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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March 31, 2015 11:48 AM | Posted by Nicole Ryan and Christopher Rendall-Jackson | Topic(s): Procedure, Privilege Issues, FL-SD
On March 9, 2015, in United States ex rel. Bumbury v. Med-Care Diabetic & Medical Supplies, Inc., a court in the Southern District of Florida disqualified the relators’ counsel for having a conflict of interest in violation of the Florida Rules of Professional Conduct. read more
March 30, 2015 11:23 AM | Posted by Scott Stein | Topic(s): Rule 9(b), U.S. Supreme Court, 11th Circuit

As we previously reported, the Supreme Court last year declined an invitation to resolve a circuit split regarding how much detail about particularized false claims must be pleaded in an FCA case in order to satisfy Rule 9(b)’s particularity requirement. A new cert petition filed this month asks the Court to take up the issue this term. Last year, in an opinion we wrote about here, the 11th Circuit affirmed in part and overruled in part the dismissal of an FCA complaint under Rule 9(b). The court held that while the relator had not pleaded, and was not required to plead facts regarding specific false claims, he had pleaded other facts that provided sufficient “indicia of reliability” with respect to his claims based on conduct allegedly occurring during his employment by the defendants. By contrast, the court held, the relator had failed to plead sufficient “indicia of reliability” that the conduct continued after his employment ended, and therefore affirmed the dismissal of the post-employment claims. It is the latter ruling with which the cert petition, filed by the relator, takes issue. The question presented in the cert petition is “[w] hether, under Rule 9(b), it is sufficient for a relator under the False Claims Act to plead "particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted" to the government, or whether Rule 9(b)'s particularity requirement precludes the drawing of reasonable inferences that claims were actually submitted”

In the petition considered last year, the Supreme Court requested the Solicitor General’s views. The SG’s brief, while recognizing a circuit split, encouraged the Court to deny cert, and the Court did just that. It remains to be seen whether the Solicitor General will, or will be asked to by the Court, weigh in on the petition. In any event, we will continue to monitor this case and report on important developments.

March 24, 2015 11:49 AM | Posted by Carol Lynn Thompson and Paul Belonick | Topic(s): Public Disclosure, 9th Circuit
On Tuesday, March 17, 2015, the Ninth Circuit Court of Appeals heard two consolidated False Claims Act cases en banc, US ex rel. Hartpence v. Kinetic Concepts, Inc. (12-55396) and US ex rel. Godecke v. Kinetic Concepts, Inc. (12-56117). As discussed here, the challenged district court ruling dismissed the Relators’ cases under the public disclosure bar. In Tuesday’s argument, the Relators urged the court to overturn its holding in U.S. ex rel. Wang v. FMC Corp., 975 F. 2d 1412 (9th Cir. 1992), upon which the district court relied in ruling that an original source must have “played a part in publicly disclosing the allegations and information on which their suits were based” to escape the FCA’s public disclosure bar. The Relators argued that the Supreme Court’s decision in Rockwell Int’l Corp., v. United States, 549 U.S. 457 (2007) abrogated Wang’s “hand in the disclosure” requirement when it held that the “direct and independent knowledge” that a relator must have to qualify as an original source is the information upon which his or her complaint is based, not the information underlying the public disclosure. Defendant-Appellee countered that Rockwell did not disturb Wang’s test, and asked the court not to upset its long-standing precedent. read more
March 16, 2015 11:55 AM | Posted by Kristin Graham Koehler and Joshua Fougere | Topic(s): Public Disclosure, CA-CD
In a peculiar twist on a familiar issue, the United States recently filed a brief taking a broad view of the so-called “public disclosure” bar to argue that the U.S. District Court for the Central District of California lacked subject matter jurisdiction over a relator’s claims. read more
March 13, 2015 2:36 PM | Posted by Amanda Farfel, Ellyce Cooper and Michael Andolina | Topic(s): Legislation
On February 26, 2015, the Senate Committee on Commerce, Science, and Transportation approved the Motor Vehicle Safety Whistleblower Act. The full text of the Motor Vehicle Safety Whistleblower Act can be found here. Introduced by Senators John Thune (South Dakota) and Bill Nelson (Florida), the proposed legislation prescribes certain incentives to whistleblowers who voluntarily provide information relating to motor vehicle defects that are likely to cause unreasonable risk of death or serious physical injury. The proposed whistleblower provisions are very similar to those of the Dodd-Frank Act. read more
March 13, 2015 12:27 PM | Posted by Kristin Graham Koehler and Brian Morrissey | Topic(s): Original Source, PA-ED
A federal district court in Pennsylvania recently held that a former employee of Novartis Pharmaceutical Corporation was an original source of allegations regarding company conduct that occurred after his termination, and that he could overcome the FCA’s public disclosure bar on that ground. See United States ex rel. Galmines v. Novartis Pharmaceuticals Corp., No. 06-3213, 2015 WL 851837 (E.D. Pa. Feb. 27, 2015). read more
March 12, 2015 12:15 PM | Posted by Kristin Koehler

James Cole has joined Sidley’s White Collar: Government Litigation & Investigations practice as a partner in the Washington, D.C. office. Jim comes to Sidley from the Department of Justice, where he served as Deputy Attorney General of the United States. He will focus his practice on the full range of federal enforcement and internal investigation matters, with an emphasis on cross-border and multi-jurisdictional matters.

The press release announcing his arrival is attached here.

March 10, 2015 12:57 PM | Posted by Kristin Graham Koehler and Kaitlyn Findley | Topic(s): Proposed NY Whistleblower Program
On February 26, 2015, New York Attorney General, Eric Schneiderman, announced that he would propose state legislation to “protect and reward employees who report information about illegal activity in the banking, insurance, and financial services industries.” Attorney General Schneiderman’s proposed bill—The Financial Fraud Whistleblower Act—would both incentivize whistleblowers to report suspected securities and other financial frauds and protect them for doing so. In particular, the bill would provide compensation to individuals whose tips lead to more than $1 million in sanctions and would guarantee the confidentiality of whistleblowers’ information. Finally, the bill would provide whistleblowers with explicit legal protection from retaliation by current or prospective employers in response to their participation in New York’s whistleblower program. read more
March 9, 2015 1:25 PM | Posted by Kristin Graham Koehler and Kaitlyn Findley | Topic(s): SEC Whistleblower Program
On February 25, the Wall Street Journal (“WSJ”) reported that the SEC recently sent nonpublic letters to several companies asking them to disclose all confidentiality agreements, nondisclosure agreements, severance agreements, settlement agreements, any documents that “refer or relate to whistleblowing,” and a list of terminated employees since the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) went into effect. read more
March 9, 2015 11:53 AM | Posted by Jaime L.M. Jones and Brenna Jenny | Topic(s): Original Source, Rule 9(b), Discovery, PA-ED, Upcoding, IL-CD
On March 4, 2015, the Central District of Illinois granted a defendant hospital’s motion to dismiss FCA claims based on “upcoding” allegations, holding the relator was not an original source of certain allegations and finding his remaining allegations insufficient to satisfy the requirements of Rule 9(b). U.S. ex rel. Gravett v. The Methodist Med. Ctr of Ill., No. 12-1008 (C.D. Ill. Mar. 4, 2015). In reaching its decision the court rejected relator’s argument that he could be the original source of allegations based on conduct that occurred after he left defendant’s employ, breaking with recent precedent out of the Eastern District of Pennsylvania. See U.S. ex rel Galmines v. Novartis Pharma. Corp., No. 06-cv-03213 (Feb. 27, 2015). read more
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