2012 January Dba Health Law Speech

PRACTICAL CONSIDERATIONS IN DEFENDING AGAINST

HEALTHCARE FRAUD AND ABUSE ACTIONS

STARK LAW, THE ANTI-KICKBACK STATUE,THE FALSE CLAIMS ACT/QUI TAM ACTIONS

_____________________________________

MartinMerritt PLLC100 Crescent Court

Suite 700Dallas, Texas 75201

(214) 459-3131(214) 459-3010 (Fax)(214) 952-1279 (Cell)

[email protected]____________________________________

DALLAS BAR ASSOCIATIONHEALTH LAW SECTION

January 18, 2012

MartinMerritt PLLC Health Care Fraud and Abuse Dallas Bar Assn Health Law Section Page 1

Martin MerrittAttorney At Law

MartinMerritt PLLC100 Crescent CourtSuite 700Dallas, Texas 75201(214) 459-3131(214) 459-3010 (Fax)(214) 952-1279 (Cell)

Practice Focus: Martin Merritt is a member of the Health Law Section of the Dallas Bar Association and the HealthLaw Section of the State Bar of Texas. MartinMerritt PLLC is a boutique practice, which focuses on the needs of Physicians in Stark Law/Anti-Kickback Statute Compliance, False Claims Act Litigation, Contracts and Leases,Medical Business Law, Malpractice Defense, Medical Ethics, Business Litigation, Pharmaceutical Litigation, MDLActions. Lead counsel in over 2000 medical cases. Over 100 first-chair jury trials and administrative law hearingsinvolving ethics, benefit reviews, eligibility, and whether a physician’s course of treatment was reasonable andnecessary, met the applicable standard of care, the amount charged was usual and customary in Dallas County and/orthat the coding was appropriate for the treatment provided. Cases include defense of physicians in medicalmalpractice, ethics violations, and pharmaceutical defense in MDL class action opt-out cases. As a witness, Martinhas testified in open court over 100 times on behalf of clients. First Chair Jury Trial experience in MedicalMalpractice, Wrongful Death, Paralysis Injury, Products Liability, Contracts, Negligence, Premise Liability, DTPA,Breach of Contract, Breach of Warranty, Personal Injury, Workers Compensation, Federal Statutory Law, StateRegulatory Law, Real Estate. At least a dozen $1 million and multi million dollar (net present value) recoveriesactually received on behalf of clients. Over $500 million dollars in medical malpractice and Pharmaceutical claimsdefended. Volunteer Legal Director of StarkLaw.org, a national website devoted to helping healthcare providers findanswers to compliance issues, or referral to a health lawyer in their state. Martin has also served as a Prosecutor forthe Texas Commission for Lawyer Discipline. Books Authored:

Texas Motion Practice Handbook, Vols. I-II, 1600 pp., (updated annually), Knowles Publishing Co., Fort Worth,Texas (1992-2005)(Best-selling treatise and form book, Texas Civil Trial Procedure and Evidence. Chapters includeSummary Judgment, Default Judgment, Motions to Recuse Judges, Motions to Disqualify Counsel, New Trials,Dismissal for Want of Prosecution, Sanctions, Discovery Motions.) This book and the annual updates requiredreporting on every major development in civil procedure each year during the publication run.

Texas Bar Journal Articles and MCLE Presentations:

“Practical Considerations in Defending Stark Law, Anti-Kickback, False Claims Act, and Qui Tam Actions,” Dallas BarAssociation, Health Law Section, (Jan. 2012) “Medicare Set-Asides Under the Secondary Payor Act,” National BusinessInstitute, (Dec. 2010); “Federal Practice Update,” National Business Institute (Feb. 2001) “Fry is Out, But What is the Test? The Foundation for Expert Testimony in Federal Trials after Daubert”, 57 Tex. Bar. J. Vol. 7, pp. 710-715, (July 1994);“TexasSummary Judgment Evidence,” 53 Tex. B. J. Vol. 1, p. 24, (January 1990); “Prejudgment interest in Wrongful Death, PersonalInjury and Property Damage Actions,” Texas Trial Lawyer’s Forum, Vol. 2., No. 2 p 21-23 (1992); “A Critical Analysis of IrvingYounger’s Ten Commandments of Cross Examination,” Texas Trial Lawyers Forum Vol. 28, No. 1. pp.11-16 (1994); “Rule165a. Dismissal for Want of Prosecution” 60 Tex. Bar.J. Vol 6, pp. 555-559 (June 1997);” Summary Judgments in Texas,”


Dallas Bar Assn. Friday MCLE Clinic, (May 1990); “Responding to Adverse Pretrial and Trial Motions,” Texas Trial LawyersAssociation MCLE Seminar, Dallas and San Antonio, (Feb. 1994); “Demonstrative Aides in Civil Trials,” National BusinessInstitute Seminar, (Feb. 1994); “Motion Practice Pointers,” Plano Bar Association, (July 1995); “Case Intake and Investigation,”Institute for Paralegal Education, Seminar, (Sept. 1994) “Cross Examination, Getting the Most out of Depositions,” Texas TrialLawyers Assoc., Seminar, (Sept 1996); Guardian Ad Litem Practice and Procedure,” University of Houston Bar Foundation.

Part I: Government Enforcement of Health CareFraud and Abuse Laws. By Martin [email protected] 1. Fraud vs. Abuse. Sources of Federal HealthCare Fraud and Abuse Laws: The AMA Codeof Medical Ethics

The health care system in the UnitedStates has been described as the world’s largest,costliest health care bureaucracy, engulfed by redtape and maddening complexity, in which“[i]nsurers cheat patients and doctors; patientscheat doctors and insurers; doctors cheat insurersand patients; and all cheat the federal and stategovernments.” See, Bartlett, Donald; Steele,James, Critical Condition– How Health Care inAmerica Became Big Business and Bad Medicine, New York: Doubleday (2004.) This wasn’talways the case.

In America, throughout most of the 20th

century, the nation’s physicians held virtuallyunchallenged economic, moral, and political swayover the regulation what we now call the “healthcare industry.” See, e.g., Mahar, Maggie, MoneyDriven Medicine, New York: Harper -Collins2006. Gazing out over the horizon, physicianssaw trouble in the form of both government(socialist) and corporate (capitalist) takeover ofmedicine. The problem with socialist medicine isthat it is thought to kill both innovation and thehuman spirit, as we observed in the case of theSoviet Union, while corporations were thought toplace too much emphasis on the needs of

shareholders, as we have seen with decisionsmade by CEO’s of managed care organizations. Fifty years ago, the AMA didn’t really need tochoose which was worse– Scylla or Charybdis– inthe 1950's the AMA had fairly well erasedcapitalism from the picture. Both thepharmaceutical industry and the health caredelivery industry had come to respect the AMA’spower to enact state laws which made thecorporate practice of medicine a crime, or simplymade it impossible, by negative implication, forcorporations to qualify for a license to deliverhealth care. See, Claymon, Jennifer, “CorporatePractice of Medicine and Non-Profits,” UT Schoolof Law Health Law Conference, (April 2009.) See,Garcia v. Texas State Board of MedicalExaminers, 384 F. Supp. 434, 437-38 (W.D. Tex.1974). So powerful was the AMA, evenPharmaceutical companies didn’t dare advertisedirectly to consumers, as the AMA did not wantanyone, other than a physician, telling patientswhat drug to buy.

Medicare “Fraud and Abuse” regulationsare the bane of physicians and the healthcareindustry. Not only are the regulations impossibleto find for the average physician, the frustration iscompounded by the seemingly inescapableconclusion that the federal government is moreinterested in the appearance of reform, than inactually enforcing a code which in any wayreduces the deficit. Consider, as a stunningexample, that in 2003, when Medicare Part D waspassed, the pharmaceutical industry was able tosecure a provision that forbids CMS (Medicare)from negotiating volume discounts whenpurchasing drugs. Hence, the Veteran’sAdministration (and virtually everyone else) payson average, 58% less than Medicare for the same


drugs. While physicians and providers spendcountless resources attempting to comply withfraud and abuse laws, Every nickle that the USTreasury has ever recovered under the FCA hasbeen squandered in a single year by operation ofthis “no haggle” provision in Medicare Part D. Inother words, all this effort is wasted.

To be sure in the formative years of bothprivate and public health insurance, just like thepharmaceutical industry, the AMA insisted neithercorporate “Blue Shield” plans, nor the newMedicare program should attempt to extract“purchasing power” discounts. See, Mahar,Maggie, Money Driven Medicine, New York:Harper-Collins (2006). The difference is this,while there were those in 1965 who thought wecould actually afford to pay full sticker price foreverything, by 2003, no one was under any suchmisapprehension about our ability to pay full pricefor Medicare Part D. Yet we did it anyway.

In 1965, (as Congress debated enactingTitles XVIII and XIX of the Social Security Act,)the AMA turned its full attention toward whatwould happen if the federal government got intothe business of providing for, (and regulating) the practice of medicine. The AMA wasparticularly concerned not only that their memberscontinue to be paid a “reasonable” fee for“necessary” services, but also about governmentregulators (who were laymen) instructing or second-guessing the reasonableness and necessityof medical services.

“Failure” is not, as JFK opined, alwaysand “orphan.” When spending got out of control,congress had no trouble figuring out who, or what(other than congress,) we should blame– fraudand abuse. It is fair to say the AMA saw thiscoming– but not in their wildest dreams did theyimagine the true scope of the storm which was tobecome modern federal “fraud and abuse” law. Tosome extent, the AMA succeeded in preserving(for a while) the “fee for service” model ofreimbursement. However, with that came therecognition that physicians had a “perverse

incentive,” to perhaps over-treat. In fact the onlything standing in the way, would be the state-by-state versions of the AMA Code of MedicalEthics.

As federal spending on Medicare doubled,then tripled, over the decade between the 70's and80's, the federal government snatched the AMACode of ethics from the hands of doctors, andturned a few sections into a multi-billion dollarcivil and criminal litigation leviathan called“fraud and abuse.” (State laws, based uponfederal law, are used to enforce Medicaid and insome cases, private health plan fraud and abuse.Although important, state laws are not covered inthis paper.)

Today, physicians and providers stand inthe eye of the storm. In their reception areas, allmay seem calm– but behind the scenes, everymedical decision, and every business decision,every medical office lease, equipment rental,medical supply contract, employment contract,partnership, joint venture, real estate transaction,every investment, gift, discount, as well as everycode entered, and every waiver of co-payment– carries with it the threat of a federalinvestigation, and potential liability of millions ofdollars, (and possibly a felony conviction.) Meanwhile, the real criminals are hauling freightloads of government cash out of the treasury, withlittle fear of being caught (under the government’sp lan of “pay, then chase .” ) See ,http://oig.hhs.gov/fraud/fugitives/index.asp.

To say that the rules and regulationsagainst healthcare fraud and abuse are “difficult tomaster,” would be a gross understatement.Because regulators are being asked to regulatesomething they don’t understand, they tend toover write. It also appears the W.H.O. is destinedto write a ICD code for every cell in the humanbody. This tendency to overwrite is especiallynoticeable, as one begins to delve into theprovisions of 42. U.S.C., and 42 C.F.R, whichhave been described as “among the mostcompletely impenetrable texts within human


http://oig.hhs.gov/fraud/fugitives/

experience.” See, Rehab’h Ass’n of Va. v.Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994.)See, Baumann, et al., Healthcare Fraud andAbuse, p. 200, ABA Health Law Section Press,2002.

Yet, RAC auditor/bounty hunters, withcomparatively little more training that one mightgain from a cereal box are being asked to reviewmedical charts of physicians with years of medicaltraining and experience. (RAC auditors aresupposed to be looking for “over” and “under”payment errors. Not surprisingly, – 96% of theerrors found by RAC auditors favor theg o v e r n m e n t . ) S e e , h t t p : / / w w w .ahima.org/resources/rac.aspx.

(a) The Five Primary Federal Fraud andAbuse Prevention Statutes.

The 4 Circuit’s observation that “Fraudth

and Abuse” rules constitute an “impenetrabletext,” is a bit misleading. There is no “text.” Infact, the landscape looks as if we handed amachine gun to a group of regulators who havenever seen a gun before, and told them to shootanything they don’t recognize as harmless. The“rules” against fraud and abuse are literallyscattered out everywhere. The rules are found inactual statutes, under 42 U.S.C. and in regulationsfiled under 42 CFR. Then there are the Bulletins,Fraud Alerts (“Special” and un-Special)Memoranda, Opinion Letters, regular letters,(“Open” and un-Open,) some of which end up inthe Federal Register, some of which end up inthe OIG, HHS and CMS websites, and others aresimply tucked away in some manual– calling tomind the final scene of Raiders of the Lost Ark. The rest, are what I call “Legend and Lore,” basedupon what someone thought they understood, oreven heard a government official say in a townhall meeting on the subject of what would lead toenforcement activity. (This all tends to explainwhy most of my clients simply call the wholecollection, “Stark Law,” and leave it to me to

know which law actually applies.)

I will tell you this, no “official” (orunofficial) compendium of federal fraud andabuse regulations exists. See, Tully, Federal Anti-Kickback Law, 1500:0607 (BNA’s Health andBusiness Series, 2001.) In fact we Stark lawyershave learned to become our own book binders,(with three-ring binders as our chief weaponryagainst chaos.)

This isn’t to say that the government is hiding the ball, or trying to keep the rules a secret.Far from it– they simply cannot write a rule thatalso effectively takes everything into account.

Recognizing this, CMS and the OIG doattempt to set out what will be prosecuted by thegovernment on their respective web sites. But “thegovernment” is not one entity. It is a collection ofagencies and offices. Not every agency agrees onenforcement, nor do they necessarily talk to oneanother. Personnel vary widely from region toregion with regard to knowledge on the subjectbeing regulated. The government bridged the gapin knowledge between regulators, and theregulated by producing operational manualswhich guide agents in day-to-day operations.

The trouble is, these operational manualsare not statutes, which are written after publichearings, debate and input from the industry.Often, the people in charge of enforcement havenever read the actual statutes, and certainly noidea what constitutes reasonable and necessarymedical practices. This is not to impugn theintegrity of employees of HHS, CMS, or OIG. Many are highly skilled, highly trained and highlyknowledgeable. Even those who are lessexperienced are good, sincere, hard-working people doing the best they can, given the fact thatthey are non-physicians, who have been given thetask of enforcing the AMA Code of Medical Ethics against licensed physicians who are oftenfaced with the impossible task of treating patientswho, themselves, are not always forthright inrelaying their own histories . (In further defense ofthese federal agents, they do see some fairly


http://www.

outrageously bad actors, which tends to erodeblind faith that absent a firm hand, mankind willbehave itself.)

Add to this, the army or RAC auditors,and qui tam relators, who are paid a percentagebounty to find even the slightest error (which maydisqualify billions of dollars in reimbursements,)and an environment of KGB-style terror reigns. Because qui tam actions are filed under seal,medical providers have no idea, (sometimes foryears,) that they have been sued, what they maybe accused of, when unsealing will happen, orwhich of their employees, suppliers, neighbors orfriends have turned them in.)

Nevertheless, the OIG lists on its websiteand its “Roadmap for Physicians,” the fiveprimary Medicare fraud and abuse preventionstatues, that will be the subject of enforcementactions: (1) the False Claims Act, 31 U.S.C.§§3729–3733, (2) the Anti-kickback Statute, 42U.S.C.§ 1320a-7b(b), (3) the Physician Self-Referral (Stark) Law,42 U.S.C.§ 1395nn (4) theCivil Monetary Penalty Statute , 42 U.S.C.§1320a-7a and (5) the Exclusionary Statute 42U.S.C.§ 1320a-7 . These statues and rules worktogether, both by cross-reference, crossincorporation, and with a great deal of overlap. Understand, there are actually more than 50federal statues which could be employed– and ifa client does something really dishonest, he mayhave every federal agency from the FBI, the postalinspector to the department of defense in hislobby– but for the OIG, more than 5 is simplyoverkill. The five are:

(1) The False Claims Act Congress passed theFalse Claims Act on March 2, 1863, 12 Stat. 696. (31 U.S.C. §§ 3729–3733, also called the "LincolnLaw.") The FCA imposes liability on persons andcompanies (typically federal contractors) whodefraud governmental programs. A false claimmay be a “reverse false claim”– meaning a falsestatement about how much one owe’s thegovernment (IRS matters are excluded.)

(2) The Anti-kickback Statute, 42 U.S.C.§1320a-7b(b). Congress passed the AKS in 1972

for two reasons (1) in response to the ballooningfederal budget, (2) growing public awareness thatdefense and medical contractors were “gaming”the system. Contractors with less than stellarabilities, services, or products were jumping infront of higher quality providers simply by payingthe highest kickbacks. The AKS was at first amisdemeanor criminal statute, then upgraded to afelony, and finally, a civil money penaltyprovision was added. Although the AKS appliedto any government contractor, its major provisionswere taken from AMA Ethics Code provisions on“Fee Splitting” (Rules 6.02-6.04.) In the 1980'sthe spirit of deregulation caused the OIG to craft a number of Safe Harbors, under 42 CFR1001.952 (a)-(u) which apply to the most commontypes of arrangements.

First, the AKS prohibits paying cash oritems of value for referrals. Second, the AKSprevents “in kind” kickbacks by outlawingreferrals between providers who have any kind offinancial relationship with one another.Obviously, not every relationship contains a“kickback,” and cost savings can be realized frompooling of capital. The safe harbors were designedto permit relationships which carried little risk ofabuse. It would be very difficult to write a safeharbor for every possible arrangement, just as itwould be difficult to write a product liability rulefor each individual product manufactured. Instead,if a relationship is subject to a safe harbor,providers must meet the requirements. If anarrangement doesn’t have a published safe harbor,that doesn’t mean the AKS has been violated.Instead, the parties would likely be required todemonstrate by analogy, that no kickback isinvolved, (usually by comparing the FMV of thething involved, and the amount paid for it. If thetwo are not equal, there may be a kickback.)

(3) “Stark Law.” The Prohibition AgainstPhysician Self-Referral,42 U.S.C.§ 1395nn. In1989, Congressman Pete Stark sponsored a specialrule prohibiting certain Medicare referrals, whichonly applied to physicians, and only to certainspecific items of expense. In order to understandwhy this was thought necessary, given the obvious


overlap between Stark Law and the AKS, (andwhy most physicians feel betrayed by continuedenforcement of the rule,) we must pull back the lense, in order to gain a broader historicalperspective.

Over the course of the 20 century,th

American physicians, through the AMA, triedmightily to fend off not only the government, butalso corporate intrusion– which they termed, the“corporate practice of medicine.” (Little realizingone would lead directly to the other, as spendingon health care tripled between 1970 and 1980,thanks to Medicare.) What the AMA objected towas “for anyone else, such as an investor, to makea return from a physician’s labor.” See, Starr, PaulThe Social Transformation of American Medicine(New York: Basic Books, 1982.) So the AMAdecided to erase capitalism from the picture. Ifmedicine required capital beyond that whichdoctors could provide, it would have to becontributed gratis by the community, (instead ofinvestors looking for a profit.) Id. Nonetheless, theAMA was wise enough to realize, as the legalmaxim goes: he who seeks equity, must do equity. If the AMA were to have any credibility againstcritics who charged the AMA’s lofty ideals were“financially convenient,” physicians would needto “practice what they preached.” And so theAMA adopted rules prohibiting their ownmembership from earing passive income fromfinancial investment of capital. This wasaccomplished by AMA Rule 8.03, which declaredit “unethical” for a physician to earn a profit fromthe referral of a patient to an outside clinic, which the physician also owned. Physicians happilyaccepted this trade-off, but only for so long aseveryone played by the rules. But in the 70's and80's, the walls which held corporate interests atbay was finally breached. Private investors (often by pretending to be “non-profit” entities,)began earing a profit from physician’s referrals.

Physicians responded (rightly orwrongly,) by taking the position that because thegoal posts had been moved, they were free todisregard their own rules– with impunity.Practically overnight, it seemed, every physicianalso owned a diagnostics laboratory. The AMA

soon found out how difficult it is to “un-ring abell,” (for had they not, themselves declared itunethical for a physician to earn income fromoutside referrals.) As a consequence, (and in atwist of fate too strange for fiction,) thegovernment passed the Stark Act, whichessentially declared that physicians are the onlyentrepreneurs who may not earn passive incomefrom the investment in outside diagnosticfacilities.

Unlike the AKS, the Stark Act is a strictliability statute, which applies only to physiciansand only to referrals for Designated HealthServices to providers where they, or a close familymember has a financial relationship. Stark Lawhas safe harbors found in the main statute and asconstantly tinkered with by the OIG and HHS in42 C.F.R. § 411.351, et seq., and a variousassortment of bulletins and advisories.

(4) the Civil Monetary Penalty Statute , 42U.S.C.§ 1320a-7a. Civil penalties range from $10,000 to $50,000 and may be assessed on a perincident, per person, or per day of non-ompliance,as set forth in the Act.

(5) The Exclusionary Statue. 42 U.S.C.§ 1320a-7. Under the Social Security Act, exclusion ismandatory for certain acts, and permissive inothers. Conviction for Criminal offenses, for fraud in billing, or the criminal neglect or abuse ofpatients can result in automatic exclusion for fiveyears. The government is mindful that exclusionmay have a detrimental effect upon theavailability of health care. Often, solutions aimedat compliance are employed specifically to avoidthe harsh remedy of exclusion. If a person hasbeen excluded, OIG regulations state that anexcluded person may not be employed by aprovider, if any federal dollars are used tocompensate the excluded person. Thus, it isextremely important for providers to carefullyscreen employees.

(b) Is it “Fraud,” or “Abuse.”

Whether a practice is “fraudulent” or merely “abusive,” goes hand in hand with thequestion: will a pattern of conduct result in


criminal action, or simply civil money penalties? The answer isn’t entirely simple to provide. Apractice or scheme will normally fall within acontinuum, or range of mental states– frominnocence, to negligence, gross negligence,conscious indifference, willful ignorance,knowing, or intent to defraud. It is usually notnecessary that a provider “know” or “intend” toviolate a law, it is sufficient that the providerknowingly engage in an act that is forbidden.

Some behavior is designated a “crime,”(malum prohibitum) even though it isn’t actuallyimmoral, or “fraud,” (malum in se.) One exampleis taking kickbacks (especially “in-kind”) forreferrals, where the patient did actually need thetreatment. This isn’t so much immoral as it is, simply a crime, because congress, through theAKS says it is. Perhaps in recognition of the factthat some behaviors are always morally wrong,(stealing) while others are wrong because a statutesays so, (accepting office space at below marketrates, then referring cases to the landlord);whether a provider will be prosecuted criminallyvs. civilly under a statute like the AKS, (whichcalls for either,) often depends upon the evidence,(including past “run-ins” with enforcement) thatdemonstrates the provider knew his activity wasillegal, but did it anyway. While the violation iscomplete by knowingly engaging in behavior,(thus, legally sufficient) juries are often slow toconvict doctors and professionals of a crime,absent such aggravating factors,(only then is thecharge factually sufficient to support conviction.)

It is up to a prosecutor to decide whichcharge, or allegation to bring, based upon thestrength of the evidence. It is up to the jury todecide if the charge or allegation is true.

In practice, “Fraud or Abuse” is usuallyprosecuted as a crime for behaviors which arefairly close to “stealing.” See, Hooper, Patrick,Health Care Fraud And Abuse, Los Angeles:ABA Health Law Section, pp. 197-251 (2001) “Abuse,” is more or less synonymous with“medically unethical”. . . but without the intent todefraud or steal. Further, even a practice thatfalls within a “safe harbor” could still be“fraudulent,” depending upon “intent.” For

example, a physician may perfectly fit the AKS“safe harbor” for referrals of patients to a hospitalwhere he has ownership interest in the entirehospital. However, if it can be shown that theintent behind the practice was to refer patientswho don’t really need the treatment, then that is“fraud,” even though he has complied with a safeharbor.

2. What is the government trying to prevent? The government is primarily concerned with twothings: (a) “Fee Splitting,” or receiving“Kickbacks” for referrals, including “self-referrals,” and (b) billing the government forthings, when you don’t have a right to be paid.

(a) Fee Splitting, Kickbacks and SelfReferrals.

Fee Splitting and Kickbacks have always beenmedically unethical. See, AMA Code of MedicalEthics Rule 6.02 (Doctors can’t pay for referrals);Rule 6.03 (“Clinics, laboratories, hospitals, orother health care facilities that compensatephysicians for referral of patients are engaged infees splitting which is unethical; Rule 6.04 (Aphysician may not accept any kind of payment orcompensation for prescribing drugs or devicesfrom the manufacturer.) Fee splitting is not illegalin other businesses. As stated in the main rule:

“Rule 6.02: Payment by or to a physician solelyfor the referral of a patient is fee splitting and isunethical. A physician may not accept payment ofany kind, in any form, from any source, such as apharmaceutical company or pharmacist, an opticalcompany, or the manufacturer of medicalappliances and devices, for prescribing orreferring a patient to said source. In each case, thepayment violates the requirement to deal honestlywith patients and colleagues. The patient reliesupon the advice of the physician on matters ofreferral. All referrals and prescriptions must bebased on the skill and quality of the physician towhom the patient has been referred or the qualityand efficacy of the drug or product prescribed.

Self Referral (Stark Law) Stark Law is taken


from AMA “Conflict of Interest” Rule 8.032 (andits predecessors) which held, “In general, aphysician should not refer a patient to a facilityoutside of their office, where they do not providethe service or care, when they have an ownershipor investment interest in the facility.” A majordifference between Stark Law and the AKS, liesin the fact that under Stark Law, any referral forDHS’s (where a financial relationship existsinvolving a referring physician,) is per se illegal–there need not be a colorable “kickback” involved. A defendant (who need not be a physician) underthe AKS may escape liability by proving thereactually was no kickback, (either under a safeharbor, or simply as a matter of mathematicalfact.) Because Stark Law has its basis in both “feesplitting” and “conflict of interest” ethical rules,physicians are simply held to the higher ethicalstandard– this is also true because of a peculiarcircumstance: the patient’s limited concern overthe cost of treatment authorized.

The OIG explains this in its “Roadmapfor Physicians,” because the government (and notthe patient) is paying the bill, the usual marketforces do not apply. (Patients simply do what theyare told without regard to cost.) Both the patientand the government must be assured that thereferral is being made solely on the basis ofreasonable medical necessity, (not because thephysician owns the imaging center) and to themost capable provider– not simply to the providerwho is the “highest bidder.”

(b) Billing the Government, When ProviderDidn’t Have a Right to Payment.

Under this broad heading falls almosteverything else that will get you in trouble withthe government, subjected to a RAC audit claimfor reimbursement, (or sued by a qui tam relatoron behalf of the government.) Items in thiscategory may either be forbidden by a federal rule,(which for the most part are made unethical underAMA Rules 2.035, 2.09, 2.19, 4.04, 4.06, 8.03) ormay be something that smacks of fraud, (even ifHHS is yet to pass a rule on the subject,) such as

the Amgen case cited in Part II. This includes:

(1) charging for services that were neverperformed, (if intentional, this is just plainfraud,”)

(2) “Upcoding,” which can be a form of fraud,(depending upon intent,) in which a providerdeliberately assigns a higher reimbursement codethan it deserves,

(3) “Unbundling,” which is abusive, because thegovernment says it is: charging for a service thatshould have been included in a bundle, rather thanseparately, (Although note: In U.S. v. Krizek , apsychiatrist was sued for $80 million, $245k in alleged actual damages, because he did notunbundle an hours worth of time into smallerunits.)

(4) Failing to disclose discounts or pricereductions, either when the government is basingpayment on the belief a provider paid full pricefor supplies, or if the if a physician routinelywaives 20% co-pays. This often considered“fraud,” and not simply abuse.

(5) Claiming expenses when they weren’tincurred, including selling free samples ofprescriptions, then billing the government asthough the provider actually purchased the drugsfor resale.

(6) Billing for work done by an excluded provider.

(7) And the catch all– “false certification.” Thisoccurs when the provider falsely certifies to thegovernment that the provider has complied withall laws and regulations entitling the provider to apayment (Stark Law and the AKS for starters,and more and more so, the Civil MonetaryPenalties Statute and the Exclusionary State haveadded false certification definitions ) when if fact,the provider has not.

3. Damages and Penalties.

Violations of “fraud and abuse”regulations carry heavy penalties, which oftenbear no relationship to the damage done. If thegovernment is billed for services for a patient whohas been referred in violation of Stark Law or theAKS, then every single bill can be considered a“False Claim” under the False Claims Act, and


subject to a penalty for each claim submitted. Thisis how in the Krizeck case, a physician earing$100,000.00 per year ended up with a lawsuit for$82 million. ($10,000 fine for each of 8,000claims submitted.) In addition, a provider may beexcluded from the program under the“Exclusionary Statute.” It is worthy of note, thegovernment does not need to prove that theservices were not reasonably necessary. It isenough that the referral was poisoned in someway, and if so, the patient receives the care forfree, the government receives the benefit of thetreatment without paying for it, and the providermust pay a substantial penalty for each claimsubmitted.

4. FERA

With the Fraud Enforcement and Recovery Act of2009 (“FERA”), the federal government’s “mostpotent weapon” to fight fraud against the UnitedStates became even stronger. Since its inception,the False Claims Act has punished anyone whoknowingly submits a “false” claim for payment tothe United States. A claim is “false” when theperson or entity who submits the claim is notentitled to be paid. In the healthcare context, themost basic example of a false claim is a providerwho intentionally submits claims for services thatwere never provided. Penalties under the FalseClaims Act are severe, and include treble damages(three times the amount of claims improperlypaid), administrative sanctions, and potentialexclusion from participation in federal healthcareprograms. In some cases, criminal liability is alsoa possibility.

“Unknowingly” submitting a false claimdoes not violate the False Claims Act – at least notprior to FERA. With FERA, Congress amendedthe False Claims Act to cover the knowingretention of payments received pursuant to a falseclaim (a “reverse” false claim), even when thefalse claim was not knowingly submitted. ThePatient Protection and Affordable Care Act of2011 further strengthened FERA by adding the“60 Day Rule.” Under the rule, once a provider“identifies” a payment to which it is not entitled

(i.e., “knows” about the claim), the provider mustreturn the payment within (a) 60 days, or (b) thedate the corresponding cost report is due.

5. The Holder Memorandum.

To the actual participants, how one feltabout the Fall of Jericho might largely havedepended up which side one was standing whenthe walls crumbled. As for the rest of us, wewould really rather see disputes resolved beforethey become a war of annihilation. Thegovernment, unlike qui tam relators, also has avested interest in the survival of the regulated, andis therefore, often more interested in compliance,than convictions. (CMS simply cannot shut downthe only hospital in a region, no matter how badlyit is mismanaged. See, e.g., The problem withD a l l a s ’ P a r k l a n d .http://dallashealthcare.blogspot.com/)

As for smaller providers, in 1999, the“Holder Memorandum” was issued by the Deputy Attorney General, Eric Holder, to all UnitedStates Attorneys, and government civilenforcement lawyers, aimed at providing guidancefor both US Attorneys and trial attorneys in theCivil Division of the US Government. TheHolder Memorandum instructed governmentlawyer to use the “sledge hammer” of fraud andabuse laws under the FCA in a fair andresponsible manner. The gist of the HolderMemorandum was to encourage governmentlawyers to (1) not treat everyone as unrepentantfelons, unless they act like unrepentant felons, (2)remember the difference between “knowingly”false statements, (which are illegal) and falsestatements by mistake, (which are not) (3) takeinto account how much notice was provided of aposition taken by the government, (was theprovider they warned? Had the government beenprosecuting prior to the enforcement in aparticular case) (4) consider how bad the conductwas, and was it institution-wide, or just one badactor? (5) consider cooperation and willingness tocomply in assessing punishment, (6) try to resolvethe case by “contact letters” rather than sue first,(7) consider alternative remedies tailored to the


situation, (8) consider ability to pay in accessingcivil money penalties, and fines (8) don’t railroadpeople who can’t afford attorneys, just because itis easy, (9) don’t shut peoples business down(unless they really deserve it) while attempting toinvestigate and ferret out abuse.

To be consistent with my observationregarding those memoranda I consider “bad” formy clients, note that the Holder Memorandum,(though “good” for clients,) is not a statute oreven a regulation. It is an internal memo,circulated within the government, which was thenrepublished in the appendicies to books, such asHealth Care Fraud and Abuse, Bauman, L. ABABooks, (2002.) The point being, we healthlawyers literally hang on every word published bythe government.

I include the Holder Memorandum also tocompare and contrast government actions fromqui tam lawsuits. Notice that the government willnotify a defendant and take into account varioussocial concerns, before imposing penalty. In quitam actions, there is no pre-lawsuit discussion, infact a defendant may not know he has been suedfor years. Qui tam relators do not have anyinterest in the continued viability of a target– theydon’t care if they kill the host. Therefore, if apotential defendant gets wind of the fact he maybe sued, he may wish to consider the value of selfreporting– whatever the government might do, itis certainly preferable to total war.

6. OIG Bulletins, Open Letters, andMemoranda

In the decade of the 2000's, the OIGissued a number of internal bulletins andmemoranda which were eventually published afterthe fact, to help guide providers as to what thegovernment is looking for, when it comes tocertain practices, such as “joint ventures,” officespace, etc, under the title, “What to look for” fore x a m p l e , w i t h J o i n t V e n t u r e s ;(See,http://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html):

“Suspect Joint Ventures: What To Look For Tohelp you identify these suspect joint ventures, the

following are examples of questionable features,which separately or taken together may result in abusiness arrangement that violates the anti-kickback statute. Please note that this is notintended as an exhaustive list, but rather givesexamples of indicators of potentially unlawfulactivity.

(1) Investors are chosen because they are in aposition to make referrals.

(2) Physicians who are expected to make a largenumber of referrals may be offered a greaterinvestment opportunity in the joint venture thanthose anticipated to make fewer referrals.

(3) Physician investors may be activelyencouraged to make referrals to the joint venture,and may be encouraged to divest their ownershipinterest if they fail to sustain an `àcceptable''level of referrals.

(4) The joint venture tracks its sources ofreferrals, and distributes this information to theinvestors.

(5) Investors may be required to divest theirownership interest if they cease to practice in theservice area, for example, if they move, becomedisabled or retire.

The point of this is not to provide anexhaustive treatise on what the government islooking for, but to give you an idea that a greatdeal of information is out there, which you need toknow if you advise clients in federal fraud andabuse compliance.

7. Steps for Staying out of Trouble with theGovernment

As attorneys advising clients in the areaof healthcare fraud and abuse, Rule #1 : Anyadvice you provide a client, based upon the factshe has given you, may provide a defense to a“knowing” violation. Ordinarily, communicationsbetween attorney and client are privileged.However, that privilege belongs to the client, andhe may (and likely will) waive it. In fact, as the


U.S. v. Campbell case, (Cited in Part II)demonstrates, one of the first things a client willdo is report to the government that “my lawyersaid this was legal.” In the Campbell case, theattorneys responded, “the client didn’t tell useverything.” We don’t need to look at thecrime/fraud exception to privilege, because theclient just waived privilege. Knowing this,Rule#2: Document everything. Your opinionletter should state in clear terms every fact uponwhich your opinion is based, and that no otherfacts have been given or considered. Doctors havelong held to the heuristic maxim: “If it didn’t getwritten down, it didn’t happen.” What you mustnot do is get caught in this trap: If you “lie, andagree with the client,” as to what he now claimshe told you– he gets off the hook for millions ofdollars, but if you tell the truth, (he didn’t give meall the facts) the opposite result happens. If youfind yourself in this dilemma, the best advice I cangive you is , (1) Do not lie to the FBI, (2) Hire thebest ethics lawyer you can find.

Advising clients is “art” not “science.”Even the official OIG bulletins carry a disclaimer,“Don’t rely on us to know what we are talkingabout. The statutes and regulations are the law.You are responsible for following the law, notwhat we say the law is. ” (Well, that’scomforting!) The point being, you must know allthe rules and regulations, as well as anything thegovernment has written on a subject. With thatwarning in mind, here are a few ideas I think wecan all agree on.

(1) Before an arrangement is in place. If you arefortunate enough to be involved before anarrangement is in place:

(A) Read and understand not only the statues,but also everything the government has written ona particular practice or arrangement. Asmentioned earlier, the rules and regulations aredifficult to locate or digest. This problem iscompounded by the fact that congress, andvirtually every lesser agency (from aConstitutional law standpoint) is constantlytinkering with the questions of what is actuallyillegal. If your client is facing enforcementaction, pay very close attention to the dates of the

alleged wrongdoing compared with the rule beingenforced.

(B) Do whatever the “Safe Harbor,” theregulation, fraud alert, or bulletin says you aresupposed to do.

(C) Document efforts to comply. If theregulation requires payment of “Fair MarketValue” for something, hire a consultant to tell youwhat FMV is. Don’ t just pick a number out ofthin air.

(D) Haggle. The opposite of just picking anumber out of the clear blue sky, as a “give andtake” negotiation. This includes not only the price,for example, of office space, but also theamenities, and use of common areas and facilities.This can sometimes be difficult where the sellerdoesn’t really care what it is paid. (For example,where a lessor of office space would be happywith $1 a year in lease payment.)

(E) Be prepared to defend the number. Thedollar amount of and arms length transaction isusually a range of numbers between x and y. Beprepared to show why the number is what it is.For example, if more fringe benefits are included,the number should reflect that.

(2) Drafting the Contract. Track the language ofthe regulation or Safe Harbor in the contract.Legally, it may make no difference what thecontract says. However, putting the language inthe contract does show that the parties wheretrying to comply, and more importantly, may be ofgreat evidentiary value in negating the “scienter”or “knowing violation” element of thegovernment’s case. Therefore, for example, if theregulation requires that the price struck in thebargain does not include the “value of referrals,”the contract should expressly state that the partiesagree to this very thing.

(3) Post Contract Behavior. After the contractis in place, educate the client in the followingproblem areas:

(A) Conversations Kill. Particularly in mypractice, which is restricted to physicians– no oneneeds to know the doctor’s business, except the


doctor, and maybe the office manager. Instructyou clients to keep the circle of people who knowyour client’s business to a “need to know,” absolute minimum. Instruct those people to keeptheir mouths shut! Qui tam relators areeverywhere. Especially disgruntled formeremployees. They cannot blow the whistle on whatthey don’t know. I am not saying, “activelyencourage fraud.” That is illegal. What I amsaying, is if there is open talk about everything thepractice does, but there is a “black box” around aparticular transaction, people notice, and what toinvestigate. Better to keep quiet about all financialrelationships.

(B) Educate the Sales Team. Physicians andlicensed healthcare professionals all know theAMA Code of Ethics. Licensed professionalsknow in their bones when something is whensomething is wrong. Don’ t assume the sales teamdoes. It is amazing the number of qui tam caseswhich reveal the marketing team has no conceptabout medical ethics. Reign them in early andoften.

(C) That’s Not Funny! There should be a “nojokes” policy in place. Especially in emails. In theera of Electronic Discovery, and entire cottageindustry has sprung up, with providers, such asHudson Legal, who will assemble and army oflawyers, many recent graduates of law schools, ata rate of $20 per hour to pour over emails, lookingfor something that constitutes a “Hot Doc.” TheNeurontin case, cited below in Part II, might havebeen a little easier to defend, if the marketingteam hadn’t taken to calling the drug, “SnakeOil.”

(D) Do the Work Called for Under theContract. For example, if the a clinic or hospitalretains a physician as a medical director, and thecontract price is based upon, say 5 hours a month,then the physician and the clinic or hospital mustdocument the time was actually worked. In U.S.v. Campbell, a case in federal court in New Jersey,the court ruled that a False Claims Act suit couldproceed against a doctor who entered into a part-time employment relationship with a hospital butwas not required to actually perform the servicesidentified in the contract. Thus, the court decided

that the doctor may have been paid above the fairmarket value for the services actually renderedand the excess payments could violate the self-referral constraints of the Stark Act. The violationof Stark caused the Medicare claims to be false,thus exposing the hospital and doctor to FalseClaims Act liability. While the doctor wasultimately exonerated in a jury trial, this casenonetheless demonstrates the risks associated withemployment, and agreements that are notoperationally enforced.

Part II: Qui Tam ActionsUnder the False Claims Act, 2011 Judicial Year in Review.The False Claims Act

A. Introduction:

Congress passed the False Claims Act onMarch 2, 1863, 12 Stat. 696. (31 U.S.C. §§3729–3733, also called the "Lincoln Law.") TheFCA imposes liability on persons and companies(typically federal contractors) who defraudgovernmental programs. The law includes a "quitam" provision that allows people who are notaffiliated with the government to file actions onbehalf of the government (informally called"whistleblowing"). Persons filing under the Actstand to receive a portion (usually about 15–25percent) of any recovered damages. Claims underthe law have typically involved health care,military, or other government spending programs.The government has recovered nearly $22 billionunder the False Claims Act between 1987 (afterthe significant 1986 amendments) and 2008.

The Justice Department secured morethan $3 billion in settlements and judgments incivil cases involving fraud against the governmentin the fiscal year ending Sept. 30, 2011. http://www.justice.gov/opa/pr/2011/December/11-civ-1665.html. This is the second year in a rowthat the department has surpassed $3 billion inrecoveries under the False Claims Act, bringing


http://www.justice.gov/opa/pr/2011/December/11-civ-1665.html.

http://www.justice.gov/opa/pr/2011/December/11-civ-1665.html.

the total since January 2009 to $8.7 billion – thelargest three-year total in the Justice Department’shistory. Id.

“Qui tam” is an abbreviated form of theLatin legal phrase qui tam pro domino rege quampro se ipso in hac parte sequitur ("he who bringsa case on behalf of our lord the King, as well asfor himself") In a qui tam action, the citizen filingsuit is called a "relator." As an exception to thegeneral legal rule of standing, courts have heldthat qui tam relators are "partially assigned" aportion of the government's legal injury, therebyallowing relators to proceed with their suits.

The private plaintiff qui tam provisionswere thought necessary because the federalgovernment lacked the resources to detect anddeter fraud. (On the other hand, it seemedblissfully simple to “fight greed with greed.”) One small tweak in the law was necessaryhowever, and is one which has become significantin the defense of qui tam cases in modern times. The problem simply was there was no prohibitionagainst the “parasitic” practice of filing a claimfor a part of the recovery after the qui tam relatorlearned of the fraud from sources such as readingreports of criminal indictments by the federalgovernment. (Remember the whole point of a quitam provision in the FCA was that the governmentlacked the resources to detect the fraud in the firstplace.) Today, the “Public disclosure” rule barsthe filing of a qui tam action if the government, orthe public, is already aware of the practice, unlessthe relator was the original source of theinformation. The defense forms a major part ofthe body of cases in 2011 cited below. The PatientProtection and Affordable Care Act, 124 Stat.119, amended the public disclosure bar, asdiscussed in Shindler Elevator v. US ex rel Kirk,131 S.Ct. 1885 (2011).

The False Claims Act establishes liabilitywhen any person or entity improperly receivesfrom or avoids payment (reverse false claims) tothe Federal government (tax fraud is excepted).The Act prohibits:

(1) Knowingly presenting, or causing to be

presented a false claim for payment or approval;

(2) Knowingly making, using, or causing to bemade or used, a false record or statement materialto a false or fraudulent claim;

(3) Conspiring to commit any violation of theFalse Claims Act;

(4) Falsely certifying the type or amount ofproperty to be used by the Government;

(5) Certifying receipt of property on a documentwithout completely knowing that the informationis true;

(6) Knowingly buying Government property froman unauthorized officer of the Government, and;

(7) Knowingly making, using, or causing to bemade or used a false record to avoid, or decreasean obligation to pay or transmit property to theGovernment.

See, 31 U.S.C. § 3729.

To establish a violation, a plaintiff "mustshow that defendants (1) made a claim, (2) to theUnited States government, (3) that is false orfraudulent, (4) knowing of its falsity, and (5)seeking payment from the federal treasury." U.S.ex rel. Mikes v. Strauss, 274 F.3d 687, 695 (2dCir. 2001) The FCA defines "knowingly" ashaving "actual knowledge," or acting in"deliberate ignorance" or with "recklessdisregard" of truth or falsity. 31 U.S.C. § 3729(b)(2005). Thus, the requisite intent is more thannegligence or innocent mistake. Mikes, 274 F.3dat 703 . Put another way, "knowingly" presentinga false claim "does not mean the claim is incorrectas a matter of proper accounting, but rather meansit is a lie." Id. (citation omitted).

Most, if not all of the opinions cited hereare qui tam actions. The most important thing, (orthings) to understand about the False Claims Actis (1) the United States government does notneed the False Claims Act in order to recoverdamages or penalties and usually doesn’t use thecourts. (There are literally dozens of federalstatutes that can accomplish this, including theexclusionary statute and the civil monetarypenalties statute,) usually the government handles enforcement administratively, and will often use


the courts as a last resort. (2) qui tam relators mustuse the False Claims Act and meet therequirements of the Act, or the claim and thelawsuit must fail. This is important because any defense which is valid and results in dismissalagainst the first relator to file, is a bar against anyother relator.

B. Procedure

(1) Sealing. Qui tam relators suits are filed underseal, and may remain under seal for years, pendingthe government’s decision to intervene. Under 31U.S.C. §§ 3730(b)(4) and (c)(3), if theGovernment elects not to proceed by taking overa qui tam action, the Plaintiffs-Relators "shallhave the right to conduct the action." Although theGovernment is entitled under such circumstancesto be served with copies of all pleadings andcertain discovery material, there is no expressright to keep files sealed from the Defendantindefinitely. U.S. v. CACI International Inc., 885F. Supp. 80, 81 (S.D.N.Y. 1995). That being said,the statute does not specifically address whetherfile materials beyond the complaint are to beunsealed once the Court enters its order. Severalcourts, after having considered this issue, havefound that a court has the authority to retain thefiled documents under seal, or conversely, tomake them fully available to the parties. See e.g.,U.S. ex. Rel. Howard v. Lockheed Martin Corp.,No. 1:99-285, 2007 WL 1513999, *2 (S.D. OhioMay 22, 2007); U.S. ex rel. Yannacopolous v.General Dynamics, 457 F. Supp.2d 854, 858(N.D. Ill.2006); U.S. ex rel. Health OutcomesTechnologies v. Hallmark Health System, Inc.,349 F. Supp. 2d 170, 173 (D. Mass. 2004).

(2) The Decision to Intervene.

Although the Statue allows thegovernment 60 days to decide to intervene, the

court for “good cause” may, (and normally)grants a number of extensions that can last years.(Thus, a defendant may be the target of a hundredmillion-dollar lawsuit, and be completely unawareof it for years.) How long does the governmenthave to decide? Case law construing the "goodcause" requirement of 31 U.S.C. § 3730(c)(3) isscarce. At least one court has found that therequirement was implemented to protect theinterest of relators. In U.S. ex rel. Stone v.Rockwell Intern. Corp., 950 F.Supp. 1046 (D.Col.1996), the Court reviewed the Senate Reportregarding the 1986 amendment to the FalseClaims Act, which implemented the "good cause"requirement for government intervention. The1986 amendments altered the reward provisions ofthe False Claims Act, permitting relators torecover 25 to 30 percent of the alleged fraud ifthey proceeded alone, but only 15 to 25 percent ifthe government intervened. Id. at 1048-49. Giventhe new reward provisions, the Stone court noted,"[g]overnment intervention late in the proceedingsmay be unfair to a relator who has expendedconsiderable resources to advance the case andthen loses up to half of the reward for bringing theaction." Id. at 1049.

(3) The “First to File Rule

"When a person brings an action under [the quitam] subsection, no person other than theGovernment may intervene or bring a relatedaction based on the facts underlying the pendingaction." 31 U.S.C. § 3730(b)(5). This rule carrieshidden implications. Unlike class action cases,there is no hearing to determine the relator’sability to represent the government. Even where acase may have merit, if the relator fails to selectexperienced counsel, there may be only one quitam action. Thus, motions to dismiss becomecrucial.

(4) Motions to Dismiss.

Once the government makes a decision onintervention, (“yes,” or “no,”) then the case is


unsealed and the defendant is served. The firstresponsive pleading will normally contain the12.b.1, an Iqbal/Twombly 12.b.6 motion and/or aRule 9.b motion, although subject matterjurisdiction. None of these allege the defendant“didn’t do it.” Instead, these motions seekdismissal because the plaintiff didn’t pleadenough facts to remain in court.

(i) 12.b.1 Motion to Dismiss for Lack of SubjectMatter Jurisdiction

Under the False Claims Act ("FCA"), federalcourts lack jurisdiction over a qui tam action if theallegations in a relator's complaint have beenpublicly disclosed in a federal hearing, in a federalreport or audit, or in the news media — unless therelator is an original source of the information.(The relator does not lose the ability to sue, bygoing to the government agency before filingsuit.) See,31 U.S.C. § 3730(e)(4)(A), whichprovides:

“No court shall have jurisdiction over an actionunder this section based upon the publicdisclosure of allegations or transactions in acriminal, civil, or administrative hearing, in acongressional, administrative, or GovernmentAccounting Office report, hearing, audit, orinvestigation, or from the news media, unless theaction is brought by the Attorney General of theperson bringing the action is an original source ofthe information.

On March 23, 2010, 31 U.S.C. §3730(e)(4) was amended, but the legislation issilent as to retroactivity. See Section 10104(j)(2)of the Patient Protection and Affordable Care Act,Pub. L. 111-148, 124 Stat. 119; SchindlerElevator Corp. v. United States ex rel. Kirk, 131S. Ct. 1885, 1889 n.1 (2011). Courts are permitted

to weigh mixed fact and law issues in a 12.b.1motion to a greater degree than under 12.b.6. See,Osborn v. United States, 918 F.2d 724, 729-30 &n.6 (8th Cir. 1990) ("Because at issue in a factual12(b)(1) motion is the trial court's jurisdiction —its very power to hear the case — there issubstantial authority that the trial court is free toweigh the evidence and satisfy itself as to theexistence of its power to hear the case.")

(ii) Rule 9(b) Pleading Fraud with Particularity

It is well established that the heightenedpleading requirements of Fed. R. Civ. P. 9(b)apply to claims brought under the False ClaimsAct. This requires pleading “who, what when,where.” See Gagne, 565 F.3d at 45. AlthoughRule 9(b) may be satisfied where "some questionsremain unanswered [but] the complaint as a wholeis sufficiently particular to pass muster under theFCA," id. at 46, quoting United States ex rel. Rostv. Pfizer, Inc., 507 F.3d 720, 732 (1st Cir. 2007),"Karvelas requires the complaint to provide,among other fraud specifics, `details concerningthe dates of the claims, the content of the forms orbills submitted, their identification numbers, [and]the amount of money charged to the government.'"Gagne, 565 F.3d at 46, quoting Karvelas, 360F.3d at 233.

(iii) Rule 12.b.6. Iqbal/Twombly

Before 2009, the only reason to file a 12.6.bmotion would have been if the Complaint wereperhaps written in crayon, or otherwise,embarrassingly childlike. That all changed withIqbal. To satisfy Fed. R. Civ. P. 12(b)(6), "acomplaint must contain sufficient factual matter,accepted as true, to `state a claim to relief that isplausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct.1937, 1949 (2009); Bell Atlantic Corp. v.Twombly, 550 U.S. 544, 570 (2007). Iqbal and Tombly mark a dramatic departure from priorfederal practice, (for example, the 2002 versionof the Federal Procedure Hornbook by Wright& Miller dismissed as “insignificant,” and devoted less than a page to the subject ofdismissal for failure to state a claim upon whichrelief could be granted.)

Why the sudden change? The


Iqbal/Twombly decisions were specificallydesigned to address growing concerns that (1)absent a strengthened rule 12(b)(6), summaryjudgment would be the first chance a court mighthave to dismiss a claim, (2) summary judgmentnormally could only be determined after discovery had been fully developed, (3) given themodern practice of electronically saving everydocument which would then be discoverable, (4)the costs of discovery, even if the defense were tobe successful, would constitute at best, a Pyrrhicvictory. Thus, Iqbal/Twombly motions havebecome a powerful tool for defendants who seek dismissal of cases, before the keys to discoveryhave been handed over.

One of the most abrupt paradigm shiftsfrom the old “notice pleading” rules, underIqbal/Twombly is the new concentration upon thedistinction between pleading facts vs. conclusions.Any litigator worth his salt, is familiar withevidentiary prohibitions against conclusorytestimony. After Iqbal/Twombly parties must alsoapply the same standard to pleadings. TheSupreme Court has declared post Iqbal/Twomblythat the trial court is to disregard any conclusionscontained in the pleadings when determiningwhether the Complaint states a plausible claim forrelief. Compliance with Iqbal/Twombly, in mostcases, is not so much a matter of substance, as itis a matter of form, but in FCA cases, the burdencan be quite difficult to overcome.

Why? Because the “one-two-punch” ofthe application of Iqbal/Twombly– plus theheightened pleading standard under Rule 9(b)– ,even where the evidence of a fraudulent scheme is so strong that “fraud must be occurring” courtshave dismissed FCA cases where the relator couldnot state with specificity “who, what, when, andwhere” false clams were actually presented. See, US ex rel NATHAN v. Takeda Pharmaceuticals (ist. Court, ED Virginia, Case No. 1:09-cv-1086 (September 6, 2011)(Discussed in Part II)

(iv.) A Reduced Burden in Whistle Blower

Cases?

Notwithstanding the practical benefits ofa strengthened dismissal practice, k,.Whistleblower relators may have particular difficultymeeting the “who, what , when, where” standardunder rule 9, and the “plausibility” standard underIqbal, because the relator may either be a“stranger” to the transaction, or a formeremployee who has no access to the records. Theremay also be confidentiality issues under ethicsrules and HIPAA. Courts are still in the processof figuring out how to comply with the SupremeCourt’s opinions in Iqbal/Twombly and Congress’express instructions that the False Claims Act is tobe treated as an important tool of government. Some solutions have been to relax the standard forpleading where the relator has no way to comply, or to permit limited discovery. The Fifth Circuitrecently noted that the standard for stating a claimfor relief with particularity is lower in the FCAcontext than it is in the securities or common lawfraud contexts. See, United States ex rel. Grubbsv. Kanneganti, 565 F.3d 180, 185 (5th Cir.2009)(Noting that in medical FCA cases, theDefendant will often be in sole possession of thenecessary medical records.)

If dismissal is granted, the relator may be permitted to replead, depending upon a number offactors, as set out in Rule 15 and the cases thatfollow.

The most striking difference betweengovernment initiated enforcement and qui tamactions lies the fact that the government has greatneed to ensure the continued survival of theindustry being regulated, and a great deal ofconcern, as set out in the Holder Memorandum,whether or not jobs will be lost due to anexcessive penalty. Qui tam relators have no suchconcern or duty.

(5) Issues related to Settlement.

Unlike Class Action lawsuits, theplaintiff/relator need not prove fitness to representthe government. This does not imply that therelator is free to settle a case as it sees fit. Underthe federal False Claims Act, a person may bringan action "in the name of the Government"


seeking civil remedies for fraud against the UnitedStates. 31 U.S.C. § 3730(b)(1). Id. "The actionmay be dismissed only if the court and theAttorney General give written consent to thedismissal and their reasons for consenting." .Thus, the government has "an absolute veto powerover voluntary settlements in qui tam FalseClaims Act suits." Searcy v. Philips Elecs. N. Am.Corp., 117 F.3d 154, 158 (5th Cir. 1997); accordUnited States v. Health Possibilities, P.S.C., 207F.3d 335, 339 (6th Cir. 2000). This veto power isnecessary because:

“relators can manipulate settlements in waysthat unfairly enrich them and reduce benefits tothe government . ... In qui tam litigation, [ there isa danger that a relator can boost the value ofsettlement by bargaining away claims on behalf ofthe United States . ... If the government decidesthe settlement isn't worth the cost, § 3730(b)(1)allows the government to resist these tactics andprotect its ability to prosecute matters in thefuture.

Searcy, 117 F.3d at 160. Without this veto power,the public relator would "retain sole authority tobroadly bargain away government claims." HealthPossibilities, 207 F.3d at 340. The governmentmay veto a settlement agreement that it believesprovides too broad a release by refusing toconsent pursuant 31 U.S.C. § 3730(b)(1).

SELECTED CASES REPORTED IN 2011:

IN RE NEURONTIN MARKETING ANDSALES PRACTICES LITIGATION

THIS DOCUMENT RELATES TO: KAISERFOUNDATION HEALTH PLAN, INC., et al.v. PFIZER, INC., et al. Civil Action No.04-cv-10739-PBS. U. S. District Court, D.Massachusetts. (August 31, 2011.)

Opinion Excepts: Approved by the Food andDrug Administration (FDA) in 1993 as asecondary treatment for epilepsy, Neurontin

became one of the top selling drugs in the world.Sales rose from fewer than 50,000 prescriptions in1995 to more than 1.4 million in 2004. Thesuccess of the drug was due to the illegal activitiesof Parke-Davis, Warner-Lambert and Pfizer,companies that undertook a nationwide effort tounlawfully market this drug for off-label uses forwhich there was little or no scientific evidence ofefficacy. The Food, Drug and Cosmetic Act(FDCA) prohibits such off-label marketing bypharmaceutical companies. See 21 U.S.C. §355(a).

Dubbed "snake oil" by Pfizer's own sales team,Neurontin was promoted through a publicationstrategy that suppressed negative clinical trialsand showcased positive ones. Pfizer alsosponsored continuing medical education programsand detailed doctors to promote off-label uses ofthe drug. Eventually Warner-Lambert pled guiltyto criminal violations of the FDCA and paid civilfines and criminal penalties totaling $430 million.

Multi-district litigation (MDL) that consolidatesfor pretrial purposes Neurontin-related civillawsuits brought nationwide. One group of MDLcases consists of products liability actionsclaiming that Neurontin caused someone tocommit or attempt to commit suicide. Anothergroup of cases involves lawsuits related to thesales and marketing of Neurontin. KaiserFoundation Health Plan and Kaiser FoundationHospitals (collectively, "Kaiser"), bring this caseagainst Pfizer, Inc. and Warner-Lambert Company(collectively, "Pfizer"), alleging violations of theRacketeer Influenced and Corrupt OrganizationsAct (RICO) and the California UnfairCompetition Law ("UCL"). See 18 U.S.C. §1962(c) (RICO); Cal. Bus. & Prof. Code § 17200(UCL). Kaiser spent about $200 million onNeurontin from 1996 to 2004. After a five-weektrial, on March 25, 2010 a federal jury found thatPfizer engaged in a RICO enterprise thatcommitted mail and wire fraud by fraudulentlymarketing Neurontin for off-label conditions suchas bipolar disorder, neuropathic pain, andmigraine, and at doses greater than 1800 mg/day.The jury found for defendants with respect toplaintiffs' claims of fraudulent promotion of


Neurontin for nociceptive pain. The jury rendereda verdict in plaintiffs' favor on the remainingclaims in the amount of $47,363,092. The statuterequires the Court to treble the award to$142,089,276. 18 U.S.C. § 1964(c).

In 1994, Parke-Davis estimated that Neurontinwould generate $500 million in profits over theduration of its patent. In a memorandumcirculated within Parke-Davis, one executivesuggested a "strategic swerve" to increase theearning potential of Neurontin. Some of thestrategies explored included marketing the drugfor epilepsy monotherapy, bipolar disorder andsocial phobia, and neuropathic pain. Defendantsadopted these new strategies, which turned out tobe stunningly successful: in 2003 alone,Neurontin sales exceeded $2 billion. Beginning in1995, Parke-Davis began developing strategies tomarket Neurontin for off-label conditions, that is,conditions not included on the official labelapproved by the FDA. The company wasinterested in Neurontin's potential psychiatricuses, despite the uncertainty about its efficacy intreating bipolar disorder.

Dr. David Franklin, the whistleblower in theinitial Neurontin litigation in 1996, testified aboutthe direct marketing of Neurontin to physiciansfor off-label uses. Dr. Franklin was hired in 1996as a medical liaison for Parke-Davis. As part ofhis job he was provided training on off-labelmarketing of Neurontin. ("[I]t was our job to . . .actually talk to physicians and sell Neurontin foroff-label indications.").) His job was "99 percentfocused on off-label promotion." On May 13,2004 the Department of Justice filed a criminalinformation charging Warner-Lambert with illegaloff-label promotion of Neurontin. The same day,Pfizer caused Warner-Lambert (which it owned)to plead guilty to two felony counts of marketingNeurontin for various unapproved uses, includingpainful diabetic neuropathy, bipolar disorder,reflex sympathetic dystrophy (RSD), and migraineheadaches. (stating that "Warner-Lambertexpressly and unequivocally admits that itcommitted the crimes charged in the Information.Warner-Lambert agrees that the facts set forth in

the Information are true.").) As a result of itsguilty plea, Warner-Lambert agreed to pay a $240million criminal fine. (Id.) The guilty pleaincluded an admission that the company promotedthe sale and use of Neurontin for the off-labelindications of neuropathic pain, bipolar disorder,and migraine through the use of salesrepresentatives, medical liaisons, advisory boardmeetings, consultants meetings, andteleconferences.

As early as 1994, Parke-Davis identified Kaiser asa potentially lucrative target for its marketingcampaign. Defendants conducted marketinglargely through three tactics: direct marketing tophysicians, publication of positive Neurontinarticles in medical journals and suppression ofnegative trials, and the sponsorship of CMEevents attended by physicians.

The Court finds that fraudulent marketingactivities took place during the following timeperiods for each indication: (1) bipolar disorder:July 1998 through December 2004; (2)neuropathic pain: November 1997 throughDecember 2004; (3) migraine: April 1999 throughDecember 2004; and (4) doses greater than 1800mg/day: November 1997 through December 2004.

Beginning in July 1998 when Parke-Davisobtained (and began to suppress) the negativeresults of the Pande trial, the defendants engagedin the fraudulent marketing of Neurontin for thetreatment of bipolar disorder. In addition tofraudulent detailing, Pfizer sponsored at least twofraudulent supplements, engaged in a fraudulentpublication strategy by publishing only positiveinformation and suppressing negative; conductedat least two fraudulent continuing medicaleducation programs; and made a fraudulentmisrepresentation, through a half-truth, inpublished reviews.

Holding: On the one remaining claim (aparticular California statute) the court held TheCourt finds the defendants liable under theCalifornia Unfair Competition Law for conductrelated to the following off-label conditions: (1)bipolar disorder; (2) neuropathic pain; (3)


migraine; and (4) doses greater than 1800 mg/day.

Notes:

1. The pharmaceutical industry has been sosuccessful controlling members of congress (andthe FDA, by calling upon members of congress toreign in the FDA) See, Mundy, Alice Dispensingwith the Truth, The Dramatic Story Behind theBattle over Fen-Phen, New York: St. Martin’sPress (2001), that the industry seems to have beentotally blind-sided by the fact that lawenforcement (OIG) play by a different set of rules. Unlike virtually every other health care enterprise,(most of whom are scared to death of the federalgovernment) the pharmaceutical industry seemsastonished that they cannot do anything they wish,regardless of the rules. To be fair, the interests ofthe pharmaceutical industry is not easily separablefrom the interests of everyday workingAmericans. Teacher’s retirement plans, municipalworker’s plans, mutual funds, and almost everyother individual American investor are the actualowners of pharmaceutical companies. We cannotcomplain about “them,” without complainingabout “us.”

Questions:

1. Is the Federal False Claims Act the onlymeans by which a whistleblower could bringaction against a billion dollar industry?

2. For the Plaintiffs’ bar, what advantages do QuiTam whistleblower cases have over traditionalclass action and MDL mass tort lawsuits?

3. How important is it to a Defendant to knockout the Qui Tam relator from any case that couldbe brought by the government?

Notes:

1. This case illustrates that you do not need(though it certainly helps) a federal statute to winhundreds of millions of dollars in a whistleblowercase. Pfizer caused its subsidiary,Warner-Lambert to plead guilty to two felonycounts of marketing Neurontin for various

unapproved uses, including painful diabeticneuropathy, bipolar disorder, reflex sympatheticdystrophy (RSD), and migraine headaches. In thatplea, "Warner-Lambert expressly andunequivocally admits that it committed the crimescharged in the Information. Warner-Lambertagrees that the facts set forth in the Informationare true." Although this is not a FCA case,(because the Federal Government did not pay thisclaim for drug benefit,) the Neurontin scandalillustrates the growing tendency of privatecompanies, such as the Kaiser Family of HMO’s to file suit on state whistleblower grounds. (Therewere two classes of Neurontin cases, the productliability MDL cases relating to suicide, and thistype of case, for false marketing claims. Here, thewhistleblower was a doctor hired to market thedrug.) While lacking the federal statutes and civilmonetary penalty provisions, these companies arefiling state law claims alleging they werefraudulently induced to pay claims which werefalse or fraudulent, and they want there moneyback. This is the “findings of fact andconclusions of law” memorandum supporting theorder of payment of $95 million in restitution toKaiser, (in addition to the treble damages of $147million awarded by the jury) who was bilked intopaying for a drug referred to as “snake oil.”Kaisersought to prove that it spent too much money onthe off-label prescription of the drug. Defensecountered the physician’s prescription could bedue to any of a number of factors. The defensealso countered that the drug actually was effectivefor off-label use. Further, the defense argues thestatute of limitations precluded recovery.

The Court order defendants to pay restitution tothe Kaiser Foundation Health Plan in the amountof $95,286,518.

2. The advantage of FCA cases over class actionand mass tort cases lies in the fact that there isonly one plaintiff (not thousands.) The damagesawarded often bear no relationship to the harmdone. (A technical defect in the provision ofservices and products may result in huge awards, even if the services or product was good for thepatient.) Further, the United States is the realparty in interest, and the injury is complete by the


payment of a claim, there is no affirmativedefense that the plaintiff contributed to his owninjury, or failed to mitigate loss.

3. The defendant cannot escape responsibility onthe grounds that as co-defendant talked them intothe violation. (There is no “trying the emptychair.” As the Campbell case belowdemonstrates.)

US v. CAMPBELL,

2011 WL 43013, No. 08-1951

(D. N.J., Jan. 4, 2011.)

Facts: In this case, the University of Medicineand Dentistry of New Jersey (UMDNJ) and itsaffiliated medical teaching facilities,UMDNJ-New Jersey Medical School (NJMS) andUMDNJ-University Hospital (UH), sought toemploy cardiologists under part-time employmentarrangements in an effort to obtain patientreferrals that would maintain the requisite numberof cardiac procedures needed for UH's Level OneTrauma Center license. One of these physicianswas Dr. Campbell. Campbell, among others, washired as a Clinical Assistant Professor (CAP) toperform duties related to this cardiology program.

Under the arrangement, Campbell was to receive$75,000 in annual compensation as a CAP. Priorto signing his employment agreement, UMDNJlegal counsel assured Campbell that theemployment arrangement met applicableAnti-Kickback and Stark exceptions. Campbellclaimed to have relied on this assurance of legalitywhen he signed the agreement. He did not seekindependent counsel.

During his CAP employment, Campbell did notperform any of the duties required under theagreement, nor did UMDNJ demand that he do so.He was allegedly suspended multiple times forfailing to prepare adequate medical charts for hisprocedures performed at UH, and he wasultimately terminated for continual suspension

and for under performance of procedures.Following his termination, a federal monitorconducted an investigation of UMDNJ'scardiology program and determined that it was anillegal scheme to pay cardiologists for patientreferrals in order to maintain UH's cardiacservices and Level One Trauma Center licenses.CAP physicians were rarely required to performthe delineated duties and were in essence paid fortheir cardiology patient referrals to UMDNJ.Following this investigation, UMDNJ entered intoa settlement agreement with the federalgovernment in September 2009, payingapproximately $8.33 million to the United Statesto settle the FCA claims against it.

On January 4, 2011, the U.S. District Court ofNew Jersey issued a ruling2 that held that: (1)summary judgment is not appropriate fordetermining the scienter element under the federalFCA; and (2) absent misrepresentation or fraudthat is independent from FCA liabilities claims, anFCA defendant cannot seek indemnification andcontribution against third-party defendants.Therefore, Dr. Campbell may not re-join thehospital as a defendant.

Questions.

1. Recall that the reason the government says kickbacks and self referrals are illegal, is thatthere should be no other consideration than“patients needs” in prescribing care. Here could itnot be said the government has created a“perverse incentive”, and an conflict of interest.

2. Often defendants wish to argue that the otherparty talked them into a scheme, or that a law firmcleared the plan, but here, does it not appear thatthe scheme was legal at the time Dr. Campbellwas hired, except for the fact that no serviceswere performed after the contract was signed,(which naturally the legal department would nothave known at the outset, but Dr. Campbellcertainly would.)


2. False Certification and “Implied” FalseCertification

THE UNITED STATES OF AMERICA ex rel.KASSIE WESTMORELAND v.AMGEN,INC.; INTERNATIONAL NEPHROLOGYNETWORK renamed INTEGRATEDNEPHROLOGY NETWORK, a d/b/a ofDIALYSIS PURCHASING ALLIANCE, INC.;and ASD HEALTHCARE, Civil Action. No.06-10972-WGY. United States District Court, D.Massachusetts.September 15, 2011.•

[Introductory note: The Amgen defendantsapparently were overfilling single-vial doses ofAmgen, encouraging doctors to harvest theoverfill, and when enough had been pooled for apatient dose, to administer the free dose, but billthe government as if the clinic had actually paidfull price for the free dose. Among the manydifferent regulations violated, the governmentthrough relator, Westmoreland, alleged thispractice violated the AKS Discount Safe Harbor.]

Opinion excerpts. Safe Harbor. “To receiveprotection, a business arrangement must fitsquarely within a safe harbor; substantialcompliance is not enough, although compliance isvoluntary and failure to comply is not a per seviolation of the statute.” OIG ComplianceProgram for Pharmaceutical Manufacturers, 68Fed. Reg. 23731, 23734 (May 5, 2003). "Whethera particular payment practice violates the statuteis a question that can only be resolved by ananalysis of the elements of the statute as appliedto that set of facts." Medicare and State HealthCare Programs: Fraud and Abuse; Clarification ofthe OIG Safe Harbor Anti-Kickback Provisions,59 Fed. Reg. 37202, 37203 (July 21, 1994)."[T]he gravamen of a violation of the statute isìnducement' and not necessarily the structure ofthe arrangement," such that "case by caseinquiries must necessarily focus on the intent ofthe parties." Medicare and State Health Care

Programs: Fraud and Abuse; OIG Anti-KickbackProvisions, 56 Fed. Reg. 35952, 35955 (July 29,1991) (citing Bay State Ambulance, 874 F.2d at29); see Shaw, 106 F. Supp. 2d at 114 ("[T]hefundamental analysis required of a trier of fact is`to recognize that the substance rather than simplythe form of the transaction should be controlling.'"(quoting 56 Fed. Reg. at 35957)). "The reasonbehind the transaction and the requisite state ofmind underlying the criminal act are moresignificant than form and label." Shaw, 106 F.Supp. 2d at 116. If the requisite intent to willfullyor knowingly solicit or offer a kickback is present,formal compliance with a safe harbor is notsufficient to avoid liability under theAnti-Kickback Statute. Cf. Medicare and StateHealth Care Programs: Fraud and Abuse;Clarification of the Initial OIG Safe HarborProvisions and Establishment of Additional SafeHarbor Provisions Under the Anti-KickbackStatute, 64 Fed. Reg. 63518, 63530 (Nov. 19,1999).

Notes: A substantial bulk of the opinion isdevoted to the treatment of 42 C.F.R. §424.510(d)(3),] when a provider signs theProvider Agreement, he or she "attests that theinformation submitted is accurate and that [he orshe] is aware of, and abides by, all applicablestatutes, regulations, and program instructions."The regulation states that a provider who signs theProvider Agreement is certifying that he is incompliance with "all applicable statutes." 42C.F.R. § 424.510(d)(3) (emphasis added). TheAnti-Kickback Statute being one such “applicablestatute.”

Most damning was the fact Amgen and INNdeveloped spreadsheets comparing (1) thereimbursement cost of Aranesp including overfillversus excluding overfill, and (2) thereimbursement cost advantage of Aranesp versusthe competitor drug Procrit when overfill wasincluded. Id. ¶¶ 20, 29. These spreadsheets wereshown to medical providers. Id. Amgen's seniorfinance manager referred to overfill as "a type ofhidden discount to customers."


This case is noteworthy because of the court’streatment of the legal issues surrounding “ImpliedCertification” and a defendant’s “knowing”violation of the Anti-kickback Statute where CMSis in the process of forbidding the practice inquestion, but had not yet passed a rule. Factually,single dose vials of a drug often contain overfill (a1 mil. vial may contain 1.1 mil. This is done toaccount for spills and medicine sticking to thevial. Overfill ensures that the patient actuallyreceives the full 1 mil. dose.) Evidence in thiscase shows that the manufacturer encouragedclinics to harvest the excess and when enoughproduct had been pooled from the excess, theclinic could administer and bill CMS for the dose,as though the clinic had paid for the product,when it had not. At a bare minimum, clinics mustreport to CMS that the overfill was being used andthe dose was free of charge to the clinic. After5 years of litigation, and 350 ECF filings, this QuiTam case finally reached the posture that it is ripefor a 12(c) motion for judgment on the pleadingsand motions for partial summary judgment. Thecentral allegation is that an illegal kickback wasgiven by free- of- charge overfilling of vials of adrug with $23 billion in worldwide sales (2001-2010.) The Defendants had a very strong casethat a safe harbor should have protected them, andeven if it didn’t, it would be hard to demonstratea knowing violation, as CMS had not outlawedthe practice and has never prosecuted a case foroverfill on the grounds that it is an illegalkickback. However, one of the defendants createda paper trail in which it appears to have includedextra overfill in each vial, and expressly statedthat an illegal kickback is exactly what wasintended by the overfill. The email stated that thecompany’s product had a competitive advantagebecause of the intentional overfill, thepurchaser/clinic will be able to bill Medicare fora drug expense that was not incurred. The opinion cites a great deal of authority on overfill rules,including false labeling regulations. The opinionconcluded that where a defendant has encourageda fraudulent billing practice, the defendant may beliable, even if a safe harbor applies, where there isevidence of actual intent to encourage another to

defraud Medicare.

Amgen Petition for Writ of Certiorari to theU.S. Supreme Court. The Amgen defendantshave applied for a Writ of Certiorari to the U.S.Supreme Court, noting the U.S. Courts of Appealshave been wrestling with the reach of the FalseClaims Act when the actual claim submitted to thegovernment is not “factually false.” Some courtshave adopted a framework in which a claim that istrue on its face can be considered “legally false”where a party somehow involved in the goods andservices provided failed to comply with certainstatutory, regulatory or contractual obligations,despite never expressly certifying that it didcomply with these obligations. This is called the“implied certification” theory of liability. In itsPetition for a Writ of Certiorari to the U.S.Supreme Court, Amgen contends that “[t]heCircuits have applied a dizzying array of differenttests in deciding whether claims like this qualifyas ‘false or fraudulent’ within the meaning of theFCA.”

In its Writ, Amgen describes some of the varyingpositions taken by the Circuits regarding theimplied certification theory of liability:

1st Circuit: dispensing with the “certification”framework, and holding that liability can bepremised on failure to comply with a contractual,regulatory or statutory obligation whenever thegovernment could theoretically reject a claim fornon-compliance. See New York ex rel.Westmoreland et al. v. Amgen, Inc. et al., 2011WL 2937420 (1st Cir. July 22, 2011); UnitedStates ex rel. Hutcheson et al. v. BlackstoneMedical, Inc., 2011 WL 2150191 (1st Cir. June 1,2011). For further details on the First Circuitdecisions, click here, here, and here.

7th, 4th, and 5th Circuits: have taken positionsthat are incompatible with an implied certificationtheory. See United States ex rel. Yannacopoulosv. General Dynamics, 2011 WL 3084932, at *3n.4. (7th Cir. July 26, 2011); Harrison v.Westinghouse Savannah River Co., 176 F.3d 776,786-87 n.8 (4th Cir. 1999); United States ex rel.Marcy v. Rowan Cos., 520 F.3d 384, 389 (5th Cir.


2008).

2nd, 3rd, and 8th Circuits: implied certificationtheory limited to where there is a statute orregulation that is a condition of payment. SeeMikes v. Straus, 274 F.3d 687 (2d Cir. 2001);United States ex rel. Wilkins v. United HealthGroup, Inc., 2011 WL 2573380, at *9 (3d Cir.June 30, 2011); United States ex rel. Vigil v.Nelnet, Inc., 639 F.3d 791, 795–96 (8th Cir.2011).

11th Circuit: implied certification theory can bebased on either a condition of payment or acondition of participation in the federal program. See McNutt ex rel. United States v. HaleyvilleMedical Supplies, Inc., 423 F.3d 1256, 1259 (11thCir. 2005).

D.C. Circuit: holding that a violation of acontractual obligation that was “material” to thegovernment’s obligation to pay a claim can formthe basis for FCA liability. See United States v.Science Applications Int’l Corp., 626 F.3d 1257,1261 (D.C. Cir. 2010).

Questions:

1. What does the first quoted sentence on “SafeHarbors” actually mean? Is it not possible in theattempt to say everything, the court has saidnothing at all?

2. The “False Certification” claim is designed tocure what problem in prosecuting False ClaimsAct Cases?

3. Is it fair for HHS or CMS to require aDefendant to certify that it has complied withevery possible regulation and rule of any kind, orbe subject to civil monetary penalties andrepayment of every Medicare dollar it received incompensation?

4. In the Neurontin case, Kaiser filed suitclaiming that the drug it purchased was worthless.Here the claim is not that the drug was worthless,but that the marketing scheme violated the“discount” provisions of the AKS. Is it not afundamentally unfair scheme for the government

to reap a windfall in anti-kickback cases, (wherethe patient received treatment which wasreasonably necessary, and highly beneficial,) butdue to some technical violation of the discountrules under the AKS, the patient gets the drug forfree and the government does not have to pay forthe treatment? Should there be some commonsense mitigation of the damages awarded?

5. How many times should the government beallowed to fine a defendant for a single act, bysimply terming the fine a civil monetary penalty?

1 T H E C O M M O N W E A L T H OFMASSACHUSETTS, v. SCHERING-PLOUGHC O R P O R A T I O N , S C H E R I N GC O R P O R A T I O N , & W A R R I C KPHARMACEUTICALS CORPORATION, CivilAction No. 03-11865-PBS. United States DistrictCourt, D. Massachusetts.

(September 23, 2011.)

Opinion Excerpts: The Commonwealth ofMassachusetts claims that Schering-PloughCorporation, Schering Corporation, and WarrickPharmaceuticals Corporation caused theMassachusetts Medicaid Program to overpay forthe generic drug Albuterol by fraudulentlyinflating the "Wholesale Acquisition Cost"("WAC") of the drug. The Commonwealth arguesthat the spreads between defendants' reportedprices and "true" WACs ranged from 100% to700%. Albuterol is a drug used to prevent andtreat respiratory problems caused by lung diseasessuch as asthma.

After a lengthy trial, the jury returned a verdict infavor of the Commonwealth, finding thatdefendants committed fraud and violated theMassachusetts False Claims Act ("MFCA")andthe Massachusetts Medicaid False Claims Act("MMFCA"). (See Jury Verdict, Docket No. 934.)After trial, defendants filed a motion seekingjudgment as a matter of law in their favor or,alternatively, a new trial. "Not all fraudulentconduct gives rise to liability under the FCA.[T]he statute attaches liability, not to theunderlying fraudulent activity or to thegovernment's wrongful payment, but to the claim


for payment." (internal citations and quotationsmarks omitted). The touchstone must still be afalse claim.

Here the pharmacists' claims werefactually false because the reported Usual andCustomary prices (different pricing benchmarksfrom WACS) were inaccurate, but defendants had"no role in causing that independent falsehood."Schering-Plough Corp., 2011 WL 1575198, at *6.The independently false representations made bydefendants—the false WACs—were not presentedto MassHealth with the pharmacists' claims andthe pharmacists had never made anyrepresentations about WACS. Instead, the WACswere published in First DataBank and,subsequently, were one of four prices contained inthe state's regulatory pricing file used to determinethe reimbursement price. Id. at *4. Therefore,under Prong 1, defendant is not liable for causingthe submission of a false or fraudulent claimbased on the WAC unless the Court determinesthe regulatory pricing file to be part of the claimpresented to the government by the pharmacist.The Court has already considered and rejected thisargument by the Commonwealth, and nothing inHutcheson or Westmoreland affects the Court'sprevious factual ruling.

Notes: As with the Amgen Cases, the question isa tricky one, “When is bad behavior actionableunder the False Claims Act?” This case is similarto/ a companion of Massachusetts v.Schering-Plough Corp., ___ F.Supp. 2d ___, 2011WL 1575198 (D. Mass. Apr. 27, 2011);Massachusetts v. Mylan Labs., Inc., 608 F. Supp.2d 127 (D. Mass. 2008). The narrow issue in thiscase is whether the fraudulent activity alleged cansupport a False Claims Act violation, where thereis no evidence the other defendant played a part inthe submission of the claims. Here, pharmacistsacted independently of the defendant when theyallegedly submitted the false claims. The court, inruling against the commonwealth observed: "Notall fraudulent conduct gives rise to liability underthe FCA. [T]he statute attaches liability, not to theunderlying fraudulent activity or to thegovernment's wrongful payment, but to the claim

for payment." Here the pharmacists' claims werefactually false because the reported Usual andCustomary prices (different pricing benchmarksfrom WACS) were inaccurate, but defendants had"no role in causing [the claim to be filed]."

3. The Fifth Circuit View of Using the FalseClaims Act as a “Blunt Instrument” to enforceevery federal law.

UNITED STATES OF AMERICA, ex rel,BRADLEY SLOAN WRIGHT,

v.

C O M S T O C K R E S O U R C E S ,INCORPORATED

No. 10-40785.

United States Court of Appeals, Fifth Circuit.

(Filed December 15, 2011.)

Opinion Excepts: The False Claims Act providesthat "any person who . . . knowingly presents, orcauses to be presented, a false or fraudulent claimfor payment or approval . . . is liable to the UnitedStates Government for a civil penalty." 31 U.S.C.§ 3729(a)(1). In determining whether liabilityattaches under the FCA, we ask "(1) whether therewas a false statement or fraudulent course ofconduct;[2] (2) made or carried out with therequisite scienter; (3) that was material; and (4)that caused the government to pay out money or toforfeit moneys due (i.e., that involved a claim)."United States ex rel. Longhi v. Lithium PowerTechs., Inc., 575 F.3d 458, 467 (5th Cir. 2009)(quoting United States ex rel. Wilson v. KelloggBrown & Root, Inc., 525 F.3d 370, 376 (4th Cir.2008)) (internal quotation marks omitted). By itsown terms, the FCA imposes no liability unlessthe alleged violator "(1) has actual knowledge ofthe information; (2) acts in deliberate ignorance ofthe truth or falsity of the information; or (3) actsin reckless disregard of the truth or falsity of theinformation." 31 U.S.C. § 3729(b)(1)(A). As weexplained in United States ex rel. Taylor-Vick v.Smith, 513 F.3d 228 (5th Cir. 2008), this means


that "the evidence must demonstrate `guiltyknowledge of a purpose on the part of [thedefendant] to cheat the government,' or`knowledge or guilty intent.'" Id. at 231 (citationsomitted).[3] Thus, Relators must raise a fact issuenot only as to whether Comstock made false orfraudulent claims, but also as to whether itknowingly committed fraud.

. . .

Whatever violations may have occurred, the FCAis not a "blunt instrument" for enforcing federalstatutes. See Mikes v. Straus, 274 F.3d 687, 699(2d Cir. 2001); United States ex rel. Thompson v.Columbia/HCA Healthcare Corp., 125 F.3d 899,902 (5th Cir. 1997) (holding that "claims forservices rendered in violation of a statute do notnecessarily constitute false or fraudulent claimsunder the FCA") (citing United States ex rel.Weinberger v. Equifax, Inc., 557 F.2d 456, 461(5th Cir. 1977)); see also Steury, 625 F.3d at 268.As we stated at the outset, Relators must notmerely raise a fact issue as to statutorycompliance; Relators must raise a fact issue as towhether Comstock knowingly defrauded theGovernment. We conclude that Relators havefailed to do so.

Questions:

1. What difference does it make whether theFalse Claims ct is used to enforce a FederalStatute?

4. The U.S. Southern District of Texas,Houston Division view of Using the FCA “FalseCertification” to Enforce Federal Laws

UNITED STATES OF AMERICA, ex rel.ELAINE BENNETT, Plaintiffs,

v.

BOSTON SCIENTIFIC CORPORATION andGUIDANT CORPORATION, Defendants.

Civil Action No. H-07-2467.

United States District Court, S.D. Texas, HoustonDivision.

March 31, 2011.

Opinion Excerpts: This case is one of a numberraising the question of when a manufacturer'spromotion of a medical device for an "off-label"use may provide the basis for a qui tam action bya private plaintiff suing under the False ClaimsAct.

The FDA approves products for specificindications, which are stated in the label. When amedical device is approved for one purpose orindication and used outside this approved purpose,that use is deemed "off label." Off-labelpromotion may involve disseminating informationabout product uses the FDA did not approve. TheFDA generally restricts a manufacturer frommarketing for off-label purposes but does notrestrict a hospital from purchasing, or a doctorfrom prescribing or using, a medical device for anoff-label purpose. Off-label use of many devicesand drugs is an accepted medical practice.

Courts recognize that off-label use of adrug or medical device is not the same as amedically unnecessary use of that drug or device.See Buckman Co. v. Plaintiffs' Legal Comm., 121S. Ct. 1012, 1018 (2001) ("`[O]ff-label' usage ofmedical devices . . . is an accepted and necessarycorollary of the FDA's mission to regulate in thisarea without directly interfering with the practiceof medicine."); Svidler v. United States Dep't ofHealth and Human Servs., No. C-03-3593 MJJ,2004 WL 2005781, at *5 (N.D. Cal. Sept. 8, 2004)("[T]he FDA can restrict a company frommarketing off-label uses, but cannot prevent adoctor from prescribing a device for an off-labeluse for any purpose she deems medicallynecessary." (citing Washington Legal Found. v.Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998));United States ex rel. Polansky v. Pfizer, No.04-cv-0704 (ERK), 2009 WL 1456582, at *6(E.D.N.Y. May 22, 2009) ("[T]he FDA hasacknowledged that àccepted medical practiceoften includes drug use that is not reflected inapproved drug labeling.'" (citing Food & DrugAdmin., Use of Approved Drugs for UnlabeledIndications, 12 FDA Drug Bulletin 4, 5 (1982));United States ex rel. Stephens v. Tissue Sci. Labs.,Inc., Civil Action No. 1:07-CV-2357-ODE,LEXIS 2009 DIST. 101601, at *20 (N.D. Ga.


Aug. 13, 2009) (noting that DRG payment may bemade for hernia care even if noncovered care —the use of the device at issue — was present).

Medicare reimbursement for off-labeluses of medical devices is not addressed withinthe Medicare Act itself. See generally Yale-NewHaven Hosp. v. Leavitt, 470 F.3d 71, 73 (2d Cir.2006). Broad wording excludes from Medicarecoverage "any expenses incurred for items orservices . . . which . . . are not reasonable andnecessary for the diagnosis or treatment of illnessor injury or to improve the functioning of amalformed body member." 42 U.S.C. §1395y(a)(1)(A). The Secretary of the Departmentof Health and Human Services "is responsible forspecifying those services that are covered underthe ̀ reasonable and necessary' standard" and "haswide discretion in selecting the means for doingso." Yale-New Haven Hosp., 470 F.3d at 74 (citing42 U.S.C. § 1395ff(a); Heckler v. Ringer, 466U.S. 602, 617 (1984)). Traditionally, the Secretaryhas acted through "formal regulations and(informal) instructional manuals and letters." Id.Before 1995, the Medicare Hospital Manual, theMedicare Carriers Manual, and the IntermediaryManual stated that payment could not be made fordevices not approved by the FDA for commercialdistribution because "they were not considered`reasonable and necessary' under 42 U.S.C. §1395y(a)(1)." In re Cardiac Devices Qui TamLitig., 221 F.R.D. 318, 323 (D. Conn. 2004)(citing Medicare Hospital Manual § 260.1(B)(effective July 15, 1986); Medicare CarriersManual § 230.1; Intermediary Manual § 3151.1));see also Yale-New Haven Hosp., 470 F.3d at 74(discussing the history of the manual provisions).

In 1995, the Secretary of the United StatesDepartment of Health and Human Servicespublished regulations superseding the manualprovisions and allowing Medicare coverage forCategory B investigational devices under the"reasonable and necessary" standard. Yale-NewHaven Hosp., 470 F.3d at 71.

While there is no FDA approval for usingthe FlexView system to treat atrial fibrillation,

there is no identified statutory, regulatory, or otherprohibition on reimbursement to physicians orhospitals for using the FlexView system for thispurpose. While Medicare and Medicaid typicallydo not reimburse off-label prescriptions for drugs,see United States ex rel. Franklin v. Parke-Davis,147 F. Supp. 2d 39, 44-45 (D. Mass. 2001);United States ex rel. Hess v. Sanofi-SynthelaboInc., No. 4;05CV570MLM, 2006 WL 1064127, at*10 (E.D. Mo. Apr. 21, 2006), the relator has notpointed to a similar categorical restriction onreimbursement for Category B medical devices.[5]For medical devices, eligibility for reimbursementdepends on whether the procedure performed is"medically necessary" or "reasonable andnecessary."

The courts have held that a claim may befalse or fraudulent under the FCA because itincludes a certification of compliance with afederal statute, regulation, or contract that is aprerequisite to obtaining the government benefit.United States ex rel. Graves v. ITT Educ. Servs.,Inc., 284 F. Supp. 2d 487, 497 (S.D. Tex. 2003),aff'd, 111 F. App'x 296 (5th Cir. Oct. 20, 2004).Such "legally false" certification differs from"factually false" certification, which involves anincorrect description of goods or servicesprovided or a request for reimbursement for goodsor services never provided. See Mikes v. Straus,274 F.3d 687 (2d Cir. 2001). The Fifth Circuit hasheld that a claim is "legally false" only when aparty affirmatively and explicitly certifiescompliance with a statute or regulation and thecertification is a condition to receiving thegovernment benefit. See Thompson, 125 F.3d at902. In addition to express certifications ofcompliance, other circuits have found that FCAliability may exist under an "implied theory" ofcertification. See Willard, 336 F.3d at 82(discussing cases). "The theory of impliedcertification rests on the notion that `where thegovernment pays funds to a party, and would nothave paid those funds had it known of a violationof a law or regulation, the claim submitted forthose funds contained an implied certification ofcompliance with the law or regulation and wasfraudulent.'" United States ex rel. Foster v.


Bristol-Myers Squibb Co., 587 F. Supp. 2d 805,823 (E.D. Tex. 2008) (citing United States ex rel.Barrett v. Columbia/HCA Healthcare Corp., 251F. Supp. 2d 28, 33 (D.D.C. 2003)). For example,the Sixth Circuit has found that FCA liability "canattach if the claimant violates its continuing dutyto comply with the regulations on which paymentis conditioned." Willard, 336 F.3d at 82 (quotingUnited States ex rel. Augustine v. Century HealthServs., Inc., 289 F.3d 409, 415 (6th Cir. 2002)).The Fifth Circuit has never adopted impliedcertification as a theory of FCA liability. UnitedStates ex rel. Marcy v. Rowan Cos., Inc., 520 F.3d384, 389 (5th Cir. 2008) (citing Willard, 336 F.3dat 381-82); United States v. Southland Mgmt.Corp., 326 F.3d 669, 679 (5th Cir. 2003) (enbanc) (Jones, J. concurring); United States ex rel.Steury v. Cardinal Heath, Inc., 625 F.3d 262, 268(5th Cir. 2010). Instead, the Fifth Circuit has heldthat "[t]he violation of the statute or regulationdoes not create a cause of action under the FalseClaims Act; liability arises only if the defendanthas made a false certification of compliance withthe statute or regulation, when payment isconditioned on that certification." Graves, 284 F.Supp.2d at 497.

The court dismissed the Complaint, withleave to amend.

Notes: This is an “implied” False Certificationcase, among other things, similar to the Neurontinand Amgen Cases. The key issue is whether thepromotion of “off-label” use is in and of itself, aFalse Claims Act violation, in the absence ofevidence that the off label use was not reasonableand necessary. The 5 Circuit has taken ath

conservative view of implied False Certification.The Fifth Circuit has held that "[t]he violation ofthe statute or regulation does not create a cause ofaction under the False Claims Act; liability arisesonly if the defendant has made a false certificationof compliance with the statute or regulation, whenpayment is conditioned on that certification. Thiscase is also extremely valuable to Texas litigantssimply for the sheer stamina of the court inwriting at length on a multitude of issues,including when a litigant should be relieved ofsome of the burden of Rule 9's heightened

pleadings standards and issues of “upcoding, ”and “retaliation.” In sum, the court concludes thatthe missing element of the relator’s claim is anyallegation that the Defendant misrepresented thatthe device in question was actually approved forthe off label use, when it was not. Nor did thedefendant certify compliance with the AKS as acondition of payment. The court refuses to acceptthe argument that any off label use must not, orcannot, be medically necessary, when the exactcontrary appears to be the rule of law. Even ifFDA rules forbid the defendant from marketingfor off label use, this is not the same asencouraging another to make a false claim, orencouraging the physicians to make a false claimwhen they choose to use the device, evenexperimentally.

5. The U.S. District Court for the SouthernDistrict (Houston Division) Reminds Us, IsStill Possible to Do Something So Rotten thatYou Deserve to be Sued.

UNITED STATES OF AMERICA ex rel.JOHN KING, et al., Plaintiffs,

v.

SOLVAY S.A., et al., Defendants.

Civil Action No. H-06-2662.

United States District Court, S.D. Texas, HoustonDivision.

October 12, 2011.

Opinion Excerpts: This case is about apharmaceutical manufacturer and its affiliates thatallegedly made millions of dollars by marketingthree drugs—Luvox, Aceon, and AndroGel—forconditions other than the conditions for which thedrugs were approved by the Food and DrugAdministration ("FDA") and by offeringkickbacks to physicians who prescribed the drugs. Relators worked for SPI as district salesmanagers, and they were responsible forsupervising sales representatives who marketedAndroGel, Luvox, and Aceon (collectively, the"Drugs at Issue"). Relators claim that theiremployment was terminated after they questionedthe ethics and legality of off-label promotions andkickbacks.


Relators contend that Solvay inappropriatelymarketed the Drugs at Issue for off-label use by(1) encouraging its sales representatives to marketthe drugs to specifically targeted high Medicaidprescribers who Solvay deemed likely to heavilyprescribe the drugs; (2) "shaping the science"through medical literature by paying influentialdoctors to research and write about the off-labeluses that provided the most promise of profit; and(3) influencing physician speakers to promote thedrugs off label. Id. at 95-107.

In addition to the alleged off-label marketingcampaign, Relators claim that Solvay "bribeddoctors to use its drugs," for on- and off-labeluses, with unlawful kickbacks such as "bogusspeaker and research fees, resort weekends, cashpayments, or Harley Davidson goods," inviolation of the AKS. Id. at 122.

Here, the court finds that the allegations relatingto the off-label promotion scheme for eachoff-label use paired with the examples that showthat some of the off-label promotion led toprescriptions for some of the off-label uses meetsthat standard. Moreover, the heightened 9(b)pleading standard "stems from the obviousconcerns that general, unsubstantiated charges offraud can do damage to a defendant's reputation."Guidry v. Bank of LaPlace, 954 F.2d 278, 288(5th Cir. 1992). In the court's view, the lack ofexamples for some of the off-label promotionclaims does not threaten SPI's reputation withunsubstantiated charges given the number ofexamples of promotion for off-label uses that aresubstantiated.

Despite the fact that the claims data that the 4ACuses to link specific physicians who allegedlyreceived kickbacks to Medicaid prescriptions forthe Drugs at Issue are all from Texas, Relatorshave alleged enough details of a geographicallydiverse kickback scheme to reliably indicate thatthere was a nationwide kickback scheme.[15]They have alleged their own personal knowledgeof the kickback scheme as Solvay sales managers,

and they have provided details of specific types ofkickbacks provided in different parts of thecountry, including an internal Solvay audit reportthat indicates various types of giftswere given tophysicians in Louisiana and Texas, informationabout physicians in West Virginia to whom King,in his capacity as a sales representative, providedkickbacks (in the form of speaker's fees), andinformation about roundtables atupscale resorts indifferent areas of the country where Solvayallegedly paid for physicians' and their families'rooms, meals and activities, golf, and a show inthe evening, as well as specific allegations relatingto physicians receiving kickbacks in Virginia,Georgia, North Carolina, and Alabama.

. . .

In sum, the court holds that the 4AC reliablyindicates that Solvay's alleged kickback practiceswere crafted with the intent that physicians wouldwrite prescriptions for Solvay drugs and that theseprescriptions would be reimbursed by Medicaid orother government payers.

. . .

Because the details in the 4AC about theallegations in the 4AC that Solvay engaged in thealleged marketing schemes with the intention thatthe schemes would have the natural tendency toinfluence the decision of the government to paythe claims resulting from the schemes, Solvay'smotion to dismiss Relators' subsection 3729(a)(2)(2006)/3729(a)(1)(B) (2009) claims because theylack Rule 9(b) particularity is DENIED.

6. The Question of “Presentment,” the“Reverse” Flase Claim, and “Indirect ReverseFalse Claim.” (No, I didn’t Make that Up)

UNITED STATES OF AMERICA, Plaintiff, v. J O S E P H E D E L S T E I N , S U Z A N NEEDELSTEIN, THOMAS B. BOND andHOLLAND PHARMACY, Defendants.

Civil Action No. 3:07-52. United States DistrictCourt, E.D. Kentucky, Central Division,Frankfort.


September 29, 2011.

Notes: Must a defendant actually present theclaim directly to the government for liability toattach under a former version of the FCA, or ispresentation to the government contractorsufficient? In this case, two pharmacists sold freesamples, and then billed medicaid administration contractors in Kentucky for the prescription. Under the former version of the False Claims Act,the Act expressly states one may not present theclaim to the government or its employees forpayment. Here, the defendant’s moved forsummary judgment on the grounds they merelysubmitted the claim to an intermediary contractor.

The Government asserts claims under the versionof the FCA that was in effect at the time theComplaint was filed. Specifically, theGovernment asserts claims under 31 U.S.C. §§3729(a)(1), 3729(a)(2), and 3729(a)(3). Congressamended the FCA in 2009 with the FraudEnforcement and Recovery Act ("FERA"). Pub. L.No. 111-21, 123 Stat. 1617 (2009).

Thus, for a claim under subsection (a)(1), theplaintiff need not present evidence that thedefendant himself presented the false claim to theGovernment, but there must be evidence that thedefendant submitted a false claim and that theclaim was ultimately submitted to the Governmentfor payment or approval. See Marlar v. BWXTY-12, LLC, 525 F.3d 439, 445 (6th Cir.2008)(citing Allison Engine Co., 471 F.3d at 614).

In Count I of its Complaint, the Governmentasserts a claim under former subsection3729(a)(1) against Bond, Edelstein, and HollandPharmacy. That subsection prohibits any personfrom "knowingly present[ing], or caus[ing] to bepresented, to an officer or employee of the UnitedStates Government . . . a false or fraudulent claimfor payment or approval. . . ." 31 U.S.C. §3729(a)(1)(emphasis added).

To understand this argument, it is necessary toexplore the case law leading up to Congress'sdecision to amend the FCA with FERA. Thatdecision was in direct response to the SupremeCourt's decision in Allison Engine Co. v. UnitedStates ex rel. Sanders, 553 U.S. 662 (2008) by

which the Supreme Court sought to resolve aconflict between the Sixth and D.C. Circuit Courtsof Appeals regarding the proper interpretation ofsubsections (a)(2) and (a)(3) of the FCA.

In Allison Engine, the district court had held thatall three sections of former Section 3729(a)required a showing that the false claim at issuehad actually been presented to the Government forliability to attach. Allison Engine, 471 F.3d 610,613 (6th Cir. 2006). At trial, the plaintiffs did notpresent any evidence that any invoice was actuallypresented to the Government. Instead, theypresented evidence that all of the money paid tothe defendants ultimately came from theGovernment. Id. at 613. The district court heldthat this was insufficient as a matter of law toestablish liability under each of the threesubsections of the FCA and granted thedefendants' motion for judgment as a matter oflaw. Id. The Sixth Circuit reversed, holding thatsubsections (a)(2) and (a)(3) only requireevidence that the false claim at issue wasultimately "paid with government funds." Id. at615.

In reviewing the Sixth Circuit's decision inAllison Engine, the Supreme Court stated that itconflicted with the D.C. Circuit's holding inUnited States ex. rel. Totten v. Bombardier Corp.,380 F.3d 488 (D.C. Cir. 2004). 553 U.S. at 668. InTotten, the district court dismissed the complaintalleging that the defendants violated subsection(a)(1) by submitting false invoices to Amtrak.Totten, 380 F.3d at 490. The D.C. Circuitaffirmed, finding that "Amtrak is not theGovernment," and that, under the plain languageof 3729(a)(1), "claims must be presented to anofficer or employee of the Government beforeliability can attach." Id. at 490.

With Allison Engine, the Supreme Courtundertook to resolve this conflict. 553 U.S. at 668.It concluded that "it is insufficient for a plaintiffasserting a §3729(a)(2) claim to show merely that`[t]he false statement's use . . . result[ed] inobtaining or getting payment or approval of theclaim,' or that `government money was used to


pay the false or fraudulent claim'" as the SixthCircuit had held Id. at 665 (citations omitted).Instead, the Supreme Court held that the focusshould be on the defendant's intent. Thus, for aclaim under subsection (a)(1), the plaintiff neednot present evidence that the defendant himselfpresented the false claim to the Government, butthere must be evidence that the defendantsubmitted a false claim and that the claim wasultimately submitted to the Government forpayment or approval. See Marlar v. BWXT Y-12,LLC, 525 F.3d 439, 445 (6th Cir. 2008)(citingAllison Engine Co., 471 F.3d at 614).

[Here, summary judgment was denied because thegovernment failed to introduce evidence that thecontractor passed the claim on to the governmentfor payment.]

U N I T E D S T A T E S o f A m e r i c a ,Plaintiff-Appellant,

v.

CAREMARK, INC.; Caremark International,Inc. Et al

Nos. 09-50727, 09-51053.

United States Court of Appeals, Fifth Circuit.

February 24, 2011.

Notes: A “False Claim” is the intentionalmisrepresentation of how much the governmentshould pay. The “Reverse False Claim,” is theintentional misrepresentation of how much isowed to the government. Here, Caremark findsitself sued for an “indirect reverse false claim,”because the defendant allegedly knowingly madea false statement to a third party, knowing that itsstatement would "conceal, avoid, or decrease" anobligation to the Government. 31 U.S.C. §3729(a)(7). What Caremark actually did was actlike a “claims adjuster.” It told and intermediary,who then told the government, Caremark hadreviewed the claims for repayment and determinedCaremark did not owe the government. At least inthe record, there is no evidence that what

Caremark said was false. The 5 Circuit, refusingth

to overtly disagree with the 9 Circuit, limited itsth

holding to the simple observation, “Since false isthe opposite of true, statements that are factuallytrue are not false statements about the facts.” Thecourt left open the possibility that Caremark, hadit done more, (which facts were not in the record,) then the claims “we don’t owe the governmentmoney” might have been proven false.)

Opinion Excerpts: Some people who are eligibleunder a plan administered by a PBM are alsoeligible for Medicaid. These individuals, referredto as dual-eligible individuals, sometimes identifythemselves at a pharmacy as Medicaid recipientsinstead of privately-insured individuals, thusresulting in a state Medicaid agency paying thebill. However, if the state Medicaid agencydiscovers that a Medicaid recipient is adual-eligible individual, the agency must seekreimbursement from the private insurer (known asa "third party") under federal law. 42 U.S.C. §1396(a)(25). In addition to requiring stateMedicaid agencies to seek reimbursement fromthird parties, federal law directs the States to enactlaws that require Medicaid recipients to assigntheir rights to receive payments from any thirdparty to the state Medicaid agency. 42 C.F.R. §§433.137-.254 (2009).

State Medicaid agencies receive substantialfunding from the Government. See 42 C.F.R. §433.140; Ark. Dep't of Health & Human Servs. v.Ahlborn, 547 U.S. 268, 275, 126 S.Ct. 1752, 164L.Ed.2d 459 (2006) ("The [Medicaid] program isa cooperative one; the Federal Government paysbetween 50% and 83% of the costs the Stateincurs for patient care . . . ."). However, theGovernment does not provide federal funding(known as federal financial participation or"FFP") if a State is able to recover funds from athird party. 42 C.F.R. § 433.140; Ahlborn, 547U.S. at 289, 126 S.Ct. 1752. Additionally, if theGovernment provides FFP and the State laterrecovers from a third party, federal law requiresthe State to return a portion of the reimbursementto the Government. 42 C.F.R. § 433.140(c).


In 1999, the relator, a former Caremark employee,filed a qui tam action on her own behalf and onbehalf of the United States, Arkansas, California,Florida, Illinois, Louisiana, Tennessee, and Texas,claiming that Caremark violated the FCA andsimilar state laws by making false statements toavoid liability to the Government and stateMedicaid agencies.

Claims under 31 U.S.C. § 3729(a)(7) requireproof that the defendant "knowingly makes, uses,or causes to be made or used, a false record orstatement to conceal, avoid, or decrease anobligation to pay or transmit money or propertyto the Government." 31 U.S.C. § 3729(a)(7).[6]This is known as a reverse false claim because theeffect of the defendant's knowingly falsestatement is a failure to pay the Government whenpayment is required. A direct claim, on the otherhand, occurs when a false claim for payment issubmitted to the Government. United States ex rel.Bain v. Ga. Gulf Corp., 386 F.3d 648, 652 (5thCir.2004). In this case, the Government contendsthat Caremark made false statements to the stateMedicaid agencies—who receive over half oftheir funding from the Government—that allowedCaremark to fraudulently avoid making paymentsto the state Medicaid agencies. This is known asan indirect reverse false claim because thedefendant allegedly knowingly made a falsestatement to a third party, knowing that itsstatement would "conceal, avoid, or decrease" anobligation to the Government. 31 U.S.C. §3729(a)(7).

. . .

Since false is the opposite of true, statements thatare factually true are not false statements aboutthe facts. Indeed, neither the State Appellants northe Government argue that the statements at issuein this appeal were factually incorrect. Instead,they argue that Caremark's true statements that itdenied requests for reimbursement because theparticipants' plans did not have a paper claimsprovision were untrue because Caremark was notlegally permitted to deny those requests. The StateAppellants rely on United States v. Bourseau, 531F.3d 1159 (9th Cir.2008), to support theirargument. In Bourseau, the Ninth Circuit noted

that "courts decide whether a claim is false orfraudulent by determining whether a defendant'srepresentations are accurate in light of applicablelaw." Id. at 1164.

We need not decide whether we agree withBourseau's analysis because we decline to gofarther than the matter addressed by the districtcourt—whether stating that a request was deniedfor a reason stated in a client's plan is a "falsestatement." We conclude it is not. If, indeed,Caremark went further and stated that its conductwas in compliance with the law or otherwisecertified the legal effect of its actions, that maypresent a different question, one we do not reach.Therefore, we reject the State Appellants' and theGovernment's argument that the district courterred in holding factually true statements, withoutmore, were not false for purposes of the FCA.

II. Defensive Use of the Federal Rules of CivilProcedure and Procedural Rule of the FCA

1. The “Public Disclosure” Bar and the “Firstto File” Rule

131 S.Ct. 1885 (2011)

SCHINDLER ELEVATOR CORPORATION,Petitioner,

v.

UNITED STATES ex rel. Daniel KIRK.

No. 10-188.

Supreme Court of United States.

Argued March 1, 2011.

Decided May 16, 2011.

Opinion Excerpts: The False Claims Act (FCA),31 U.S.C. §§ 3729-3733, prohibits submittingfalse or fraudulent claims for payment to theUnited States, § 3729(a), and authorizes qui tamsuits, in which private parties bring civil actions inthe Government's name, § 3730(b)(1). This caseconcerns the FCA's public disclosure bar, whichgenerally forecloses qui tam suits that are "basedupon the public disclosure of allegations or


transactions . . . in a congressional, administrative,or Government Accounting Office report, hearing,audit, or investigation." § 3730(e)(4)(A) (footnoteomitted). During the pendency of this case, thePatient Protection and Affordable Care Act, 124Stat. 119, amended the public disclosure bar.Because the amendments are not applicable topending cases,” [[ the court answers the pendingquestion] ] We must decide whether a federalagency's written response to a request for recordsunder the Freedom of Information Act (FOIA), 5U.S.C. § 552, constitutes a "report" within themeaning of the public disclosure bar. We hold thatit does.

The drafting history of the public disclosure bardoes not contradict our holding. As originallyenacted in 1863, the FCA placed no restriction onthe sources from which a qui tam relator couldacquire information on which to base a lawsuit.See Graham County, 559 U.S., at ___, 130 S.Ct.,at 1411. Accordingly, this Court upheld therecovery of a relator, even though the Governmentclaimed that he had discovered the basis for hislawsuit by 1894*1894 reading a federal criminalindictment. See United States ex rel. Marcus v.Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443(1943). In response, Congress amended the statuteto preclude such "parasitic" qui tam actions basedon "evidence or information in the possession ofthe United States . . . at the time such suit wasbrought." 559 U.S., at ___ 130 S.Ct. at 1411(internal quotation marks omitted). Then, in 1986,Congress replaced the so-called Governmentknowledge bar with the narrower publicdisclosure bar. Id., at ___, 130 S.Ct. at 1411.

We also are not concerned that potentialdefendants will now insulate themselves fromliability by making a FOIA request forincriminating documents. This argument assumesthat the public disclosure of information in awritten FOIA response forever taints thatinformation for purposes of the public disclosurebar. But it may be that a relator who comes by thatinformation from a different source has alegitimate argument that his lawsuit is not "basedupon" the initial public disclosure. 31 U.S.C. §

3730(e)(4)(A). That question has divided theCourts of Appeals, and we do not resolve it here.See Glaser v. Wound Care Consultants, Inc., 570F.3d 907, 915 (C.A.7 2009) (describing the splitin authority). It may also be that such a relatorqualifies for the "original source" exception.

Questions:

1. Why does the Supreme Court take the unusualstep of writing on a subject which has beenmooted by Congress?

2. Is the Court really so concerned with themethod by which a relator discovers wrongdoing,or is the Court more concerned with expressingconcern that left unchecked, Qui Tam cases willtake down a major sector of the US Economy,while doing very little to actually address the realissue– that Medicare is unsustainably expensive.

Notes: This case is ostensibly about whether thegovernment’s response to a Freedom ofInformation Act Request triggers the “PublicDisclosure” bar to the Relator’s Qui Tam action;and more to the point the Court seems to wish toaddress: a case about whether it is wise to unleashthe public on every corporation which doesbusiness with the government. As to the firstquestion, The Supreme Court ruled in theaffirmative. However, Congress mooted thisquestion before the case was decided, with thepassage of the Patient Protection and AffordableCare Act, 124 Stat. 119, when it amended thepublic disclosure bar. However, the SupremeCourt seems to be more interested in writing toforeshadow what will happen when the plaintiffs’bar fully begins to appreciate the opportunities forwindfall lawsuits on behalf of those whorandomly file Freedom of Information Actinquiries, for the purposes of identifying somebasis for a lawsuit. The court stopped short ofterming the modern practice, “parasitic.” Butclearly, the Court is deeply concerned that theFalse Claims Act is simply too broad to beenforced by the general public perusinggovernment documents, looking for somethingover which to file a billion dollar suit.


UNITED STATES of America ex rel. ThomasF. JAMISON, Plaintiff-Appellant,

v.

McKESSON CORPORATION; McKessonMedical-Surgical Medinet, Inc.; GGNSCHoldings, L.L.C.;

649 F.3d 322 (5 Cir. 2011)th

Opinion Excerpts: The public disclosure bar ofthe False Claims Act ("FCA") deprives the districtcourt of jurisdiction whenever qui tam relatorsbring a suit based on publically availableinformation. The district court held that it lackedjurisdiction. Because the relator's action includedno allegations specific to the defendants, butmerely repeated a general description of fraudeasily available in several government documents,we affirm.

Before the 2010 amendments, the publicdisclosure provisions of the FCA provided that

(A) No court shall have jurisdiction over an actionunder this section based upon the publicdisclosure of allegations or transactions in acriminal, civil, or administrative hearing, in acongressional, administrative, or GovernmentAccounting Office report, hearing, audit, orinvestigation, or from the news media, unless theaction is brought by the Attorney General or theperson bringing the action is an original source ofthe information.

(B) For purposes of this paragraph, "originalsource" means an individual who has direct andindependent knowledge of the information onwhich the allegations are based and hasvoluntarily provided the information to theGovernment before filing an action under thissection which is based on the information.

31 U.S.C. § 3730(e)(4) (2006). We have distilledthose provisions into a three-part test, asking "1)whether there has been a `public disclosure' ofallegations or transactions, 2) whether the qui tamaction is `based upon' such publicly disclosedallegations, and 3) if so, whether the relator is theòriginal source' of the information." Fed.Recovery Servs., Inc. v. United States, 72 F.3d

447, 450 (5th Cir.1995).

We need not follow the three steps rigidly,however. See, e.g., United States ex rel. Fried v.W. Indep. Sch. Dist., 527 F.3d 439, 442 (5thCir.2008) (combining the first two steps). Indeed,combining the first two steps can be useful,because it allows the scope of the relator's actionin step two to define the "allegations ortransactions" that must be publicly disclosed instep one. That is, for the public-disclosure bar toapply, the publicly disclosed allegations ortransactions need only be as broad and as detailedas those in the relator's complaint, because that isall that is needed for the action to be "based on"the publically disclosed allegations.

Were we to rule otherwise, a qui tam relator couldarbitrarily select a large group of defendants inany industry in which public disclosures haverevealed significant fraud, in hopes that hisallegations will prove true for at least a fewdefendants. We do not countenance such relatorlotteries, which are quintessentially "parasiticsuits by opportunistic late-comers who addnothing to the exposure of fraud" and which thepublic disclosure bar is designed to prevent.Reagan, 384 F.3d at 174. We thus conclude thatJamison's action was based upon publiclydisclosed allegations or transactions.

UNITED STATES OF AMERICA, EX REL.SHELDON BATISTE, Appellant,

v.

SLM CORPORATION, Appellee.

No. 10-7140.

United States Court of Appeals, District ofColumbia Circuit.

Argued September 16, 2011.

Decided November 4, 2011.

Notes: This is a fascinating “First to File” case inwhich the relator blew the whistle against thedefendant, alleging dirty tricks in student loanfinancing which increased the bank’s return onloans at the government’s expense. The case had


previously been filed by a different relator, but dismissed under rule 12.b.1. Often, court’s referto the effect of a nonsuit or a dismissal withoutprejudice as placing the parties in the sameposition as if the case had never been filed. Thisresult is all the more satisfying where dismissal isfor want of subject matter jurisdiction under Rule12 b.1. Clearly, a judgment where the courtlacked jurisdiction is void. Quaintly put, a voidjudgment is “good nowhere and bad everywhere.” This is all fine and good, unless the case arisesunder the False Claims Act, where the “first tofile” rule is a bar to any of the remaining 7 billionpeople on the planet from filing the same case.What is the effect of filing an FCA case, wherethe court lacked jurisdiction to hear it? Here, theCourt of Appeals affirmed dismissal on theground that this whistle had previously beenblown, even though the first case was dismissedon jurisdictional grounds. Also, the courtdeclined to accept the relator’s interestingargument that because the first complaint failed tomeet Rule 9's heightened pleading standard, thefirst complaint should not count as the “first tofile.” In other words, even a poorly filed andprosecuted Complaint– in a court that did nothave jurisdiction to hear it, nevertheless meets the“first to file rule.” ]

Opinion Excerpts: On November 9, 2005, overtwo years before Relator Batiste filed hiscomplaint, Michael Zahara filed a qui tam caseagainst, inter alia, SLM and his employer, StudentAssistance Corporation ("SAC"), a wholly-ownedSLM subsidiary. The district court dismissedBatiste's complaint with prejudice on September24, 2010, for lack of subject matter jurisdictionunder Federal Rule of Civil Procedure 12(b)(1).United States ex rel. Batiste v. SLM Corp., 740 F.Supp. 2d 98, 101-02 (D.D.C. 2010). The courtheld that under the FCA's first-to-file rule, theZahara Complaint barred the court's considerationof the Batiste Complaint. The first-to-file ruleprovides, "When a person brings an action under[the qui tam] subsection, no person other than theGovernment may intervene or bring a relatedaction based on the facts underlying the pending

action." 31 U.S.C. § 3730(b)(5). The district courtfound that the Batiste Complaint alleged the"same material elements" of fraud as the ZaharaComplaint, and thus was barred by theearlier-filed complaint. Batiste, 740 F. Supp. 2d.at 102. The district court rejected Batiste'sargument that the Zahara case was not a "pendingaction" for first-to-file purposes because theZahara Complaint did not meet heightenedpleading standards for fraud allegations underFederal Rule of Civil Procedure 9(b). Id. at 104.[We arffirm.]

2. Iqbal/Twombly Rule 12(b)(6) Motions toDismiss and Rule 9(b)’s Heightened PleadingStandard.

UNITED STATES OF AMERICA, et al. ex rel.MISTY WALL, Relator, Plaintiffs,

v.

VISTA HOSPICE CARE, INC. d/b/aVISTACARE, VISTACARE, INC. andODYSSEY HEALTHCARE, INC., Defendants.

Civil Action No. 3:07-CV-604-M.

United States District Court, N.D. Texas, DallasDivision.

March 9, 2011.

Notes: This is a Dallas Iqbal/Twombly, Rule 12(b)(6) and Rule 9 case, which addresses thequestion of whether the relator has met theheightened pleading standard for FCA cases. Here, the allegation centers around the allegationthat the Defendant had been playing fast and loosewith the Medicare Hospice Benefit rules, (MHB),forwhich eligibility generally requirescertification that a person is not expected to livelonger than 6 months. In addressing the Rule 9(b)pleading standard, the court first explains atlength the various definitions of “legally false”and “factually false” claims, and the pleadingrequirements for each. The court finds that therelator has sufficiently plead some of the claims,


such as the forging of physician certification ofterminal illness, but dismissed with leave toreplead the remaining “who, what, when andwhere” allegations.

Opinion Excerpts: Defendants now move todismiss the Amended Complaint pursuant toFederal Rules of Civil Procedure 12(b)(6) and9(b). FCA allegations must also satisfy Rule 9(b),which requires that a party "alleging fraud ormistake . . . must state with particularity thecircumstances constituting fraud or mistake." TheFifth Circuit has interpreted Rule 9(b) to require,at a minimum, that a plaintiff set forth the "who,what, when, where, and how" of the alleged fraud.However, the Fifth Circuit has also stated that the"time, place, contents, and identity standard is nota straitjacket for Rule 9(b)," concluding that Rule9(b) is context-specific and flexible. The FifthCircuit recently noted that the standard for statinga claim for relief with particularity is lower in theFCA context than it is in the securities or commonlaw fraud contexts. See, United States ex rel.Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir.2009)(Noting that in medical FCA cases, theDefendant will often be in sole possession of thenecessary medical records.)

Wall alleges VistaCare improperly enrolledpatients into hospice and billed the governmentfor hospice services to be paid by Medicare andMedicaid, in violation of the FCA's presentmentand false record provisions. VistaCare contendsWall does not show the "who, what, when, where,and how" of the alleged fraud for her presentmentand false record theories of improper enrollmentof hospice patients. The court, after a lengthydiscussion of the counts in the Complaint, agreedthat some of the allegations are inadequate andmust be dismissed. The court further held relatormay amend her Complaint in accordance with thisOpinion on or before twenty-eight days from thedate of this Opinion.

UNITED STATES OF AMERICA ex rel.CATHY WILDHIRT AND NANCYMCARDLE, and STATE OF ILLINOIS ex rel.CATHY WILDHIRT AND NANCY

MCARDLE, Plaintiffs,

v.

AARS FOREVER, INC., and THHACQUISITION LLC I, Defendants.

No. 09 C 1215.

United States District Court, N.D. Illinois,Eastern Division.

November 4, 2011.

Notes: Rule 9(b) requires the pleading withparticularity of specific acts of False Claim filing. This usually means the relator must plead thefamiliar specific “who, what , when, where” factsas to which claims presented to the governmentfor payment were in fact false. What if the actualclaims for payment were not false, but there wasfraud in the inducement of the contract which ledto the claim being presented for payment? Stateanother way, there is fraud, but I t is impossibleto meet the “who, what, when, where” test. Herethe court held the FCA (as well as Stark Law andthe Anti-Kickback statute ) do contemplate thatintent to defraud, or fraud in the inducement of agovernment contract will give rise to FCAliability, even though there was no irregularity inthe actual presentment of the claim for payment,after the contract was fraudulently induced. Thisis similar to holdings under the Anti-Kickbackstatute in which the defendant has technicallycomplied with a safe harbor, but there is evidencethat the scheme was actually a kickback forreferrals. Courts often, though not uniformly, holdthat fraudulent intent trumps any defense that thescheme was technically compliant.

Opinion Excerpts: The district court dismissedthe complaint under Rule 12(b)(6) "because thefalse statements and fraud `were not made inconnection with the presentation of a claim.'" Id.at 783. According to the Fourth Circuit: "Thedistrict court reasoned that the False Claims Actdoes not reach false statements in submissions tothe Government to gain approval for


subcontracting decisions. In the district court'sview, the False Claims Act reaches only situationsin which a `claim [i.e., the demand for paymentfrom the government] . . . is itself false orfraudulent.'" id. (brackets in original); see also id.at 785 ("The district court would only find a falseclaim where a demand for payment is itself falseor fraudulent (presumably for services notperformed or for an incorrect amount). Thedistrict court flatly rejected the possibility thatFalse Claims Act liability could rest on falsestatements submitted to the government to gainapproval for a subcontract.").

The Fourth Circuit rejected the district court'sview, holding that the FCA recognizes afraud-in-the-inducement theory, under whichliability attaches "for each claim submitted to thegovernment under a contract, when the contract orextension of government benefit was obtainedoriginally through false statements or fraudulentconduct." Id. at 787 (citing United States ex rel.Marcus v. Hess, 317 U.S. 537, 543-44 (1943)).That is, even where "the claims [for payment] thatwere submitted were not in and of themselvesfalse" and "the work contracted for was actuallyperformed to specifications at the price agreed,"FCA liability arises "because of the fraudsurrounding the efforts to obtain the contract orbenefit status." Ibid. Other circuits are in accord.See United States ex rel. Longhi v. Lithium PowerTechs., Inc., 575 F.3d 458, 468 (5th Cir. 2009)("Under a fraudulent inducement theory, althoughthe Defendants' subsequent claims for paymentmade under the contract were not literally false,[because] they derived from the originalfraudulent misrepresentation [in the grantproposals], they, too, became actionable falseclaims.") (brackets in original; internal quotationmarks omitted); United States ex rel. Bettis v.Odebrecht Contractors of Cal., Inc., 393 F.3d1321, 1326 (D.C. Cir. 2005) ("Although the focusof the FCA is on false `claims,' courts haveemployed a `fraud-in-the-inducement' theory toestablish liability under the Act for each claimsubmitted to the Government under a contractwhich was procured by fraud, even in the absence

of evidence that the claims were fraudulent inthemselves."); United States ex rel. Hagood v.Sonoma Cnty. Water Agency, 929 F.2d 1416,1420-21 (9th Cir. 1991) (holding that "a contractbased on false information is a species of falseclaim," and finding that an FCA claim wasproperly stated where the complaint alleged thatthe defendant "played an active part in havingpresented for signature a contract that the[defendant] knew was based on falseinformation").

UNITED STATES OF AMERICA andC O M M O N W E A L T H O F ,MASSACHUSETTS ex rel. DONNA MARIEGLYNN,

v.

COMPASS MEDICAL, P.C., PARTNERSCOMMUNITY, HEALTHCARE, INC., andJOHN DIORIO.

Civil Action No. 09-12124-RGS.

United States District Court, D. Massachusetts.

November 10, 2011

Opinion Excerpts: On December 16, 2009,plaintiff/relator Donna Marie Glynn, a nursepractitioner formerly employed by CompassMedical, P.C. (Compass), brought this actionunder the federal False Claims Act (FCA), 31U.S.C.§ 3729 (a)(1)-(2).[1] Glynn alleges thatCompass Medical, P.C. (Compass), PartnersCommunity Healthcare, Inc. (Partners), and JohnDiorio violated the FCA (Count I), subjected herto a retaliatory termination in violation of 31U.S.C. § 3730(h) (Count II). Glynn alleges thatDiorio, a physician with whom she worked atCompass, fraudulently filled out patient billingsheets in order to bill Medicare and Medicaid forfictional visits to nursing home patients, care thatwas not medically necessary or appropriate, andimproper patient discharges and pronouncementsof death.

It is well established that the heightened pleadingrequirements of Fed. R. Civ. P. 9(b) apply toclaims brought under both subsections. SeeGagne, 565 F.3d at 45. Although Rule 9(b) may


be satisfied where "some questions remainunanswered [but] the complaint as a whole issufficiently particular to pass muster under theFCA," id. at 46, quoting United States ex rel. Rostv. Pfizer, Inc., 507 F.3d 720, 732 (1st Cir. 2007),"Karvelas requires the complaint to provide,among other fraud specifics, `details concerningthe dates of the claims, the content of the forms orbills submitted, their identification numbers, [and]the amount of money charged to the government.'"Gagne, 565 F.3d at 46, quoting Karvelas, 360F.3d at 233. Defendants argue that Glynn hasfailed to plead her FCA claims with any of therequisite particularity. The court agrees.

For Glynn to make out her subsection (a)(1)claim, she must show that a false claim wasactually presented to the government. See Gagne,565 F.3d at 45-46, citing Allison Engine, 553 U.S.at 669-671. Glynn has not alleged any particularsregarding the "presentment" of any specific claimto the government. She alleges only that Compassand Partners employees submitted claims basedon Diorio's billing statements to the governmentdespite knowing or having reason to know that insome respects they were fraudulent. Glynn doesnot allege specific billing codes, dates, claimnumbers, or patients associated with such falseclaims, or even the name of the governmentagency to which the claims were allegedlysubmitted. Because Glynn has failed to allegewith particularity the actual presentment of anyindividual claim, her subsection (a)(1) cause ofaction fails.

With respect to Glynn's subsection (a)(2) claim,her footing is no more firm. On a given weekendin May of 2009, Diorio claimed to have seen sixtynursing home patients, among whom he listedMarotti, when according to a statement Glynnattributes to Marotti's daughter, no doctor hadtreated her mother. This double-hearsay allegation(mother to daughter to Glynn) does not comprisethe personal knowledge of fraud that the FCA isintended to extract. See United States ex rel. Joshiv. St. Luke's Hosp., Inc., 441 F.3d 552, 561 (8th

Cir. 2006), quoting United States ex rel. Kinney v.Stoltz, 327 F.3d 671, 674 (8th Cir. 2003) ("The[FCA] is intended to encourage individuals whoare either close observers or involved in thefraudulent activity to come forward, and is notintended to create windfalls for people withsecondhand knowledge of the wrongdoing.").While in this one instance, it might be possible tomatch a billing code on behalf of a named patientwith Glynn's allegations, she has no actualknowledge that Diorio did not in fact see Marottion this occasion.For the foregoing reasons,defendants' motions to dismiss Glynn's federalclaims (Counts I and II) are ALLOWED withprejudice.

Notes: Here, the court deals with the thorny issueof the heightened pleading standard under Rule9(b) and Iqbal/Twombly. The heightenedpleading standard under rule 9 requires that theRelator plead False Claims facts withparticularity. Iqbal and Twombly contemplatethat the ‘keys to discovery” will not be turnedover unless the Relator states a plausible cause ofaction. This can place the Relator in a bind. Onthe other hand, unlimited discovery can be asexpensive to the defendant as the damagesclaimed. Often, to address these concerns, theRelator will be granted limited discovery in orderto meet the heightened rule 9 requirements, whichwill be strictly enforced.

UNITED STATE EX REL. NATHAN

v. TAKEDA PHARMACEUTICALS NORTHAMERICA, INC.

Dist. Court, ED Virginia, Case No. 1:09-cv-1086(AJT) (September 6, 2011)•

Opinion Excerpts: Relator alleged TakedaPharmaceuticals conspired to create false claimsthrough Medicare, Medicaid, TRICARE,CHAMPVA and Federal Employee HealthBenefit programs, by encouraging the "off-label"prescriptions of Takeda's drug Kapidex. Relator'sThird Amended Complaint must satisfy both Fed.R. Civ. P. 12(b)(6) and 9(b). To satisfy Fed. R.Civ. P. 12(b)(6), "a complaint must containsufficient factual matter, accepted as true, to ̀ statea claim to relief that is plausible on its face.'"


Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009);Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570(2007). Relator attempted to rely upon statisticswhich showed, “fraud must be occurring,” ratherthan specific instances as required by this federalcircuit. [Held:] Courts in this Circuit have clearlyexplained that a relator's allegation that "fraudmust be occurring" is not sufficient to satisfy Rule9(b). Relator's statistics-based version of thistheory does not satisfy his obligation to plead hisclaims under the FCA with specificity.

Blenhem Group, LLC v. JT USA, LLC,

Civil No. 10-5986 ; Dist. Court, D. New Jersey(JBS-JS).July 26, 2011.

Opinion Excerpts: Federal Rule 9's heightenedpleading standard requiring specific allegations incases sounding in “fraud” applies to a § 292 claimfalse trademark cases. There are four elements toa § 292 claim which make it sound in “fraud” :"(1) a marking importing that an object is patented(2) falsely affixed to (3) an unpatented article (4)with intent to deceive the public." Clontech Lab.Inc. v. Invitrogen Corp., 406 F.3d 1347, 1351(Fed. Cir. 2005) (internal quotations and citationsomitted). Rule 9(b) applies to claims broughtunder § 292. BP Lubricants USA, 537 F.3d at1311. In this case, relator brought a qui tam caseon behalf of the government under the FalseClaims Act. The court noted, "every regionalcircuit has held that a relator must meet therequirements of Rule 9(b) when bringingcomplaints on behalf of the government.”

UNITED STATES OF AMERICA and STATEOF TEXAS, ex rel. L. DAVID PORTER,Relator, v. HCA HEALTH SERVICES OFOKLAHOMA, INC., AFZAL NIKAEIN,MEDICAL CITY HOSPITAL, and TEXASMEDICAL SPECIALITY, INC., Defendants.

Civil Action No. 3:09-CV-0992. United StatesDistrict Court, N.D. Texas, Dallas Division

(October 11, 2011).

Opinion Excerpts. The Federal False Claims Act("FCA") permits nationwide service of process ona defendant. See 31 U.S.C. § 3732(a). Whendetermining whether a federal court may exercisepersonal jurisdiction over a defendant in a suitbased upon a federal statute that providesnationwide service of process, the Fifth Circuithas indicated that so long as the defendant has hadminimum contacts with the United States, the DueProcess clause of the Fifth Amendment requiresno further inquiry. See, e.g., Bellaire Gen. Hosp.v. Blue Cross Blue Shield, 97 F.3d 822, 826 (5thCir. 1996); Busch v. Buchman, Buchman &O'Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir.1994).

Since HCA is an Oklahoma resident, it is bydefinition a citizen of the United States.Therefore, HCA has the requisite contactsrequired to exercise personal jurisdiction overDefendants under the FCA's provision fornationwide service of process. Thus, the CourtDENIES HCA's motion to dismiss for lack ofpersonal jurisdiction.

[As to Venue] The FCA states: "Any action undersection 3730 [31 U.S.C. § 3730] may be broughtin any judicial district in which ... any onedefendant can be found, resides, transactsbusiness, or in which any act proscribed bysection 3729 [31 U.S.C. § 3729] occurred." 31U.S.C. § 3732(a). HCA, being one of the listeddefendants, resides, transacts business, and can befound in the Western District of Oklahoma,Additionally, some of the alleged violationsoccurred in that district. [On the issue of whetherOklahoma is a better district] As to location ofdocuments, "[b]ecause modern technology permitsthe rapid transfer, sharing, and copying ofdocuments, the location of documents andbusiness records usually receives little weight inthe transfer analysis." See e.g., Sarmiento v.Producer's Gin of Waterproof, Inc., 439 F. Supp.2d 725, 732 (S.D. Tex. 2006); E.E.O.C. v.Mustang Mobile Homes, Inc., 88 F. Supp. 2d 722,726 (W.D. Tex. 1999).


The second private interest factor is theavailability of compulsory process to secure theattendance of non-party witnesses. "Since thedefendant bears the burden to demonstrate thattransfer is appropriate, the defendant, `mustspecifically identify the key witnesses and outlinethe substance of their testimony.'" PatentCompliance Group, Inc. v. Hunter Fqn Co., No.3:10-CV-0359-P, 2010 U.S. Dist. LEXIS 108966,at *5 (N.D. Tex. 2008) (Solis, J.) (citationomitted). HCA has failed to identify any of itsnon-party witnesses who reside outside of theNorthern District of Texas or more than 100 milesfrom this Court. If HCA is referring to itsemployees as non-party witnesses, this Court doesnot recognize employees in that way since theymay be compelled by their employer to appear.See Patent Compliance Group, 2010 U.S. Dist.LEXIS, at *5. For this reason, the Court finds thatthis factor does not weigh in favor of transfer.

The availability and convenience of witnesses hasbeen held to be the most significant factor indeciding a § 1404(a) motion to transfer. See Bushv. Robertson, No. 3:05-CV-2043-L, 2006 WL1222031, at *5 (N.D. Tex. May 5, 2006). HCAinsists a transfer to the Western District ofOklahoma is for the convenience of all partiesinvolved. "A transfer of venue must not simply`shift the expense and inconvenience from oneparty to the other.'" See Patent ComplianceGroup, 2070 U.S. Dist. LEXIS, at *7. Here, HCAis one of four Defendants, among which it is theonly one outside the Northern District of Texas.The Court finds this factor disfavors transferbecause it would merely shift the burden fromHCA to Porter and the other defendants.

Finally, a change of venue would simply shift theburden of travel from HCA's witnesses to theother parties' witnesses. HCA has not shown thatOklahoma is a more convenient venue for thewitnesses. In sum, the private interest factorsfavor the denial of HCA's Motion to TransferVenue to the Western District of Oklahoma. Here, Plaintiff alleges HCA defrauded the State ofTexas. Therefore, Texas and its residents have aninterest in the resolution of this case. See In reVolkswagen of Am., Inc., 545 F.3d 304, 318

(transfer analysis should consider "those actuallyaffected — directly or indirectly — by thecontroversies and events giving rise to a case.")The Court finds the local interest factor weighsagainst transfer out of this district.

The Court finds that HCA has not established thatthe Western District of Oklahoma is a clearlymore convenient forum. Instead, the Courtconcludes that transfer would serve primarily toshift the inconvenience from one party to another.HCA's motion to transfer venue is DENIED.

The 12 b.6 Motion to Dismiss One type of FCAclaim is the "false certification" claim. The term"false certification" generally refers to a case inwhich a defendant who makes a claim forpayment from the government submits a documentexpressly certifying compliance with the law,when the defendant did not in fact comply withthe requirement, rendering the certification, andtherefore, the claim for payment "false". Claire M.Sylvia, The False Claims Act: Fraud Against theGovernment § 4.33 (Apr. 2011). In United Statesex rel. Thompson v. Columbia/HCA HealthcareCorp, the Fifth Circuit described the "falsecertification" theory of FCA liability in this way:when "the government has conditioned paymentof a claim upon a claimant's certification ofcompliance with, for example, a statute orregulation, a claimant submits a false orfraudulent legal claim when he or she falselycertifies compliance with that statute orregulation." 125 F.3d 899, 902 (5th Cir.1997).The Thompson court also recognized that "claimsfor services rendered in violation of a statute donot necessarily constitute false or fraudulentclaims under the FCA." Id. Rather, a claimantsubmits a false claim where he falsely certifiescompliance with a statute or regulation, and thegovernment has conditioned payment upon thatcertification. Id.

The issue of whether the government hasconditioned Medicare payment on CLIAcompliance is a complex one — requiring theCourt to go outside the Complaint to extrinsicevidence, such as manuals, testimony, and


administrative rulings. To consider such evidenceat this time would effectively convert this 12(b)(6)motion to a summary judgment motion. Becausethis case is in the motion to dismiss stage, theCourt will review the facts and allegations in theComplaint in the light most favorable to Porter, Indoing so, the Court concludes there is plausibleground on which Porter's FCA claim rests. TheCourt will consider summary judgment evidenceat the summary judgment stage. Defendants'motion to dismiss Porter's FCA claim is herebydenied.

3. Deadlines for Government Inetervention. Sealing and Unsealing

UNITED STATES OF AMERICA, ex rel. andELIN BAKLID-KUNZ, Relator, v. HALIFAXHOSPITAL MEDICAL CENTER, d/b/a HalifaxHealth, a/k/a Halifax Community HealthSystem, a/k/a Halifax Medical Center andHALIFAX STAFFING, INC., Defendants.

Case No. 6:09-cv-1002-Orl-31DAB. United StatesDistrict Court, M.D. Florida, Orlando Division.


Notes: When is it too late for the Government tointervene? In this Qui Tam case, the governmentcontinued to decline to intervene, stating it hadnot completed its investigation, while reservingthe right to intervene. After it had delayed 15months, the government moved to intervene. The relator did not oppose intervention, but thedefendant did. The court seems to be of theopinion (without precisely deciding) that therelator is the only party who could object to thelate intervention, because the relator would lose apercentage of the award, if intervention were to beallowed.

Opinion Excerpts: Case law construing the"good cause" requirement of 31 U.S.C. §3730(c)(3) is scarce. At least one court has foundthat the requirement was implemented to protectthe interest of relators. In U.S. ex rel. Stone v.Rockwell Intern. Corp., 950 F.Supp. 1046 (D.Col.1996), the Court reviewed the Senate Report

regarding the 1986 amendment to the FalseClaims Act, which implemented the "good cause"requirement for government intervention. The1986 amendments altered the reward provisions ofthe False Claims Act, permitting relators torecover 25 to 30 percent of the alleged fraud ifthey proceeded alone, but only 15 to 25 percent ifthe government intervened. Id. at 1048-49. Giventhe new reward provisions, the Stone court noted,"[g]overnment intervention late in the proceedingsmay be unfair to a relator who has expendedconsiderable resources to advance the case andthen loses up to half of the reward for bringing theaction." Id. at 1049. As set forth in the motion, theRelator in this matter does not oppose theGovernment's intervention. . . .[ the Defendant’sarguments mostly going to a defense on themerits, are irrelevant.]

UNITED STATES OF AMERICA ex. rel.ALICE C. YANNITY, MAUREEN C. McNABB,and TRACEE URQUHART, -Relators,v. J&BMEDICAL SUPPLY COMPANY, INC., aMichigan corporation, Defendant. Case No.08-11825. United States District Court, E.D.Michigan, Southern Division.


Opinion Excerpts: The Defendant asks theCourt to unseal the entire file in this matter,inasmuch as it — as of November 11, 2010 — hadonly received copies of (1) the order of October 6,2010, (2) the complaint, and (3) thePlaintiffs-Relators' jury demand. It notes that dueprocess requires the Court to grant access to thecomplete file in order for the Defendant toproperly defend itself. Further, it asserts that tothe extent the Government resists unsealing thedocuments for fear of jeopardizing its ongoinginvestigation, the Court should conduct an incamera review of any purportedly confidential orprotected documents to assess the propriety ofkeeping them sealed.

Under 31 U.S.C. §§ 3730(b)(4) and (c)(3), if theGovernment elects not to proceed by taking overa qui tam action, the Plaintiffs-Relators "shall


have the right to conduct the action." Although theGovernment is entitled under such circumstancesto be served with copies of all pleadings andcertain discovery material, there is no expressright to keep files sealed from the Defendantindefinitely. U.S. v. CACI International Inc., 885F. Supp. 80, 81 (S.D.N.Y. 1995). That being said,the statute does not specifically address whetherfile materials beyond the complaint are to beunsealed once the Court enters its order. Severalcourts, after having considered this issue, havefound that a court has the authority to retain thefiled documents under seal, or conversely, tomake them fully available to the parties. See e.g.,U.S. ex. Rel. Howard v. Lockheed Martin Corp.,No. 1:99-285, 2007 WL 1513999, *2 (S.D. OhioMay 22, 2007); U.S. ex rel. Yannacopolous v.General Dynamics, 457 F. Supp.2d 854, 858(N.D. Ill.2006); U.S. ex rel. Health OutcomesTechnologies v. Hallmark Health System, Inc.,349 F. Supp. 2d 170, 173 (D. Mass. 2004).

The Government opposes the Defendant's requestfor relief on grounds of confidentiality relating toits ongoing investigation. It submits that thefollowing factors should be considered by theCourt when seeking to determine whether todisclose specific judicial records: (1) the need forpublic access to the documents at issue; (2) theextent of previous public access to the documents;(3) if anyone has objected to the proposeddisclosure, (4) the identity of the objecting person;(5) the strength of any asserted property andprivacy interests; (6) the possibility of prejudiceto those persons who have opposed disclosure;and (7) the purposes for which the documentswere introduced during the judicial proceedings.EEOC v. Nat'l Children's Ctr., Inc., 98 F3d 1406,1409 (D.C. Cir. 1996). The Government alsoasserts that (1) the Defendant does not argue thatits request is based on the need by the generalpublic to have access to such documents, (2) thechallenged sealed documents have not beendisclosed publicly or to the Defendant, (3) theDefendant has not asserted any property interestsin the matters under seal, and (4) it has a privacyinterest in protecting the integrity of its

investigation, its deliberations, as well as thethought processes of its attorneys.

Notwithstanding these assertions, the Courtbelieves that its decision must be guided by adifferent standard than that suggested by theGovernment. In qui tam actions that are similar innature to the case at bar, courts are asked tobalance the need for disclosure against the harmsthat could arguably flow from unsealing thedocuments. See e.g. Yannacopolous, supra at 858;U.S. ex rel. Mikes v. Straus, 846 F. Supp. 21, 23(S.D.N.Y. 1994); U.S. ex rel. O'Keefe v.McDonnell Douglas Corp., 902 F. Supp. 189, 191(E.D. Mo.1995). Courts routinely take note of thestrong presumption in favor of public access tojudicial records in resolving these cases. U.S. v.Bon Secours Cottage Health Services, 665 F.Supp. 2d 782, 785 (E.D. Mich. 2008) ("Whilepublic access to judicial records is not absolute,the strong presumption in favor of public access isnot easily overcome. . . . Significantly, thepresumption in favor of public access to courtfilings is especially strong where, as here, thefilings involve matters of particular concern to thepublic, such as allegations of fraud against the[G]overnment.")) (internal citations andquotations omitted).

Upon applying this analysis here, the Court findsthat the Government has not sufficientlyestablished the risk of harm it might incur from adisclosure of the sealed records in this matter.Having reviewed the Government's requests forextensions and the documents that have beenpreviously furnished by the Plaintiffs-Relators, theCourt is not persuaded that an unsealing of therecords would jeopardize its investigation, couldcause harm to any prospective witness, orotherwise disclose its confidential methods forexamining allegations of fraud and, possibly,criminal activity. To the contrary, theinvestigatory procedures discussed in theGovernment's motions, as well as thedocumentary evidence, suggest that it hasgathered routine information from entities that alay person could readily identify as likely sourcesfor a FCA investigation.

As to the competing interests of the Defendant in


this matter, the Court disagrees with theGovernment's view that the Defendant isembarking on "an unwarranted fishingexpedition," or that its request for information is"overly broad and speculative." (Govt's. Resp. at8). As the accused party, it is entitled to exploreany relevant defenses and to understand the basis,if any, of the allegations being lodged against it.Lockheed Martin, supra at *3. Thus, in theabsence of a showing by the Government thatunsealing the record carries a significant risk ofspecific harm to its interests, the Court will grantthe Defendant's request to unseal the entire recordin this matter.

To that end, the Government is directed to providethe Court with a written in-camera description ofthe items within the currently-sealed file that itbelieves contain confidential or sensitiveinformation that should be redacted or otherwiseexempted from disclosure within a period offourteen (14) days from the entry of this order.Any failure by the Government to do so withinthis time frame may result in the imposition ofappropriate sanctions.

Notes: This case is noteworthy for its discussionof when and under what circumstances, the courtshould order the unsealing of a Qui Tam action. Civil litigators are intimately familiar with the factthat criminal investigative agencies will notrelease their files during the pendency of anongoing and contemporaneous criminalinvestigation. However, in a False Claims ActCase, the government is the real party in interest.Sealing of the government’s files could seriouslyimpact the defense of a qui tam case against therelator. The government alleged it should bepermitted to essentially hide the ball, while thedefendant attempts to defend itself with nothingbut the original complaint.

UNITED STATES OF AMERICA ex rel. TOMJACKSON, Plaintiff/RELATOR,

v.

N I C K P A S L I D I S ; D O N N ASOODALTER-TOMAN; and ARKANSASFOUNDATION FOR MEDICAL CARE,

Defendants.

No. 4:09CV00812 JLH.

United States District Court, E.D. Arkansas,Helena Division.

November 14, 2011.

Notes: Here, the court discusses the issue of whatmust be unsealed once the government decides itwill not intervene in a qui tam action. Clearly theComplaint must be unsealed under 31 U.S.C. §3730(b)(3), but what of the remaining documentson file? At first blush it would seem natural thatanything filed with a United States District courtshould be made public. The “ghost in themachine,” to borrow a phrase from Gilbert Ryle,lies in the fact that the government always seeksby motion, to show good cause for an extension ofthe 60 day period provided for it to decidewhether to intervene, and must have informed the court of the details of its investigation andwhat else it needs to do before reaching a decisionon intervention. Our government is nothing, if notconsistent in its desire to keep its investigationunder wraps. The government especially does notlike leaving a paper trail when it declines tointervene, as it will not be around to defendquestions as to its methods. More importantly, thegovernment does not want to be on record, norquestioned in a subsequent, possibly unrelated case, why it did not investigate something thegovernment had previously advised the court itmust investigate before filing an FCAintervention. It’s simply a bear trap. While thestatute is silent on the issue, court’s typicallyevaluate the legitimacy of the government’s claimto work product-type privileges, balanced againstthe public’s right to know what the Plaintiff hasfiled with the court. Notice also that the unsealingissue occurs prior to the service of the case on theDefendant. Opinions of this type often reflect thatthe court is acting on behalf of the public withoutmotion by the defendant.


Opinion Excerpts: The United States havingdeclined to intervene, the Complaint will beunsealed so that it may served upon theDefendants by the Relators, as contemplated by31 U.S.C. § 3730(b)(3).

An additional issue exists with regard to whetherall other documents filed in this case to dateshould remain under seal. The Government hastendered a proposed Order, the terms of whichstate that only the Complaint will be unsealed andspecifically require that all other documents filedin the case to date shall remain under seal. Suchan approach appears to conflict with this Court'scustomary practice, which requires a showing ofgood cause to justify the sealing of documents ormaterials filed in federal court. That cause wasmade for the United States initially by operationof the False Claims Act. But, at the point at whichthe United States declined to intervene, therebytriggering the unsealing of the Complaint and theprosecution of the action by the Relators, thequestion arises as to whether good cause remainsfor continuing to keep such documents under seal.Because this issue raises important policyconcerns, the Court raises the issue sua sponte.

While the False Claims Act makes explicitreference to the lifting of the seal on the relator'scomplaint, it is silent on the issue of the unsealingof any other documents in the case. Other courtsto consider the issue have found that because theFalse Claims Act permits in camera submissions,it necessarily invests a district court with authorityto either maintain such filings under seal or tomake them available to the parties. U.S. ex rel.Erickson v. Univ. of Washington Physicians, etal., 339 F.Supp.2d 1124, 1126 (W.D. Wash.2004)(hereinafter, "the Erickson case")(citingcases). This Court agrees.

The Court also finds appropriate the approachutilized in the Erickson case for evaluating thegovernment's request to continue to maintaindocuments under seal after it declines tointervene. By analogy to Fed. R. Civ. P. 26(c),

which authorizes protective orders to protectagainst the disclosure of "a trade secret or otherconfidential research, development, orcommercial information," the Erickson courtdescribed the appropriate analysis:

Resolution of disputes underRule 26(c) is based on apragmatic balancing of the needfor and harm risked by,disclosures sought.

Where disclosure of confidentialinvestigative techniques, ofinformation which couldj e o p a r d i ze a n o n go i n ginvestigation, or of matter whichcould injure non-parties isr e q u e s t e d , cou r t s haverecognized the interest of thepublic in denying or deferringdisclosure.

Erickson, 339 F.Supp.2d at 1126.

The Erickson court suggested that documentsmerely describing the government's routineinvestigative procedures should not remain underseal. In making the decision to unseal the entirecourt file, the court concluded:

This court is satisfied thatnothing in the documents in thiscourt file would reveal anysensitive information as to howan investigation works. Thed o c u m e n t s c o n t a i n n oi n f o r ma t i o n t ha t cou l dc o m p r o m i s e a f u t u r ei n v e s t i g a t i o n , s u c h a sexplanations of specifictechniques employed or specificr e f e r e n c e s t o o n g o i n ginvestigations.


[O]nce the government has decided it will notintervene, it should not be able to handicap therelator's action by keeping materials under sealwithout some showing of good cause or amplejustification." U.S. by Dept. of Defense v. CACIInten. Inc., 885 F.Supp. 80, 82 (S.D.N.Y. 1995).Independently of whether a relator's action will behandicapped, courts have a duty to ensure that alldocuments filed with the Court remain availableand accessible to the public unless good causeexists for restricting access. That duty arises fromthe "common-law right of access to judicialrecords." Nixon v. Warner Communications, Inc.,435 U.S. 589, 597 (1978).

#3 THE UNITED STATES OF AMERICA, etal., ex rel. MARY KATHLEEN DANNER,Plaintiffs,

v.

QUALITY HEALTH CARE INC., et al.,Defendants.

Case No. 11-4026-CM-KMH.

United States District Court, D. Kansas.

October 18, 2011.

Notes: This case explains the proper purpose of“sealing” qui tam complaints. Here the Relatorsought dismissal without prejudice in order toconduct more investigation. She feared unsealingwould allow another to “jump” her claim. Thecourt denied the motion to reseal the record,holding “private investigation” is not the purposeof sealing under the qui tam provisions of theFCA.

[Opinion Excerpts] Relator's concern aboutcontinuing her private investigation misconstruesthe purpose of the sealing provisions in the FCA.The FCA requires the complaint to be filed undersea l t o p r o t e c t t h e gove r nmen t ' sinvestigation—not relator's private investigation.

See Lujan v. Hughes Aircraft Co., 67 F.3d 242,245 (9th Cir. 1995) (explaining that the sealprovisions of the FCA recognize the need to allowthe government to fully evaluate the privateenforcement suit); United States ex rel. Pilon v.Martin Marietta Corp., 60 F.3d 995, 998-1000(2nd Cir. 1995) (discussing purposes of sealrequirements); United States ex rel. Herrera v.Bon Secours Cottage Health Servs., 665 F. Supp.2d 782, 785 (E.D. Mich. 2008) (concluding that"the seal was intended to allow the Governmentan opportunity to adequately investigate thedefendant's alleged fraud").

UNITED STATES OF AMERICA Ex. Rel.JOYCE RUBLE Plaintiff,

v.

TROY SKIDMORE, D.O., et al. Defendants.

Case No. 2:09-cv-549.

United States District Court, S.D. Ohio,Eastern Division.

November 8, 2011.

Notes: At the outset, the filing under seal provides the relator some anonymity. This was neverintended to permanently shield the relator frompublic disclosure of whislteblowing activity. Here,the Relator changed her mind after theGovernment declined to intervene, and soughtdismissal and permanent seal or redaction of hername form the pleadings. At this stage, theDefendant will not have been served, therefore thecourt’s usually take a more active role inprotecting the public’s right to access.

Opinion Excerpts: “In Herrera, the EasternDistrict of Michigan determined that theplaintiff-relator's "fear of employment-relatedretaliation [was] not completely unfounded givenher alleged constructive discharge," butnonetheless held that her fear of retaliation by acurrent or future employer was not "sufficient toovercome the strong presumption in favor of


access to judicial records." Herrera, 665 F. Supp.2d at 785-86. The court explained that "toconclude otherwise would ignore that [theplaintiff-relator's] amorphous concern is nodifferent from the concern any employee mayhave when she sues her employer for whateverreason." Id. at 786 (quoting United States ex rel.Permison v. Superlative Techs., Inc., 492 F. Supp.2d 561, 564 (E.D. Va. 2007)). The court alsonoted that, if the plaintiff-relator were to sufferretaliation for filing the qui tam action, the FCAwould provide a cause of action. Id. (citing 31U.S.C. § 3730(h); Superlative Techs., 492 F.Supp. 2d at 564).

THE UNITED STATES OF AMERICA ex rel.DAVID LEE BERNAT, Plaintiff,

v.

THE BOEING COMPANY, INC., et al.,Defendants.

Case No. 4:09 CV 517 RWS.

United States District Court, E.D. Missouri,Eastern Division.

December 12, 2011.

Notes: Clearly, the False Claims Act Qui Tamprovisions require the Complaint to be filed underseal for 60 days. What happens if the “case gets”out for 12 hours, because of a motion to seal,which itself was not filed under seal? Should, asBoeing urges, the case be dismissed, or at least theplaintiff lose Relator status? The best practice isto find out from the court how it wishes the QuiTam case to be filed in compliance with thesealing provisions of FCA. In this case, the courtfound that even though the motion to seal wasfiled and the caption available on PACER, theactual Complaint was not filed until the recordwas sealed. The court refused to deviate from theexpress language of the FCA, which requires theComplaint to be sealed, not the previously filedmotion to seal.]

Opinion Excerpts: Bernat initiated this case byfiling a Motion to File Complaint in Camera and

Maintain Under Seal [#1] on April 1, 2009. Theparties agree that the Motion and case captionwere publically available on the CM/ECF andPACER systems for at least 12 hours after Bernatelectronically filed the Motion. At least one of theDefendants learned of Bernat's case by viewingpublically available information. The Notice ofElectronic Filing on CM/ECF indicates this casewas sealed on April 2, 2009 at 2:21 p.m. Whilethe docket sheet attributes a filing date of April 1,2009 to the Complaint, the Notice of ElectronicFiling indicates the Complaint was entered intoCM/ECF on April 2, 2009 at 2:29 p.m., after thecase was sealed.

Defendants argue Bernat's Complaint should bedismissed for lack of subject matter jurisdictionbecause Bernat failed to comply with Section3730(b)'s filing requirements. Alternatively,Defendants argue Bernat's alleged violation ofSection 3730(b) divests him of qui tam status, andas a result, his Complaint should be dismissed.Finally, Defendants argue that if I do not concludethat Section 3730(b)'s filing requirements arejurisdictional, do not find that Bernat is withoutqui tam status, I should apply a balancing test toconclude that dismissal with prejudice is anappropriate sanction for Bernat's alleged violation.

Section 3730(b) requires the complaint in thistype of case to be filed under seal and remainunder seal for 60 days. The parties agree that thecase caption and Bernat's Motion to Seal wasavailable for approximately twelve hours onCM/ECF and PACER. However, the statutespecifically indicates Bernat's Complaint must befiled under seal. As demonstrated above, theComplaint in this case was filed after the case wassealed. The CM/ECF Notices of Electronic Filingdescribed above demonstrate that the Complaintwas entered into CM/ECF after the case wassealed. As a result, Defendants have failed toestablish that Bernat violated Section 3730(b).


4. Attorney’s Fee’s

UNITED STATES OF AMERICA ex rel.NAJMUDDIN PERVEZ, v NORTHSHORE-LONG ISLAND JEWISH HEALTHSYSTEM, INC., NORTH SHORE UNIVERSITYHOSPITAL, LONG ISLAND JEWISHMEDICAL CENTER, and ERNST & YOUNGLLP, Defendants.

No. 06 Civ. 1114 (DLC).United States DistrictCourt, S.D. New York.

(July 11, 2011.)

Notes: In this FCA/Qui Tam case, thePlaintiff/Relator successfully recovered $560,000out of a $2.9 million dollar settlement, but failedto move the court for an award of attorneys feesuntil 5 months post judgment. The court held thatthe motion is time-barred, as the motion must befiled no later than 14 days from the date of thejudgment.]

Opinion Excerpts: The relator in theabove-captioned action, moves for an award ofexpenses, attorneys' fees and costs pursuant to 31U.S.C. § 3730(d)(1) ("§ 3730(d)(1)") of the FalseClaims Act ("FCA"), 31 U.S.C. § 3729 et seq. Thedefendants have objected to the motion asuntimely under Rule 54(d)(2)(B), Fed. R. Civ. P.,and Local Rule 54.1(a).[1] Pervez contends that §3730(d)(1) entitles him to an award of reasonableexpenses, attorneys' fees and costs. Thedefendants maintain that Pervez cannot recoversuch an award since his application is untimelypursuant to Rule 54(d)(2)(B), Fed. R. Civ. P.

Section 3730(d)(1), titled "Award to qui tamplaintiff," provides in relevant part that "if theGovernment proceeds with an action," anyindividual who is entitled to a share of theGovernment's proceeds "shall also receive anamount for reasonable expenses which the court

finds to have been necessarily incurred, plusreasonable attorneys' fees and costs." 31 U.S.C. §3730(d)(1). "All such expenses, fees, and costsshall be awarded against the defendant." Id.

The Federal Rules of Civil Procedure require "[a]claim for attorney's fees and related nontaxableexpenses" to be "made by motion unless thesubstantive law requires those fees to be proved attrial as an element of damages." Fed. R. Civ. P.54(d)(2)(A). Such a motion "must be filed no laterthan 14 days after the entry of judgment," absent"a statute or a court order provid[ing] otherwise."Fed. R. Civ. P. 54(d)(2)(B)(i). Unless there is "astatute or order of the court such as a local rule,[a] district court [must] . . . find èxcusableneglect' under Rule 6(b)(2) to extend the time tomove for attorneys' fees after the expiration ofRule 54's fourteen-day deadline."[2] Tancredi v.Metropolitan Life Ins. Co., 378 F.3d 220, 227-28(2d Cir. 2004) (emphasis supplied). [Because noexcusable neglect exists, the court denied themotion for attorneys fees as untimely.]

5. Retaliation Cases

JILL POFFINBARGER, Plaintiff,

v.

PRIORITY HEALTH, a Michigan DomesticNonprofit Corporation, and PRIORITYHEALTH MANAGED BENEFITS, INC., aMichigan Domestic Corporation, Defendants.

Case No. 1:11-cv-993.

United States District Court, W.D. Michigan,Southern Division.

December 13, 2011.

Notes: What happens, when the plaintiff allegesshe was fired in retaliation for filing a whistleblower case, and also takes issue with threatsmade during the course of the subsequent


litigation, (such as a counterclaim for damagesbased on her alleged stealing of trade secrets.)Here the Michigan court answers that legalwrangling in the actual lawsuit do not constitute“retaliation” under the False Claims Act, wherethe relator was no longer employed at the time thecounterclaims were made.

Opinion Excerpts: Defendants argue that theseadditional retaliation claims should be dismissedbecause they occurred after Plaintiff's terminationof employment, and because they do notconstitute an adverse action. The Court agrees.The False Claims Act unambiguously limitsretaliation claims to adverse actions taken "in theterms or conditions of employment." 31 U.S.C.3730(h)(1). The allegedly retaliatory threats oflegal action and affirmative defense raised byDefendants clearly are not actions affecting theterms or conditions of employment. Furthermore,even if the FCA did not limit retaliation claims toconditions of employment, the Court finds thatneither legal posturing nor the raising of anaffirmative defense in . . . litigation initiated byPlaintiff constitute an adverse action. See Harmarv. United Airlines, Inc., 1996 WL 199734 (N.D.Ill.) ("Raising the affirmative defense did notcause plaintiffs to incur the expense of hiringcounsel to respond to a lawsuit; they were alreadyrepresented and already engaged in litigation . . .Presenting an affirmative defense, even afrivolous one, will not support a retaliationclaim.").

UNITED STATES OF AMERICA ex rel,CLIFF BERGLUND, Plaintiff,

v.

THE BOEING COMPANY, Defendant.

No. 03:02-cv-193-AC.

United States District Court, D. Oregon, PortlandDivision.

December 13, 2011.

Notes: What is the statute of limitations on aretaliation claim? Congress enacted theDodd-Frank Wall Street Reform and ConsumerProtection Act of 2010 ("Dodd-Frank Act"), Pub.L. No. 111-203, 124 Stat. 1376, which amendedthe FCA to supply an express statute of limitationfor § 3730(h) retaliation claims. Consequently, theFCA now provides that "[a] civil action under [ §3730(h)] may not be brought more than 3 yearsafter the date when the retaliation occurred." 31U.S.C. § 3730(h)(3).] But what of cases which arestuck in the middle? The law is well establishedthat if Congress has not supplied a limitationsperiod for a federal cause of action, the courts areto apply the most closely analogous statue oflimitations under state law. See, e.g., Reed v.United Transp. Union, 488 U.S. 319, 323-24(1989) (and cases cited therein.) The limitationsstatue sought to be applied, must none-the-less,have been in effect at the time. In this case,Oregon’s one year limitations period forretaliation claims wasn’t in effect when the claimarose. Thus, Boeing could not rely on it. Couldthen, the 3 year period under the FCA be appliedretroactively. The court goes to some length todiscuss the various interpretations among thecourts which have addressed this question.

III. Miscellaneous

1. Procedure for Nonsuit or Dismissal ofDefendants Post Settlement.

UNITED STATES OF AMERICA, PETER C.CURNIN, Relator, v. BALD HEAD ISLANDLIMITED, MARK D. MITCHELL, MICHAELK. MITCHELL, No. 7:03-CV-174-F(1).

United States District Court, E.D. North Carolina,Southern Division.


Notes: This case illustrates the method by whicha Qui Tam/FCA case must be dismissed, wherethe relator no longer wished to prosecute pursuantto FRCP Rule 41 (a)(1)(A)(I). A Qui Tam action"may be dismissed only if the court and the


Attorney General give written consent to thedismissal and their reasons for consenting." 31U.S.C. § 3730(b)(l).

Opinion Excerpts: “A voluntary dismissalpursuant to Rule 41 (a)(1)(A)(i) generally isself-executing, and operates to dismiss acomplaint without any action by the court. MarexTitanic, Inc. v. Wrecked & Abandoned Vessel, 2F.3d 544, 546 (4th Cir. 1993). Under the FalseClaims Act, 31 U.S.C. § 3729 et seq., however, aqui tam action such as this one "may be dismissedonly if the court and the Attorney General givewritten consent to the dismissal and their reasonsfor consenting." 31 U.S.C. § 3730(b)(l). See alsoU.S. ex rel. Littlewood v. King Pharmaceuticals,Inc., ___ F.Supp.2d ___, 2011 WL 3805607 at*11 (D. Md. Aug. 29, 2011).

Here, the consent of the United States Attorneyfor the Eastern District of North Carolina, via anAssistant United States Attorney, appears in theNotice of Dismissal [DE-60] itself. TheGovernment indicates that it consents to thedismissal of the action because

“[t]his case has an extensiveprocedural history, and questionshave been raised about whetherservice of process was properlyor timely effected. The interestsof justice would be best servedby allowing this case to bedismissed without prejudice.

Notice of Dismissal [DE-60] at p. 2 ("Consent ofthe Government").

For the reasons stated by the Government, thecourt consents to the dismissal ofthis action. See31 U.S.C. § 3730(b)(1). This case is thereforeDISMISSED and the Clerk of Court isDIRECTED to close this case.

THE UNITED STATES OF AMERICA, ex rel.NORMAN RILLE and NEAL ROBERTS v.A C C E N T U R E L L P , e t a l . N o .4:04CV00985-BRW. United States District Court,E.D. Arkansas, Western Division. October 11,2011.

[Martin Merritt’s notes/comments: Procedureupon settlement. Following settlement, the courtdismissed with prejudice the main case againstthe defendant with prejudice, while retainingjurisdiction over the question of how the relatorsshall divide the settlement and the amount ofattorney’s fees.]

Opinion Excerpts: The parties have reached anagreement to settle this litigation. The UnitedStates and Accenture agree that each will bear itsown costs, expenses and attorneys' fees. TheRelators, Norman Rille and Neal Roberts, andAccenture have not yet reached agreement as topayment of attorneys' fees, costs and expenses ifany, pursuant to 31 U.S.C. § 3730(d). The UnitedStates and the Relators have not yet reachedagreement as to the relators' share of the proceedsof the settlement of this matter pursuant to 31U.S.C. § 3730(d). Accordingly, in light of theSettlement Agreement, the Court rules as follows:

IT IS ORDERED that this case is DISMISSEDwithout prejudice as to Relators with respect tothe determination of relators' share or relators'attorneys' fees, costs and expenses and otherwisewith prejudice as to Relators and with prejudice asto the United States to the extent of the "CoveredConduct" in the Settlement Agreement betweenthe United States, Relators and Accenture andotherwise without prejudice as to the UnitedStates. The Court retains jurisdiction over thismatter to enforce the terms of the SettlementAgreement.

The Court also retains jurisdiction over this matterfor purposes of determining appropriate attorneys'fees, costs and expenses, if any, to be paid to


Relators by Accenture pursuant to 31 U.S.C. §3730(d), and for purposes of determining anappropriate relators' share of the proceeds of thesettlement of this case pursuant to 31 U.S.C. §3730(d). The United States and Accenture eachwill bear its own costs, expenses, and attorneys'fees.

2. Estoppel

UNITED STATES OF AMERICA, Plaintiff,

v.

VILLASPRING HEALTH CARE CENTER,INC., et al., Defendants.

Civil Action No. 3:11-43-DCR.

United States District Court, E.D. Kentucky,Central Division, Frankfort.

December 19, 2011.

Notes: In this case, the Defendant makes theinteresting claims that the Government should beestopped from arguing the Defendant made falseclaims, because the government paid the claimswithout objection. The court makes short shrift ofthe estoppel argument, observing that to adopt theDefendant’s reasoning, would eliminate anypossibility of any successful False Claims Actcase.

Opinion Excerpts: The defendants' estoppelargument can be broken down into three separatearguments, all of which are unconvincing. First,the defendants assert that the United States isprecluded from bringing this claim because of itsknowledge of the deficient care provided byVillaspring. According to this argument, becauseCMS was aware of "alleged deficiencies in theconditions of participation," but still allowedVillaspring to continue submitting claims andreceiving payments, "the government had actualknowledge of the care provided by Villaspring

and is estopped from now arguing now [sic] thatVillaspring violated the False Claims Act."[Record No. 8-1, pp. 26-27] As the United Statespoints out, however, the "statutory basis for anFCA claim is the defendants' knowledge of thefalsity of its claim, which is not automaticallyexonerated by any overlapping knowledge bygovernment officials." United States ex rel.Kreindler & Kreindler v. United Tech. Corp., 985F.2d 1148, 1156 (2d Cir. 1993); see also A+Homecare, Inc., 400 F.3d at 454 n.21 (rejectingthe defendants' argument that the government'sknowledge of a false accrual did not preclude hisliability under the FCA for submitting a falseclaim).

Nonetheless, the defendants press forward withtheir second argument, which essentially contendsthat CMS's failure to bring charges or discontinuepayments negates the scienter element of theUnited States' FCA claim. They maintain that thegovernment "must prove intentional, knowingmisconduct,[] and in a case such as this where thegovernment did not give notice of false claimswhen reviewing and assessing penalties for thecare provided, the provider. . . is entitled toreasonably rely on the government'srepresentations." [Record No. 27, p. 7 (replying toRecord No. 23, p. 18)] As an initial matter, thefact that CMS did not "declare the services to beworthless" does not constitute a representationfrom the government that the claims submitted byVillaspring were not false. [Id.] Additionally,however, this argument conflates the element ofscienter under the FCA with the issue of estoppel,resulting in an untenable reading of the FCA. Therule espoused by the defendants would essentiallyeviscerate the FCA, most importantly because itignores the fact that the term "knowingly" in thestatute also encompasses intentional acts. Thisinterpretation would have the effect of shieldingdefendants who engaged in intentional andpurposeful fraud on the United States just becausethe government did not inform them that theirclaims were false before bringing an action. TheCourt declines to adopt a rule that would havesuch an anomalous result.


3. The 5 Amendment Privilege Trap.th

RUTH L. RUCKMAN, United States ofAmerica, Ex Rel, Plaintiff,

v.

ALFRED H. CHAN, M.D. and JUDY H.CHAN, Defendant.

Case No. C08-5532 RBL.

United States District Court, W.D. Washington,Tacoma.

December 8, 2011.

Opinion Excerpts: The United States moves theCourt to either enter a default judgment as asanction for the Chans' refusal to providecourt-ordered discovery or grant partial summaryjudgment in their favor as a result of the unrefutedevidence put forth by the United States. They seekan award of $4,861,236 in damages and an orderprecluding Alfred and Judy Chan from contestingthe Government's allegations of the Chans'fraudulent transfers. The Chans argue that neitherremedy is appropriate because they have lawfullyasserted their Fifth Amendment rights in responseto the United States' discovery requests. For thereasons that follow, the United States' Motion isGRANTED in so far as it seeks partial summaryjudgment.

On September 29, 2010, this Court issued ExParte Pre-Judgment Writs of Garnishment oncertain of the Chans' property and financialaccounts under the Fair Debt Collection PracticesAct, 28 U.S.C. §§ 3001 et. seq. The Writs wereissued based upon the Court's finding that therewas sufficient facts supporting the reasonableprobability of the United States' right to recover,and reasonable cause to believe that the Chanswere about to dispose or conceal their assets insuch a way as to hinder the United States' abilityto recover the debt.

A party may assert the Fifth Amendment in a civilproceeding where answers might incriminate himin future criminal proceedings. Lefkowitz v.Turley, 414 U.S. 70, 77 (1973). The Court may,however, "draw adverse inferences from theirfailure of proof." S.E.C. v. Colello, 139 F.3d 674,677 (9th Cir. 1998) citing Baxter v. Palmigiano,425 U.S. 308, 318 (1976). "Levkowitz and Baxterrequire that there be evidence in addition to theadverse inference to support a court's ruling."Colello, 139 F.3d at 678.

4. The Pro Se qui tam Relator

KIONNA K. FOX, Plaintiff,

v. SELECT MEDICAL CORPORATION, etal., Defendants.

No. 4:11CV02037 TCM.

United States District Court, E.D. Missouri,Eastern Division.

December 9, 2011.

Opinion Excerpts: The United States is the "realparty of interest" in an action under the FCA, andactions under the FCA may be brought only bylicensed attorneys. See, e.g., U.S. ex rel. MergentServs. v. Flaherty, 540 F.3d 89, 93 (2nd Cir.2008); United States v. Onan, 190 F.2d 1, 6 (8thCir. 1951) ("[W]e do not think that Congresscould have intended to authorize a layman to carryon ... as attorney for the United States but musthave had in mind that such a suit would be carriedon in accordance with the established procedurewhich requires that only one licensed to practicelaw may conduct proceedings in court for anyoneother than himself."). Plaintiff, as a pro se litigant,therefore, may not bring any FCA claims in thisCourt.

5. The State as qui tam Defendant

WEIHUA HUANG, Plaintiff,


v.

THE RECTOR AND VISITORS OF THEUNIVERSITY OF VIRGINIA, ET AL.,Defendants.

Case No. 3:11-cv-00050.

United States District Court, W.D. Virginia,Charlottesville Division.

December 19, 2011.

Notes: Is a state liable under the FCA in a qui tamaction? No. See, In Vermont Agency of NaturalResources v. United States ex rel. Stevens, 529U.S. 765, 781-82 (2000)

Opinion Excerpts:

Official-Capacity FCA Claim for Damages InWill v. Michigan Department of State Police, 491U.S. 58, 71 (1989), the Supreme Court held that"a suit against a state official in his or her officialcapacity is not a suit against the official but ratheris a suit against the official's office." Therefore,for the purposes of FCA liability, Dr. Li and Dr.Johnson are, in their official capacities,synonymous with UVa. And UVa isunquestionably an instrumentality of theCommonwealth of Virginia. See Jones v.Commonwealth, 267 Va. 218, 224, 591 S.E.2d 72,76 (2004) ("The University is a governmentalentity. Its powers and duties, exercised by theRector and Visitors of the University, are createdby statute and are controlled by the GeneralAssembly."). As a general matter, in order for anagency of the state like UVa to be liable under theFCA, it must be a "person." See 31 U.S.C. §3729(a) (subjecting to liability "any person" who,inter alia, "knowingly presents, or causes to bepresented, to an officer or employee of the UnitedStates Government . . . a false or fraudulent claimfor payment or approval"). In Vermont Agency ofNatural Resources v. United States ex rel.Stevens, 529 U.S. 765, 781-82 (2000), a qui tamaction, the Supreme Court held that the term"person" as used in the FCA did not include statesor state entities, thus barring the relator's claim

6. Opinions are not Actionable

W. HOWELL; DR. ANUPAM BISHAYEEDr. Helene Z. Hill, App UNITED STATES OFAMERICA, EX REL. DR. HELENE Z. HILL,

v.

U N I VERSITY O F M EDI CI N E &DENTISTRY OF NEW JERSEY; DR.ROGER ellant.

No. 10-4364.

United States Court of Appeals, Third Circuit.

Argued: September 13, 2011.

Filed: October 20, 2011.

[Opinion Excerpts] At issue is whether theDistrict Court erred in granting summaryjudgment for defendants, the University ofMedicine & Dentistry of New Jersey, Howell, andBishayee, in this qui tam action under the FalseClaims Act. 31 U.S.C. § 3729 et seq. We willaffirm the judgment of the District Court. TheUniversity of Medicine & Dentistry of New Jersey(UMDNJ) employed both the appellant, Dr.Helene Hill, and the appellees, Dr. Robert Howelland Dr. Anupam Bishayee in its radiologydepartment where they all collaborated onpreliminary research to support a grant applicationto the National Institutes of Health (NIH) to fundfurther investigation into the "bystandereffect."[1] The crux of Dr. Hill's complaint is thatdata used in support of this grant application wasfabricated.

To establish a prima facie case under the FalseClaims Act (FCA) a plaintiff must prove: (1) thedefendant presented or caused to be presented toan agent of the United States a claim for payment;(2) the claim was false or fraudulent; and (3) thedefendant knew the claim was false or fraudulent.Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d176, 182 (3d Cir. 2001). Because "[e]xpressionsof opinion, scientific judgments or statements asto conclusions which reasonable minds may differcannot be false," United States ex rel. Jones v.


Brigham and Women's Hosp., 750 F. Supp. 2d358, 366 (D. Mass. 2010), FCA liability will notattach.


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