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 Corp., et al., No. 1:10-cv-00976 (CRC) (U.S. Dist. Ct. D.D.C.). The government intervened against certain defendants, including Armstrong, shortly after the 2013 interview aired. The government and Landis seek to recover as damages the entire $32 million the Postal Service paid to Tailwind during the last four years of the sponsorship, trebled to nearly $100 million, on the grounds that the defendants sought payment while actively concealing Armstrong’s and his teammates’ PED use, which violated both the rules of the sport and the Postal Service’s sponsorship agreement—thereby violating the FCA.
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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 advice about the contracts from several attorneys – one of whom, Kevin McAnaney, indicated that the contracts raised “red flags” under the Stark Law.  McAnaney was jointly retained by Tuomey and the physician, Drakeford, after Tuomey received a legal opinion from its longstanding counsel that the contracts were Stark compliant.  Despite McAnaney’s advice, Tuomey elected to move forward with the contracts.  Drakeford subsequently filed an FCA qui tam lawsuit against Tuomey, and the extensive litigation ensued.
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