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Alison Nadel has successfully represented clients in arbitrations, class actions and other complex litigation. Her broad experience includes intellectual property cases involving allegations of patent infringement, trademark and copyright infringement, and unfair competition, as well as complex commercial contract disputes, business tort matters, public accommodation disputes involving the Americans with Disabilities Act, state accessibility laws and related tort claims, administrative law cases, and defense of qui tam litigation involving state and federal False Claims Acts. Read Alison Nadel's full bio.

The U.S. Department of Justice (DOJ) continues to tout its total annual recoveries in False Claims Act cases, as it does each year after the federal government’s fiscal year closes in September.  In its December 3, 2015, press release, DOJ disclosed that it obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the 2015 fiscal year.  DOJ boasts that this is the fourth consecutive year that these kinds of recoveries have exceeded $3.5 billion, raising the total recoveries from January 2009 through the end of the fiscal year to a whopping $26.4 billion.

Cases involving the health care industry represented the largest chunk of recoveries in 2015, totaling $1.9 billion from companies and individuals.  This figure only includes monies paid to the federal government, not to state Medicaid programs or individuals.  Thus, the total sum paid out by the health care industry for False Claims Act cases is actually higher.  Since January 2009, federal recoveries from the health care industry have totaled nearly $16.5 billion.  DOJ attributes these large sums to the high priority that the Obama Administration places on fighting health care fraud and the efforts of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), which was created in 2009.

Other categories specifically mentioned in DOJ’s latest press release are government contracts, from which DOJ recovered $1.1 billion, and housing and mortgage, from which DOJ recovered $365 million.

Of the $3.5 billion recovered in 2015, DOJ reports that the vast majority—$2.8 billion—is related to lawsuits filed under the qui tam provisions of the False Claims Act, which permit whistleblowers to file lawsuits alleging false claims on behalf of the government and to recover between 15 and 30 percent of any recoveries.  Whistleblowers filed a total of 638 lawsuits in 2015, which is the lowest number of qui tam suits filed since 2011.

Although this year’s overall recovery from False Claims Act cases in 2015 is less than each of the three preceding years—and far less than the $5.69 billion reported at the end of the 2014 fiscal year—it is still a sizeable sum.  And, it reveals DOJ’s continued efforts and emphasis on False Claims Act cases.

For further information, see DOJ’s press releases for the last several years:

2015

2014

2013

2012

2011

In a previous post, we discussed the petition for certiorari in Gonzalez v. Planned Parenthood of Los Angeles (S. Ct. No. 14-4080), a False Claims Act (FCA) case in which the relator alleged that Planned Parenthood knowingly overcharged the government for contraceptives it provided to low-income individuals in California.

In Gonzalez, the Ninth Circuit held that the district court properly dismissed the relator’s claims because documents attached to the complaint showed that the government knew about Planned Parenthood’s allegedly improper billing practices; thus, the relator could not demonstrate the requisite scienter under the FCA. The relator argued that the issue of government knowledge was worthy of Supreme Court consideration due to a split between the Ninth Circuit and other circuits on this issue.

We opined that Relator’s cert petition did not raise an issue worthy of consideration by the Supreme Court. Consistent with our expectation, the Supreme Court denied the cert petition on May 18, 2015.

The U.S. Supreme Court will decide within the next few weeks whether to hear a False Claims Act (FCA) case that has garnered media attention because it involves alleged wrongdoing by Planned Parenthood.  In Gonzalez v. Planned Parenthood of Los Angeles (No. CV 05-8818, C.D. Cal.), the relator alleged that Planned Parenthood knowingly overcharged the government for contraceptives it provided to low income individuals in California.

The issue in the case turns on the role of government knowledge as a defense to scienter, i.e., the notion that when the government knows about or approves of the billing practices at issue, the defendant does not knowingly or recklessly submit a false claim.  In Gonzalez, the Ninth Circuit held that the district court properly dismissed the relator’s claims because documents attached to the complaint showed that the government knew about Planned Parenthood’s allegedly improper billing practices.  These documents included correspondence between Planned Parenthood and the California Department of Health Services, in which Planned Parenthood candidly disclosed its billing practices (to which it received no response or contradiction), as well as a letter from the Department to Planned Parenthood explaining that it would not seek a refund from Planned Parenthood because the key term at issue was not defined, and because the Department was concerned that “conflicting, unclear, or ambiguous representations have been made to providers” with regard to the billing practices at issue.  Accordingly, Planned Parenthood lacked the requisite scienter to establish a “knowing” submission of a false claim.

In seeking certiorari, the relator argued that there is a split between the Ninth Circuit and other circuits on the issue of government knowledge. While the relator did not dispute that a number of circuits held that government knowledge can refute allegations of knowledge or recklessness, the relator argued that the Ninth Circuit deviated from the approach taken by all other circuits by dismissing a case based on government knowledge at the pleadings stage, rather than at summary judgment.

On this issue, Planned Parenthood has the better argument.  As Planned Parenthood noted in its opposition, numerous cases in numerous circuits have found that government knowledge is relevant to scienter under the FCA.  The Ninth Circuit’s decision merely follows a long line of cases standing for this principle.  While it is true that the Ninth Circuit dismissed the case at the pleadings stage, it did so because the complaint (including evidence contained in documents the relator attached to the complaint) permitted such a dismissal.  The Court found that this evidence “fatally undercut” the relator’s allegation that Planned Parenthood “knowingly” submitted false claims.  Accordingly, the relator did not state a “plausible” claim under Federal Rule of Civil Procedure 8(a).

Such compelling evidence is not often available at the pleading stage, so it is unsurprising that in many cases the government knowledge issue is not in play until later stages of the litigation.  Yet the availability of such evidence here—provided by relator himself in connection with his complaint—was sufficient to warrant dismissal.

In sum, while the government knowledge issue arose at a procedurally early point in Gonzalez, it is not an issue worthy of the Supreme Court’s attention.  It is well-established that government knowledge can undermine an FCA claim.  Whether it does so, turns on the specific facts of each case.  In Gonzalez, those facts were set forth in documents that the relator himself attached to his complaint.

We will continue to monitor this case and will provide a further update if the Supreme Court grants cert.