FCA Alert : Lawyers & Attorneys for Whistleblower, False Claims Act & Qui Tam Defense : Kelley Drye & Warren LLP

On December 27, 2010, the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of an employee’s retaliation claim against a firearms contractor, Heckler & Koch Defense, Inc. (“HKD”), brought under the anti-retaliation provision (§ 3730(h)) of the federal False Claims Act.  Mann v. Heckler & Koch, Defense, Inc., No. 09-1847, 2010 WL 5262729 (4th Cir. Dec. 27, 2010).  The Fourth Circuit held that the employee’s opposition to, and investigation of, his employer’s conduct surrounding a government bid submission and the employee’s subsequent filing of a retaliation claim were not protected activities under the FCA because the employer’s conduct involved “nothing more than non-fraudulent statements made…during the course of a contractual bidding process.”

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Last week we reported on the denial of Orthofix’s motion to dismiss the complaint of the relator, Jeffrey Bierman, on Rule 9(b) grounds in United States ex rel. Bierman v. Orthofix International, N.V. et al., Civil Action Nos. 05-10557-EFH, 08-11336-JLT, 2010 WL 4973635 (D. Mass.).  Bierman’s action is consolidated with another action against Orthofix brought by the relator, Marcus Laughlin.  Laughlin alleges that Orthofix engaged in five fraudulent schemes (one of which is the same as the bone growth stimulator scheme alleged by Bierman and arguably barred by the first-to-file bar of section 3730(b)(5)).  Unlike in the Bierman action, the Court dismissed all of the False Claims Act claims based on these allegedly fraudulent schemes for failure to allege the claims with particularity under Rule 9(b).  The decision can be found here.

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Yesterday, we discussed the district court’s basis for denying the Rule 12(b)(6) motions to dismiss made by several medical device manufacturers in the Orthofix case pending in the District of Massachusetts.  Today, we examine the second part of the court’s opinion which addressed defendants’ motion to dismiss for failure to plead fraud with particularity under Rule 9(b).  In Orthofix, the relator alleges that several medical device companies submitted, or caused to be submitted, reimbursement-related false claims under the False Claims Act in connection with the sale versus rental of certain bone growth stimulators.

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On December 8, 2010, in United States ex rel. Bierman v. Orthofix International, N.V. et al., Civil Action Nos. 05-10557-EFH, 08-11336-JLT, 2010 WL 4973635 (D. Mass.), a District of Massachusetts court denied several medical device manufacturers’ motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b) for reimbursement-related false claims under the False Claims Act associated with the sale versus rental of certain bone growth stimulators.

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 In a December 3, 2010 decision in United States v. Science Applications International Corporation, Case No. 04-CV-01543 (D.C. Circuit Dec. 3, 2010), the D.C. Circuit affirmed a trial court’s holding that the implied certification theory of liability does not require the offending false certification to relate to an express condition for payment, holding that a violation of the False Claims Act exists when a false certification is material to the government’s decision to pay a claim.  In addition, the D.C. Circuit rejected the lower court’s instructions on the “collective knowledge” standard for scienter and its instructions on damages, vacated the lower court’s judgment as to liability and damages, and remanded for a new trial.

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Several months ago, we reported that the American Hospital Association (“AHA”) sent a letter to U.S. Attorney General Eric Holder and Kathleen Sebelius, Secretary of Health and Human Services, requesting a review of the so-called kyphoplasty initiative being pursued by the Office of the United States Attorney for the Western District of New York. Earlier this week, AHA wrote a letter to Associate Deputy Attorney General Edward Siskel and Deputy Assistant Attorney General Michael Hertz thanking them for meeting with AHA on November 22, 2010 to discuss AHA’s request for greater oversight of the kyphoplasty initiative.

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According to statistics published by the Department of Justice (the “DOJ report”), 573 federal whistleblower complaints were filed under seal in 2010. The DOJ report also shows that 1,246 sealed qui tam complaints remain under investigation pending the government’s decision on intervention. 

Of the 5,954 qui tam cases that have been unsealed between 1987 and 2010:

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On November 18, 2010, the Sixth Circuit Court of Appeals affirmed a trial court’s post-trial judgment finding of liability under the FCA against United Technologies, but reversed the portion of the judgment finding no damages as to United Technologies. United States v. United Technologies Corp., No. 08-4256 (6th Cir., Nov. 18, 2010).

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On November 19, 2010, a qui tam complaint was unsealed against 78 Indiana prosecutors alleging violations of the Indiana False Claims Act. The complaint alleges that the prosecutors violated the Indiana FCA by failing to pay into the Indiana common school fund the net proceeds of criminal forfeiture actions.

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Yes, according to a Texas court in D.B. v. K.B., 176 S.W.3d 343 (Ct. Ap. 1st Dist. Texas 2004). In D.B., a husband filed a qui tam lawsuit under the False Claims Act in federal court while he was still married to his wife. As the relator in that proceeding, the husband could potentially recover between 15 and 30 percent of any settlement or damages recovered in the lawsuit.

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