By

Monica Groat

15 March 2016

Seventh Circuit Re-Affirms That Disclosure to Government Officials Constitutes Public Disclosure, But Suggests It May Be Open to Reconsidering That View

On February 26, 2016, the Seventh Circuit refused to revive a public interest group’s False Claims Act suit alleging that the Chicago Transit Authority (CTA) misreported transit data to gain additional federal grant allocations.  The three-judge panel upheld the district court’s dismissal of the suit, which accused the CTA of over-reporting bus mileage to secure up to $55 million in inflated grant allocations.  The district court found that the group’s accusations had already been publicized in a state performance audit report and federal agency letter, and the Seventh Circuit agreed that the relator, public interest group Cause of Action, failed to establish subject-matter jurisdiction under the FCA’s public-disclosure bar, which limits jurisdiction over qui tam actions based on allegations that already have been disclosed publicly through certain sources unless the relator is an “original source” of the information.  See Cause of Action v. Chicago Transit Authority, No. 15-1143 (7th Cir. Feb. 29, 2016).

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23 October 2015

Hitting Reset, District Court Raises the Bar for Public Disclosure Defense

On October 6, 2015, the U.S. District Court for the District of Columbia allowed relator Stephen Shea to refile his case against Verizon in order to avoid the False Claims Act’s first-to-file bar.  See U.S. ex rel. Shea v. Verizon Business Network Services et al., No. 09-1050-GK (D.D.C. Oct. 6, 2015).  By allowing Shea to refile, the District Court took an important stance on the FCA’s public disclosure bar that may make it more difficult for future defendants to advance the bar.

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21 July 2015

Court Sides with Armstrong in Document Dispute Involving Defendants’ Prior Counsel

On July 13, 2015, the District Court for the District of Columbia sided with cyclist Lance Armstrong and his former attorneys, Williams & Connolly, LLP, in their efforts to oppose relator Floyd Landis’ attempt to compel Williams & Connolly to comply with a subpoena for communications among the firm, Armstrong, and Armstrong’s agents, Capital Sports and Entertainment Holdings Inc. (CSE).  A copy of the court’s order can be found here.

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07 July 2015

Document Dispute in Armstrong Litigation Raises Privilege and Burden Concerns for Defendants’ Prior Counsel

Posted by Kristin Graham Koehler, Monica Groat, and Hilary Hoffman (Summer Associate)

In June 2010, relator Floyd Landis (Lance Armstrong’s former cycling teammate) brought a False Claims Act lawsuit against Armstrong, Armstrong’s agents Capital Sports and Entertainment Holdings Inc. (CSE), and Tailwind, Armstrong’s former employer. We have previously discussed the Armstrong litigation on this blog here, here, here, here, and here.

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06 July 2015

District Court Refuses to Reconsider Bifurcation of Trial between Proof of Falsity and Other FCA Elements

Posted by Kristin Graham Koehler, Monica Groat, and Marina Romani (Summer Associate)

As we have previously discussed on this blog, a court in the Northern District of Alabama last month granted AseraCare’s motion to bifurcate its trial. On June 25, 2015, the court refused the Government’s request to reconsider that decision.

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26 May 2015

As Expected, Supreme Court Issues Split Decision in KBR v. Carter

Posted by Scott Stein and Monica Groat

Today the Supreme Court issued its opinion in Kellogg Brown & Root Services, Inc. et al. v. U.S. ex rel. Carter, a case we have written about extensively here, here, here, and here. In a unanimous opinion authored by Justice Alito, the Court held that the Wartime Suspension of Limitations Act (WSLA) does not apply to toll the statute of limitations in civil FCA cases, rejecting the position advanced by the relator and the Department of Justice. However, relators will find solace in the portion of the Court’s ruling holding that the first-to-file bar applies only so long as a first-filed case is active and pending, and ceases to apply when the first-filed case is settled or dismissed. A copy of the Court’s decision can be found here.

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14 January 2015

Oral Argument Suggests A Mixed Result in Carter

Posted by Scott Stein and Monica Groat

Yesterday, the Supreme Court heard oral argument in Kellogg Brown & Root v. Carter, a case which raises two important issues under the False Claims Act: (1) whether the Wartime Suspension of Limitations Act (WSLA) applies to toll the statute of limitations in civil FCA cases, and (2) whether a first-filed case is still deemed to be “pending” within the meaning of the FCA, barring any subsequently-filed suit, even after the first-filed case is settled or dismissed. We have previously written about this case here, here, and here. Though it is always precarious to predict the outcome of a case based on oral argument, the questioning at the argument suggests that while many of the justices were receptive to KBR’s argument that the WSLA does not apply to civil FCA claims, the relators and DOJ appeared to have the upper hand with regard to the scope of the first-to-file bar.

The lawyer for petitioner Kellogg Brown & Root (KBR) framed the first question before the Court as “whether Congress changed [the WSLA] along the way to make it civil” when the statute was amended in 1944 to delete the phrase “now indictable” from the phrase “offenses now indictable,” referencing the scope of actions to which the statute’s tolling provisions applied. Most members of the Court seemed skeptical of the arguments advanced by both respondent Carter and the Solicitor General that these amendments were intended to broaden the scope of the WSLA to apply to both criminal and civil matters. The Justices appeared to be far more receptive to KBR’s argument that Congress removed the phrase “now indictable” from the WLSA to ensure that the statute operated prospectively, and added the word “any” to clarify that the statute was applied to any offenses “against the United States.”

Carter’s lawyer and the Deputy Solicitor General arguing on behalf of the United States as amicus curie advanced several arguments in favor of reading the 1944 amendments to expand the WSLA to civil matters, but the Justices did not appear particularly receptive. Several of the Justices appeared wary of the argument advanced by both Carter and the Solicitor General that the use of the term “offenses” used in the WSLA and other sections of Title 18 of the United States Code could be read to refer to civil offenses.

The parties spent less time addressing the first-to-file bar. KBR’s attorney argued that if the Court found in KBR’s favor on the WLSA argument, it would not need to address the first-to-file issue at all. KBR did maintain the argument advanced in its briefs that the FCA’s first-to-file bar continues to apply to any subsequently filed suit even after a first-filed case is settled or dismissed. However, a number of justices appeared skeptical of this argument. Justice Kennedy noted that KBR’s arguments “give no significance of the word ‘pending'” and “almost write that out of the statute.” Justice Sotomayor and other justices suggested that the original source provision provided adequate protection from non-meritorious second-filed suits. Justice Ginsburg seemed more receptive to the argument that the first-to-file bar creates a race to the courthouse that incentivizes relators to bring information to the Government’s intention and may ultimately incentivize settlement.

A number of justices expressed concerns about whether the relator in a second-filed non-intervened suit would be bound by an adverse judgment against the relator in a first-filed non-intervened suit. To assuage those concerns, the Deputy Solicitor General argued that the United States, and any relator in a second-filed suit, would be bound by an adverse judgment in a non-intervened suit by a first-filed relator. This is actually a significant concession that runs directly contrary to the position that DOJ routinely takes in lower courts around the county – an issue we plan to cover in a separate post.

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A decision in Kellogg Brown & Root is expected by June 2015, and we will provide an update when it is available.

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02 December 2014

Reply Brief Filed in Supreme Court Case Concerning Statute of Limitations & First to File Bar; Case Set for Argument

Posted by Kristin Graham Koehler and Monica Groat

As we previously have written about, the Supreme Court has agreed to decide two important issues relating to the FCA in Kellogg Brown & Root v. Carter: (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. Earlier this month, petitioners KBR Inc. and Halliburton Co. (collectively, KBR) filed their reply brief.

With respect to the application of the WSLA to civil FCA cases, KBR asserted that the relator Benjamin Carter and the Solicitor General (participating as amicus curiae) fundamentally have misinterpreted the statutes by ignoring the text, structure, history and purpose of the Act and suggesting that the WSLA’s references to an “offense” include civil violations as well as criminal offenses. Rejecting the argument that amendments to the statute have expanded its scope, KBR maintained that “Congress has repeatedly amended the WSLA to ensure symmetry with the criminal, not civil, statute of limitations.” The petitioners also rejected several policy arguments in favor of applying the WSLA to the FCA, including the Government’s argument that evidence for FCA cases may be difficult to obtain during times of war. KBR noted that “[m]ost FCA claims involve domestic conduct unrelated to war” and that the “record number” of FCA cases suggests that “wartime exigencies are not impairing the government and relators.” The petitioners also noted that the effect of the WSLA on FCA litigation can already be felt; the Government has begun to frequently invoke the statute, including “in cases having nothing to do with war.”

Regarding the FCA’s first-to-file bar, KBR argued that the FCA’s text, structure, and purpose cannot and should not be read to permit a relator to re-file a complaint after an earlier case is dismissed or settled. The petitioners also rejected several arguments in favor of additional flexibility for both relators and the Government.

KBR thus urged the Court to reverse the Fourth Circuit’s decision, which, according to the petitioners, read both the FCA and the WSLA to “effectively repeal[ ] the statute of limitations for claims of civil fraud against the government in the post-9/11 world, and give[ ] private relators leave to re-file duplicative claims indefinitely.”

The case is now fully-briefed and has been set for oral argument on Tuesday, January 13, 2015. The Solicitor General requested and was granted leave to participate in the argument as an amicus curiae on behalf of the respondent. A decision in this important FCA case is expected by June 2015.

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01 December 2014

DOJ Announces Nearly $6 Billion in Fraud Recoveries During 2014

Posted by Kristin Graham Koehler and Monica Groat

On November 20, Acting Associate Attorney General Stuart F. Delery and Acting Assistant Attorney General Joyce R. Branda announced that the Department of Justice recovered a record $5.69 billion in settlements and judgments from civil cases involving alleged fraud against the Government in fiscal year 2014. This figure represents the highest annual total recovery and an increase of nearly $2 billion over the Government’s recovery in fiscal year 2013.

Recoveries from the financial industry accounted for the most significant proportion of fraud-related recoveries, representing $3.1 billion of the total $5.69 billion. This amount was more than double the previous record for recoveries from banks and other financial institutions, which paid $1.4 billion in fiscal year 2012. Healthcare fraud represented the second largest area of recovery; DOJ recovered $2.3 billion from pharmaceutical and device manufacturers, hospitals, and other healthcare providers. Fiscal year 2014 was the fifth straight year during which the Government has recovered more than $2 billion in cases involving false claims against federal healthcare programs, including Medicare and Medicaid.

Of the $5.69 billion recovered this year, nearly $3 billion related to lawsuits filed under the FCA’s qui tam provisions, and relators recovered $435 million. The number of FCA qui tam suits filed in 2014 decreased slightly: 713 suits were filed in 2014, compared with 754 in 2013. These numbers indicate that both DOJ and private relators are continuing to bring FCA cases; although the volume of cases did not increase, recoveries by both the Government and relators increased. The announcement also confirms that DOJ is continuing to aggressively pursue fraud cases, with a continuing interest in healthcare fraud and an increasing focus on the financial industry.

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26 June 2014

Court Order Compelling FCA Defendant to Produce Documents Previously Produced to HHS OIG Warns of Limitations of Confidentiality Agreements

Posted by Kristin Graham Koehler, Monica Groat, and Morgan Branch (Summer Associate)

On May 29, 2014, the United States District Court for the Southern District of Illinois ordered K-Mart Corporation to produce documents to a relator pursuant to a motion to compel in a case brought under the False Claims Act. See United States ex rel. Garbe v. Kmart Corp., 2014 WL 2218758 (S.D. Ill. May 29, 2014). The court found that, despite the existence of a confidentiality agreement between K-Mart and the government, potentially privileged documents produced by K-Mart in cooperation with a separate government investigation were discoverable by the relator by virtue of prior disclosure.

In 2009, the Office of Inspector General (OIG) for the Department of Health and Human Services began an investigation into possible improper Medicare claims submitted by K-Mart. In response to a subpoena, K-Mart and outside counsel produced 8,400 documents to OIG, including a subset of Medicare transactional data. This data was produced in an easier-to-understand format in order to foster cooperation with OIG. Prior to production, K-Mart and OIG agreed that “confidential proprietary” business information – information typically protected pursuant to a protective order under Federal Rule of Civil Procedure 26(c)(G) – would be protected from disclosure.

In a separate False Claims Act case, which was filed under seal during the OIG investigation, Relator Garbe requested all documents that K-Mart had produced to OIG. K-Mart complied, with two exceptions: (1) the transactional data described above, and (2) documents shared with a U.S. Attorney’s Office during settlement negotiations. Garbe moved to compel the production of both the data and the settlement documents. With respect to the data, K-Mart argued that the doctrine of selective waiver should apply and that the data should remain protected as attorney work product.

The court was not convinced and ordered K-Mart to produce the transactional data. Magistrate Judge Frazier found that K-Mart forfeited protection of the data under the attorney work product privilege when it was produced to OIG, reasoning that knowing disclosure to a third party “almost invariably surrenders the privilege.” The court stated that K-Mart should not be permitted to “pick and choose” the circumstances in which it waived work product protection and, despite the confidentiality agreement with OIG, found that K-Mart did not take sufficient steps to preserve the privilege and qualify for selective waiver. Reviewing the agreement, Judge Frazier noted that the confidentiality agreement did not contain the words “attorney,” “work product,” or “privilege,” and was targeted at protecting sensitive business information, not attorney work product. With respect to the settlement documents, the court found that these documents need not be produced in accordance with Federal Rule of Evidence 408.

This decision is a reminder to companies and their outside counsel to proceed with caution when disclosing potentially privileged material in an attempt to cooperate with government entities like HHS OIG. The advantages of cooperation should be weighed against the possibility that any information disclosed may be subsequently disclosed to other enforcement agencies or an FCA relator. When the advantages of cooperation outweigh the potential downsides, counsel should secure a confidentiality agreement with the relevant agencies (to the extent possible), expressly stating that the attorney-client and attorney work product privileges have not been waived with respect to third parties. However, even with such a confidentiality agreement, counsel should recognize that, under the prevailing weight of legal authority regarding selective waiver, subsequent disclosure is likely to be required.

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