Welcome to Original Source: The Sidley Austin False Claims Act Blog

The False Claims Act (FCA) has long been a key enforcement tool for the federal government in matters involving government contracts or other expenditures of government funds. FCA enforcement has traditionally focused primarily on two industries receiving a substantial amount of government funds: healthcare and defense and other government contractors. Recently, however, FCA enforcement has expanded to other industries, including financial services. Through the False Claims Act Blog, lawyers in Sidley’s White Collar, Healthcare, FDA, Government Contracting, Financial Services, Appellate, and other practices will provide timely updates on new and interesting developments relating to FCA enforcement and litigation.

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July 3, 2015 9:43 PM | Posted by Kristin Graham Koehler and Brian P. Morrissey | Topic(s): Discovery, IL-ND, Confidentiality Agreements
Last week, a federal district court addressed a question that often arises in False Claims Act litigation: Can a qui tam relator who files suit against his employer be compelled to return company documents that he possesses in violation of company policy or a confidentiality agreement? In Shmushkovich v. Home Bound Healthcare, Inc., No. 12-C-2924 (N.D. Ill. June 23, 2015), the district court held that the relator was not required to return such documents, so long as they were relevant to his claims. read more
June 29, 2015 6:01 PM | Posted by Kristin Graham Koehler, Scott Stein, Brenna Jenny | Topic(s): Settlement, Procedure, Upcoding, Sampling, SC-D
A judge in the District of South Carolina has invited the Fourth Circuit to become the first appellate court to rule on when statistical sampling can appropriately be used to establish FCA liability. The district court also certified for interlocutory appeal the question of whether the Attorney General’s decision in a non-intervened qui tam suit to reject a proposed settlement is subject to judicial review, an issue on which the circuit courts are split. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 12-3466 (D.S.C. June 25, 2015). Both issues became intertwined in this case when the government rejected a $2.5 million settlement agreed to by the defendants and the relator, citing its own extrapolated calculations (based on an undisclosed statistical sampling) as the basis for concluding that damages to the government were $25 million, and that the settlement was therefore inadequate. The resolution of these questions has the potential to significantly impact bargaining dynamics when investigating and negotiating resolutions to qui tam suits. read more
June 16, 2015 1:44 PM | Posted by Scott Stein and Emily Van Wyck | Topic(s): Relators, Privilege Issues, MS-SD
Whether and under what circumstances an attorney can act as a whistleblower is one of the most controversial subjects under the False Claims Act. We wrote previously about a Second Circuit case in which the court dismissed an FCA case brought against a company by its former general counsel on the ground that the attorney had violated his ethical obligations to his former client. See “Second Circuit Affirms Dismissal of False Claims Act Suit Brought By Clinical Laboratory Defendant’s Former General Counsel”. Now another district court has disqualified an attorney whistleblower who sued his client’s adversary, holding that, in doing so, the attorney had violated duties of confidentiality and loyalty to his own client. See United States ex rel. Holmes v. Northrup Grumman Corp., No. 1:13-cv-00085-HSO-RHW (S.D. Miss. June 3, 2015). read more
June 16, 2015 12:01 PM | Posted by Jaime L.M. Jones and Brenna Jenny | Topic(s): Pharmaceuticals, Worthless Services, GMP, Implied Certification, CA-ND
On Friday, the Northern District of California dismissed with prejudice claims alleging that a failure to obtain supplemental approval for major changes in manufacturing processes created FCA liability. U.S. ex rel. Campie v. Gilead Sciences, Inc., No. 11-0941 (N.D. Cal. June 12, 2015). The court also adopted a narrow reading of “worthless services” in the context of pharmaceutical products. Together, these holdings deal a significant blow to those seeking to premise FCA suits on violations of current Good Manufacturing Practices (“cGMPs”). read more
June 12, 2015 11:15 AM | Posted by Jaime L.M. Jones and Brenna Jenny | Topic(s): Public Disclosure, CA-CD
A decision earlier this month by the Central District of California that the public disclosure bar had been triggered marked an unusual ruling in which the court determined that a whistleblower whose allegations led to an administrative investigation may be precluded from sharing in the settlement funds due to the disclosure of the resulting report to the relator himself. United States ex rel. Swoben v. SCAN Health Plan, No. 09-cv-05013 (C.D. Cal. June 1, 2015). read more
June 10, 2015 12:33 PM | Posted by Scott Stein, Max Fischer and Joe Cooper | Topic(s): Retaliation, PA-WD
In a case raising an issue of first impression, a court recently held that an employer can be held liable under the FCA’s retaliation provisions for adverse action taken against an employee based on that employee’s protected activity against a prior employer. Cestra v. Mylan Inc., et al., No. 14-825, 2015 U.S. Dist. LEXIS 67069 (W.D. Penn. May 22, 2015). Acknowledging that its decision was an unprecedented expansion of existing law, the district court also certified its decision for interlocutory review by the Third Circuit. read more
June 5, 2015 3:56 PM | Posted by Jaime Jones and Bevin Seifert | Topic(s): State/Local FCA
On May 12, 2015, Maryland Governor Larry Hogan signed into law Senate Bill 374, an expansion of the Maryland False Claims Act (“MFCA”), which took effect on June 1, 2015. The prior version of the MFCA was limited to Medicaid and healthcare-related fraud, whereas the new law covers any claims made to the state or to local government. read more
May 29, 2015 10:14 AM | Posted by Scott Stein and Brenna Jenny | Topic(s): Health Care Providers, Procedure, Knowledge/Scienter, AL-ND, Sampling
A court in the Northern District of Alabama recently granted defendant AseraCare’s motion to bifurcate its trial, limiting the government in the first phase to proving the element of falsity as to its sample of claims. read more
May 28, 2015 12:21 PM | Posted by Scott Stein and Bevin Seifert | Topic(s): Anti-Kickback Statute, Rule 9(b), Clinical Laboratories, GA-ND

Posted by Scott Stein and Bevin Seifert

On May 19, 2015, a federal district court in the Northern District of Georgia dismissed kickback allegations against Laboratory Corporation of America and Laboratory Corporation of America Holdings (“LabCorp”), holding that the allegations fell short of the particularity required by Rule 9(b). The relators—competitors of LabCorp—alleged that LabCorp’s pricing practices violated Georgia’s state false claims act and were independently unlawful under the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2)(A). Relators alleged that LabCorp violated the AKS by providing “deeply discounted” prices to customers to induce them to refer (or “pull-through”) large volumes of Medicaid and other business. The court found, however, that relators failed to allege those claims with particularity because they did not identify a single improper referral to a physician, nor a specific Medicaid claim resulting from such referral. Moreover, the court held that relators failed to identify a specific kickback, finding that allegations of specific discounts alone were insufficient to establish a referral or claim resulting from such referral. Having disposed of the federal AKS claims, the court declined to exercise supplemental jurisdiction over plaintiffs’ state law claims and, therefore, remanded the remaining claims to the State Court of Fulton County, Georgia. A copy of the court’s decision can be found here.

May 27, 2015 1:20 PM | Posted by Ellyce Cooper and Patrick Kennell | Topic(s): Privilege Issues, D.C. Circuit, DC-D
The ongoing saga regarding privilege and work product issues continues in United States ex rel. Barko v. Halliburton Co., No. 05-cv-1276 (D.D.C. 2005). (Our previous blog posts on the case can be found here, here, and here.) As we previously reported, in June of 2014, the D.C. Circuit ordered the lower court to reconsider its order that Halliburton turn over to the relator the results of an internal investigation. The D.C. Circuit held that “[s]o long as obtaining or providing legal advice was one of the significant purposes of the internal investigation, the attorney-client privilege applies, even if there were also other purposes for the investigation.” In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) (emphasis added). However, the court directed the District Court to examine the other reasons advanced by the relator as to why the documents at issue were “not covered by either the attorney-client privilege or the work product doctrine.” Id. at 764. read more
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