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!

On August 11, 2015, the U.S. Court of Appeals for the D.C. Circuit issued a writ of mandamus supporting the robust applicability of the attorney-client privilege and attorney work product doctrines in the context of False Claims Act (“FCA”) investigations conducted under the direction of corporate and outside counsel. This marks a continuation of its repudiation of a 2014 lower-court decision that significantly eroded these privileges. Interpreting the scope of the privileges in the context of internal investigations of potential FCA violations is especially tricky because of the unique roles played by the parties (the Government as a potential plaintiff, the relator as a bounty hunter, and the corporation-as-defendant). This latest ruling from the D.C. Circuit, in a case arising out of wartime contracts in Iraq run by Kellogg, Brown & Root, Inc. (“KBR”)(formerly part of Halliburton), is a breath of fresh air for companies doing business with the Federal Government. The ruling from the Court of Appeals also sends a signal to the trial court that an overly narrow view of the attorney-client privilege and attorney work product doctrine creates unacceptable uncertainty that will ultimately be rejected on appeal.
Continue Reading Whew! That Was Close – D.C. Circuit Reaffirms Application of Attorney-Client Privilege and Attorney Work Product Doctrine in Internal Investigations

On June 8, 2015, the U.S. Court of Appeals for the Seventh Circuit rejected the doctrine of implied false certification in a False Claims Act (“FCA”) lawsuit, U.S. ex rel. Nelson v. Sanford-Brown Ltd.  No. 14-2506, 2015 WL 3541422.  In a welcome decision for government contractors, the Court held that the FCA is “not the proper mechanism” for Government enforcement of regulations.  Instead, regulatory violations should be handled by the appropriate Government agency–not the courts.
Continue Reading Seventh Circuit Rejects FCA Implied False Certification Theory

In an opinion released May 26, 2015, Kellogg Brown & Roots Services, Inc. v. United States ex rel. Carter, the U.S. Supreme Court unanimously held that whistleblowers cannot extend the statute of limitations for war-related civil false claims under the Wartime Suspension of Limitations Act (“WSLA”), reinstating an already generous statute of limitations period under the civil False Claims Act (“FCA”).  The Court also settled a split between the U.S. Courts of Appeals for the D.C. Circuit and the Fourth Circuit.  For purposes of the FCA’s “first-to-file” bar, the FCA only limits a lawsuit based on the same underlying facts as another case that is actually open and pending when the later lawsuit is filed.  In reaching these holdings, the Court relied heavily on the plain meaning of the statutory language, simultaneously handing a victory to both Defendants (on the statute of limitations issue) and Plaintiffs (on the first-to-file issue).  But, the holding relating to the WSLA may prove to be the greatest legacy from the KBR decision, reigning in aggressive whistleblowers and government lawyers who would try to allege a case of “fraud” decades after the conduct occurred, and long after a Defendant is able to defend itself effectively.
Continue Reading SCOTUS: No Unlimited Suspension of the Statute of Limitations Under the False Claims Act; “First-to-File” Doctrine Does Not Bar Related Suits in Perpetuity

The federal crop insurance program is an often overlooked area of potential liability under the False Claims Act (“FCA”).  The program, which is governed by a substantial body of regulatory law, is subject to intense oversight by the U.S. Department of Justice.  So much so that the U.S. Department of Agriculture’s Risk Management Agency maintains and keeps public a long list of DOJ prosecutions for fraud and violations of the False Claims Act.  See DOJ Prosecutions.  These prosecutions include criminal charges brought against North Carolina tobacco farmers, Texas peanut growers, and California fruit and vegetable producers for fraudulently filing claims against the USDA crop insurance program.
Continue Reading When it Comes to Crop Insurance, the FCA Bears Fruit

On February 12, 2015, the Department of Justice (“DOJ”) announced that three U.S.-based importers had agreed to pay more than $3 million to resolve a lawsuit brought by the United States under the False Claims Act (“FCA”).  The Government alleged that the importers had made false declarations to U.S. Customs and Border Protection (“CBP”) and conspired with other domestic companies to make false declarations to CBP in order to avoid paying “antidumping” and “countervailing” duties.  No Government contracts were involved.  These were “reverse” FCA claims based upon underpayment of duties for private sector import transactions.
Continue Reading Add Importers to Those Facing Expanding Whistleblower Claims Under the False Claims Act

The Federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., has unique procedural aspects that come into play when a private whistleblower (the “relator”) seeks to sue on behalf of the Government.  One of these, the so-called “first-to-file” bar, applies when two “related” whistleblower actions are filed:  “When a person brings an [FCA action], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”  31 U.S.C. § 3730(b)(5).  The circuits are split as to whether the bar applies only while the first-filed action is “pending,” or applies even if the first-filed action has been dismissed.  For example, the Fourth Circuit held “that once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.”  U.S. ex rel. Carter v. Kellogg Brown & Root Servs., Inc., 710 F.3d 171, 181, 183 (4th Cir. 2013), cert. granted, 134 S. Ct. 2899, 189 L. Ed. 2d 853 (2014).  On the other hand, the D.C. Circuit expressly disagreed with Carter, rejecting the concept that the first-to-file bar is a “temporal limit” to related suits, and concluding that related actions are barred “regardless of the posture of the first-filed action.”  U.S. ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343-44 (D.C. Cir. 2014), reh’g denied en banc (July 16, 2014).   In finding that the statutory reference to “pending action” means the first-filed action, the D.C. Circuit noted that its interpretation “better suits” the policy of the bar—to prohibit subsequent private actions once the Government is on notice of the fraud.  The Supreme Court’s July 1, 2014 grant of certiorari to review the Fourth Circuit’s decision in Carter should resolve the circuit split.
Continue Reading You Again?: Application of the First-to-File Bar Where Subsequent Actions Are Brought By the Same Relator