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False Claims Act Statistics, News & Analysis

Back to Basics with the Original Source: Pre-ACA Public Disclosure Bar

With the fate of the Affordable Care Act in question these days, the FCA community nevertheless continues its struggle to understand and cope with the changes wrought to the statute over seven years ago through the 2010 ACA amendments. And yet, due in large part to the quirky nature of the FCA’s sealing provision, which results in cases existing “undercover” for years, application of pre-ACA law remains an occasional necessity. In September, the Eighth and Fifth Circuits each examined the question of what it means to be a pre-ACA “original source,” the saving grace for relators whose allegations would otherwise be subject to dismissal under the public disclosure bar.

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Open Season for FCA Relators? Ninth Circuit Finds Falsity in Gilead Case Despite Possible Discrepancy with Sister Court

We’re back with our second installment on the Ninth Circuit’s decision in United States ex. rel. Campie v. Gilead Sciences, Inc., No. 15-16380, 2017 WL 2884047 (9th Cir. July 7, 2017). If Gilead’s materiality ruling left you scratching your head, then best take a seat now, because the falsity analysis is even more puzzling. But peel back the problematic legal analysis, and what seems to have driven the Ninth Circuit to let this case proceed past the pleadings is that relators alleged specific examples of the defendant having misled the government about the product it was selling. Despite our other criticisms of this opinion, Gilead’s emphasis on alleged specific misrepresentations is a saving grace because it is consistent with Escobar’s two-part implied certification test, which requires (1) a specific representation that (2) is made a misleading half-truth by omission.

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  • 22
  • August
  • 2017

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Government's Trip to Fairyland Comes at a Price: Sixth Circuit Vindicates FCA Defendant's Demand for Attorneys' Fees

The Sixth Circuit on Friday issued a decision holding that where the government had pursued a “nearly frivolous” theory of FCA damages wildly in excess of actual damages, defendants were entitled to recover the costs of defending themselves — even where the fraud itself was substantiated. This decision is welcome news to defendants who may not “prevail” in the common sense of the word (by fending off liability entirely) but for whom the cost of defending is driven disproportionately high by the government’s aggressive and unjustified litigation positions. And in the process, the court cast doubt on some applications of the government’s common “taint” theory of liability, under which it argues that (sometimes minor) frauds deprive the government of the full value of a contract.

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Will Defendants Be Left With the Tab, Even When Government Pays the Bill?: Courts Continue to Wrestle With Post-Escobar Materiality Standard

Potentially adding to continued confusion regarding what to make of materiality in Escobar's wake, two more recent cases — one stemming from the Eastern District of Pennsylvania and the other from the Court of Federal Claims — have addressed when FCA claims fail because the government paid the bill with knowledge of the alleged noncompliance with underlying rules or requirements. In both cases, defendants urged the courts to strike down FCA claims by relying on Escobar’s holding that “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 2003-04 (2016). The Court of Federal Claims, after a trial, agreed with defendants, while the Eastern District of Pennsylvania, on a motion to dismiss, did not.

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A Year after U.S. ex rel. Escobar, Lower Courts Diverge on Key Question in Implied-False-Certification FCA Suits

Just over a year ago, False Claims Act (FCA) watchers eagerly awaited the US Supreme Court’s decision in U.S. ex rel. Escobar v. Universal Health Services, Inc., expecting that it would resolve once and for all whether implied false certification is a valid FCA theory. V&E’s Craig Margolis and Christian Sheehan provide a post-Escobar analysis in an article they recently wrote for Washington Legal Foundation (WLF).

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The Second Circuit Protests Too Much We Think — Disguising Deepening Split on Rule 9(b)

Injecting additional uncertainty into the already-muddled case law regarding what precisely must be pleaded with particularity under Rule 9(b), the Second Circuit in U.S. ex rel. Chorches v. American Medical Response, Inc., No. 15-3930, 2017 WL 3180616 (July 27, 2017), held that a relator need not identify a specific invoice in order to adequately plead that a false claim was presented to the government. While Chorches would seem to deepen a circuit split on Rule 9(b) — one the Supreme Court has repeatedly declined to take up — the Second Circuit goes to great lengths to downplay its existence. According to the Second Circuit, “the reports of a circuit split are, like those prematurely reporting Mark Twain’s death, greatly exaggerated.”

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A Bad Week for Copycat Relators: Fourth and D.C. Circuits Say First-to-File Bars Cases Brought While Earlier-Filed Cases Were Pending Even After Earlier Case Is Dismissed

Defendants facing serial, related qui tam cases should breathe a collective sigh of relief because the Fourth Circuit and the D.C. Circuit have just rejected relators’ efforts to undermine the first-to-file bar. In decisions issued less than a week apart, the D.C. Circuit in U.S. ex rel. Shea v. Cellco Partnership, Nos. 15-7135 & 15-7136, and the Fourth Circuit in U.S. ex rel. Carter v. Halliburton Co., No. 16-1262, both held that the first-to-file bar compels dismissal of actions brought while earlier-filed actions were pending, even if those earlier-filed actions have since been dismissed. Both courts also put the kibosh on those relators’ efforts to evade the first-to-file bar by amending their complaints after dismissal of the earlier-filed action. We’re proud to say that the attorneys of Vinson & Elkins, the same people who bring you LLB, represented the defendants in Carter and an amicus supporting the defendants in Shea.

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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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