On March 14, the Fifth Circuit affirmed summary judgment for the defendants in a former employee’s False Claims Act suit against BP related to an oil rig in the Gulf of Mexico. The opinion is notable in at least two respects. First, the Fifth Circuit affirmatively “agree[d] with [its] sister circuits that the public disclosure bar is no longer jurisdictional” after the 2010 amendments to the FCA. Slip op. 4 n.2. That had previously been an open question in the Fifth Circuit. Second, the Court reinforced the “demanding” materiality standard that the Supreme Court articulated in Escobar. Id. at 4-6. The relator’s FCA claims had led Congress to request an investigation by the Department of Interior. After that investigation, however, DOI “decided to allow the [rig] to continue drilling,” and that decisions was, in Escobar’s words, “‘strong evidence’” that regulatory compliance requirements related to the rig were “not material.” Id. at 5-6. Summary judgment for defendants was therefore warranted.
A copy of the opinion is here.
In a recent opinion by Judge Wilkins, the D.C. Circuit affirmed the dismissal of a qui tam action against Phillip Morris, United States ex rel Oliver v. Phillip Morris USA, Inc., No. 15-7049 (D.C. Cir. June 21, 2016), with two key holdings that will help FCA defendants in future cases. Specifically, the Court adopted an expansive reading of the FCA’s public disclosure bar and a stringent “original source” requirement.
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).
Suppose you’re a relator who files a qui tam case against your former employer only to see your case dismissed on the grounds that you released the claims as part of accepting a severance package from your employer. Can your wife or another former employee who didn’t sign the release subsequently retain the lawyer who represented you in your qui tam case and file her own lawsuit making identical claims against your former employer? Not in the Fourth Circuit, as a result of a January 29, 2016 panel decision in U.S. ex rel. May v. Purdue Pharma L.P., No. 14-2299.
A district court recently denied a relator’s efforts to translate alleged manipulation of skilled nursing facility (“SNF”) CMS Star Ratings into a claim under the FCA, while allowing the relator to proceed with allegations that the CEO of a SNF chain oversaw a kickback scheme designed to churn business. See U.S. ex rel. Orten v. North Amer. Health Care, Inc., No. 14-cv-02401 (N.D. Cal. Nov. 9, 2015). The case reinforces well-established precedent that FCA suits alleging regulatory violations cannot proceed where the government does not condition payment on complete regulatory compliance. The government’s Statement of Interest arguing that the public disclosure bar was triggered as to certain claims demonstrates the DOJ’s growing wariness of opportunistic behavior by relators seeking to capitalize on pre-existing government investigations to which they did not contribute.
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.
A district court recently took a broad view of the public disclosure bar in holding that where previously unsealed qui tam suits take a scattershot approach to broad industry allegations of misconduct, even companies not named in those suits can successfully invoke the public disclosure bar during later litigation.
In United States ex rel. Ambrosecchia v. Paddock Labs., LLC, No. 12-cv-2164 (E.D. Mo. Sept. 23, 2015), the relator alleged that defendants violated the FCA by making fraudulent misrepresentations to CMS about FDA approval dates for drugs and providing false Drug Efficacy Study Implementation (“DESI”) codes indicting defendants’ products were safe and effective, which the federal healthcare programs then relied upon to pay for drugs ineligible for reimbursement. The defendants moved to dismiss, arguing that the claims were substantially the same as those in a suit filed prior to the relator’s, and therefore the public disclosure bar applied. The relator attacked the application of the public disclosure bar both procedurally and substantively.
On August 20, 2015, the District of New Jersey granted in part and denied in part defendants’ motion to dismiss allegations that by making comparative claims regarding an on-label use of a drug, the defendant prevented physicians from making informed decisions about whether resulting prescriptions were eligible for Medicare or Medicaid reimbursement. See United States ex rel. Dickson v. Bristol-Myers Squibb Co., No. 13-1039 (D.N.J. Aug. 20, 2015). The case highlights relators’ ever-broader use of the FCA to target sales and marketing activities of pharmaceutical manufacturers.
Posted by Jaime L.M. Jones and Brenna Jenny
A decision earlier this month by the Central District of California that the public disclosure bar had been triggered marked an unusual ruling in which the court determined that a whistleblower whose allegations led to an administrative investigation may be precluded from sharing in the settlement funds due to the disclosure of the resulting report to the relator himself. United States ex rel. Swoben v. SCAN Health Plan, No. 09-cv-05013 (C.D. Cal. June 1, 2015).
Posted by Jonathan Cohn and Brian Morrissey
On May 12, a federal district court dismissed what the New York Times had described as an “innovative” qui tam suit against U.S. Bank, N.A., alleging that the lender had submitted over $2.3 billion in false claims for FHA insurance payments. United States v. U.S. Bank, N.A., No. 3:13-cv-704 (N.D. Oh. May 12, 2015). In an unusual step, the suit was brought by a legal aid group, Advocates for Basic Legal Equality, Inc. (“ABLE”), rather than by an individual relator.