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False Claims Act Statistics, News & Analysis

Ding, Dong, the Case is Dead – Which Old Case, the Barko Case

This spring’s winter blast may dampen this year’s cherry blossoms but didn’t dim the spirits of your friends at LLB, especially those who represented KBR in the long-running Barko qui tam case. Huddled indoors on Tuesday, we received an unexpected, but welcome glimmer of sunshine. Over three years after the motion was filed, the district court issued a more than 60-page decision granting summary judgment for KBR. United States ex rel. Barko v. Halliburton Co., et al., No. 05-cv-1276. Judge Royce Lamberth, who penned the decision, is the third district judge to sit on this case since its inception a dozen years ago, having inherited the case (and then-pending summary judgment motion) from Judge James Gwin, who had in turn taken over the case from Judge Emmet Sullivan at the motion to dismiss stage. This non-intervened case, filed under seal in 2005, alleged that KBR violated the FCA in a number of ways, including by accepting kickbacks, rigging subcontractor bids, and billing the government for duplicative or poorly performed work under the LOGCAP cost reimbursement contract under which KBR provided logistical support to the U.S. military during the conflicts in Iraq and Afghanistan.

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  • 10
  • March
  • 2017

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Moody’s Manhandles Materiality: Court Finds Materiality Defeated by Government’s Continued Payment after News Reports and Congressional Hearings

On the heels of the D.C. Circuit’s favorable materiality decision in U.S. ex rel. McBride v. Halliburton, which we wrote about previously, the Southern District of New York on March 2 issued another helpful materiality decision for defendants. In U.S. ex rel. Kolchinsky v. Moody’s Corp., the district court found that congressional investigations and news reports about a relator’s allegations put federal agencies on notice of the relator’s allegations. No. 12-cv-1399, 2017 WL 825478 (S.D.N.Y. Mar. 2, 2017). Because the government paid the defendant’s claims after those public investigations and reports, the court concluded the relator’s allegations failed Escobar’s materiality test.

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D.C. Court Declines to Find U.S. Postal Service Suffered No Damages from Lance Armstrong’s Doping Admissions and Greenlights $100 Million FCA Case for Trial

Just a few short weeks ago, the D.C. District Court issued an opinion ruling on cross-motions for summary judgment in the infamous Lance Armstrong FCA case. United States ex rel. Landis v. Tailwind Sports Corp., No. 10-cv-00976, 2017 WL 573470 (D.D.C. Feb. 13, 2017). This case is premised on allegedly false claims made under sponsorship agreements between the U.S. Postal Service (“Postal Service”) and the cycling team headed by Lance Armstrong because Armstrong and his team members were secretly using performance-enhancing drugs (“PED”) in violation of the terms of the sponsorship agreements. Originally filed under seal in 2010 by former teammate and admitted PED user Floyd Landis, the government has since intervened and now seeks over $32 million in damages, which after trebling and application of penalties could soar as high as $100 million. This amount would likely be paid in large part by Armstrong himself, as the team’s highest-paid rider. The Court’s summary judgment decision sets the stage for an interesting and high-stakes race to the November 6, 2017 trial date.

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A Roll of the Dice: FCA Jury Verdict Finds Over $115 Million in Damages

After betting it all on a federal jury in Florida, four defendants in a non-intervened qui tam FCA action now face more than $347 million in damages. The jury returned a verdict for $115 million, which the court then trebled and tacked on more than $2.4 million in penalties. In United States and Florida ex rel. Ruckh v. CMC II, LLC, et al., 8:11-cv-1303 (M.D. Fl.), the four corporate defendants—CMC II LLC, Salus Rehabilitation LLC, 207 Marshall Drive Operations LLC, and 803 Oak Street Operations LLC—were found to have submitted, or caused to be submitted, false claims to Medicare and Medicaid for patient care that was unneeded, or not supplied at all, at 53 skilled nursing facilities (“SNFs”) in Florida. In rare jury verdicts like this and the verdict we covered last year, the jury’s verdict is only the first bad draw for defendants: trebling, penalties, attorney’s fees, reasonable expenses, and costs are all part of the second wave of misfortune when an FCA defendant loses at trial.

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False Claims Act Cert. Monitor: Second Circuit Case Remanded for Escobar, Three Other FCA Cert. Petitions Denied

On Tuesday, the Supreme Court granted the relators’ petition for certiorari, vacated the judgment below, and remanded (“GVR’d”) in Bishop v. Wells Fargo & Co., No. 16-578, with instructions for the Second Circuit to reconsider its decision in light of the Supreme Court’s decision in Escobar.  As we explained last November, the Second Circuit, following its precedent in Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), had concluded that a general certification of compliance with banking regulations was not an express certification  of compliance with a specific statute, and that because the relevant regulations did not state that compliance was a precondition of payment they could not form the basis of an implied certification  FCA claim.

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"The Benefit of Hindsight": The D.C. Circuit Holds That the Government's Failure to Seek Repayments After Investigating a Relator’s Allegations Is "Very Strong Evidence" of Immateriality

On Friday, the D.C. Circuit issued its first decision applying Universal Health Services, Inc. v. United States ex rel. Escobar. The D.C. Circuit’s decision, United States ex rel. McBride v. Halliburton Co., provides important guidance regarding the False Claims Act’s materiality standard and applies that standard to an implied certification theory.

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Double Dipping: Liability for FCA Violations Doesn't Necessarily End with the DOJ

Last month a federal judge in Tennessee approved a $60 million settlement in a shareholder derivative action brought on behalf of Community Health Systems, Inc., officially resolving five years of litigation. A qui tam FCA action based on the same underlying conduct settled for $98 million in 2014, not including the attorneys’ fees and expenses also owed. Both actions arose from allegations that the company shirked the traditional evidence-based and objective admissions criteria used by most hospitals in favor of more lenient criteria designed to steer patients toward medically unnecessary inpatient admissions. Allowing patients to be treated inpatient rather than outpatient allegedly allowed Community Health Systems to receive hundreds of millions of unwarranted Medicare and Medicaid reimbursements for the inpatient services. The derivative suit plaintiffs claimed that the actions of the officers and directors left the company open to legal liability, including the FCA claims, resulting in substantial harm to the company’s reputation and financial health. This settlement is a cautionary tale for all public companies facing potential FCA claims: liability and fees may not end with a settlement with the DOJ.

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Supreme Court Nominee Judge Gorsuch on the False Claims Act

President Trump recently announced that he was nominating Judge Neil M. Gorsuch to fill the Supreme Court seat vacated one year ago by the death of Justice Antonin Scalia. We at LLB went to work researching what a Justice Gorsuch might mean for future case law construing our favorite statute, the False Claims Act. Here is what we found.

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  • 09
  • February
  • 2017

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Baby, It’s Cold Outside – Federal Hiring Freeze and the Government Contractor

We may be experiencing an unusually warm spring, but for government contractors the outlook is becoming icier and more treacherous as the impact of President Trump’s federal hiring freeze takes shape. The hiring freeze, enacted through an executive order issued on the first full working day of the new administration, applies to all federal civilian employees in the executive branch, with certain enumerated exemptions. Those exceptions include military personnel, personnel deemed “necessary to meet national security or public safety responsibilities,” or specific personnel deemed necessary by the Director of the Office of Personnel Management. During the period of the freeze, no vacant civilian position may be filled and no new positions may be created. This winterization of the federal government is indefinite in length, hinging on the implementation of an as-yet-unformed plan from the Office of Management and Budget “to reduce the size of the Federal Government’s workforce through attrition.”

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  • 07
  • February
  • 2017

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The Ratchet Clicks: DOJ Increases FCA Penalties, Applies Worrisome Retroactivity Rule

Last week, we noted that DOJ missed the January 15 deadline for issuing its annual inflation adjustments to the FCA’s penalties. Perhaps DOJ read our post. Two days later, DOJ released for public inspection its FCA penalty adjustment, which was published in the Federal Register and took effect on February 3, 2017. As expected, DOJ has fallen in line with the Department of Commerce’s (“DOC’s”) earlier FCA penalty adjustment, increasing FCA penalties from between $10,781 and $21,563 to between $10,957 and $21,916.

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False Alarm? Early Tremors of January FCA Penalty Adjustments Followed by Silence from DOJ in Run Up to Change of Administration

UPDATE: DOJ released its annual penalty adjustment on February 2, two days after we put up this post. Click here to see our post about DOJ’s increased FCA penalties and their retroactive reach.

Earlier this month, we reported on the Department of Commerce’s inflation adjustments to the FCA’s penalties from between $10,781 and $21,563 per false claim to between $10,957 and $21,916. At the time, we expected that DOJ and the Railroad Retirement Board (“RRB”) would follow suit by January 15, the adjustment deadline in the statute. 28 U.S.C. 2461 note. While the Federal Register overflowed with penalty adjustments from other agencies for other penalties leading up to and shortly after January 15, to date DOJ and RRB have remained conspicuously silent about adjustments to FCA penalties.

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  • 27
  • January
  • 2017

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Jeff Sessions: Attorney General Nominee a One-Time Qui Tam Lawyer

In our FCA Year-End Review Webinar last November, we predicted that President Trump’s nominee for Attorney General, Sen. Jeff Sessions, would continue to support DOJ’s aggressive efforts at FCA enforcement. Long-time FCA champion and Senate Judiciary Committee Chairman Chuck Grassley confirmed our suspicions at Sen. Sessions’ confirmation hearings earlier this month. Under questioning from Sen. Grassley, not only did our likely future Attorney General express his support for qui tam cases as an “effective method of rooting out fraud” because they “cause[] companies to be more cautious” out of fear of whistleblowers, but he also revealed that in fact he “even filed [a qui tam] [him]self one time as a private lawyer.”

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Just What the Doctor Ordered: First Circuit Curtails Fraudulent-Inducement Theory Where Government Took No Action After Learning of FCA Allegations

In a pro-Defense bar, post-Escobar decision handed down shortly before the holidays, the First Circuit held that a relator could not proceed with an FCA claim based on alleged fraud in the inducement on the Food and Drug Administration because the FDA had not withdrawn or suspended its approval of the defendants’ medical device in response to relator’s allegations. D’Agostino v. ev3, Inc., No. 16-1126, 2016 WL 7422943 (1st Cir. Dec. 23, 2016). The opinion also doubles down on the First Circuit’s Cyberonics decision that we wrote about here, again rejecting as insufficiently particular under Rule 9(b), allegations that identify a fraudulent scheme but fail to show that false claims actually were submitted to the government as a result.

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Litigation Update: Ninth Circuit to Weigh In on Key Post-Escobar Issues

We have reported previously on an implied false certification case in the Northern District of California, United States ex rel. Rose v. Stephens Institute, in which the court considered whether a university violated the FCA when it obtained funding from the U.S. Department of Education by allegedly falsely certifying compliance with Title IV of the Higher Education Act. The university moved to certify the district court’s order ruling against it on falsity and materiality for immediate appeal to the Ninth Circuit, and as we reported here, the district court in October certified three of the university’s four proposed questions for interlocutory appeal and stayed the case pending resolution of the university’s appeal.

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