Amy Deline

20 September 2017

Fifth Circuit Rules In Favor Of Pharmaceutical Manufacturer Based on Relators’ Failure to Establish Causation

Last week, the Fifth Circuit affirmed summary judgment for Solvay Pharmaceuticals Inc. on allegations that the company violated the False Claims Act as a result of off-label marketing efforts and kickbacks to physicians, emphasizing the relator’s failure to demonstrate a causal link between the alleged improper conduct and any false claims. (more…)

13 April 2015

Court Affirms DOJ’s Unfettered Right to Reject Settlement in Lance Armstrong Case

As we have written about on this blog previously, Lance Armstrong’s former teammate, Floyd Landis, filed a qui tam suit alleging that Armstrong’s and his team’s use of performance enhancing drugs and practices violated their sponsorship agreement with the United States Postal Service and thereby defrauded the government of approximately $40 million over six years. Landis brought suit against Armstrong individually, as well as Armstrong’s management company, Tailwind Sports, and his talent agent, Capital Sports & Entertainment Holdings (CSE). The government joined in the claims against Armstrong and Tailwind Sports in February 2013, but declined to intervene against CSE.

Landis and CSE subsequently negotiated a settlement, which was presented to DOJ for approval. However, after DOJ declined to approve the settlement – or to explain why it would not approve the settlement – CSE moved the Court to accept the settlement notwithstanding DOJ’s opposition. However, on April 9, the district court denied the motion. The court held that the False Claims Act affords DOJ essentially unfettered power to veto settlements, even in cases in which it has not intervened. While the D.C. Circuit has not expressly ruled on whether the government’s right to veto a settlement in a non-intervened case is unfettered, several appellate courts that have ruled on the issue have held that it is. Both the Fifth and Sixth Circuits have held explicitly that settlements in non-intervened cases are subject to government approval. See, e.g., Searcy v. Philips Elecs. N. Am. Corp., 117 F.3d 154, 159-60 (5th Cir. 1997) (cited by the District Court here, and reasoning that the government is allowed to “stand on the sidelines and veto a voluntary settlement”). The Ninth Circuit, by contrast, has held that the government’s decision to veto a settlement is reviewable when the government has declined to intervene. See, United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715 (9th Cir. 1994) (reasoning that the government’s settlement veto power exists only while the case is under seal, prior to an intervention decision).

In its opposition to the motion, the government noted that it is willing to continue negotiations to reach settlement terms on which all parties agree. For now, however, Landis and CSE must continue their litigation.

30 June 2014

Court Rejects Application of Wartime Tolling to Qui Tam Claims

The U.S. District Court for the District of Columbia ruled on June 19, 2014 that the Wartime Suspension of Limitations Act (WSLA) does not apply to the FCA. As a result, the court dismissed Floyd Landis’s non-intervened qui tam claims against his former cycling teammate, Lance Armstrong.

As we have discussed previously on the blog, Lance Armstrong is the defendant in a False Claims Act qui tam case brought by Landis alleging that Armstrong and others defrauded the United States Postal Service of approximately $42 million in sponsorship fees between 1995 and 2004 as a result of Armstrong’s use of performance enhancing drugs and practices. Landis filed suit in 2010 and the Government intervened in part back in February 2013. Landis has continued to press forward with those claims on which the Government has not intervened.

In its order on the defendants’ motion to dismiss, the District Court ruled that Landis’s claims are largely time-barred. Principally, the court held that the tolling provision of the FCA does not apply to Landis. Section 3731(b)(2) of the FCA provides that government has up to three years to bring claims after it knows or has reason to know that a violation of the FCA has occurred, even if this extends beyond the law’s six year statute of limitations (up to a maximum of ten years). Despite his arguments to the contrary, Landis, as a whistleblower and not a government official, is not covered by the provision. All but approximately $68,000 of Landis’s claims are therefore time-barred by the law’s six year statute of limitations, and were accordingly dismissed with prejudice.

In analyzing the statute of limitations arguments, the court addressed the applicability of the WSLA to Landis’s claims. The WSLA, in brief, suspends statutes of limitations for offenses involving fraud against the government during wartime. In recent years, the government often has relied on the law to stop the clock from running, arguing that while the U.S. is still at war in Iraq and Afghanistan, it has nearly unlimited time to bring fraud claims. According to a Wall Street Journal article last year, U.S. Uses Wartime Law to Push Cases Into Overtime (April 15, 2013), the government relied on the WSLA twelve times between 2008 and 2012. That is equal to the number of times the government used the law in the preceding 47 years.

Until this month, the wartime law has been invoked with almost complete success in FCA cases. The Landis court, however, found that the WSLA does not apply to the FCA. According to the court, the WSLA only suspends statutes of limitation when the offense at issue requires proof of specific intent to defraud the government. The FCA does not and has not since its amendment in 1986. Therefore, the court found that Landis cannot rely on the WSLA to bring his otherwise stale claims. While other courts have previously limited the reach of the WSLA (e.g., to FCA cases in which the government has intervened; to cases regarding war-related contracts), the District Court is the first to completely reject its applicability to the FCA.

The court’s motion to dismiss order in United States ex rel. Floyd Landis v. Tailwind Sports Corporation, et al., No. 10-cv-976 (RLW) can be found here.

25 November 2013

Cycling and the False Claims Act: Lance Armstrong’s Motion to Dismiss Hearing

Cyclist Lance Armstrong argued last week in federal court to have a False Claims Act qui tam suit against him dismissed as time-barred. The lawsuit, filed in June 2010 by Armstrong’s former teammate, Floyd Landis, alleges that Armstrong, his cycling team, the team manager and others defrauded the United States Postal Service of approximately forty million dollars worth of sponsorship fees between the mid-1990s and 2004 as a result of Armstrong and the team’s use of performance enhancing drugs and practices. Armstrong was stripped of his seven Tour de France titles in August 2012 by the United States Anti-Doping Authority, and admitted to using banned substances on national television in January 2013. The United States intervened shortly thereafter in some of the claims alleged by Landis, and now seeks treble damages.

Last Monday, on November 18, 2013, the federal district court for the District of Columbia heard nearly three hours of arguments in which Armstrong asserted that the Postal Service had constructive knowledge of his doping as early as 2000, when the French racing authorities conducted an investigation and allegations of the team’s drug use were widespread. The Postal Service chose not to investigate the allegations a decade before Landis’s lawsuit, and did not investigate in the subsequent years despite continued doping allegations. According to the defense, the Postal Service turned a blind-eye and renewed Armstrong’s contract because it profited from the publicity gained by the cycling team’s success.

The government’s last sponsorship payment to Armstrong’s team was made in 2004. Based on the timing of that last payment, Armstrong argues that the False Claims Act’s six year statute of limitations expired nine days before Landis filed his claim and now prevents the suit from going forward.

The government argues, however, that it was not on notice of Armstrong’s improper conduct before 2010. The French investigation found nothing, and Armstrong and his cycling team vehemently denied doping allegations and went to extreme lengths to cover up their use of steroids and other prohibited substances. As a result, the Postal Service had no way of knowing about Armstrong’s cheating. The government further argues that professional athletes routinely are accused of doping; such allegations do not inherently warrant an investigation, particularly in this case, when Armstrong and others repeatedly assured the Postal Service and the public that the accusations were unfounded.

The presiding district court judge, Judge Robert Wilkins, indicated during Monday’s hearing that he expects to let some claims go forward and plans to issue his ruling within thirty days.
Landis, a former teammate of Armstrong’s, previously admitted to using banned substances and was stripped of his own Tour de France title. He has been a primary source for the Anti-Doping Authority’s investigation of Armstrong. In August, in connection with a federal deferred prosecution agreement, Landis admitted to defrauding donors contributing to his defense fund when he lied about using performance enhancers. He would receive a portion of the recovery in this case if the government succeeds.

The case, United States ex rel Landis v. Tailwind Sports Corp., et al, 10-cv-00976, is pending in the District Court for the District of Columbia.

15 November 2012

Court Rejects Argument That Contracts Were Too Vague To Satisfy AKS Safe Harbors

A federal district court in Tampa recently rejected a relator’s argument that regulatory safe harbors to the Anti-Kickback Statute (AKS) concerning rental and service arrangements were inapplicable to certain contracts governing the provision of space, equipment, and services on the ground that the contracts were not specific enough.

At issue in United States ex rel. Armfield v. Gills, Case No. 8:07-cv-2374-T-27TBM (M.D. Fla.) is the relationship between an ophthalmologic surgical center and a physician providing preoperative eye examinations within the surgical center complex. The relator contends that the rental, equipment, and services agreements between the center and the leasing physician were intended to induce referrals to the physician, including the relator’s referral for a preoperative examination, in violation of the AKS and False Claims Act. The opinion arose out of the relator’s motion for summary judgment on the defendants’ affirmative defense that the arrangements at issue fall within the AKS regulatory safe harbors governing space and equipment rental and personal services. 42 C.F.R. § 1001.952.

The relator did not dispute the agreements met the basic requirements of the safe harbors. Each challenged arrangement was the subject of a written agreement signed by the parties, negotiated in an arm’s length transaction for a period of not less than a year, and established payments that were set in advance without regard to referrals. Nevertheless, the relator argued that the safe harbors are inapplicable because the descriptions of the space, equipment, and services contained in the agreements are not specific enough. For example, the provided-for space is described within the agreement as “sufficient Space for the rendering of medical services and administration of [the leasing physician’s practice] located at [address],” with Space defined as “exclusive use of private office space sufficient for physician and office manager; exclusive use of an examination area to perform preoperative clearances on Surgery Center patients; exclusive use of an area for the storage of medical records [of the leasing physician’s practice]; and non-exclusive use of common areas including, but not limited to, hallways, waiting areas, rest rooms and kitchen facilities.”

The court found the relator’s contention that the space rental safe harbor requires greater specificity than this unavailing. The same proved true for similarly general descriptions in the equipment and services agreements. In the first instance, the court cited the relator’s own understanding of the financial arrangements and the provided for space, equipment, and services as evidence that they were sufficient. Further, while the court admitted that lesser language might arguably be inadequate, it held, “[n]othing in the regulation requires any more than what is contained” in the agreements. In the absence of any authority to support the relator’s call for more detail, the court concluded that the safe harbors are intended to ensure arrangements that offer “transparency and verifiability,” and the agreements in this case fulfill that purpose. A contrary ruling would have been cause for concern, given that the kind of general language challenged in Gills is not uncommon in these types of contracts.

The court’s order denying summary judgment can be found here.

21 June 2012

HHS OIG Seeks Comment on Revising Provider Self-Disclosure Protocol

On June 18, the Department of Health and Human Services Office of the Inspector General (“OIG”) announced plans to revise its Provider Self-Disclosure Protocol (“SDP”) and asked for public comment and recommendations on potential changes. The SDP, originally adopted in 1998, allows healthcare providers to disclose actual or potential fraud to the OIG in effort to expedite the resolution of any potential claims and conserve the OIG’s limited investigative resources. The SDP provides healthcare entities with guidance not only on the proper disclosure procedure, but on conducting an internal investigation, estimating the financial impact and liability, and cooperating with the OIG throughout the process.

According to the OIG, it has settled over 800 matters in the past 14 years through the SDP process, resulting in more than $280 million in recovery to the federal healthcare programs. These matters often involved healthcare entities reporting the employment of individuals excluded from the federal healthcare programs or disclosing potential kickbacks. For healthcare entities, the possible benefits of the SDP include avoiding an enforcement action under the False Claims Act, the Anti-Kickback Statute, or other relevant law; the presumption against Corporate Integrity Agreements that accompanies the SDP; and settling claims for less than may otherwise occur through civil litigation.

The OIG now hopes to revise the SDP to “address relevant issues” and “provide useful guidance to the healthcare industry.” To similar ends, the OIG previously issued three open letters in 2006, 2008, and 2009 to encourage use of the SDP, clarify its requirements, and expedite the process. This, however, will be the first revision to the SDP itself.

A copy of the OIG’s announcement can be found here. Comments are due by August 17, 2012.

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