Court Sanctions DOJ and Defendants For Discovery Violations In False Claims Act Case

On July 10, 2020, a federal magistrate judge in the District of Minnesota issued a 39-page decision sanctioning DOJ (and the defendants) for various discovery violations in an FCA case based on alleged violations of the Anti-Kickback Statute.

As previously reported here, the Defendants Paul Ehlen (“Ehlen”), the majority owner of Precision Lens, and Cameron-Ehlen Group (conducting business as Precision Lens) (collectively, the “defendants”) are involved in the distribution of intraocular lenses and other products for ophthalmic surgeries.  DOJ alleges that the defendants provided physicians with expensive trips, meals, and other in-kind remunerations at no cost or below fair market value.  DOJ further alleges that, in exchange, these physicians purchased the Defendants’ products and used them during surgeries, which were subsequently billed to Medicare, in violation of the Anti-Kickback Statute and the False Claims Act.  DOJ and the defendants filed motions seeking sanctions against the other in connection with inadequate preparation of 30(b)(6) designees and potential spoliation of information, documents, and electronically stored information.  DOJ also filed a motion to compel the production of additional potentially relevant documents.


Court Orders DOJ to Articulate Factual Basis for Allegation that AKS Violations Caused the Submission of False Claims

Earlier this month, a federal judge in Minnesota held that DOJ was required to articulate the factual basis for its allegation that Defendants’ claims for payment resulted from kickbacks, rejecting the argument that such information was irrelevant based on a legal presumption of causation.  The Government alleges that defendants Precision Lens and Paul Ehlen provided kickbacks to physicians, including “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value,” to induce them to use products that Defendants supplied.  The Government further alleges that these kickbacks violated the Anti-Kickback Statute (AKS), causing the submission of false claims to the Government.


District Court Held that Government Must Produce Factual Basis For Allegations of Below-Fair-Market-Value Transfers

Earlier this month, in a FCA case in which the Government intervened, the United States District Court for the District of Minnesota held that the Government was obligated to produce evidence that supported its allegation that amounts that physicians paid for social trips and other benefits provided by Defendants were below fair market value.  In United States v. Cameron-Ehlen Grp., Inc., No. 13-CV-3003 (WMW/DTS), 2019 WL 1453063, at *1 (D. Minn. Apr. 2, 2019), the Government’s Complaint-In-Intervention alleged that Defendants, Precision Lens and Paul Ehlen, schemed to pay kickbacks—in the form of “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value”—to physicians to induce them to use products supplied by Defendants. The Complaint-In-Intervention includes several specific examples where physicians “were remunerated by not paying the full fair market value for trips and other benefits provided by Defendants.” (more…)

District of Minnesota Decision Sides With Swift’s Interpretation of DOJ’s “Unfettered Right” To Dismiss A Declined Qui Tam Action

Since last year’s Granston Memo (discussed recently here and here), DOJ has actively sought dismissal of FCA cases that it believes do not serve the interests of the federal government.  DOJ’s power to do so derives from Section 3730(c)(2)(A) of the FCA, which provides that the Government “may dismiss” a relator’s action if the realtor “has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”  In United States ex rel. Davis v. Hennepin County, the court considered two questions about the scope of that statutory power:  (1) whether the government must first intervene in a case before moving to dismiss the action, and (2) whether the government must show a valid purpose and a rational relationship between dismissal and the accomplishment of its stated purpose.  The district court answered “no” to both questions and dismissed the relator’s suit.  In so doing, the court signaled its view that the Eighth Circuit would side with the D.C. Circuit in the split over the standard that applies when the government seeks dismissal under Section 3730(c)(2)(A) (the circuit split is discussed here and here).


D. Minn. upholds qui tam complaint against ICD manufacturer Guidant

Posted by Sean Griffin and Kristin Graham Koehler

On March 14, 2012, Judge Donovan W. Frank of the United States District Court for the District of Minnesota upheld a relator’s complaint against Guidant Corporation (“Guidant”) based on its manufacture of certain implantable cardiac devices (“ICDs”), which had been sold to the Department of Veterans Affairs and/or reimbursed by Medicare. The relator, James Allen, alleged that Guidant had made false statements and failed to disclose known safety concerns in its post-approval reports to the Food and Drug Administration. Allen, a patient who had received one of Guidant’s ICDs, claimed that his allegations were based on his personal experience and certain adverse event reports he had reviewed. However, the safety and disclosure allegations in question had also been litigated both in prior, multi-district products liability litigation and in an earlier criminal adulteration proceeding.

After the government moved to intervene, Guidant moved to dismiss the relator’s complaint. The district court first rejected the argument that the government’s complaint in partial intervention was sufficient to supersede Allen’s complaint in its entirety. The district court also rejected the argument that the earlier litigation and related news coverage deprived the court of jurisdiction under the pre-FERA version of the FCA because it found the relator’s personal experience with Guidant’s products qualified him as an original source. Finally, the court found that Rule 9(b) had been satisfied because Relator had provided, inter alia, the names of Guidant employees allegedly involved in the purported false statements as well as the particulars of five allegedly defective devices.

While the court ultimately refused to dismiss this FCA case entirely, it did dismiss the relator’s claims for unjust enrichment and payment by mistake. Citing authority from courts in the First, Second, Eighth and D.C. Circuits, Judge Donovan ruled that qui tam relators lack standing to bring common law claims on behalf of the government.