Under 31 U.S.C. § 3730(d), whistleblowers who bring qui tam suits under the False Claims Act are entitled to a share of any recovery. The statute sets the range of the whistleblower’s potential share but leaves it to the whistleblower and government to negotiate the exact split, or if they can not (which isn’t often), to the district court to determine. Although the relator’s share of the recovery is not a frequently litigated issue, on occasion, the government and the relator disagree about the appropriate share.
In U.S. ex rel Fowler v. Evercare Hospice, Inc., after the government intervened and the defendant (now known as Optum) agreed to an $18 million settlement, the relators and the government disagreed how that money should be split, with the relators seeking a 23 percent share and the government arguing for an 18 percent figure. (In intervened cases, the statute sets the relator’s share between 15 and 25% of the recovery.)
The Colorado district court determined earlier this year that it had ample discretion in selecting the final share amount, guided by a few key principles. Although the court cited to the DOJ’s internal policy memorandum about such issues, the court ultimately applied the three factors identified in the FCA’s legislative history: “the significance of the information provided by the relator, the relator’s contribution to the final outcome, and whether the government was previously aware of the fraud.”
After walking through the evidence on these factors, as well as a few of the more salient considerations from the DOJ’s internal policy, the court ultimately split the difference in the government’s favor, awarding the relators a 20 percent share of the recovery. Twenty percent also happens to be the midpoint of the allowable range, which may be one of the reasons the court settled on this figure in a close case.
(In case you don’t want to do the math, the ruling resulted in the relators receiving $3.6 million and the government getting about $14.4.)
Days 2 and 3 were devoted to the mock trial. The fact pattern for the mock trial involved six bellwether cases of elder abuse at a skilled nursing facility (SNF). The pretend relator was the former director of nursing at the facility. The government intervened in the mock case. The case centered around the claim that the SNFs provided “worthless services” to the six patients.
The opening session was an excellent presentation by Kerri Ruttenberg about trial graphics. Kerri provided terrific guidance about creating, polishing, and perfecting trial graphics and presentation slides.
The remainder of Day 2 involved voir dire, opening statements, and the examination of witnesses for the mock trial. The mock opening statements and examinations provided some good models and teaching moments.
Day 3 began with closing arguments and then proceeded to jury instructions. The mock case was designed to have “good” facts for the relator and government, including some egregious examples of extremely poor medical care by the hypothetical nursing home. However, since the legal standard for “worthless service” claims is a very high bar–the care must be “so deficient that for all practical purposes it is the equivalent of no performance at all”–the case set up a classic trial dispute.
Then we got to watch the jury deliberate. The mock jury, while swayed by the heart-breaking examples of extremely poor patient care, struggled to apply the legal standard. Some jurors were willing to apply a pragmatic approach to the question of whether the services were worthless–looking at the care holistically and finding the care to be worthless. Other mock jurors, apparently persuaded by the defendant’s closing argument, looked at the care as a collection of specific acts and had difficulty finding the care was worthless since not every act of care was deficient. The jurors also struggled to evaluate the difference between merely negligent care and care that was worthless.
Watching the “sausage making” of jury deliberations is always an invaluable experience for trial lawyers, and the ABA’s False Claims Act trial institute provided a fascinating opportunity to watch the process in a trial under the False Claims Act.
The ABA’s 2017 False Claims Act Trial Institute kicked off yesterday at the Washington School of Law at American University. Of course, the first panel of the Institute examined the effect of U.S. Supreme Court’s 2016 decision in Universal Health Services v. U.S. ex rel Escobar on False Claims Act jurisprudence. The panel discussed a number of the issues that have arisen since Escobar.
- Is Intervention Relevant to Materiality? The panel discussed the recent circuit court decisions in United States v. Triple Canopy, Inc., in which the court noted that the government’s decision to intervene was evidence of materiality, and United States ex rel. Petratos v. Genentech Inc., in which the court found the government’s decision not to intervene suggested a lack of materiality.
- How Much Should the Government’s Payment of Claims Matter to the Materiality Determination? On a related issue, the panel discussed Escobar‘s discussion of the government’s payment of claims despite knowledge of potential violations. The panel recognized that there are many factors that may cause the government to continue making payments despite knowing about possible legal violations, particularly where practical issues preclude the government from simply stopping payments. The panel seemed to agree that the specific facts of the case will determine whether the government’s continued payments are pertinent to the materiality analysis and that continued payment is not dispositive.
- Discovery on Materiality Issues? The panel also discussed discovery issues relating to the materiality factors set forth in Escobar. In particular, Escobar‘s recognition that the government’s response to similar violations in the “mine run” of cases is relevant to materiality suggests that some discovery into the government’s actions in similar cases should be allowed.
The second panel discussed the working relationship between relators, relators’ counsel, and government counsel to develop and prosecute cases. Conversely, the third panel addressed False Claims Act case development from the defendant’s perspective.
In a recent decision in U.S. ex rel Feaster v. Dopps Chiropractic Clinic, LLC, the District of Kansas addressed plaintiff’s motion to strike a number of boilerplate affirmative defenses. Feaster involves both qui tam and retaliation claims under False Claims Act, as well as other employment claims.
Obviously, False Claims Act litigation is not immune from defendants’ typical abundance-of-caution practice of asserting the standard list of everything-and-the-kitchen-sink affirmative defenses, regardless of their specific applicability to the case. In this case, the relator/plaintiff filed a motion to strike a number of these defenses.
The court granted the motion as to some of the defenses and denied it as to others. For example, the court struck two defenses asserting that the complaint failed to assert valid claims because the court had already ruled upon and denied motions to dismiss on the same grounds.
The court also struck the defense asserting the relator lacked standing to bring the qui tam claims, noting that the US Supreme Court and Tenth Circuit have rejected that argument.
On the defenses to the retaliation claim, the court required the defendant to plead its statute of limitations defense with supporting facts. However, the court denied the motion with respect to several other defenses, including mitigation of damages.
This decision in Feaster builds on a long line of precedent that teaches the importance of carefully evaluating the affirmative defenses asserted in False Claims Act litigation. Although defendants must assert all possible defenses, relators and plaintiffs should carefully evaluate the applicability of such defenses and bring an appropriate motion to strike those that are inapposite.