We previously reported on the Supreme Court’s invitation to the Solicitor General to weigh in on whether the Court should grant certiorari in an important case involving the pleading standards in FCA cases. U.S. ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al., Dkt. No. 12-1349 (Oct. 7, 2013). In a recent brief, the Solicitor General argued that since the issue of whether a relator must identify specific false claims in order to meet the pleading requirements of 9(b) is still being considered by various lower courts, the Court should decline to grant certiorari at this time. read more

On February 21, 2014, the Fourth Circuit upheld the dismissal of a former employee’s False Claims Act suit against Omnicare, Inc. (“Omnicare”), holding that while the relator alleged violations of certain Food and Drug Administration (“FDA”) regulations by Omnicare’s subsidiary, Heartland Repack, his failure “to allege that the defendants made a false statement or that they acted with the necessary scienter” was fatal to his claim. read more

On February 10, 2014, following a recent jury finding that pipemaker J-M Manufacturing (“J-M”) was liable for damages in a False Claims Act suit initiated by former employee John Hendrix, J-M filed a complaint in the Superior Court of New Jersey, Middlesex County, alleging that the whistleblower and his counsel, Phillips & Cohen LLP (“P&C”), conspired to misappropriate confidential, proprietary, and trade secret information in furtherance of the qui tam lawsuit. read more

In many FCA cases, the potential liability for civil penalties is vastly higher than potential damages, even after trebling. For that reason, defendants have asserted various challenges, including Constitutional challenges, to the applicability or imposition of civil penalties. In a February 6 opinion, U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, a district court in Florida rejected the argument that a relator who foregoes a claim for damages, and seeks only civil penalties under the FCA, lacks Article III standing. Relying primarily on the Supreme Court’s 2000 opinion in Vermont Agency of Natural Resources, the district court concluded that the long tradition of qui tam actions – including those for recovery of civil penalties – dating back centuries, which was cited in Vermont Agency, supported the conclusion that qui tam suits seeking recovery of civil penalties only are properly understood to be “cases” or “controversies” within the meaning of Article III. The district court also cited in support the December 2013 opinion in U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., in which the Fourth Circuit held that relators have standing to pursue qui tam claims for civil penalties, even in the absence of any claim for damages. As we previously reported, the Fourth Circuit in that case also rejected Constitutional challenge to imposition of civil penalties under the Eighth Amendment, holding that imposition of $24 million in civil penalties in the absence of any damages did not violate the Eighth Amendment’s prohibition against excessive fines.

^{Posted by Kristin Graham Koehler and Brian P. Morrissey}

Sidley lawyers Kristin Graham Koehler and Brian Morrissey have authored an article as a part of the Washington Legal Foundation’s Counsel’s Advisory series, entitled “Circuit Court Affirms High Pleading Standard For ‘Induced’ False Claims Qui Tam Actions.” The article examines the First Circuit’s recent ruling in United States ex rel. Ge v. Takeda Pharmaceutical Co., 737 F.3d 116 (1st Cir. 2013), a closely-watched case in which the relator alleged that a pharmaceutical manufacturer violated the FCA by failing adequately to comply with the FDA’s adverse-event reporting rules for pharmaceutical products. The First Circuit punted on the key issue that drew so much attention to the case, declining to decide whether a violation of FDA’s adverse-event reporting rules can be the basis for FCA liability. The Court nonetheless used the case as an opportunity to reemphasize the important principle that a qui tam relator cannot rely on a mere inference that false claims “necessarily follow” from a defendant’s alleged violation of a federal law or regulation; the relator must present specific “factual or statistical evidence” to justify that inference. Holding that the relator failed to carry that burden, the First Circuit affirmed dismissal of the case on Rule 9(b) grounds.

The article is available for download on the Washington Legal Foundation’s website: http://www.wlf.org/publishing/publication_detail.asp?id=2417.

Last week, the Supreme Court of Louisiana reversed a $330 million judgment ($258 million in penalties, $70 million in attorney fees, and $3 million in costs) against Johnson & Johnson and its subsidiary, Janssen Pharmaceutical, because there was no evidence that “any defendant made or attempted to make a fraudulent claim for payment against any Louisiana medical assistance program within the scope of [the Louisiana Medical Assistance Programs Integrity Law (‘MAPIL’)]”—a state statute based on the federal False Claims Act. Caldwell ex rel. State v. Janssen Pharmaceutical, Inc., Nos. 2012-C-2447, 2012-C-2466, 2014 WL 341038, slip op. at 1-2, 19-20 (La. Jan. 28, 2014) read more

Earlier this month, the West Virginia House Judiciary Committee approved a State False Claims Act by a 15-9 vote, advancing the bill for consideration by the full House. If enacted, the bill would add West Virginia to the list of over 30 states that currently have False Claims Act legislation in place. read more

In a case decided last week, United States ex rel. Lesinski v. South Florida Water Management District, No. 12-16082, 2014 U.S. App. LEXIS 14 (11th Cir. January 2, 2014), the Eleventh Circuit Court of Appeals affirmed the dismissal of a qui tam suit against the South Florida Water Management District, holding that the District is an arm and instrumentality of the state of Florida, and therefore not a “person” under the False Claims Act. read more

In December, the Department of Justice announced that the number of False Claims Act qui tam suits filed in 2013 grew significantly. 752 were filed in 2013 -- over 100 more than the prior record established last year. These numbers indicate that both DOJ and private whistleblowers, whom the statue allows to file suit on behalf of the government, are bringing FCA cases with increasing frequency. read more

As we previously reported, a federal court in Virginia last year held that the minimum statutory civil FCA penalties were unconstitutionally excessive in light of the facts before it, and refused to impose any penalties. U.S. ex rel. Bunk v. Birkard Globistics GMBH (E.D. Va. Feb. 14, 2012). On December 19, the Fourth Circuit reversed and remanded the district court’s decision to enter no penalties with an instruction to award the plaintiff $24 million – the amount relator Bunk previously had expressed a willingness to accept. United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369, slip op. 30 (4th Cir. Dec. 19, 2013). read more