The U.S. District Court for the Eastern District of Pennsylvania recently refused to extend the period during which a False Claims Act (FCA) action remains under seal while the government investigates and decides whether to intervene. In U.S. ex rel. Brasher v. Pentec Health, Inc., which involved claims of illegal kickbacks constituting FCA violations, the court denied the government’s eleventh extension request and subsequent request for reconsideration even after both the relator and the defendant joined that request. The case had been under seal for more than five years.

Settlement Discussions Were Not Good Cause to Extend the Seal Period

The court held that the matter would not remain sealed to allow the government and defendant time to reach a settlement. It noted that “the purpose of the sealing provision is not to allow the Government to prosecute a civil action entirely under seal and then to present a settlement as a fait accompli to the Court and the general public.”

Continue Reading “Significant Abuses of the Statutory Scheme:” District Court Criticizes Practice of Regular Extensions of the FCA Seal Period

The U.S. Court of Appeals for the Fifth Circuit vacated a $663 million judgment, concluding that the Supreme Court’s opinion in Escobar doomed the plaintiff’s FCA claims on the issue of materiality.

FCA Allegations: Highway Guardrail Systems Had Unapproved Design Modifications

Trinity Industries, a manufacturer of highway guardrail systems, faced FCA allegations brought by a former competitor based on the theory that federally subsidized purchases of Trinity’s guardrail systems resulted in false claims as a result of unapproved design modifications. Prior to the filing of the relator’s qui tam lawsuit, the relator met extensively with Federal Highway Administration (FHWA) officials during which he presented his allegations regarding the design modifications and his assertions that those modifications rendered Trinity’s guardrail systems ineligible for federal reimbursement. FHWA met separately with Trinity to discuss the relator’s allegations. Following those meetings, FHWA confirmed that state purchases of the Trinity guardrail system were eligible for federal reimbursement notwithstanding the design modifications.

Continue Reading Fifth Circuit Relies on Escobar in Vacating $663 Million FCA Judgment

Last week, the U.S. Supreme Court granted the petition for writ of certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Rigsby and will consider what standard should determine when a relator’s complaint should be dismissed for violating the FCA’s seal requirement.  In Rigsby, former claims adjusters who worked with State Farm after Hurricane Katrina filed suit against the company under § 3730(b), alleging that State Farm misclassified wind damage as flood damage to shift the costs of paying those claims to the federal government.  After a jury found that State Farm falsely claimed that damages to a home in Mississippi were caused by flooding, the district court ordered State Farm to pay $758,000 in damages and awarded the relators $227,000.  State Farm appealed the verdict, citing the district court’s failure to dismiss the lawsuit despite the district court’s finding that the relators’ attorneys breached the FCA’s seal requirement by disclosing the existence of the case to the media.

Continue Reading U.S. Supreme Court to Resolve Circuit Split on FCA Seal Breaches

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine the FCA’s public disclosure bar and recent cases considering whether disclosures are sufficient to bar FCA claims.

The FCA’s public disclosure bar prevents a relator from filing a qui tam complaint based on information previously disclosed to the public, thereby dissuading parasitic lawsuits based on publicly available information. In cases considering the scope of the public disclosure bar, courts have continued to examine the issue of how or to whom information must be disseminated in order to constitute a “public disclosure,” which often has resulted in a narrowing of the public disclosure bar’s scope in a given case. Such cases marked a shift away from decisions favorable to FCA defendants toward a more nuanced and specific application of the public disclosure bar.

Continue Reading FCA Deeper Dive: When Public Disclosures Bar FCA Claims