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

Earlier this month, we reported that the U.S. Attorney in the Southern District of New York filed a billion dollar False Claims Act lawsuit against Deutsche Bank and its subsidiary MortgageIT for alleged mortgage fraud during last decade’s housing bubble. (Click here for the prior post.)  It appears that a number of state attorneys general may begin to file lawsuits as well. Yesterday, the California Attorney General announced the creation of mortgage fraud strike force, and the Illinois Attorney General expanded her investigation into alleged practices used by banks and other mortgage institutions, including “robosigning.”  (Click here for the California AG press release and here for the Illinois AG press release).  Last week, the New York Attorney General opened an investigation into mortgage securitization practices.  (Click here for the story reported on the WSJ blog.)  Illinois, California, and New York all have state false claims acts and the increased attention given by the attorneys general may encourage private litigants to bring qui tam cases.

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On January 4, 2011, in United States ex rel. Turner et al.v. Michaelis Jackson & Associates, L.L.C. et al., a district court in the Southern District of Illinois denied a defendant’s motion for summary judgment in a False Claims Act case which involves the issue of whether certain ophthalmology procedures performed by the defendant were medically necessary. The court was not persuaded by the lay testimony provided by the relators on the issue of medical necessity, and held that the relator’s testimony that the defendant performed “true” procedures only 5% of the time he billed for it did not present a genuine issue of material fact under the False Claims Act. In arriving at this conclusion, the court noted that the use of probability as the backbone to a False Claims Act suit has been denounced by the Seventh Circuit. The court was influenced, however, by the detailed expert testimony presented by the relator on the issue of medical necessity and held that the expert testimony was sufficient to create a material issue of fact for trial and withstand summary judgment.

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