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Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.
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The Supreme Court sides with whistleblowers in False Claims Act cases and rejects “objectively reasonable” interpretation of the law defense.
On June 1, 2023, the Supreme Court issued a decision in the pending whistleblower cases, United States ex rel. Schutte v. SuperValue and United States ex rel. Proctor v. Safeway. The Seventh Circuit Court of Appeals previously ruled against the whistleblowers, finding the retail pharmaceutical companies had reasonably interpreted regulatory requirements and, therefore, could not have knowingly submitted a false claim to the Government. The Supreme Court, however, disagreed.
Comment
Can an “Objectively Reasonable” Interpretation of the Law—Even if You Don’t Believe it—Protect Against False Claims Act Liability?
On April 18, 2023, the Supreme Court heard oral argument from three whistleblowers requesting that the Court revive their lawsuits against retail pharmacies SuperValue and Safeway. See https://www.scotusblog.com/2023/04/justices-will-consider-false-claims-in-two-pharmacy-cases/. The whistleblowers accused the companies of unlawfully pocketing millions of taxpayer dollars by knowingly overbilling government health insurance programs for prescription drugs. The whistleblowers brought the case under the False Claims Act—the government’s primary anti-fraud statute. Under the FCA, a defendant is liable for “knowingly” submitting a false claim to the government for payment. Knowledge can constitute either actual knowledge, deliberate ignorance, or reckless disregard.
On Behalf of the King
The False Claims Act is aimed at fraudulent claims for payment from the government (or, in what are known as “reverse” false claims, underpayment to the government), and the typical case involves a whistleblower who helps the government uncover the fraud. In some of these cases, the whistleblower tells the government and the government initiates the lawsuit. But in others, the government does not get involved and the whistleblower becomes a relator - someone who litigates the action on behalf of the government. These are known as “qui tam” actions, a phrase that is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur.” This translates, more or less, to “He who sues for the king as well as for himself in this issue.” The “for himself” refers to the substantial financial incentives for whistleblowing. A whistleblower in a successful case may receive a substantial portion of the damages to the government, and - even if a case is not ultimately successful - is protected from being retaliated against for whistleblowing.
Supreme Court Declines to Review “Objective Falsity” Issue and Resolve Circuit Split
Several months ago, we posted a blog discussing how Circuit Courts are split on the question of whether the False Claims Act requires objective falsity, or whether a difference of opinion regarding medical necessity is sufficient to support an actionable claim. Despite this Circuit split, the Supreme Court recently denied certiorari in two cases—one from the Third Circuit and one from the Ninth Circuit—that would have allowed the Court to address the issue of “objective falsity.”
The False Claims Act and PPP: Practical Considerations
Much has been written over the past several months about the application of the False Claims Act to PPP loan fraud. While, at first look, the cases seem appealing, it is important to consider the practical implications of bringing such a case and whether, in the general scheme of things, a PPP case is worthwhile.
When Evaluating a Release of FCA Claims, Sequence Can Make All the Difference
Meet Peter Fabien. Until recently, Peter worked as an engineer at a company that makes tank parts for the United States military. Last June, he discovered that his employer was knowingly delivering substandard parts and hiding the defects using falsified test results. Peter alerted upper management, and was fired for his trouble. Incensed, he hired an employment lawyer to protest his termination. The employment lawyer negotiated a lump sum payment from the company, but in exchange the company insisted that Peter sign a release promising not to file any lawsuits alleging violations of the False Claims Act (FCA). Is the release enforceable? Federal courts increasingly hold that, in many cases, the answer is no.
Medicaid Fraud Control Unit and Other Prosecutors Hard At Work Replenishing State Coffers Depleted By State’s COVID Response
As the holiday season approaches and New Yorkers struggle with finances due to COVID-related limitations imposed on business, the government has been searching for ways to alleviate the hardships faced by many. For example, Attorney General Letitia James and Governor Andrew Cuomo recently announced that the Office of the Attorney General (OAG) renewed, for the eighth time, an order to halt the collection of medical and student debt owed to the State of New York, including those matters specifically referred to the OAG for collection. However, when one hand giveth, the other taketh away. Because the State treasury has also suffered tremendously during the pandemic, agencies are under pressure to recoup losses. Thus, like other agencies, the Medicaid Fraud Control Unit (MFCU) of the OAG is working harder than ever to prosecute health care fraud and recapture State funds and penalties.
Ninth Circuit Finds False Certifications of Medical Necessity Actionable Under the FCA
When a person insured by Medicare or Medicaid receives medical services, the service-provider is often required to certify that the services are medically necessary. The Ninth Circuit Court of Appeals recently joined the Third, Fifth, and Tenth Circuits in finding false certifications of medical necessity actionable under the False Claims Act.
DOJ’s $678 Million Novartis Settlement for False Claims Act and Anti-Kickback Statute Violations—Changing Big Pharma’s Expectations for Compliance Programs
Roopa Chakkappan authored an article titled, "DOJ’s $678 Million Novartis Settlement for False Claims Act and Anti-Kickback Statute Violations—Changing Big Pharma’s Expectations for Compliance Programs," which was posted on the American Health Law Association's (AHLA) website.
Government Fraud Statistics Demonstrate the Enduring Utility of False Claims Act Litigation
The U.S. Department of Justice, Civil Division has published a substantial amount of data on the historical success of whistleblower cases and investigations. The statistics show that whistleblower litigation under the False Claims Act (often referred to as “quit tam” litigation) continues to be the government’s primary weapon in combating fraud.
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