Posted by Michael D. Mann
Kimberly A. Dunne, co-chair of Sidley’s White Collar: Government Litigation and Investigations practice in Los Angeles, participated in a Q&A session with Law360 and shared some thoughts on reform of the FCA: “Where the government — for resource or other reasons — chooses to decline quickly and defer to a whistleblower the responsibility for investigating and litigating, then the whistleblower litigation is justified for all the reasons why the government encourages whistleblowers to raise alarm bells when fraud is suspected. But when the government has spent the time and energy to investigate, I think giving a whistleblower a second bite at the apple when the mere fact of litigation gives him huge leverage to extract a settlement is unfair.” Click here to read the full article (subscription required).
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.
Posted by Brian P. Morrissey and Kristin Koehler
A. Brian Albritton at the False Claims Act and Qui Tam Law blog discusses an interesting interview recently published in the Corporate Crime Reporter with Joseph E.B. “Jeb” White of the firm Nolan & Auerbach, P.A., which focuses its practice exclusively on representing qui tam relators in healthcare fraud suits. The interview discusses White’s view on the types of cases in which the Department of Justice is most likely to intervene. In a particularly notable passage, White briefly mentions DOJ’s practice of “deferring” its decision on whether to intervene in a qui tam suit when the deadline for that decision comes due. That topic warrants a bit of exploration here because, as readers may have observed in their own practice, DOJ appears to be relying on this practice with increasing frequency.
The FCA provides that, once a relator files a complaint, the complaint “shall remain under seal for at least 60 days,” affording DOJ a window within which to investigate the relator’s claims. 31 U.S.C. § 3730(b)(2). At the end of that period (which is routinely extended for months or even years), DOJ is required to either intervene and take over the action, or decline and allow the relator to conduct the litigation instead. Id. § 3730(b)(4). Even if DOJ declines, the FCA grants the Department the right to join the case at a later time, provided it can show “good cause.” Id. § 3730(c)(3).
It is increasingly common for DOJ prosecutors to file a statement with the court indicating that the DOJ has made “no decision” on intervention, but reserving its right to intervene at a later time. In light of the FCA provisions discussed above, these “no decision” statements have the very same effect as a statement declining intervention. After DOJ files its “no decision” statement, the relator proceeds with the litigation alone, and DOJ preserves the same statutory right to intervene later, just as it would if it had formally declined to intervene.
Yet DOJ may achieve some benefits in labeling its choice on intervention as a “no decision” rather than a declination. White suggests one. He observes that, in some cases, a “no decision” statement allows the DOJ to signal to relator’s counsel that DOJ is, in fact, interested in the case, but simply cannot intervene at the moment because of resource constraints or because the relator has not yet fully fleshed out his or her allegations. By making “no decision,” DOJ sends a message to the relator saying “please keep this case alive, we are going to come back later.” But a second consideration may motivate “no decision” statements in other cases. Sometimes, DOJ may conclude that a relator’s allegations are unlikely to establish a violation of the FCA, but may also be aware that DOJ’s failure to intervene in the relator’s case could prompt a negative reaction from certain politicians or members of the media. The scores of recent qui tam complaints filed against participants in the mortgage securitization industry provide an example of this phenomenon. Some such complaints have merit, some do not, but the default presumption among certain sectors of the general public is that the DOJ should be actively pursuing all forms of fraud in that industry. By styling its choice on intervention as a “no decision” rather than a “declination,” the Department provides itself with some public relations cover, emphasizing to the public that while it is not formally joining the relator’s suit, it is retaining its right to do so later, which the FCA would have provided to the Department anyway, even if it had formally declined to intervene.
Whatever the reasons for DOJ’s “no decision” statement in a particular case, it is clear that DOJ’s practice of using such statements is on the rise and likely to continue in the future.
Posted by Robert J. Conlan
In an opinion providing a view of the interactions between DOJ and a qui tam relator during the Government’s investigation of the relator’s claims, the U.S. District Court for the District of Columbia last week ordered the Government to pay the relator more than DOJ had argued the relator was entitled to receive as a share of the Government’s recovery pursuant to 31 U.S.C. 3730(d). The case, U.S. ex rel. Shea v. Verizon Communications, Inc., No. 07-111(GK) (D.D.C. Feb. 23, 2012) (reported at 2012 U.S. Dist. LEXIS 22776), is one of relatively few judicial decisions addressing relator’s-share issues in detail.
The relator in Shea filed his qui tam action in 2007, alleging that MCI/Verizon had submitted false claims for improper surcharges on invoices submitted under two telecommunications contracts with the United States. The case remained under seal for several years while the Government conducted its investigation. In February 2011, the Government intervened and settled the case. The Government and the relator were not able to agree on an appropriate relator’s share, so the parties litigated the issue.
Conducting its analysis under factors identified in the Senate Report accompanying the 1986 amendments to the FCA (S. Rep. No. 99-345, at 28 (1986)), as well as in accordance with a set of “Relator’s Share Guidelines” that DOJ issued in December 1996 (11 FCA and Qui Tam Quarterly Review, at 17-19 (Oct. 1997)), the Shea court ultimately concluded that the relator in the case before it was entitled to 20% of the settlement. The court focused much of its analysis on the extent to which the relator was involved in the Government’s investigation, and it thereby provided a fairly detailed account of the interactions between DOJ and the relator in this case. Among other things, the court noted the following:
- The relator “participated fully in all aspects of the Government’s investigation and settlement discussions with Verizon,” and estimated “he spent hundreds of hours each year on the case.”
- The relator hired a “leading” telecommunications attorney to assist in the effort.
- Early in the case, the Government requested that the relator provide a memorandum stating relator’s position on why each surcharge relator identified was prohibited under the Federal Acquisition Regulation and the contract in issue. The Government also asked the relator to rank the charges in priority for investigation. The relator and his counsel provided an “exhaustive” chart and a legal memorandum setting forth the factual and legal bases for the allegations about each surcharge. The court stated that the relator’s and his counsel’s work “sav[ed] the Government enormous resources” and “helped the Government’s auditors to identify relatively quickly the ad valorem charges in Verizon’s back-up billing data.”
- The relator, through counsel, worked with the Government to draft proposed categories for subpoenas to be issued.
- The relator, “[o]n numerous occasions, . . . discussed with the GSA auditors the methods they were using to identify illegal surcharges.”
- The relator signed a non-disclosure agreement so “he could have access to the findings of the GSA audit team and analyze their usefulness to the litigation.”
- The relator reviewed a PowerPoint presentation Verizon had used to present its defenses to the Government. The relator thereafter made a “multi-hour presentation” to DOJ addressing Verizon’s positions.
- The relator “was forced to ask [the] Court to enter an Order, which was granted, directing GSA and [DOJ] to share the Government’s underlying damages estimate with him so he could analyze the methodology used.”
While each FCA qui tam case is, of course, different, the recent opinion in <lt;EM>Shea demonstrates the significant involvement that relators can have, behind the scenes, in the Government’s investigation of qui tam allegations.