property laws. Moreover, such laws are frequently written in such a way as to prevent businesses from avoiding their scope. Though the downturn in the economy has made some states more aggressive in enforcing unclaimed property obligations, most states simply do not have the enforcement resources available to them to promote wide scale compliance and businesses have not had much to worry about. With the plaintiffs' bar beginning to realize how profitable such qui tam suits can be for unclaimed property claims, lack of resources to enforce these statutes will no longer be a problem. Businesses would do well to prepare.
For a resource on unclaimed property, see attorney Mike Rato's blog, Escheatable: The Unclaimed Property Law Blog
A. Brian Albritton
April 19, 2012
The attorney for Total Asset Recovery in the Minnesota suit is former Southern District of Florida U.S. Attorney Jeffrey Sloman, who has been in private practice for the last three years after a distinguished career as a federal prosecutor. Sloman is quoted by the Minnesota Star Tribune as saying that the "the magnitude of the life insurance fraud committed on the states is in the billions of dollars . . . the numbers are mind-boggling."
I predict that in the next five years we will see an exponential increase in qui tam suits alleging that business are failing to pay the state unclaimed property. From my own experience in advising clients about state unclaimed property laws, most businesses, especially retailers and any business that issues gift cards, are simply unaware of the incredible breadth and application of these unclaimed property laws. Moreover, such laws are frequently written in such a way as to prevent businesses from avoiding their scope. Though the downturn in the economy has made some states more aggressive in enforcing unclaimed property obligations, most states simply do not have the enforcement resources available to them to promote wide scale compliance and businesses have not had much to worry about. With the plaintiffs' bar beginning to realize how profitable such qui tam suits can be for unclaimed property claims, lack of resources to enforce these statutes will no longer be a problem. Businesses would do well to prepare.
For a resource on unclaimed property, see attorney Mike Rato's blog, Escheatable: The Unclaimed Property Law Blog
A. Brian Albritton
April 19, 2012
Monday, April 9, 2012
Limited Discovery in False Claims Act Cases: One Court's Attempted Solution
When a court denies a defendant's motion to dismiss a False Claims Act or qui tam complaint, does that mean that that the relator or government should have free reign on obtaining discovery from the defendant? In many instances it does. The District Court in U.S. ex rel Minge v. Tect Aerospace, Inc, 2012 WL 1118948 (April 3, 2012 D. Kan), however, sought to only permit the parties limited discovery initially and to subject the relators' weak claims to an initial "litmus test" before allowing the case and discovery to be expanded. The Magistrate Judgment's opinion shows just how hard it is to contain limited discovery and why some courts might just throw up their hands.
Tect Aerospace was a qui tam case in which the Court had dismissed the relators' third amended complaint on Rule 9(b) grounds, finding that relators had failed to plead fraud with particularity. Specifically, the Court found that the relators failed to specify "whether any aircraft were equipped with allegedly defective parts, and if so, which parties and planes." The relators then obtained permission to file a fourth amended complaint, and the court found that it cured these Rule 9(b) deficiencies.
Though it permitted the case to proceed, the Court recommended that "discovery be initially limited in this case to determining whether non-conforming parts were in fact present on the planes identified in the fourth amended complaint and the extent of the false statements provided to the government at the time of the claim for payment." After that initial discovery period, the Court invited defendants to file a motion for summary judgment, if appropriate.
In implementing the District Court's decision to limit discovery, the Magistrate Judge interpreted the Court as essentially instituting a "litmus test" on the relators' theories, such that the parties were permitted to conduct discovery "limited to determine whether relators can support their claims as to the exemplar aircraft sufficient to survive a summary judgment challenge." The Magistrate Judge observed further: "The intent of this initial procedure is to require relators to establish their basic claims concerning the exemplar aircraft before allowing the more extensive discovery which may be required to prove their broader claims By recommending limited discovery in this initial phase, and by providing defendants an earlier opportunity to file a dispositive motion, the District Court intended to require relators, whose claims had been resuscitated by the fourth amendment . . . to establish that the parts installed on the exemplar aircraft were defective, before allowing broader discovery and litigation covering the entire manufacturing program."
Limiting discovery proved harder than the Magistrate Judge appeared to have anticipated in the Court's scheduling order. This first phase of discovery was supposed to be limited to 8-10 months with 20 depositions each. The Magistrate Judge ended up entering a second and then a third scheduling order and extending discovery twice further. The Magistrate Judge observed that throughout the discovery period, "defendants have maneuvered to limit, and the relators to expand, discovery based" on their interpretation of the Court's initial limitation of discovery. In turn, the parties filed 14 discovery motions between them.
The Magistrate Judge denied the relators request for 30 more depositions, beyond the initial 20, along with another extension of discovery. That ruling, however, did not bring discovery to a close due to 7 pending discovery motions. The final determination as to whether further discovery was to be permitted awaited the resolution of the motions.
This case illustrates that courts do not have to open the floodgates to all discovery in the event that they permit a qui tam complaint to proceed, especially one that just makes it across the threshold. Subjecting the relator's claims to a litmus test of an early summary judgment and permitting only limited discovery appears to be a very sensible way to proceed. Yet, permitting only limited discovery appears to have created substantial additional work and supervisory headaches for the Magistrate Judge and spawned a tremendous number of discovery motions. Once this case is over, it will be interesting to see if the Court finds its attempt to allow only limited discovery to be worthwhile.
A. Brian Albritton
April 9, 2012
Tect Aerospace was a qui tam case in which the Court had dismissed the relators' third amended complaint on Rule 9(b) grounds, finding that relators had failed to plead fraud with particularity. Specifically, the Court found that the relators failed to specify "whether any aircraft were equipped with allegedly defective parts, and if so, which parties and planes." The relators then obtained permission to file a fourth amended complaint, and the court found that it cured these Rule 9(b) deficiencies.
Though it permitted the case to proceed, the Court recommended that "discovery be initially limited in this case to determining whether non-conforming parts were in fact present on the planes identified in the fourth amended complaint and the extent of the false statements provided to the government at the time of the claim for payment." After that initial discovery period, the Court invited defendants to file a motion for summary judgment, if appropriate.
In implementing the District Court's decision to limit discovery, the Magistrate Judge interpreted the Court as essentially instituting a "litmus test" on the relators' theories, such that the parties were permitted to conduct discovery "limited to determine whether relators can support their claims as to the exemplar aircraft sufficient to survive a summary judgment challenge." The Magistrate Judge observed further: "The intent of this initial procedure is to require relators to establish their basic claims concerning the exemplar aircraft before allowing the more extensive discovery which may be required to prove their broader claims By recommending limited discovery in this initial phase, and by providing defendants an earlier opportunity to file a dispositive motion, the District Court intended to require relators, whose claims had been resuscitated by the fourth amendment . . . to establish that the parts installed on the exemplar aircraft were defective, before allowing broader discovery and litigation covering the entire manufacturing program."
Limiting discovery proved harder than the Magistrate Judge appeared to have anticipated in the Court's scheduling order. This first phase of discovery was supposed to be limited to 8-10 months with 20 depositions each. The Magistrate Judge ended up entering a second and then a third scheduling order and extending discovery twice further. The Magistrate Judge observed that throughout the discovery period, "defendants have maneuvered to limit, and the relators to expand, discovery based" on their interpretation of the Court's initial limitation of discovery. In turn, the parties filed 14 discovery motions between them.
The Magistrate Judge denied the relators request for 30 more depositions, beyond the initial 20, along with another extension of discovery. That ruling, however, did not bring discovery to a close due to 7 pending discovery motions. The final determination as to whether further discovery was to be permitted awaited the resolution of the motions.
This case illustrates that courts do not have to open the floodgates to all discovery in the event that they permit a qui tam complaint to proceed, especially one that just makes it across the threshold. Subjecting the relator's claims to a litmus test of an early summary judgment and permitting only limited discovery appears to be a very sensible way to proceed. Yet, permitting only limited discovery appears to have created substantial additional work and supervisory headaches for the Magistrate Judge and spawned a tremendous number of discovery motions. Once this case is over, it will be interesting to see if the Court finds its attempt to allow only limited discovery to be worthwhile.
A. Brian Albritton
April 9, 2012
Wednesday, April 4, 2012
Wellcare Health Plans Agrees to Pay $137.5 Million to Resolve False Claims Act Case
The U.S. Attorney for the Middle District of Florida and the Civil Division of the U.S. Department of Justice announced yesterday that WellCare Health Plans had agreed to pay $137.5 million to settle a qui tam/ False Claims Act case pending against it, primarily in the Middle District of Florida, that has been pending for years. You can see the links above for a fuller description of the case and settlement.
Remarkably, WellCare announced the settlement of the qui tam almost two years ago on June 26, 2010 when I was serving as U.S. Attorney for the Middle District of Florida. See St. Petersburg Times, June 26, 2010, "WellCare Health Plans Strikes $137.5 million settlement, challenged by new whistle-blower disclosures."
Just as remarkably, in the two years prior to the government's announcement of the settlement, the relator's counsel, a prominent criminal defense attorney who stood to reap millions in fees, had already begun criticizing the not-yet-announced settlement as "grossly inadequate" and claiming that "tax payers" were "unfairly disadvantaged" by the settlement. Though he acknowledged the "financial benefits" of any settlement to the relator, relator's counsel argued to the St. Petersburg Times that a larger settlement was more important in order "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."
The chief relator in the WellCare case, Sean Hellein, is slated to receive $21 million in the settlement.
A. Brian Albritton
April 4, 2012
Remarkably, WellCare announced the settlement of the qui tam almost two years ago on June 26, 2010 when I was serving as U.S. Attorney for the Middle District of Florida. See St. Petersburg Times, June 26, 2010, "WellCare Health Plans Strikes $137.5 million settlement, challenged by new whistle-blower disclosures."
Just as remarkably, in the two years prior to the government's announcement of the settlement, the relator's counsel, a prominent criminal defense attorney who stood to reap millions in fees, had already begun criticizing the not-yet-announced settlement as "grossly inadequate" and claiming that "tax payers" were "unfairly disadvantaged" by the settlement. Though he acknowledged the "financial benefits" of any settlement to the relator, relator's counsel argued to the St. Petersburg Times that a larger settlement was more important in order "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."
The chief relator in the WellCare case, Sean Hellein, is slated to receive $21 million in the settlement.
A. Brian Albritton
April 4, 2012
Sunday, April 1, 2012
Insurance and The False Claims Act: FCA Policies and When to Notify Insurer
In defending clients against False Claims Act matters, I have not yet had an instance where the client had insurance coverage that covered False Claims Act liability. So I was interested to learn both that insurance companies are offering coverage for False Claims Act liabilities and about some of the issues in obtaining insurance coverage for False Claims Act clams.
First, I came across an announcement in the Insurance Business Review this week that the Beazley Group was offering a new "Healthcare Regulatory Liability Policy" to protect policy holders against errors & omission claims brought on behalf of government entities. A spokesman for Beazley stated that clients had been asking for this type of coverage due to "increasing regulatory scrutiny." The policy covers civil fines and penalties with a limit of up to $10,000,00, and protects providers against a wide range of regulatory violations, including the False Claims Act and Medicare/Medicaid billing investigations.
Second, in an informative article, "False Claims Act Notice Issues: To Disclose, or Not to Disclose," attorneys James Murray, John Gibbons, and Omid Safa at the Dickstein Shapiro firm address three insurance issues that arise in the conjunction with False Claims Act ("FCA") claims. FCA claims, they point out, "can implicate several types of insurance policies, including comprehensive general liability, errors and omissions, professional liability, directors’ and officers’, crime/fidelity insurance, and employment practices liability policies, just to name a few." They initially address whether insureds must notify their insurers if they receive an FCA civil investigative demand or an Inspector General subpoena under "claims" or "occurrence" policies. Next, they discusses the whether and when an insured must notify its insurer when the insured has received notice that a qui tam matter pending is pending against but the matter remains under seal. Finally, the article notes that insueds might encounter problems with obtaining reimbursement for costs they incur in responding to a government's investigation while the matter remains under seal but prior to the matter being "tendered" to the insurer. They observe: "Courts have reached differing conclusions on whether an insurer must reimburse defense costs incurred by a policyholder prior to giving notice or formally tendering a claim. Courts denying reimbursement have relied largely on standard policy provisions barring coverage for alleged 'voluntary payments' or mistakenly reasoned that tender is a condition precedent to coverage. Neither rationale appears to be well suited to addressing the unique issues raised by the FCA, however."
A. Brian Albritton
April 1, 2012
First, I came across an announcement in the Insurance Business Review this week that the Beazley Group was offering a new "Healthcare Regulatory Liability Policy" to protect policy holders against errors & omission claims brought on behalf of government entities. A spokesman for Beazley stated that clients had been asking for this type of coverage due to "increasing regulatory scrutiny." The policy covers civil fines and penalties with a limit of up to $10,000,00, and protects providers against a wide range of regulatory violations, including the False Claims Act and Medicare/Medicaid billing investigations.
Second, in an informative article, "False Claims Act Notice Issues: To Disclose, or Not to Disclose," attorneys James Murray, John Gibbons, and Omid Safa at the Dickstein Shapiro firm address three insurance issues that arise in the conjunction with False Claims Act ("FCA") claims. FCA claims, they point out, "can implicate several types of insurance policies, including comprehensive general liability, errors and omissions, professional liability, directors’ and officers’, crime/fidelity insurance, and employment practices liability policies, just to name a few." They initially address whether insureds must notify their insurers if they receive an FCA civil investigative demand or an Inspector General subpoena under "claims" or "occurrence" policies. Next, they discusses the whether and when an insured must notify its insurer when the insured has received notice that a qui tam matter pending is pending against but the matter remains under seal. Finally, the article notes that insueds might encounter problems with obtaining reimbursement for costs they incur in responding to a government's investigation while the matter remains under seal but prior to the matter being "tendered" to the insurer. They observe: "Courts have reached differing conclusions on whether an insurer must reimburse defense costs incurred by a policyholder prior to giving notice or formally tendering a claim. Courts denying reimbursement have relied largely on standard policy provisions barring coverage for alleged 'voluntary payments' or mistakenly reasoned that tender is a condition precedent to coverage. Neither rationale appears to be well suited to addressing the unique issues raised by the FCA, however."
A. Brian Albritton
April 1, 2012
Tuesday, March 27, 2012
Opportunistic Relator or Enterprising Whistleblower?
I try to spare readers from too many "can you believe this happened in a case?" entries, but on occasion, I do find just such a story worth highlighting. The firm of Horwood Marcus & Berk ("HMB") recently highlighted an "opportunistic" (others might say, enterprising) relator and law firm in Illinois who, HMB reports, have brought over 200 cases under the Illinois False Claims Act against retailers operating nationwide who "allegedly have fraudulently failed to collect tax on the shipping portion of sales to Illinois customers." See "Opportunistic 'Whistleblower' Exploits Illinois False Claims Act." Though it does not list the cases, HMB claims that the relator's claims are based on tax advice provided by the Illinois Department of Revenue to retailers. Relator's "lawsuits accuse retailers of committing fraud by not collecting tax on shipping charges to Illinois customers, a position that the Department of Revenue has endorsed explicitly in the case of several tax payers, and more generally in over 30 information letters." Moreover, HMB essentially accuses the relator and the plaintiff's firm that has brought all 200 cases of being "opportunists," as the relator reportedly has no insider knowledge and bears little resemblance to the classic whistleblower. HMB complains further that taxpayers "attempting to understand Illinois law on the proper taxation of shipping charges will likely finish the exercise with more questions than answers" and that the Illinois Department of Revenue is partly responsible for creating this "muddled and confusing . . . legal landscape."
HMB predicts that another frontier for opportunistic qui tam suits will be claims over the payment of unclaimed property obligations, another area where HMB believes there is real confusion about what property is subject to unclaimed property laws and must be reported to the state.
by A. Brian Albritton
March 27, 2012
HMB predicts that another frontier for opportunistic qui tam suits will be claims over the payment of unclaimed property obligations, another area where HMB believes there is real confusion about what property is subject to unclaimed property laws and must be reported to the state.
by A. Brian Albritton
March 27, 2012
A Helpful Primer on the False Claims Act and the Anti-Kickback Act
I commend the PowerPoint presentation "The Evolution of the False Claims Act and Anti-Kickback Allegations and Theories of Liability in FCA Litigation" posted today by Antonia Giuliana on the FCA Alert blog. Her presentation (1) discusses how the legal standards applicable to the Anti-Kickback Act and False Claims Act ("FCA") have changed, especially as a result of the 2010 Patient Protection and Affordable Care Act amendments and the use of Anti-Kickback claims as a basis for "false certification" theories of liability; (2) how kickback allegations have evolved in FCA cases for the period of 1995 - 2009 along with a helpful chart; and (3) uses the case of US ex rel Jamison v. McKesson Corp. et al., (N.D. Miss) to illustrate the application of the Anti-Kickback Act to a False Claims Act case. This is a useful primer on the subject.
by A. Brian Albritton
March 27, 2012
by A. Brian Albritton
March 27, 2012
Friday, March 23, 2012
Court Finds FCA Retaliation Claims Subject to Arbitration
A U.S. District Court in Texas recently held that a False Claims Act ("FCA") retaliation claim brought pursuant to 31 U.S.C. 3730(h) by a sales representative against his employer was subject to the arbitration clause of his Employment Agreement and dismissed the sales representative's case in favor of arbitration. James v. Conceptus, Inc., 2012 WL 845122 (March 12, 2012, S.D. Tex).
In that case, the plaintiff, a sales representative for a medical device firm alleged that his employer, Conceptus, Inc., retaliated against by discharging him when he questioned the legality of how a sales representative marketed his employer's medical devices and how physicians billed Medicaid for such devices. The plaintiff brought a "whistleblower-retaliation action under the False Claims Act, 31 U.S.C. 3730(h), in the Southern District of Texas. His employer moved to compel arbitration under the plaintiff's employment agreement and to dismiss the suit in favor of arbitration. The employment agreement specified the application of California law as well as a California forum, and the Court spent much of its opinion evaluating whether California law permitted the arbitration of such claims, finding in the end that such claims may be subject to arbitration.
The Plaintiff also claimed that arbitration provision of his employment agreement did not apply to his FCA retaliation claim on the grounds that the Dodd-Frank Act made such arbitration clauses for whistleblower claims unenforceable. The Court observed that the Dodd-Frank Act, 7 USC 26(n) and 18 USC 1514A(e) amended the "whistleblower provisions of the Commodity Exchange Act and the Sarbanes-Oxley Act to make unenforceable any predispute arbitration clause of disputes arsing under those whistleblower sections as well as the Dodd-Frank Act itself, 12 USC 5567(d). The Court, however, found that Dodd-Frank did not apply to the False Claims Act and 31 USC 3730(h) contains no similar provision. Beyond its discussion of California law, the Court did not cite any other federal law or cases in making its determination that that the antiretaliation provisions of the False Claims Act would be made subject to arbitration.
Section 26(n) of Title 7 also provides that the "rights and remedies provided for" under the Commodities and Exchange Act qui tam provisions may not be waived. Section 1514A(e) of Title 18 provides for a similar provision as the Sarbanes-Oxley Act.
In that case, the plaintiff, a sales representative for a medical device firm alleged that his employer, Conceptus, Inc., retaliated against by discharging him when he questioned the legality of how a sales representative marketed his employer's medical devices and how physicians billed Medicaid for such devices. The plaintiff brought a "whistleblower-retaliation action under the False Claims Act, 31 U.S.C. 3730(h), in the Southern District of Texas. His employer moved to compel arbitration under the plaintiff's employment agreement and to dismiss the suit in favor of arbitration. The employment agreement specified the application of California law as well as a California forum, and the Court spent much of its opinion evaluating whether California law permitted the arbitration of such claims, finding in the end that such claims may be subject to arbitration.
The Plaintiff also claimed that arbitration provision of his employment agreement did not apply to his FCA retaliation claim on the grounds that the Dodd-Frank Act made such arbitration clauses for whistleblower claims unenforceable. The Court observed that the Dodd-Frank Act, 7 USC 26(n) and 18 USC 1514A(e) amended the "whistleblower provisions of the Commodity Exchange Act and the Sarbanes-Oxley Act to make unenforceable any predispute arbitration clause of disputes arsing under those whistleblower sections as well as the Dodd-Frank Act itself, 12 USC 5567(d). The Court, however, found that Dodd-Frank did not apply to the False Claims Act and 31 USC 3730(h) contains no similar provision. Beyond its discussion of California law, the Court did not cite any other federal law or cases in making its determination that that the antiretaliation provisions of the False Claims Act would be made subject to arbitration.
Section 26(n) of Title 7 also provides that the "rights and remedies provided for" under the Commodities and Exchange Act qui tam provisions may not be waived. Section 1514A(e) of Title 18 provides for a similar provision as the Sarbanes-Oxley Act.
Tuesday, March 13, 2012
Insights from a Qui Tam Plaintiff's Lawyer
In a recent interview with Corporate Crime Reporter, qui tam attorney Joseph E.B. "Jeb" White of the firm Nolan & Auerbach, P.A. described what kind of plaintiff/relator cases his firm is interested in and, more importantly, the kinds of cases in which the government will intervene.
White says that the government does not want "low hanging fruit. They want boxed fruit." He notes that the government intervenes in "only about 25 percent" of False Claims Act (FCA) cases, and due to "tightening budgets," the government's approach to taking FCA cases is changing. Increasingly, the government delays its decision to intervene because "sometimes the case simply isn't ready. The relator hasn't fully flushed out the allegations sufficiently for the government to intervene." Moreover, courts frequently "pressure the government to make up its mind before the government is ready to make up its mind." These pressures, he says, lead the government to often say in qui tam cases that they are "not intervening at this time" but nevertheless "signaling to the relator's lawyer" to keep the case alive because they government is "going to come back later." While it may not be able to investigate or intervene in a case due to a lack of resources, says White, the government encourages relators to "move forward" with meritorious cases, letting the relator use what may be his or her superior resources to develop the case further. In short, the government, White explains, often declines, but in doing so it frequently indicates to the relator to "pick up the ball and move it forward for us."
White's firm, Nolan & Auerbach, only does FCA cases on behalf of relators. He says the firm takes roughly one in ten FCA cases, and that they can only bring a "handful of cases in any given year." White states that when his firm brings a case to the government, they want the government to have "some level of confidence" that the case has been "fully vetted." In considering whether to take a case, White explains that the firm is looking for several things: (1) "evidence of systematic fraud" as opposed to just some "rogue employee," hopefully involving a "scheme from the top of the company;" (2) a "credible witness" who can withstand scrutiny at trial; and (3) whether there are "common road blocks," such as the public disclosure bar.
White estimates that there are 100 FCA cases every year, of which "five of them are blockbusters." He estimates that the remaining "95 settle for about $10 million each," and that the average whistleblower award is around 16.2 percent.
The entire interview is at 26 Corporate Crime Reporter 8, February 20, 2012 print edition.
A. Brian Albritton
3/13/12
White says that the government does not want "low hanging fruit. They want boxed fruit." He notes that the government intervenes in "only about 25 percent" of False Claims Act (FCA) cases, and due to "tightening budgets," the government's approach to taking FCA cases is changing. Increasingly, the government delays its decision to intervene because "sometimes the case simply isn't ready. The relator hasn't fully flushed out the allegations sufficiently for the government to intervene." Moreover, courts frequently "pressure the government to make up its mind before the government is ready to make up its mind." These pressures, he says, lead the government to often say in qui tam cases that they are "not intervening at this time" but nevertheless "signaling to the relator's lawyer" to keep the case alive because they government is "going to come back later." While it may not be able to investigate or intervene in a case due to a lack of resources, says White, the government encourages relators to "move forward" with meritorious cases, letting the relator use what may be his or her superior resources to develop the case further. In short, the government, White explains, often declines, but in doing so it frequently indicates to the relator to "pick up the ball and move it forward for us."
White's firm, Nolan & Auerbach, only does FCA cases on behalf of relators. He says the firm takes roughly one in ten FCA cases, and that they can only bring a "handful of cases in any given year." White states that when his firm brings a case to the government, they want the government to have "some level of confidence" that the case has been "fully vetted." In considering whether to take a case, White explains that the firm is looking for several things: (1) "evidence of systematic fraud" as opposed to just some "rogue employee," hopefully involving a "scheme from the top of the company;" (2) a "credible witness" who can withstand scrutiny at trial; and (3) whether there are "common road blocks," such as the public disclosure bar.
White estimates that there are 100 FCA cases every year, of which "five of them are blockbusters." He estimates that the remaining "95 settle for about $10 million each," and that the average whistleblower award is around 16.2 percent.
The entire interview is at 26 Corporate Crime Reporter 8, February 20, 2012 print edition.
A. Brian Albritton
3/13/12
Tuesday, March 6, 2012
Calculating the Relator's Share: US ex rel Shea v. Verizon Communications, Inc.
A new blog began last month that is devoted to the False Claims Act, "The Original Source: The Sidley Austin False Claims Act Blog." They have done a number good blog articles in the short time they have been publishing.
I wanted to commend their recent blog discussion of US ex rel Shea v. Verizon Communications, No. 07-111(GK) (D.D.C. Feb. 23, 2012), 2012 U.S. Dist. LEXIS 22776. This very interesting case discusses the criteria for awarding the relator a share of a False Claims Act award and the key contributions that a relator can make to the investigation and resolution of a qui tam. As the Sidley Blog points out, the case highlights a number of contributions by the relator and his counsel that were instrumental to the success of the Government's case. For example, the Court notes that the relator "directed the Government to focus" on two surcharges of the defendant, "thereby enabling the Government to save enormous amounts of lawyer time, auditor time, and staff time." In another instance, the Government solicited the relator to prepare a legal memo explaining why "each surcharge" was prohibited by the applicable law and to rank the surcharges for investigation. The opinion goes on that the relator assisted the Government in drafting subpoenas; identified witnesses; and "participated fully in all aspects of the Government's investigation and settlement" and devoted "hundreds of hours each year on the case." This informative case summarizes the elements and contributions for determining the relator's share of an award.
Notwithstanding the relator's contributions to the case as outlined by the Court, the Government opposed awarding the relator anything more than 16% of the award, or only 1% more than the minimum to which the relator was entitled. The Court criticized the Government for making a "profoundly unfair characterization of the nature and extent" of the contributions of the relator and his counsel and for arguing that the relator's "share of the proceeds depends upon the extent of the [relator's] contribution the case rather than the contribution of his counsel." The Court observed that case law does not base the relator's contribution on just what he or she individually contributed, finding than the "relator should be compensated for all of the ways in which his investment of time, resources, information, and assistance contributed to the Government's recovery." In the end, the Court ruled in favor of the relator, awarding him 20% of the lions share of the recovery.
A. Brian Albritton
3/6/12
I wanted to commend their recent blog discussion of US ex rel Shea v. Verizon Communications, No. 07-111(GK) (D.D.C. Feb. 23, 2012), 2012 U.S. Dist. LEXIS 22776. This very interesting case discusses the criteria for awarding the relator a share of a False Claims Act award and the key contributions that a relator can make to the investigation and resolution of a qui tam. As the Sidley Blog points out, the case highlights a number of contributions by the relator and his counsel that were instrumental to the success of the Government's case. For example, the Court notes that the relator "directed the Government to focus" on two surcharges of the defendant, "thereby enabling the Government to save enormous amounts of lawyer time, auditor time, and staff time." In another instance, the Government solicited the relator to prepare a legal memo explaining why "each surcharge" was prohibited by the applicable law and to rank the surcharges for investigation. The opinion goes on that the relator assisted the Government in drafting subpoenas; identified witnesses; and "participated fully in all aspects of the Government's investigation and settlement" and devoted "hundreds of hours each year on the case." This informative case summarizes the elements and contributions for determining the relator's share of an award.
Notwithstanding the relator's contributions to the case as outlined by the Court, the Government opposed awarding the relator anything more than 16% of the award, or only 1% more than the minimum to which the relator was entitled. The Court criticized the Government for making a "profoundly unfair characterization of the nature and extent" of the contributions of the relator and his counsel and for arguing that the relator's "share of the proceeds depends upon the extent of the [relator's] contribution the case rather than the contribution of his counsel." The Court observed that case law does not base the relator's contribution on just what he or she individually contributed, finding than the "relator should be compensated for all of the ways in which his investment of time, resources, information, and assistance contributed to the Government's recovery." In the end, the Court ruled in favor of the relator, awarding him 20% of the lions share of the recovery.
A. Brian Albritton
3/6/12
Subscribe to:
Posts (Atom)