Welcome to Original Source: The Sidley Austin False Claims Act Blog

The False Claims Act (FCA) has long been a key enforcement tool for the federal government in matters involving government contracts or other expenditures of government funds. FCA enforcement has traditionally focused primarily on two industries receiving a substantial amount of government funds: healthcare and defense and other government contractors. Recently, however, FCA enforcement has expanded to other industries, including financial services. Through the False Claims Act Blog, lawyers in Sidley’s White Collar, Healthcare, FDA, Government Contracting, Financial Services, Appellate, and other practices will provide timely updates on new and interesting developments relating to FCA enforcement and litigation.

First Circuit Changes Course and Finds First-to-File Rule Is Not Jurisdictional

May 21 2019
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On May 6, 2019, the U.S. Court of Appeals for the First Circuit overturned its own precedent, holding that the first-to-file rule is not jurisdictional. United States v. Millennium Labs., Inc., No. 17-1106, 2019 WL 1987249, at *1 (1st Cir. May 6, 2019).  The First Circuit now joins the D.C. Circuit and the Second Circuit in treating the first-to-file requirement as merely a matter of adequate pleading (see United States ex rel. Hayes v. Allstate Ins. Co., 853 F.3d 80, 86 (2d Cir.) (per curiam), cert. denied, 138 S. Ct. 199 (2017); United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 120-21 (D.C. Cir. 2015)), widening an existing circuit split on the issue. See, e.g., United States ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111, 117 (1st Cir. 2014) (first-to-file rule is jurisdictional).

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Tenth Circuit Offers New Guidance On “Original Source” Exception to the Public Disclosure Bar

May 20 2019
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The U.S. Court of Appeals for the Tenth Circuit weighed in on the “public disclosure bar” under the False Claims Act (“FCA”) that relators must pass for their qui tam suits to proceed. For the first time, the Court provided guidance on when a relator’s allegations can be deemed to “materially add” to public disclosures related to an alleged false claim, such that the original source exception to the public disclosure bar applies. United States ex rel. Reed v. KeyPoint Gov’t Solutions, No. 17-1379, (10th Cir. Apr. 30, 2019).

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Recent Illinois Appellate Court Decision Applies Narrow Interpretation of Public Disclosure Bar

May 17 2019
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In a recent decision, the First District of the Illinois Appellate Court reversed the dismissal of a complaint brought pursuant to the Illinois False Claims Act (the “IFCA”). The circuit court had held that relators satisfied the public disclosure bar because their claims were not substantially the same as publicly disclosed allegations or transactions, but that relators had failed to plead their claim with specificity. The First District agreed with the circuit court’s ruling regarding the public disclosure bar, but found that the circuit court had erred in holding that relators had failed to state a claim. This decision is the third Illinois Appellate Court decision in the last thirteen months reversing dismissals of IFCA actions (see People ex rel. Lindblom v. Sears Brands, LLC et al., No. 1-17-1468 (Ill. App. Ct), and Phone Recovery Services of Illinois, LLC ex rel. State of Illinois v. Ameritech Illinois Metro, Inc. et al., No. 1-17-0968 (Ill. App. Ct.)), and the language used by the court reflects a high threshold for dismissal.

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Recent Decisions Provide Further Guidance on Application of Escobar’s Materiality Standard

May 16 2019
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Two recent court decisions ruled in favor of relators on the issue of materiality under the standard set forth in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2001 (2016). On May 7, 2019, the Fifth Circuit reversed a decision by the Southern District of Texas, which had held that relators had failed to sufficiently plead materiality. And on May 8, 2019, the Eastern District of California denied a motion to dismiss premised on failure to adequately plead materiality.

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Supreme Court Unanimously Extends FCA Statute of Limitations to 10 Years for Non-Intervened Cases

May 15 2019
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On May 13, 2019, the United States Supreme Court unanimously held that the False Claims Act’s (“FCA”) alternative 10-year statute of limitations applies to non-intervened actions.  As previously reported here, Cochise Consultancy, Inc. v. United States ex rel. Hunt, presented two main issues: whether relators are entitled to invoke the FCA’s 10-year statute of limitations set forth in 31 U.S.C. § 3731(b)(2), and whether relators are considered “official[s] of the United States” whose knowledge is relevant for determining when the 10-year limitations period applies.  Writing for the unanimous Court, Justice Thomas ruled favorably for relators on both questions.

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DOJ Announces New Guidance to Prosecutors on FCA Investigations

May 08 2019
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On May 7, 2019, the Department of Justice (DOJ) announced the release of formal guidance to its False Claims Act (FCA) prosecutors that provides a path for leniency for defendants in FCA investigations. More specifically, the guidance which is formalized in Section 4-4.112 of the DOJ’s Justice Manual, explains the manner in which the DOJ will award credit to defendants who voluntarily self-disclose misconduct that could serve as the basis for FCA liability, take other steps to cooperate with FCA investigations, or implement adequate and effective remedial measures in the FCA context. And significantly, the guidance provides that a defendant can receive a reduction in the damages multiplier and civil penalties under the FCA, which is the typical form of “credit” described in the guidance.

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DOJ Publishes New Guidance on Evaluating Corporate Compliance Programs

May 03 2019
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On April 30, the Criminal Division of the U.S. Department of Justice (DOJ) released a new guidance document titled “The Evaluation of Corporate Compliance Programs,” which updates a prior version of the guidance first issued in February 2017 (previously analyzed here). The new guidance provides additional insights into how DOJ will assess the effectiveness of a company’s overall compliance program in an enforcement action, focusing on the program’s design, implementation and effectiveness.

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