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.
A recent decision from the District of Minnesota denied the government’s appeal of a federal magistrate judge’s order requiring that, as part of discovery, the government detail specific false claims and turn over notes and reports of witness interviews. The underlying case is a qui tam alleging that Precisions Lens and its founder provided kickbacks to physicians to induce the use of its eye surgery products.
On June 7, 2017, the New Jersey Supreme Court, in a 3-2 decision affirming the decision of the Appellate Division, found that the Attorney General’s administrative subpoena power under New Jersey’s False Claims Act is limited to the 60 day period (which may be extended by motion) in which the Attorney General must make his or her intervention decision. “[A]fter the Attorney General declines to intervene in a qui tam action and leaves that action in the relator’s control, the Attorney General loses the authority to issue administrative subpoenas.” In the Matter of the Enforcement of New Jersey False Claims Act Subpoenas, A-5-16 (No. 077506). (more…)
As we previously discussed here, the government’s continued payment despite knowledge of contractual or regulatory noncompliance has become a powerful defense argument post-Escobar. The Fourth Circuit recently affirmed summary judgment in favor of government contractors after they obtained declarations from responsible government officials that undercut the relator’s theories of liability. See United States ex rel. Searle v. DRS C3 & Aviation Co., No. 15-2442 (4th Cir. Feb. 23, 2017).
Historical government payment practices have gained new importance following the Supreme Court’s guidance in Escobar that such practices can preclude a finding that regulatory compliance was material to the payment of an allegedly false claim. Evidence regarding the government’s prior knowledge of regulatory violations and continued payment can also bear on the mens rea element of an FCA claim. Perhaps not surprisingly in light of the importance of this evidence, DOJ recently tried—unsuccessfully—to block a defendant’s efforts to discover information relating to historical payment determinations by CMS Medicare Administrative Contractors (“MACs”). See United States ex rel. Ribik v. HCR ManorCare, Inc., No. 09-cv-13 (E.D. Va. Feb. 3, 2017).
This month, a judge for the United States District Court for the Western District of Virginia rejected the argument of a private party, Beam Brothers Trucking, Inc. (“Beam”), that a Civil Investigative Demand (“CID”) issued by the United States should be quashed because the United States had already effected a de facto intervention in a qui tam action, despite neither formal intervention nor confirmation of the existence of the suit. See In re Civil Investigative Demand 15-439, No. 5:16-mc-3 (W.D. Va. Aug. 12, 2016). The government had been investigating Beam, which had government contracts for the transport of mail, to determine if Beam had used government-issued credit cards for non-government deliveries. Approximately thirty federal agents executed a search warrant on Beam’s offices in February 2013, after which Beam met with civil and criminal government officials regarding the investigation. Beam argued to the Court that the government recovered contracts and corporate records in the search that were responsive to the later-issued CID at issue before the Court.
A District of Nevada magistrate judge has ruled that an FCA defendant’s assertion that it complied with “all applicable legal requirements” constitutes a “good faith” defense that waives the attorney-client privilege. The opinion highlights the thin line between a mere denial of scienter (which should not waive the privilege) and an affirmative good faith defense (which may), and illustrates the difficult choices FCA defendants face when deciding how best to respond to an allegation that they knowingly attempted to commit fraud.
In a ruling earlier this week, the Ninth Circuit emphasized the demanding standard Federal Rule of Civil Procedure 9(b)’s particularity requirement imposes on qui tam relators alleging fraud, particularly when seeking to pursue an expansive scope of claims based on limited information. In United States ex rel. Driscoll v. Todd Spencer M.D. Medical Group, Inc., No. 13-17624 (9th Cir. Aug. 9, 2016), a former radiologist employed by the defendant medical group, alleged that the group and its principal violated the FCA by submitting claims to Medicare for “unnecessary CT scans” and, separately, by “unbundling” single procedures into multiple claims to “increase billings artificially.” Id. (slip op. at 3). The relator alleged that this conduct persisted for at period of several years, from at least 2007 to 2010, and perhaps longer. United States ex rel. Driscoll v. Todd Spencer M.D. Med. Grp., Inc., No. 1:11-cv-1776, 2013 WL 6243858, *5 (E.D. Cal. Dec. 3, 2013). After allowing the relator one opportunity to amend his complaint, the district court dismissed the first amended complaint with prejudice, concluding that these allegations were insufficiently specific to withstand Rule 9(b)’s particularity requirement. Id.
A recent decision out of a California district court rejected an attempt by a former employee of a provider organization with nationwide operations to obtain nationwide discovery based on alleged misconduct occurring at the particular facility where the former employee worked. The court’s thorough analysis is a model for other courts being asked to allow relators to subject defendants to expensive nationwide discovery based on generalized allegations that purported wrongdoing at a particular location was part of a nationwide pattern or practice.
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.