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LITIGATION/CONTROVERSY
January 12, 2016
False Claims Act: 2015 Year-in-Review
TABLE OF CONTENTS
I. Introduction: Highlights and Trends ...................................................................................................... 1
II. Federal Legislative and Regulatory Developments ............................................................................. 3
Congress ......................................................................................................................................... 3
Department of Justice ................................................................................................................... 5
Department of Health and Human Services ................................................................................ 6
Department of State ....................................................................................................................... 7
Department of Defense .................................................................................................................. 7
Office of Special Counsel .............................................................................................................. 7
Compliance Standards Projects ................................................................................................... 7
III. Federal Case Law Developments ......................................................................................................... 8
Supreme Court Decided Case: (1) Tolling of Statute of Limitations; (2) First-to-File
Bar ................................................................................................................................................... 8
Supreme Court Pending Cases: (1) Implied Certification; (2) Seal Requirement; (3)
Scienter; (4) Rule 9(b); (5) Fraudulent Inducement .................................................................... 9
D.C. Circuit: (1) Privileged Status of Internal Investigations; (2) Scienter – Effect of
Ambiguities in Underlying Legal Requirements or Contractual Specifications.................... 12
First Circuit: Implied Certification Liability ............................................................................... 15
Second Circuit: [None] ................................................................................................................ 16
Third Circuit: Public Disclosure Bar - Retroactivity of 2010 Amendments ............................ 16
Fourth Circuit: (1) Implied Certification; (2) Public Disclosure Bar; (3) Calculation of
Damages; (4) Advice-of-Counsel Defense................................................................................. 16
Fifth Circuit: (1) Seal Pro vision; (2) Scienter and Corporate “Collective Knowledge”;
(3) Additional Post-Trial Discovery ............................................................................................ 19
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Sixth Circuit: (1) Public Disclosure Bar; (2) Calculation of Damages .................................... 19
Seventh Circuit: (1) Rule 9(b) – Collective Pleading in Multi-Defendant Cases; (2)
Implied Certification ..................................................................................................................... 22
Eighth Circuit: (1) Implied Certification and Fraudulent Inducement; (2) Relator’s
Statutory Share of Settlement .................................................................................................... 23
Ninth Circuit: (1) Definition of “Original Source;” (2) Viability of Relator a fter
Criminal Conviction ..................................................................................................................... 24
Tenth Circuit: [None] ................................................................................................................... 25
Eleventh Circuit: (1) News Media and the Public Disclosure Bar; (2) Compliance
Efforts and the Recklessness Standard .................................................................................... 25
IV. Federal Settlements, Interventions, and Complaints ....................................................................... 27
Healthcare and Pharmaceuticals ................................................................................................ 27
Procurements and Grants ........................................................................................................... 30
Financial Institutions ................................................................................................................... 34
V. State and Local Developments ........................................................................................................... 37
VI. About WilmerHale’s False Claims Act Practice ................................................................................ 40
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I. Introduction: Highlights and Trends
In 2015, the Justice Department (DOJ) continued to give high priority to False Claims Act (FCA)
investigations, bringing in nearly $3.6 billion in settlements and judgments. Healthcare cases accounted
for approximately $2 billion and Defense Department cases approximately $259 million, leaving roughly
$1.35 billion from other kinds of procurement and financial sector matters. While this past year’s total was
lower than those for the last three years—2012 ($5 billion), 2013 ($3.8 billion), 2014 ($5.8 billion)—it
remained substantially higher than for any year before those three. In 2015, more than 630 qui tam suits
were filed.
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The most unusual aspect of this year’s numbers was the division between governm ent-initiated cases, qui
tam cases in which the government intervened, and qui tam cases in which the government declined to
intervene. For the first time since DOJ began compiling statistics 28 years ago, recoveries from qui tam
cases in which the government declined to intervene topped those from government-initiated cases—
indeed, nearly doubled them, $1.15 billion to $670 million. Recoveries in non-intervened cases, which
typically amount to no more than a tenth of recoveries in qui tam cases the government joins and often
amount to much less than that, this year totaled fully 65% of the value of government-intervened
recoveries. The enormous spike in recoveries in non-intervened qui tam cases arose in part because of
one particularly large settlement in a non-intervened case, but it also reflected the increasing commitment
of qui tam relators and their counsel to pursue cases even in the absence of government support.
More Individual Defendants, More Criminal Cases, More Data-Driven Investigations
In 2015, the Justice Department’s leadership made clear that FCA investigations will increasingly focus
on individual as well as organizational defendants and pursue potential criminal as well as civil liability.
The “Yates Memo,” issued by Deputy Attorney General Sally Quillian Yates in Septem ber, instructed
prosecutors to focus on potentially culpable individuals in corporate investigations. That directive has
already shifted how many Assistant U.S. Attorneys approach FCA investigations, placing the burden on
them to justify any decision not to name individual as well as organizational defendants. For FCA cases, it
also reinforced points made by Assistant Attorney General Leslie Caldwell, head of the Criminal Division,
in a speech to Taxpayers Against Fraud in September 2014 emphasizing the Criminal Divisio n’s
heightened attention to FCA prosecutions. Caldwell explained that DOJ had established a procedure so
that the Civil Division would share all new qui tam complaints with the Criminal Division as soon as the
cases are filed.
In October, 2015, Acting Assistant Attorney General for the Civil Division Ben Mizer described the
Department’s increased use of data analytics to identify patterns of healthcare and other f raud. Mizer
explained that the practice has enhanced the Department’s ability both to identify potential frauds for
further investigation and to support cases already being investigated or litigated.
Increased Penalties on the Way
In the Bipartisan Budget Act of 2015, signed into law on November 2, 2015, Congress mandated
increases in FCA penalties for the first time since 1999, when they were set at their current levels of
$5,500-$11,000 per false claim. The Budget Act requires the Justice Department to issue regulations by
July 1, 2016, increasing those penalties by the percentage the Consumer Price Index (CPI) has risen
since the penalties were last adjusted. If the Justice Department imposes the greatest increase possible,
civil monetary penalties under the FCA would rise approximately 40 percent, to roughly $7,700-$15,400
per false claim. Thereafter the penalties will be automatically adjusted annually based on increases in the
CPI.
Supreme Court To Consider Implied Certification Liability
At the tail end of the year, the Supreme Court granted certiorari in Universal Health Services v. United
States ex rel. Escobar to address whether the FCA permits implied certification liability and, if so, whether
such liability extends only to certifications concerning requirements that are express conditions of
payment. Given that many of the federal courts of appeals have accepted implied certification liability for
