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Sixth Circuit Hits Federal Government with $450,000+ in Legal Fees to be Paid to FCA Defendant Under the Equal Access to Justice Act

In an unusual ruling on August 18, 2017, the US Court of Appeals for the Sixth Circuit reversed the Middle District of Tennessee’s denial of the defendant’s motion for attorneys’ fees, and remanded the case for an award of legal fees and expenses related to defending against the government’s “excessive” damages demand, as well as fees incurred during the appeal and remand process.  The case is United States ex rel. Wall v. Circle C Construction, LLC, and as we have previously reported, last year the government suffered a major loss when the Sixth Circuit dramatically reduced the damage award in this False Claims Act (FCA) litigation by over 95 percent (from $762,894.54 to $14,748), which resulted in damages of less than 1 percent of the $1.66 million originally claimed by the government.  At the time, the Sixth Circuit called the government’s so-called “tainted goods” damage calculation “fairyland rather than actual.” Following the Sixth Circuit’s ruling...

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A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into...

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Insuring Against Yates: The Impact on D&O Insurance

The Yates Memo has many landscape-changing implications for corporate investigations, including the need for enhanced Upjohn warnings and the potential suppression of joint-defense agreements between corporations and their constituents (officers, directors, employees, shareholders). This new terrain exists because in order to receive cooperation credit from the government, companies must investigate and disclose all facts about corporate wrongdoers. With the spotlight shining on corporate actors from the outset, there will be an inevitable increase in individuals seeking to have independent counsel represent them early in the investigatory process. Defense costs will surely escalate under the new Yates directive. This has several important implications for D&O liability insurance coverage. Read more here.

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When an FCA Case Just Won’t Go Away: Attorneys’ Fees Remain Contested Even After Settlement

When settling a False Claims Act (FCA) case, the issue of a relator’s attorneys’ fees seems small compared to the monetary settlement and the breadth of the release. Two recent cases, however, demonstrate that fees can prove a sticking point in wrapping up an FCA case even after settlement. In U.S. ex. rel. Simring v. Rutgers, the U.S. Court of Appeals for the Third Circuit remanded a fee award entered after a settlement, finding that the lower court provided insufficient detail to review the reasonableness of deductions to a fee application. In U.S. ex. rel. Doghramji v. Community Health Systems Inc., the U.S. District Court for the Middle District of Tennessee evaluated whether a settlement agreement carve-out permitting objections to the relators’ attorneys’ fees permitted defendants to argue that the fees were barred by either the FCA’s “first to file” or “public disclosure” bar. The court decided that the carve-out did not protect such objections. The...

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Eastern District of Texas Awards Relator $218 Million Despite Fifth Circuit Caution That Claims Not Likely Material or Based on False Certifications

The Eastern District of Texas confirmed a jury verdict holding highway-guardrail manufacturer Trinity Industries liable for False Claims Act violations on June 9, 2015, resulting in a judgment of over $680 million against the company.  Out of the $663 million in damages and penalties, the court awarded the relator a 30 percent share of the recovery, citing the government’s decision not to intervene in the case, and awarded almost $19 million in attorneys’ fees and expenses.  All told, the relator was awarded over $218 million.  The case is likely to be appealed based on Trinity’s arguments that the claims were not legally false because of retroactive government approval of the guardrails in question.  The district court’s opinion is notable both due to the interesting appellate issues it presents, and the large recovery awarded to the relator. The federal government, through the Federal Highway Administration (FHWA), reimburses state transportation...

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Illinois Appellate Court Affirms Dismissal of State Tax Qui Tam Lawsuit

On March 31, 2015, the Illinois Appellate Court issued an opinion affirming the dismissal of a qui tam lawsuit filed by a law firm acting as a whistleblower on behalf of the State of Illinois against QVC, Inc., under the Illinois False Claims Act.  The opinion affirmed an important precedent previously set by the court regarding the standard for dismissal of such claims when the State moves for dismissal, and established favorable precedent for retailers by holding that use tax voluntarily paid after the filing of a qui tam action does not qualify as “proceeds” of the action within the meaning of the Illinois False Claims Act. Read the full article.

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Defense Attorneys’ Billing Records Irrelevant in Determining Relator’s Attorneys’ Fees

On March 20, 2015, the Eastern District of California ruled in United States ex rel. Doe v. Biotronik, Inc., that defendant Biotronik Inc.’s attorneys did not have to turn over their billing records to the relator and his counsel, who sought those records claiming they were relevant to prove the reasonableness of their own fees.  No. 2:09-cv-3617-KJM-EFB, 2015 WL 1291371 (E.D. Cal. Mar. 20, 2015).  The False Claims Act (FCA) entitles successful relators to “receive an amount for reasonable expenses . . . plus reasonable attorneys’ fees and costs.” 31 U.S.C. § 3730(d). The complaint in Biotronik alleged violations of the FCA based on kickbacks and off-label uses and billing.  The United States intervened and effected a settlement.  The parties agreed that the relator was entitled to fees and costs — at issue was whether discovery of defense attorneys’ fees and billing records was relevant to determining the reasonableness of relator’s attorneys’ fees. The...

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