CBO Reports on Grassley Bill That Would Modify Escobar Materiality and Impose Rational Relation Test on Granston Dismissals

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On July 15, 2022, the Congressional Budget Office (CBO) issued a cost estimate concerning the False Claims Amendments Act of 2021, a bill sponsored by Senator Grassley.  The bill would alter the False Claims Act in three important ways. (more…)

Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality

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Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.

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Sixth Circuit Applies Objective Intent Standard for Constructive Discharge Claim in FCA Retaliation Case

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The False Claims Act’s anti-retaliation provision, 31 U.S.C. § 3730(h), provides relief to an “employee, contractor, or agent,” who is “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done . . . in furtherance of an action” under the FCA. Recently, in Smith v. LHC Group, Inc. et al., __ F. App’x __, 2018 WL 1136072 (6th Cir. Mar. 2, 2018) (unpublished), the Sixth Circuit clarified that the test for an employer’s intent in a “constructive discharge” retaliation case is an objective one — joining the majority of circuits that have rejected a subjective employer intent requirement in constructive discharge cases in different contexts. (more…)

Fourth Circuit Clarifies Legal Standard for a FCA Retaliation Claim

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While there generally has been no question that the False Claims Act protects employees who suffer retaliation because of reporting suspected fraud by their employer, the Fourth Circuit recently made clear that the FCA whistleblower provisions protect disclosures that could lead to any viable FCA action regardless of whether the target is the employer of the whistleblower.   O’Hara v. NIKA Technologies, Inc., No. 16-1805, _ F.3d. _, 2017 WL 6542675 (4th Cir. Dec. 22, 2017).  This decision raises the bar for employers who learn of employees’ concerns about third-parties allegedly committing fraud on the government in the event the company takes subsequent adverse employment action against the so-called whistleblower. (more…)

Ninth Circuit Ruling Expands Dodd-Frank Whistleblower Protection

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In a March 8, 2017 ruling, the Ninth Circuit deepened a circuit split, holding that Dodd-Frank’s whistleblower protections extend to employees who raise concerns internally, and not merely to those who raise concerns to the U.S. Securities and Exchange Commission.

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Seventh Circuit Rejects False Claims Act and Retaliation Claims Premised on Purported Contractual Violations

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In United States ex rel. Uhlig v. Fluor Corp., et al., No. 14-2815 (7th Cir. Oct. 11, 2016), the Seventh Circuit affirmed the grant of summary judgment in favor of Fluor Corporation (“Fluor”) in an FCA action premised on alleged contract violations and whistleblower retaliation.  The decision sets a relatively high bar for proving the existence of “protected” whistleblower activity and is particularly helpful for defendants seeking to defeat retaliation claims under the FCA.

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Whistle-blowers Blow Whistle on Whistle-blower Group

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On December 1, the New York Times reported on the confidential settlement of unfair labor practices and retaliation claims lodged with the NLRB by two former attorneys with the National Whistleblowers Center in Washington, D.C.  According to the article, the whistleblowers were fired shortly after the Center had helped secure a $104 million whistle-blower award against a Swiss bank, a portion of which some thought might have gone to the Center.  Additionally, the NYT reports, the firings coincided with the fired attorneys’ efforts to unionize the Center’s workforce.  The details of the settled case were themselves sealed, until someone blew the whistle.

Court Declares No HIPAA Violation for Relators Who Retained Protected Health Information

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Posted by Scott Stein, Meenakshi Datta, and Catherine Kim

A recent opinion examines the interplay between the Health Insurance Portability and Accountability Act (“HIPAA”) and the False Claims Act (“FCA”). Relators Pam Howard and Eben Howard filed a wrongful termination action against Arkansas Children’s Hospital – a covered entity under HIPAA – alleging that they were terminated after expressing concern about the hospital’s billing practices in violation of the FCA and several other statutes. The relators allege that they were terminated from their positions after raising concerns regarding the manner in which the hospital billed the federal government. The Howards shared with an attorney protected health information (“PHI”) that they had retained in anticipation of their lawsuit.

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Employers Can Be Liable For Retaliating Against An Employee Who Filed an FCA Claim Against a Former Employer

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Posted by Scott Stein, Max Fischer and Joe Cooper

In a case raising an issue of first impression, a court recently held that an employer can be held liable under the FCA’s retaliation provisions for adverse action taken against an employee based on that employee’s protected activity against a prior employer. Cestra v. Mylan Inc., et al., No. 14-825, 2015 U.S. Dist. LEXIS 67069 (W.D. Penn. May 22, 2015). Acknowledging that its decision was an unprecedented expansion of existing law, the district court also certified its decision for interlocutory review by the Third Circuit.

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Court Rejects Off-Label Promotion Allegations Due to Failure to Cite Actual False Claim Submissions; Allows Retaliation Claims to Proceed

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Posted by Scott Stein and Brenna Jenny

On March 27, 2015, a federal court in the Southern District of Ohio granted in part and denied in part a motion to dismiss a qui tam suit alleging that Bristol-Myers Squibb Co. (“BMS”) and Otsuka America Pharmaceutical (“Otsuka”) had promoted Abilify for off-label uses and violated the AKS through grants, speaker, and similar programs offered to physicians. See United States ex rel. Ibanez v. Bristol-Myers Squibb Co., No. 11-cv-00029 (S.D. Ohio Mar. 27, 2015). The court’s ruling reiterates that regardless of the particularly with which a scheme is pled, complaints will be dismissed if they fail to, at a minimum, include particular allegations that support a strong inference that a false claim was submitted. However, the court’s partial denial of the motion to dismiss also demonstrates the weight of the expanded protections relators now enjoy when bringing retaliation claims under the FERA-amended definition of protected conduct.

Both BMS and Otsuka previously executed Corporate Integrity Agreements (“CIAs”) relating to alleged off-label promotion of an anti-depressant, Abilify. Relators asserted that both companies violated their CIAs by subsequently promoting Abilify for off-label uses, including for pediatric and geriatric patients, and for offering physicians kickbacks to write off-label prescriptions for Abilify. Relators asserted they could rely on a “relaxed” pleading standard referenced but never applied by the Sixth Circuit Court of Appeals, under which they need not present any samples of false claims actually submitted, so long as they pled a strong inference of such submissions.

The defendants contested that such a standard was appropriate, yet the court ruled that the dispute was moot, because relators failed even to meet the lower pleading standard. In particular, while relators alleged that defendants’ off-label promotion and kickbacks caused physicians to write prescriptions for off-label uses of Abilify, the complaint failed to support a strong-inference that the patients who received those prescriptions participated in federal health care programs, that the patients actually filled the off-label prescriptions, and that an entity submitted claims for reimbursement to the government for those prescriptions.

Relators had argued that they further fell within the ambit of dicta in United States ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493 (6th Cir. 2007), where the Sixth Circuit left open the possibility that a relaxed pleading standard would be appropriate “where a relator demonstrates that he cannot allege the specifics of actual false claims that in all likelihood exist, and the reason that the relator cannot produce such allegations is not attributable to the conduct of the relator.” According to the relators, they were precluded from identifying specific false claims because such information regarding claims for payment caused to be submitted by BMS and Otsuka lay in the exclusive possession and control of the defendants, pharmacies, and federal and state payors. The court characterized the Sixth Circuit’s dicta as “so broadly worded that [it] could undermine the purpose of the particularity rule,” and refused to allow it to “swallow[] the existing and well-settled rules for FCA pleading.”

Nonetheless, the court denied defendants’ motion to dismiss the relators’ retaliation claims. The FERA amendments to the FCA expanded protection over lawful acts “in furtherance of an action under [the FCA]” to also protect “other efforts to stop [one] or more violations of [the FCA].” Thus, whereas protected conduct prior to the FERA amendments was generally limited to actions that could lead to a FCA suit, the court noted that post-FERA, employees need only “report alleged misconduct up the chain of command in order to engage in FCA-protected activity.” Because relators had pled that they reported compliance concerns to their management, the court found this standard to be met.

A copy of the court’s opinion can be found here.