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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September 12, 2014 12:03 PM | Posted by Scott Stein | Topic(s): Relators, Counterclaims
A recent federal court decision from the District of New Jersey confirms that while the FCA protects employees’ right to blow the whistle, it does not give them carte blanche to ignore confidentiality obligations or employment agreements. Two former employees of a medical device manufacturer sued their former employer for allegedly promoting a medical device for off-label and medically unnecessary uses. After its motion to dismiss was denied, the manufacturer answered and filed a counterclaim against the former employees for breach of their employment agreements. The relators then moved to dismiss the counterclaims. read more
September 5, 2014 2:49 PM | Posted by Scott Stein | Topic(s): First-to-File, Statute of Limitations
As we previously reported, the Supreme Court has agreed to hear argument next term in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter. The case raises two issues of importance to FCA practitioners: (1) whether the Wartime Suspension of Limitations Act (WSLA) applies to toll the statute of limitations in civil FCA cases, and (2) whether the first-to-file bar ceases to apply once a first-filed case is settled or dismissed. read more
September 4, 2014 11:22 AM | Posted by Scott Stein and Catherine Kim | Topic(s): Express/Implied Certification, Health Care Providers, Public Disclosure, Knowledge/Scienter, Damages
Several circuit courts have recognized the “worthless services” theory of FCA liability, which allows qui tam relators to assert FCA claims premised on the notion that the defendant received reimbursement for goods or services that were worthless. In a recent case, U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., the Seventh Circuit held that assuming the theory is viable in the Seventh Circuit (an issue it declined to decide), it does not apply to situations in which deficient performance of a contract is alleged to have resulted in services “worth less” than what was contracted for. As the court succinctly put it, “[s]ervices that are ‘worth less’ are not ‘worthless.’” read more
August 29, 2014 1:25 PM | Posted by Nicole M. Ryan and Ryan G. Fant | Topic(s): Settlement, Procedure
In United States ex. rel. Lisitza v. Par Pharmaceutical Cos., Inc., No. 06 C 06131 (N.D. Ill. July 31, 2014), a federal district court in Illinois rejected a drug manufacturer’s argument that the doctrine of res judicata barred an FCA suit based on many of the same underlying false claims involved in a previously-settled FCA suit. The Court held that res judicata did not apply because the fraudulent schemes alleged in each case were different and there were elements of damage available in the second suit that were not resolved by the first suit. read more
August 27, 2014 1:52 PM | Posted by Carol Lynn Thompson and Chris Rendall-Jackson | Topic(s): Public Disclosure
On July 28, 2014, the Seventh Circuit another decision in a string of recent decisions by that court restricting the scope of the public-disclosure bar. read more
August 26, 2014 4:48 PM | Posted by Scott Stein and Brenna Jenny | Topic(s): Anti-Kickback Statute, Knowledge/Scienter
The Southern District of Ohio recently granted defendants’ motion to dismiss in a FCA case based on alleged violations of the Anti-Kickback Statute (“AKS”) through “swapping.” Swapping allegations can take a variety of forms; here, relator claimed that defendant Mobilex (a provider of mobile, on-site x-ray services to Skilled Nursing Facilities (“SNFs”) and long-term care facilities) deeply discounted its services for Part A beneficiaries while charging higher rates to services for Part B beneficiaries. Because Mobilex’s clients are reimbursed on a per diem basis for the x-rays provided to Part A beneficiaries, the facilities allegedly received remuneration in the form of pocketing the extra discount on Part A services. This remuneration, according to relator, was intended to induce facilities to refer to Mobilex the opportunity to provide x-rays to Part B residents as well, at non-discounted prices. read more
August 19, 2014 11:51 AM | Posted by Jay Zimbler | Topic(s): Settlement, Taxes
Last week, in Fresenius Medical Care Holdings, Inc. v. United States, No. 13-2144, __ F. 3d __ (1st Cir. Aug. 13, 2014), the Court of Appeals for the First Circuit affirmed a district court opinion that had allowed a defendant in an FCA action to deduct for federal income tax purposes amounts in excess of both single damages and relator payments. This affirmance is of considerable import because, in a well-reasoned opinion, the First Circuit expressly rejected the government’s “Catch-22” argument that the ability of a taxpayer to deduct at least a portion of this excess was precluded by the absence of an agreement between the parties. read more
August 18, 2014 11:58 AM | Posted by Scott Stein and Joe Dosch | Topic(s): Original Source, Public Disclosure, Procedure
On August 7, 2014, the Eighth Circuit affirmed the dismissal of a qui tam False Claims Act suit, and in doing so offered helpful guidance regarding the proper application of the public disclosure bar (while highlighting an open issue regarding public disclosure). The court also addressed whether consideration of materials outside of the pleadings automatically requires the court to treat a motion to dismiss on public disclosure grounds as a motion for summary judgment. read more
August 7, 2014 1:30 PM | Posted by Kristin Graham Koehler and Elizabeth Kolbe | Topic(s): Dodd-Frank
Almost four years after the passage of the Dodd-Frank Act, two recent developments suggest that clarifications regarding the whistleblower anti-retaliation provisions may be around the corner. read more
August 5, 2014 12:00 PM | Posted by Kristin Graham Koehler and Paul Sampson | Topic(s): Minority Business Enterprise
Government investigators have continued to hone in on one particular type of business arrangement—the use of so-called minority or disadvantaged business enterprises (“MBEs” and “DBEs”) to secure government contracts. Myriad state and federal contracts require MBE or DBE participation, or at least grant advantages to MBE or DBE bidders. As recent prosecutions have demonstrated, businesses have used MBEs or DBEs to win lucrative government contracts, only to perform the work themselves and retain all – or virtually all – of the money the government had intended for the MBEs or DBEs. read more
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