In Fraudulent Inducement Qui Tam, DOJ Once Again Invokes Dismissal Authority

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As discussed here and here, DOJ during the last administration reinvigorated the use of its statutory authority to move to dismiss qui tam cases over a relator’s objections.  But over the past two years, DOJ’s use of this authority has once again fallen off.  However, last week, DOJ moved to dismiss a qui tam suit in the District of Maryland alleging that the defendants knowingly presented flawed studies to the Department of Health and Human Services (HHS) to induce HHS to purchase defendants’ influenza treatment for the Strategic National Stockpile (SNS).  DOJ’s motion to dismiss serves as an important reminder of the potential benefits of strategically engaging with DOJ and HHS early in the life of a qui tam case about whether dismissal is warranted.

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Finding No Materiality, Court Grants Summary Judgment for Defense in Fraudulent Inducement Case

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On August 12, 2021, the United States District Court for the District of Minnesota granted Boston Scientific Corporation’s (BSC) motion for summary judgment in relator Stephen Higgins’s declined qui tam, which alleged that BSC had fraudulently induced the Food and Drug Administration (FDA) to approve two types of defibrillators that the FDA later recalled. (more…)

D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory

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On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139.  The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract.  In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms.  IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement.  The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided.  According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.

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