False Claims Act Statistics, News & Analysis

Made in China: Ninth Circuit Departs from Escobar and Rules Government’s Continued Payment of Claims Despite Knowledge of Chinese Origin of Drugs Not Enough to Defeat Materiality on the Pleadings

Since Escobar, FCA defendants have aggressively litigated materiality. They have asked courts to define when materiality can be defeated by a showing that the government knew of an alleged problem but paid anyway, which Escobar called “strong evidence” of immateriality. The Ninth Circuit in United States ex. rel. Campie v. Gilead Sciences, Inc. issued an opinion on July 7 that might make it more difficult for defendants in that circuit to obtain dismissal at the pleadings stage based on this “government knowledge” challenge to materiality. No. 15-16380, 2017 WL 2884047 (9th Cir. July 7, 2017). Fortunately, Gilead’s materiality ruling can likely be limited to the facts before the Court in that case, where the scope and timing of the government’s knowledge was unclear on the pleadings.

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  • 06
  • July
  • 2017

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False Claims Act Statistics: Is It Trump? Is It Escobar? Whatever It Is, With Only 3 Months Left, DOJ Fiscal Year 2017 Recoveries Are On Track to Fall Well Short of 2016

As the first DOJ fiscal year (mostly) under the Trump Administration flies past and we see round the bend to DOJ FY 2017’s end on September 30, the time has come to see how this year’s bout of DOJ versus Contractors is going as compared to last year. Subject to our usual flurry of methodological caveats, we count a little over $2 billion in recoveries spread out over 135 recoveries for the first nine months of FY 2017. At this time last year, DOJ had recovered $4.1 billion in 229 recoveries. If the match continues apace, without any last minute blockbuster FCA settlements, we predict FCA defendants will have paid roughly $2.7 billion across 180 recoveries by the end of FY 2017. That is well shy of FY 2016’s $4.8 billion recovered over 288 recoveries, and would leave FY 2017 with the lowest dollars recovered by DOJ since FY 2009.

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Short, Sweet, and Unambiguous: Ninth Circuit Cites Safeco and Finds Objectively Reasonable Interpretation of the ITAR Precludes Knowledge

Last week, we discussed developing FCA precedent on liability premised on violations of ambiguous contractual or legal obligations with a focus on the Eleventh Circuit’s Lincare decision. Today, we follow up on that with a look at a recent Ninth Circuit decision affirming a 2015 decision by the District Court for the District of Arizona dismissing a qui tam complaint alleging microelectronic manufacturer Microsemi Corporation and its subsidiary White Electronic Designs Corporation (“WEDC”) violated the FCA by falsely certifying compliance with the International Traffic in Arms Regulations (“ITAR”), which prohibit exporting controlled information without a license.

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District Court Shreds Defendant's Hopes of Summary Judgment on Materiality Due to Government's "Mixed Signals"

In a decision earlier this Spring, the D.C. District Court denied cross-motions for summary judgment in a government-intervened implied false certification suit alleging that defendant Capitol Supply sold document shredders through the General Services Administration (“GSA”) website that did not comply with the Trade Agreements Act (“TAA”) because they were manufactured in China.

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False Claims Act Cert. Monitor: Defendant Asks Court to Resolve Asserted Rule 9(b) Split and Reverse FCA Liability for "Contingent" Obligations

Victaulic, a manufacturer of pipe fittings, asked the Supreme Court in late May to review a Third Circuit decision we have written about twice before in a petition captioned Victaulic Co. v. U.S. ex rel. Customs Fraud Investigations, LLC, No. 16-1398. Victaulic asks the Court to take up two issues: (1) whether Rule 9(b)’s pleading standard requires allegations of an “opportunity for fraud,” of “actual false claims,” or of “particular details of a scheme paired with reliable indicia of fraud,” and (2) whether an alleged failure to pay a “contingent” obligation that arises only after the exercise of discretion by the government is actionable as a reverse FCA claim.

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Specific Representations and Half-Truths Need Not Apply: D.C. District Court Finds Knowingly Billing at "Significantly Higher than Reasonable" Costs Sufficient for Implied False Certification

In a decision many in the defense bar will argue was wrongly decided, the U.S. District Court for the District of Columbia in U.S. v. DynCorp Int’l LLC ruled that knowingly billing for unreasonable costs can serve as the basis for an implied certification claim under the FCA. The court took an expansive view of implied certification that departs from the Supreme Court’s guidance in Escobar and, we would argue, sidesteps the rigorous materiality requirements emphasized by the Court.

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Bon Voyage, US ex rel ABLE v. US Bank: Cert. Denied in CVSG’d Public Disclosure Case

We have been writing about the relator’s cert. petition in U.S. ex rel. ABLE v. US Bank16-130since the earliest days of LLB, but today we say good-bye to that petition about the public disclosure bar because the Supreme Court denied cert, as the Solicitor General recommended.  In other news, because the “ex rel.” might catch some readers’ eyes, we note that the Court also denied cert. in U.S. ex rel. Bauchwitz v. Holloman16-1185, a cert. petition we did not cover because despite being a qui tam, it did not raise FCA issues.

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"Common Sense" and Concealment of Noncompliance Lead Fourth Circuit to Find Triple Canopy Invoices Hit Their Materiality Mark and Were Impliedly False Despite No Specific False Representations

Earlier this week, the Fourth Circuit issued its first substantive post-Escobar implied certification opinion in the closely watched U.S. ex rel. Badr v. Triple Canopy. Prior to Escobar, the Fourth Circuit found that the government’s complaint-in-intervention stated an implied certification FCA claim, causing Triple Canopy to seek cert. After issuing the Escobar opinion, the Supreme Court remanded the case to the Court of Appeals to reconsider in light of Escobar. The Fourth Circuit largely affirmed its prior decision, finding that the government had sufficiently alleged both falsity and materiality. [Disclosure:  Two of the authors of this piece represented amici in support of Triple Canopy’s cert. petition.]

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False Claims Act Cert. Monitor: Attorneys’ Fees, Reverse False Claims, Public Disclosure Bar, and Government Employees as Relators Feature in Three New Petitions

Three new FCA relator cert. petitions have landed in the past few weeks, covering the gamut of FCA legal issues.

First, the relator in U.S. ex rel. Harper v. Muskingum Watershed Conservancy District, 16-1278, takes us back to 1L Property, alleging that the Army in 1949 granted the defendant water district a “determinable fee simple estate subject to a possibility of reverter interest retained by the United States.” In other words, the government gave the water district government land to keep so long as the land was used for recreation, conservation, etc. The relator contends that when the defendant entered into oil and gas leases on the land but kept the land and the lease income, it knowingly and improperly avoided an obligation to return the property and income to the government—i.e., a conversion reverse false claim. The question presented to the Court is whether, for a reverse false claim, the relator needed to plead that the defendant subjectively knew that it was violating the terms of the deed and had not committed a mistake of law. A potential difficulty for this petition, however, is that neither Sixth Circuit’s majority nor the dissent focused on the question of subjective knowledge of mistake of law, but rather on whether the relator pleaded sufficient facts from which the court could infer that the defendant “knew or should have known” of the requirement to return the property. The response is currently due June 26, 2017.

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A Cure for the Common Qui Tam? Escobar’s Materiality Standard and Government Inaction has Pharma Defendant Feeling Good Again

The Third Circuit recently joined the growing number of circuits refusing to find materiality where the government fails to act or intervene in the face of alleged noncompliance. See United States ex rel. Petratos v. Genentech, No. 15-3805 (3rd Cir. May 1, 2017). The D.C. Circuit; First Circuit; and Seventh Circuit all have reached similar conclusions. The Ninth Circuit will address this issue in the coming months in United States ex rel. Rose v. Stephens Institute.

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Franks and the False Claims Act? District Court Uses Familiar Fourth Amendment Remedy to Dismiss Deceptive FCA Case

An “elaborate series of falsehoods, misrepresentations, and deceptive conduct” perpetrated by a relator’s counsel culminated last Friday with dismissal of a relator’s False Claims Act complaint by the U.S. District Court for the District of Massachusetts. In U.S. ex rel. Leysock v. Forest Labs., Inc., No. 12-11354, 2017 WL 1591833 (D. Mass. Apr. 28. 2017),  relator alleged off-label promotion of an Alzheimer drug, and to get over the Rule 9(b) “hump,” relied on a purported nationwide study of physician prescribing practices for the medication.  The study results were featured prominently in the complaint – including details about particular physicians and patients.  Turns out, however, that the “study” at issue was sponsored and directed entirely by relator’s counsel under false pretenses.

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False Claims Act Cert. Monitor: Solicitor General Presents Hurdle to Clearing the Public Disclosure Bar

Several months ago, we reported that the Supreme Court had called for the views of the Solicitor General (“CVSG”) on a relator’s cert. petition about the FCA public disclosure bar in U.S. ex rel. Advocates for Basic Legal Equality, Inc. v. U.S. Bank, N.A. (“ABLE”), No. 16-130. You can read our summary of the case in that blog post here. The Solicitor General has now weighed in.

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Do Pay Attention to the Contracting Officer Behind the Curtain: Court Rules that Government Cannot Conceal Reasons Why Its Own Contracting Officer Dumped Decision on which False Claims Case was Built

Earlier this week, the Eastern District of Michigan took up an important privilege issue with significant Escobar implications. In an opinion issued only six days after oral argument, the district court granted in full a motion to compel discovery by BAE Systems Tactical Vehicle Systems, LP (“BAE-TVS”) relating to a FCA case based on allegations of “defective pricing” under the Truth in Negotiations Act (“TINA”). United States v. BAE Systems Tactical Vehicle Systems, LP, No. 15-12225, 2017 WL 1457493 (E.D. Mich. Apr. 25, 2017). [Full disclosure: your authors are both counsel to BAE-TVS in this matter].

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  • 20
  • April
  • 2017

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The Hundred Years Firm

1917 was a momentous year: the Royal Bank of Canada took over Quebec Bank, Emperor Nicholas II of Russia abdicated his throne thus ending the Russian Empire, and the United States called off its search for Pancho Villa. But did you know that 1917 is also the year that our very own Vinson & Elkins was founded? Not quite as old as the False Claims Act – but almost!

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