In recent weeks, there has been an uptick in news of cyber-related False Claims Act (“FCA”) activity. For example, on September 1, 2023, the court unsealed a qui tam lawsuit against Penn State University relating to allegations of non-compliance with Department of Defense (“DoD”) cybersecurity obligations. Separately, on September 5, 2023, the Department of Justice (“DOJ”) announced a multi-million dollar FCA settlement with Verizon under its Civil-Cyber Fraud Initiative (which focuses on leveraging the FCA to pursue cybersecurity related fraud by government contractors and grant recipients, as we previously discussed here). These and other cases suggest—as many had been speculating—that the number of enforcement actions and publicity associated with previously-sealed qui tam cases will continue to increase. They also signal that contractors and universities should brace for additional scrutiny and potential whistleblower claims in this area.
Companies regularly are required to interpret ambiguous and vague regulatory provisions. Today, the United States Supreme Court heard oral arguments in a pair of consolidated cases to determine whether a defendant’s subjective interpretation of an ambiguous regulation is relevant to determining the knowledge (or scienter) element of the False Claims Act or, as the Seventh Circuit held in the case below, that once a defendant can articulate an objectively reasonable interpretation its contemporaneously held subjective belief is irrelevant to the knowledge inquiry. The issue is a significant one for both the government and relators on one side, and potential defendants on the other, as False Claims Act (FCA) liability imposes treble damages and penalties exceeding $20,000 per claim as well as relators’ attorneys’ fees and costs.…
On June 21, 2022 the Supreme Court granted certiorari in Polansky v. Exec. Health Res., 17 F.4th 376 (3d Cir. 2021), allowing the Court to review the Department of Justice’s (“DOJ”) authority to dismiss qui tam suits brought under the False Claims Act (“FCA”), over objections by the relators. The case invites the high Court to decide two key issues: (1) whether the DOJ has the authority to dismiss qui tam suits where it declined to intervene, and (2) what standard of review applies to such requests for dismissal. …
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. 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
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
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
In early December 2014, the United States Court of Appeals for the First Circuit reaffirmed that circuit’s broad interpretation of the False Claims Act’s “first-to-file” bar, 31 U.S.C. § 3730(b)(5), in United States ex rel. Ven-a-Care of the Fla. Keys v. Baxter Healthcare Corp., 772 F.3d 932 (1st Cir. 2014). The first-to-file bar, as we have discussed in previous posts, prohibits a second relator from going forward with a False Claims Act (“FCA”) case that is similar to an earlier relator’s case.…
Continue Reading First Circuit Reaffirms FCA’s “First-to-File” Bar as a Broad Jurisdictional Limit
This blog post is a preview of a presentation Mr. Turetzky will be giving at the American Bar Association Public Contracts Law Section’s Fall Meeting in Miami, Florida on November 1, 2014.
The False Claims Act, 31 U.S.C. §§ 3729-3733, enables whistleblowers—also known as qui tam relators— to file fraud suits on behalf of the United States against private government contractors. With the assistance of qui tam relators, the United States government has recovered billions of dollars in False Claims Act settlements and judgments. Allowing private persons to litigate on the government’s behalf, however, often encourages parasitic, unmeritorious lawsuits. For this reason, Congress has limited the power of qui tam litigants in a number of ways.…