You Win Some, You Lose Some: Recent FCA Litigation Developments

Nicholas C. Harbist and Lauren E. O’Donnell

This article explores two recent developments in False Claims Act (“FCA”) litigation—one that should provide reassurance to potential FCA defendants, and one that may trouble them.

Government Dismissals of FCA Cases 

In January 2018, Michael Granston, the Department of Justice (“DOJ”) civil fraud chief, issued a memorandum on FCA case dismissals (the “Granston Memo”). As previously discussed in our April 2018 article, False Hope for False Claims Act Defendants? Government Dismissals of Qui Tam Cases May Increase, the Granston Memo provided guidance to DOJ lawyers about when they should dismiss FCA cases. Historically, such dismissals have been rare. In fact, a 2013 study by Stanford Law School professor David Freeman Engstrom concluded that since 1986, the government had uni­laterally dismissed only 30 of 4,000 unsealed whistleblower FCA complaints.

Since the Granston Memo was issued, the government has already advocated for the dismissal of three FCA cases. The first case is pending before the U.S. Supreme Court, Gilead Sciences Inc. v. U.S. ex rel. Jeffrey Campie et al., 17-936. At the end of November, the DOJ filed an amicus brief indicating that it will move to dismiss the case if it is sent back to the district court, as “continued prosecution of the suit is not in the public interest.” The DOJ explained that it is concerned about both parties making “burdensome” requests for Food and Drug Administration (“FDA”) documents and testimony if the case proceeds. According to the DOJ, such requests would distract from the FDA’s public health responsibilities. As the DOJ wrote, “The government has concluded that allowing this suit to proceed to discovery (and potentially a trial) would impinge on agency decisionmaking and discretion and would disserve the interests of the United States.”

The second action, Maldonado v. Ball Homes LLC, 17-CV-00379 (E.D. Ky.), involved Federal Housing Administration insurance. The DOJ called the whistleblower’s allegations weak, and a Kentucky federal judge agreed to dismiss the case accordingly. The third case was U.S. ex rel. Manchester v. Purdue Pharma LP et al, 16-CV-10947 (D. Mass.), a prescription opioid case filed against OxyContin maker Purdue Pharma LP and three drug distributors. The government moved to dismiss the Massachusetts suit because it found that the whistleblower’s allegations were not new and should be dismissed under the FCA’s public disclosure bar. The motion to dismiss is pending.

Given this recent government advocacy for dismissal, it appears that government attorneys are heeding the guidance in the Granston Memo. Thus, defense counsel should continually refer to this DOJ guidance to frame motion ­practice, government presentations, and discovery in an effort to persuade the DOJ to consider dismissal.

Data Mining Relators 

In August, federal courts unsealed two False Claims Act complaints filed by a company that analyzed public data to find potential fraud allegations. Unlike a typical whistleblower action, the company that filed these cases did not have direct knowledge of wrongdoing. After the company used algorithms and statistical processes to analyze Medicare claims data, it alleged that the defendants used certain procedure codes to improperly inflate reimbursement. The company then filed federal whistleblower lawsuits, claiming fraudulent upcoding of more than $61 million in one case, U.S. ex rel. Integra Med Analytics LLC v. Baylor Scott & White Health et al., 17-CV-0886 (W.D. Tex.), and $188 million in the other, U.S. ex rel. Integra Med Analytics LLC v. Providence Health Services et al., 17-CV-01694 (C.D. Cal.).

Healthcare providers may be troubled by the seemingly new trend of data mining relators—relators who have no actual connection to the providers, but whose analyses of providers’ claims data form the basis of a FCA suit. Providers should push courts to conclude that Centers for Medicare & Medicaid Services data files are information published online by the ­government and thus insufficient to provide a basis for a FCA suit under the public disclosure bar. Providers also should question whether FCA complaints based upon data mining, rather than knowledge of wrongdoing, satisfy the requirements under Federal Rule 9(b) that allegations of fraud be plead with ­particularity.