by Nolan and Auerbach on January 18, 2013
A sales manager at Takeda Pharmaceuticals brought a qui tam action against his employer under the False Claims Act. (United States ex rel. Nathan v. Takeda Pharmaceuticals America Inc., No. 11-2077 (4th Cir. 2013)).
The whistleblower claimed that his employer violated § 3729(a)(1)(A) of the Act by causing false claims to be presented to the government for payment.
However, to trigger liability under the Act, a claim for payment must have actually been submitted to the federal government. In dismissing the whistleblower’s suit, the Fourth Circuit determined that the whistleblower failed to point to any specific reimbursement claims submitted to the Government that related to the company’s alleged off-label marketing of its drugs.
The whistleblower said that Takeda was seeking reimbursement for the costs of prescriptions targeted at off-label use, which are typically not subject to government reimbursement. To prove his claim, the whistleblower utilized statistical evidence and made general allegations that Takeda engaged in a “scheme” to defraud the government. However, the whistleblower failed to point to even one specific reimbursement claim by Takeda.
The court stressed that while the whistleblower’s claim show that a false claim could have been filed, liability under the False Claims Act attaches only to false claims that were actually submitted to the government for reimbursement.
In ruling for Takeda, the court added that general allegations do not identify with particularity any claims that would trigger liability under the Act.
To learn more about whistleblowers and the False Claim Act, visit the Nolan Auerbach website.
by Nolan and Auerbach on November 27, 2012
Recent amendments to the False Claims Act corrected legislative deficiencies that fraudfeasors had used and abused to drain billions of dollars from the U.S. Treasury. Perhaps most importantly, the amendments modernized the Act’s liability provisions so as to explicitly and fully protect government dollars even when the federal government relies on others to make payment decisions for the federal Government. The need for such legislation was heightened by Allison Engine Co. v. United States ex rel. Sanders, a 2008 U.S. Supreme Court decision that narrowed the Act to only apply to false claims that were potentially reviewable by the “Government itself” and that were “material to the Government’s decision to pay.”
To effectively erase this limiting court decision from the books, Congress drafted a corrective liability amendment so that it applied to all “claims” pending two days before the Supreme Court released its Allison Engine decision. While the congressional intent was clear, circuit courts have struggled with how to retroactively apply the new liability provision.
The problem stems with the language of the retroactivity provision, found in § 4(f)(1) of the Fraud Enforcement and Recovery Act of 2009 (“FERA”). FERA states that the new liability provision applies to “all claims under the False Claims Act” that were pending two days prior to Allison Engine. However, while Congress intended “claims” to mean cases, “claims” is specifically defined in the False Claims Act to mean “demands for payment.” Thus, two circuits–the Ninth and Eleventh Circuits–have held that the new liability provision only applies to “demands for payment” that were pending two days before Allison Engine. Conversely, the Second and Seventh Circuits have held that the provision applies to cases pending two days before Allison Engine.
Recently, the Sixth Circuit broke the circuit tie when it held that the amendment applies to cases pending two days before Allison Engine. Ironically, the Sixth Circuit waded into these unsettled waters in the very case that catalyzed the False Claims Act amendments, United States ex rel. Sanders v. Allison Engine, which had worked its way back up the appellate pipeline. Of particular note, the Sixth Circuit held that the retroactive application of the new liability provision was not violative of the U.S. Constitution’s Ex Post Facto Clause.
Therefore, while Congress passed FERA to unmuddy the False Claims Act waters, the deepening circuit splits around retroactivity have, once again, stirred up confusion. Given the Supreme Court’s recent track record of limiting the reach of the False Claims Act, fraudsters are surely hoping this confusion generates another trip to the Supreme Court.
More information for whistleblowers is located at the Nolan Auerbach website.
by Nolan and Auerbach on October 4, 2012
The False Claims Act sets a range of awards for relator share between 15% and 25% to advance two goals. First, the 15% minimum was devised “in the nature of a ‘finder’s fee’ [in order] to develop incentives for people to bring information forward.” 132 Cong. Rec. H9389 (daily ed. Oct. 7, 1986) (statement of Rep. Berman). That amount is therefore paid “even if that person does nothing more than file the action in federal court.” Id. However, where a Relator’s contributions go beyond the mere filing of a complaint, an award well in excess of the statutory minimum is obligatory.
By offering relators the promise of an increased stake in the outcome of their cases based upon the extent to which they substantially contributed to the prosecution of the action, Congress created an incentive for relators and their counsel to commit time, money and resources needed to litigate aggressively on behalf of the taxpayers.
If the Department of Justice offers less of a relator share percentage than is properly due, the relator has the right to bring the issue before the court. The most recent successful challenge played out in an intervened qui tam action that exposed a residential youth center that was mistreating boys suffering from serious mental health. Ultimately, because of the relators’ actions, the mistreatment stopped and the center returned $6.85 million to the federal and Virginia governments. In assisting the government, the relators provided critical information about the fraud, attended all depositions and hearings, submitted briefs in support of the government, and secured the use of an expert who increased the defendants’ potential liability and encouraged the defendants to settle more quickly. Nonetheless, the government sought to limit the relators’ share to 17% of the recovery.
The court decided that a 20% share was more equitable. In reaching its decision, the court analyzed a number of factors, including the relators’ post-filing contributions. The court also acknowledged the gravity of the disclosure in reaching its decision: the significant safety issue posed to residents of the youth center who were not receiving the care they needed.
Hopefully, this decision sends a strong message to potential whistleblowers…and the Justice Department.
More information for whistleblowers is located at the Nolan Auerbach website.
by Nolan and Auerbach on September 11, 2012
For years, the United States Justice Department has argued that government employees cannot bring qui tam actions under the federal False Claims Act. For support, the Justice Department has maintained that the Act’s public disclosure bar is trigger when the government employees disclose the fraud allegations to themselves, private citizens. Furthermore, because the government employee is required to report fraud as a condition of employment, the employees do not “voluntarily” supply the information to the government, as required by the public disclosure bar’s original source exception.
Courts have almost uniformly rejected this argument. In addition to spotlighting the disconnect with the False Claims Act’s statutory language, the courts have stressed the important role government employee-relators play in ferreting out fraud, particularly when a governmental agency is captured by a corrupt industry.
Recently, the Third Circuit joined the chorus, when it held that government employees can file qui tam actions. Even more noteworthy, the court held that government investigators can file actions based on information they uncover during the course of their employment.
More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.
