FCA

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The United States District Court of the Eastern District of Pennsylvania recently issued a decision unsealing a False Claims Act case over the objections of the government, the relator and the defendant.[1] In United States ex. Rel. Brasher v. Pentec Health, Inc. No. 13-05745, 2018 WL 5003474 (E.D.P.A. Oct. 16, 2018), a case initially filed five years ago, the government filed a motion to continue the seal – which happened to be its eleventh such motion – arguing that additional time was necessary, in part, to finalize its decision whether to intervene in the action, as well as to pursue settlement options. The Court disagreed.
Continue Reading District Court Determines that the Eleventh Time is NOT the Charm

By memorandum dated June 7, 2018, Shay Assad, DoD’s Director, Defense Pricing/Defense Procurement and Acquisition Policy, has reversed decades of procurement practice that has been embraced by industry and the government alike in attempting to manage the often unmanageable process of providing the government with cost or pricing data that is current, accurate and complete as of the date of agreement on price. Recognizing that inherent “lag time” often makes it impossible for contractors to provide “up to the minute” data in real time at the point when the parties “shake hands,” contractors have customarily performed immediate post-handshake “sweeps” of their databases to provide the government with any data that may have escaped the pre-handshake dragnet. The government, in turn, has customarily accepted the data, evaluated its impact on the price, and negotiated, if and as appropriate, adjustments to the price. The net result was that the government had all the data, its impact on price was addressed, and the contractor avoided liability under the Truth in Negotiations Act and, possibly, under the False Claims Act. Everyone was happy.

Not anymore.
Continue Reading OSD Issues Policy Guidance Rejecting “Sweeps” Data

On January 25, 2018, Associate Attorney General Rachel Brand issued a memorandum (the “Brand Memo”) limiting the use of agency guidance documents in affirmative civil enforcement cases. The memorandum builds on Attorney General Jeff Sessions’ November 16, 2017 memorandum prohibiting DOJ from promulgating guidance documents that create rights or obligations that are binding on regulated parties. When DOJ issues a guidance document with voluntary standards, it must also contain a statement that noncompliance is not subject to future DOJ enforcement actions. The Brand Memo makes clear that this principle also applies to other agencies’ guidance documents. In other words, agency guidance, in and of itself, cannot create new binding legal requirements.
Continue Reading “Brand Memo” Prohibits US DOJ From Converting Agency Guidance Into Binding Legal Obligations In Civil Enforcement Actions

Note: This post was originally published in the October 2017 issue of the National Defense Industrial Association’s National Defense magazine.

Recent studies show that the percentage of overall research and development spending sponsored by the government has dropped sharply over the last 50 years.

Whereas government funding accounted for 67 percent of R&D in 1964, it accounted for 23 percent in 2015, a 44 percent reduction. For the government, this is not a salutary development. Increasingly, “state of the art” is being defined by the commercial marketplace, without government participation and often without its access to the resulting technological advances.
Continue Reading Industry Struggles With Ever Changing Acquisition Rules

2016 was a big year for the False Claims Act (FCA).  Total government recoveries were up; total new matters filed were up; and total new government-led FCA matters were up.  The Supreme Court issued multiple decisions relating to the FCA, including one—Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016)—which will have dramatic ramifications for litigation relating to the FCA’s materiality standard.  The Supreme Court also denied certiorari in an important FCA case—U.S. ex rel. Purcell v. MWI, Inc., 807 F.3d 281 (D.C. Cir. 2015), reh’g en banc denied, cert. denied, 580 U.S. ___ (2017)[1]—in which the D.C. Circuit held that when a defendant adopts an objectively reasonable or plausible interpretation of an ambiguous regulatory term and the agency has not warned the defendant away from its interpretation via authoritative guidance, the FCA’s scienter element cannot be established.  (Note: We previously covered the Purcell decision on our FCA blog.  You can view our article, here.)  Although some of these developments may seem concerning, there is plenty of silver lining here for government contractors.
Continue Reading What’s Past is Prologue: How The FCA’s Eventful Year in 2016 Will Affect Government Contractors

Effective August 1, 2016, the False Claims Act’s (FCA) civil penalty will double.  As it currently stands, the FCA’s civil penalty ranges from $5,500 to $11,000 per violation.  But as of August 1, the FCA’s civil penalty range will almost double to a minimum of $10,781 and a maximum of $21,563.

The increase is the result of an interim final rule issued yesterday by the Department of Justice.  81 Fed. Reg. 42491 (June 30, 2016).  Although the increase was expected, it still reflects a dramatic increase in risk to those doing business with the federal government.  Health care providers are uniquely at risk, because those entities are often sending thousands of claims to the federal government for reimbursement.  When thousands of claims are at issue, the civil penalty can easily add up.Continue Reading DOJ Rule Increases FCA Penalties to Over $20,000 Per Claim

We previously reported on the viability of the “implied certification” theory of FCA liability based on oral argument before the Supreme Court in Universal Health Services, Inc. v. U.S. ex rel. Escobar.  We concluded that the theory—under which a claim for payment can be false without an express certification, but because the government contractor has not complied with an applicable statute, regulation, or contractual provision—did not appear to be headed for extinction.  It turns out we were right.
Continue Reading FCA’s “Implied Certification” Theory Survives

Last week’s argument before the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar had the potential to put false claims based on an “implied certification” in the crosshairs. Instead, based on the weight of questioning by a plurality of justices, it appears that some form of implied certification theory may survive. (We previously reported on this case, here.)
Continue Reading Did the FCA’s “Implied Certification” Theory Dodge a Bullet?

On October 29, 2015, DOD renewed the DFARS deviation implemented in February, which prohibits contracting with entities that require employees or subcontractors to sign internal confidentiality agreements or statements that prohibit, or otherwise restrict, such employee or subcontractor from lawfully reporting waste, fraud, or abuse.  Defense contractors should review their policies to ensure they meet the requirements of these new clauses.
Continue Reading Contractors Beware: An Overly Broad Confidentiality Agreement Could Cost You!