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DOJ Weighs in on Circuit Split on False Claims Act First-to-File Issue

A key provision of the False Claims Act is the so-called “first-to-file” bar which prevents a case from proceeding if there is a “related” action “pending” at the time the case is filed. After the United States Court of Appeals allowed a whistleblower’s case to proceed despite the fact that another related case had at one time been filed, the Supreme Court has been asked to grant a petition for a writ of certiorari to review this question.


Recently, DOJ filed an amicus brief expressing its view that the Fourth Circuit correctly interpreted and applied the FCA’s first-to-file provision and the issue does not merit review by the Supreme Court.  The Fourth Circuit held that  once a case is no longer “pending” (e.g., has been dismissed and there is no pending appeal), the first-to-file provision does not bar a relator from filing a related case.


While this outcome would seem obvious given the plain language of the FCA provision and the meaning of the word “pending,”  the defendant in the Fourth Circuit case is arguing that the recent contrary decision by a panel of the United States Court of Appeals for the D.C. Circuit creates a split in the circuit courts that merits Supreme Court review and resolution.


In response, the Solicitor General and DOJ argue that the Fourth and Seventh Circuits are in agreement with DOJ’s view, that the Tenth Circuit has agreed (albeit in dicta),  and that the D.C. Circuit decision was a panel decision only with a vigorous dissent with a petition for rehearing en banc now pending.


As such, DOJ views the split as the a narrow one that may well be resolved by the D.C. Circuit itself, and thus Supreme Court review is not merited. Brief at 25-29  (pdf pages, not brief pages).


We expect the D.C. Circuit will hear the case en banc and will ultimately agree with the other Circuits, rather than give the FCA a tortured reading. We also expect the Supreme Court will not grant certiorari to hear the Fourth Circuit case.


Nevertheless, the case is a good reminder of the many potential pitfalls or land mines a relator and his or her counsel may encounter as well-funded defendants lob myriad arguments and defenses into the courts.  Both the whistleblower and their counsel should expect significant (and often unforeseen or unknown) risks anytime a qui tam case is filed.

U.S. Scores Big Win Against Bank of America and Countrywide for Bank Fraud

The U.S. District Court Judge has ordered that Bank of America, Countrywide and one individual pay a bank fraud penalty of $1.3.  In his opinion, Judge Rakoff adopted the United States’ interpretation (see brief 1 and brief 2) of the penalty provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1833a  (“FIRREA”), and rejected the argument by defendants.  FIRREA is a powerful weapon passed by Congress in response to the savings and loan crisis of the 1980’s. Using a tip from a whistleblower, prosecutors dusted off the law and used it to great success in this case.  Under FIRREA, a successful whistleblower shall be entitled to a reward of “20 percent to 30 percent of any recovery up to the first $1,000,000 recovered, 10 percent to 20 percent of the next $4,000,000 recovered, and 5 percent to 10 percent of the next $5,000,000 recovered.” 12 U.S.C. § 4205.  In calculating that award, the Attorney General may consider the size of the overall recovery and the usefulness of the information provided by the whistleblower. Id.  This means that in this case, the whistleblower is entitled to an award of between $850,000 to $1.6 million of the government’s $1.3 billion recovery. Unlike the False Claims Act, FIRREA caps the whistleblower’s reward; in other words, he or she only shares in the first $10 million of any recovery.  Presumably the defendants will appeal the jury verdict on liability and the judge’s order on penalty so this saga is not yet over.

Tuomey Healthcare Faces $238 Million Judgment In False Claims Act and Stark Law Whistleblower Case

After two jury trials and one appeal, a federal district court judge lowered the boom on Tuomey this week, ordering it to pay over $277 million for False Claims Act violations predicated on its breaching the federal Stark Law which prohibits certain referral practices by health care providers. The judge subsequently lowered the amount to $238 million after the Department of Justice filed a motion to correct an error in how the judge calculated the penalties portion of the judgment.


The judgment shows the risk companies take when they roll the dice and “bet the company” to go to trial in FCA cases; Tuomey reportedly may not have enough assets to satisfy the judgment, and there is talk of a post judgment settlement. See Modern Healthcare article.


Along the way Tuomey’s defense lawyers pulled out many arguments only to see each one shot down by the jury and/or the judge. The court’s opinion makes for very instructive and interesting reading as the judge: upholds the jury’s finding that the company violated the Stark law by paying physicians (gastroenterologists) in excess of the fair market value of their services in return for their referrals of patients to Tuomey for their endoscopies (Opinion at pp. 8-11); refuses to overturn the jury’s decision rejecting the company’s “advice of counsel” defense (Opinion at pp. 11-14); and rejects the company’s arguments that damages were not adequately proven by DOJ and its expert witness, and that the mandatory treble damages and penalties under the FCA violate the Excessive Fines Clause (Eighth Amendment) and Due Process (Fifth Amendment) clauses of the United States Constitution (Opinion at pp. 14-36).


For the whistleblower, a doctor who objected to the conduct and filed his qui tam complaint in 2005, it has been a long and winding road that is not over yet. He and his lawyers are to be commended as are the lawyers and others at DOJ and the United States Attorney’s Office who have committed tremendous resources to see this case through. Finally we should not forget the two juries and the two district court judges and the hours they have devoted to rendering justice.