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In Calculating FCA Damages, Another Court Rejects Government Windfalls Based on Purportedly “Tainted Claims”

Last month, the US District Court for the District of Columbia delivered another blow to the “tainted claims” theory of False Claims Act (FCA) damages frequently espoused by the government and qui tam relators. From the 1990s through 2004, the US Postal Service sponsored a professional cycling team led by Lance Armstrong, who won the Tour de France seven consecutive times during that span shortly after surviving metastatic cancer. It was later revealed that Armstrong and his teammates had used performance enhancing drugs (PEDs) during the relevant time period. Armstrong ultimately was stripped of his titles and banned from the sport permanently. After years of denials, Armstrong publicly admitted his PED use in a 2013 interview with Oprah Winfrey. In 2010, former Armstrong teammate Floyd Landis filed a qui tam FCA suit under seal against Armstrong, the team’s owner (Tailwind Sports Corporation) and others. United States ex rel. Landis v. Tailwind Sports...

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DOJ Nearly Doubles FCA Penalties; May Raise Constitutional Concerns

On June 29, 2016, the US Department of Justice (DOJ) issued an anticipated interim final rule that substantially increases penalties under the False Claims Act (FCA).  Under the interim final rule, minimum penalties per claim will dramatically spike from the current $5,500 to $10,781, and the maximum penalties per claim will jump from $11,000 to $21,563.  As we previously reported, the substantial increase in FCA penalties has been expected since the Railroad Retirement Board (RRB) issued a similar interim final rule in May 2016.  The massive increase in FCA penalties comes in response to the Bipartisan Budget Act of 2015, which requires agencies to adjust penalties for inflation over the past 30 years. The increased FCA penalties are set to go into effect on August 1, 2016 and will apply to claims after November 2, 2015.  As we have observed, the increased FCA penalties may raise constitutional concerns regarding defendants’ due process rights and under the...

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Fourth Circuit Upholds Judgment of Over $237 Million against Tuomey Healthcare System

On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit affirmed the U.S. District Court for the District of South Carolina’s judgment of $237,454,195 in damages and penalties against Tuomey Healthcare System in United States ex rel. Drakeford v. Tuomey Healthcare System, Inc. (No. 13-2219).  The judgment followed a rare False Claims Act (FCA) trial, after which the jury found Tuomey liable for submitting 21,730 false claims to Medicare.  While the Fourth Circuit’s Tuomey decision addressed many claims of error advanced by Tuomey on appeal, this post highlights the court’s response to Tuomey’s challenges based on the “advice of counsel” defense and on the computation and size of the judgment. Tuomey was alleged to have entered into part-time employment contracts with physicians that violated the Stark Law.  After one of the physicians expressed compliance concerns about the structure of the proposed arrangement, Tuomey sought Stark Law compliance...

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