by Nolan and Auerbach on October 22, 2010
Recently, the Third Circuit held, in an unpublished opinion, that independent contractors are not protected by the False Claims Act’s anti-retaliation provision. However, the court noted that this loophole was recently closed by the federal Fraud & Enforcement Recovery Act of 2009 (FERA).
In this case, a whistleblower ran a bus service for a county school district. After raising concerns that the school district was violating the federal False Claims Act, the school district greatly reduced the relator’s hours.
The relator brought an action under the False Claims Act’s anti-retaliation provision, which, at that time, was limited to plaintiffs who have an employee-employer relationship with the defendant. The lower court and appellate court, in dismissing the suit, both agreed that the relator was not an employee of the school district.
The amended False Claims Act provision, 31 U.S.C. § 3730(h) (2009), now offers whistleblower protections for “any employee, contractor, or agent.” This legislative improvement is especially important for physicians who may have admitting privileges at a hospital but are not technically employees. Now, these doctors can shine a light on a dishonest hospital, knowing that the FCA provides a level of protection against retaliation.
For more information about qui tam law and health care fraud, contact Nolan & Auerbach, P.A.
by Nolan and Auerbach on October 15, 2010
Most courts have concluded that the False Claims Act Amendments of 2009 are not retroactive. However, in U.S. ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94 (2d Cir. 2010), the Second Circuit went the other way, holding that the revised Section 3729(a)(2) liability provision, 31 U.S.C. §3729(a)(1)(B), applies to cases that were pending on June 7, 2009.
The Kirk decision set the table for one of the more remarkable court decisions of the year. In U.S. ex rel. Drake v. NSI, Inc., No. 3:94-cv-963, 2010 WL 3417854 (D. Conn. Aug. 26, 2010), the court reinstated FCA Section 3729(a)(2) allegations that were dismissed almost a decade ago. In this case, originally filed in 1994, a qui tam relator brought a number of claims against several defendants. In 2000, the relator’s 3729(a)(2) allegations were dismissed. See U.S. ex rel. Drake v. Norden Systems Inc., 2000 U.S. Dist. LEXIS 13371 (D. Conn. Aug. 24, 2000). Since then, the case has continued down a seemingly unending road, including a couple of side trips to the Second Circuit Court of Appeals.
Most importantly, the case was still in the litigative pipeline on June 7, 2009. In turn, in light of the FCA amendments, the relator sought reconsideration of the Section 3729(a)(2) ruling entered ten years ago. After going through the exercise of determining that the application of the revised FCA would not violate the Ex Post Facto Clause of the Constitution, the court ruled that newly minted FCA liability section could apply to the alleged conduct that occurred more than sixteen years ago. Thus, the court granted the relator’s motion to reinstate these claims.
For more information about qui tam law and health care fraud, contact Nolan & Auerbach, P.A.
by Nolan and Auerbach on October 13, 2010
The federal government brought a False Claims Act action against an insurance company, alleging that the company participated in a scheme to obtain federally reinsured crop insurance payments for ineligible persons. The lower court, in dismissing the case on the eve of trial, ruled that the government had not sufficiently pled that the defendant “intended” for the “Government itself” to be involved in the payment decision, as required by the U.S. Supreme Court’s Allison Engine decision. The government appealed the decision, arguing that the defendant was well aware that its scheme would cause claims to be submitted to the Federal Crop Insurance Corporation (FCIC), which in turn would pay the bogus claims with federal funds.
In United States v. Hawley, 2010 WL 3292710 (8th Cir. Aug. 23, 2010), the Eighth Circuit started its analysis by noting that Allison Engine holds FCA defendants liable for “natural and foreseeable consequences” of their actions. Here, because the company and its principal agent were familiar with the FCIC payment process, the court easily determined that the defendant “intended” the “natural and foreseeable consequences” of having “Government itself” involved in the payment decision. In turn, the Eight Circuit reversed the lower court’s decision.
While the Allison Engine decision ultimately did not derail the government’s prosecution of this major crop insurance fraud scheme, the lower court’s decision was one of the driving forces behind the recent False Claims Act amendments. From Senator Grassley’s home state of Iowa, this decision came out just hours after Allison Engine identified a major loophole in the FCA’s liability provisions. In championing the FCA Amendments, Senator Grassley was rightly concerned that the court’s reasoning would quickly spread, for the “Government itself” is rarely involved in the “payment decision.” Indeed, our government largely relies on contractors to make payment decisions for everything from Medicare payments to hurricane relief efforts.
The resulting amendments now protect all federal funds, regardless of who actually inks the check. However, few courts have retroactively applied these amendments to cases that were filed prior to the enactment of the amendments. In turn, this means that the government and relators will need to wrestle with the Allison Engine “intent” requirement for a few more years.
For more information about qui tam law and health care fraud, contact Nolan & Auerbach, P.A.
by Nolan and Auerbach on October 11, 2010
Nearly six months after being fired, a former employee of a government contractor brought a False Claims Act anti-retaliation suit against the contractor. The company argued that the action should be dismissed because the statute of limitations had run. In Riddle v. Dynacorp International, Inc., 2010 WL 3304245 (N.D. Tex. Aug. 19, 2010), the court ruled that these suits are limited to a 90-day statute of limitations period in the State of Texas. Thus, the court ruled that the action was time-barred.
In 2005, the U.S. Supreme Court determined that the drafters of the False Claims Act failed to include a statute of limitations period for FCA anti-retaliation suits. In turn, the Court ruled that the courts must rummage through the state statutes and borrow the statute of limitations period from the most closely analogous state whistleblower statute. This generated a patchwork of statute of limitations periods, with most hovering around 90 days.
Earlier this year, as part of the Dodd-Frank Wall Street Reform legislation, Congress finally established a uniformed three-year statute of limitations period for all FCA anti-retaliation actions. Unfortunately, courts, such as this one, have ruled that this amendment is not retroactive.
For more information about qui tam law and health care fraud, contact Nolan & Auerbach, P.A.
