A judge in the Western District of Texas recently departed from a magistrate judge’s recommendation, ruling that the novelty of the relator’s FCA claims – which are based on allegations that the defendant medical device manufacturer committed “fraud on the FDA” by seeking clearance for its stent devices based on substantial equivalence with a predicate device, when the defendant allegedly had no intention of marketing its device for the predicate device’s use – could not overcome the failure to otherwise meet all of the requisite criteria for interlocutory appeal. See United States ex rel. Sullivan v. Atrium Med. Corp., No. SA-13-CA-244-OLG (W.D. Tex. Oct. 1, 2015). This suit involves a continued, but as yet unsuccessful, effort to expand the potential basis for FCA liability to fraudulent conduct directed to one government agency separate from the payor agency.
As we previously reported, the DOJ’s recent “Yates Memo” signals a renewed focus by DOJ on individual culpability for corporate wrongdoing. This focus applies to DOJ’s view of what is required to invoke the FCA’s “Cooperation Clause,” 31 U.S.C. § 3729(a)(2), which states that an FCA defendant may be eligible for double damages (rather than treble damages) if: (1) the person committing the violation furnished U.S. officials responsible for investigating the false claims action “with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information,” (2) the person cooperated fully with the government’s investigation, and (3) at the time the person provided information on the violation, no action had commenced with respect to the violation and the person did not have actual knowledge of any investigation into the violation. The Yates Memo states that “the Department’s position on ‘full cooperation’ under the False Claims Act, 31 U.S.C. § 3729(a)(2), will be that, at a minimum, all relevant facts about responsible individuals must be provided.” “To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” If a company “declines to learn of such facts” or to disclose all facts about individual wrongdoers, the company is barred completely from eligibility for reduced damages.