From the monthly archives:

May 2012

Seventh Circuit: Public Disclosure Bar Triggered Only by Truly Duplicative Qui Tam Allegations

by Nolan and Auerbach on May 23, 2012

Struggling to decipher the False Claims Act’s public disclosure bar, a 2008 district court decision aptly summed up the prevailing sentiment: “The Court sympathizes with anyone litigating under the False Claims Act. Perhaps Congress will elect at some point to give legislative attention to the FCA to resolve some of the still unresolved questions about the Act’s application.” United States ex rel. Montgomery v. St. Edward Mercy Medical Center, 2008 WL 110858 (E.D. Ark. 2008). In 2009 Congress amended the FCA and removed much of the confusion surrounding the much-litigated public disclosure bar.

With no explicit retroactive provision in the 2009 amendments, courts are still wrestling with the old public disclosure bar language.  Undoubtedly, courts have dissected every single word in the old public disclosure bar. In fact, there are over 300+ published and unpublished rulings in well over 150 separate cases concerning the meaning of the “public disclosure” bar. A large percentage of these decisions have marinated on the “based upon” language found in provision.

With the exception of the Fourth Circuit, all of the courts have interpreted “based upon” to mean “substantially similar.” In other words, a qui tam action is “based upon” a public disclosure when the allegations are “substantially similar.” Of particular importance, this interpretation was cemented into the new public disclosure bar when Congress replaced “based upon” with “substantially similar.”

Recently, the Seventh Circuit clarified the “substantially similar” language interpreted into the old public disclosure bar and, by extension, codified into the new public disclosure bar. Specifically, in United States ex rel. Goldberg v. Rush University Medical Center, No. 10-3785 (7th Cir. May 21, 2012), the Court stressed that qui tam allegations are not “substantially similar” to publicly disclosed allegations unless they both disclose a particular fraud by particular defendant.  The Court emphasized that “a very high level of generality is appropriate, because then disclosure of some frauds could end up blocking private challenges to many different kinds of frauds.” Id. at 5.

The Goldberg decision properly encourages insiders to step forward with detailed information. Hopefully the other circuits will embrace this commonsense reading.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

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D.C. Circuit: Courts Must Hold Fairness Hearing When Relator Challenges Adequacy of False Claims Act Settlement

by Nolan and Auerbach on May 18, 2012

The highly influential D.C. Circuit Court of Appeals recently held that courts must hold fairness hearings when a relator challenges the adequacy of a False Claims Act settlement. See United States ex rel. Schwizer v. Océ N.V., No. 11-7030 (D.C. Cir. April 20, 2012). The Court simply applied the explicit statutory language of the Act:

The settlement agreement here falls squarely within § 3730(c)(2)(B): the government reached an agreement with the defendant to “settle the action . . . notwithstanding the objections of the person initiating the action.” In that circumstance, the statute required the district court to “determine, after a hearing, [whether] the proposed settlement [was] fair, adequate, and reasonable under all the circumstances.” 31 U.S.C. § 3730(c)(2)(B)

Id. at 10.

In turn, the D.C. Circuit followed the mandates of Congress and determined that it could not simply tune out the voiced concerns of the relator when it comes to adequacy of a False Claims Act settlement.

As for the constitutional concerns, the D.C. Circuit noted the courts regularly play a role in scrutinizing settlement agreements. For example, in the criminal context, under Federal Rule of Criminal Procedure 48(a), the government can only “dismiss an indictment, information, or complaint” “with leave of the court.” Moreover, the Court noted that in this particular case, the government invoked the court’s supervisory powers by urging the district court to “retain jurisdiction to . . . enforce the terms of the settlement agreement by and between the parties.”

More information for healthcare fraud whistleblowers is located at the Nolan & Auerbach, P.A. website.

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First Circuit: Statement that Relies on False Data Potentially Triggers FCA Liability

by Nolan and Auerbach on May 16, 2012

The First Circuit has led the change in rejecting the rigid divisions between factual and legal falsity, and express and implied certification, noting that the text of the False Claims Act (FCA) does not make such distinctions.  Specifically, in Hutcheson, the First Circuit declared that such distinctions “may do more to obscure than clarify the issues…” United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377, 385-86 (1st Cir. 2011). Instead, the First Circuit has taken a broad view of what may constitute “false or fraudulent” statement to avoid “foreclose[ing] FCA liability in situations that Congress intended to fall within the Act’s scope.” Id. at 387 (quoting United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1268 (D.C. Cir. 2010)) (internal quotation marks omitted).

Recently, the First Circuit had an opportunity to apply its renewed reading of “false or fraudulent” statements, in United States ex rel. Jones v. Brigham and Women’s Hospital, No. 10-2301 (1st Cir. May 7, 2012). In this NIH grant case, the defendants allegedly violated the False Claims Act by including false statements in a grant application that was submitted to the NIH. Importantly, at least from the defendants’ point of view, the application did not include the supposed false data that formed the basis of their study proposal.

In reversing the lower court’s decision, the First Circuit ruled that the statements in the grant application were still sufficiently “false” to trigger FCA liability. According to the Court, “Although it is true that the allegedly false [ ] data was not itself included in the Application, that fact is not determinative of the false claim allegation. The statute makes it a violation to ‘use . . . a false record or statement to get a false or fraudulent claim paid or approved by the Government.’ 31 U.SC. § 3729(a)(2).”

In a sense, the underlying false data tainted the subsequent statements in the grant application. The court noted, “These statements rel[ied] on the data challenged by [the Relator] as false. In the language of the FCA, they ‘use[d] . . . a false record.’ Thus premised, the statements would not be ‘true, complete and accurate’ as required by the certifications signed” by the Defendants.

The Court stressed that the relator would still need to clear two other FCA elements—materiality and knowledge. However, the “falsity” element was sufficiently pled, even if the allegations did not neatly fit into an “express certification” or “implied certification” box.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.

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