Advocates for Justice

Last week, the United States Department of Health and Human Services, Office of Inspector General (“OIG”) posted an Advisory Opinion addressing several issues of importance in the medical laboratory industry. OIG Advisory Opinions provide useful guidance to industry participants and potential whistleblowers in understanding what categories of conduct cross the line from legitimate business practices to fraud and abuse.  

The False Claims Act can be a powerful tool against for-profit educational institutions that exploit students, and bilk taxpayers. Under the Higher Education Act of 1965 (“HEA”), Congress established various student loan and grant programs, including the Federal Pell Grant Program (“Pell”), the Federal Family Education Loan Program (“FFELP”), and the Federal Direct Loan Program (“FDLP”) in order to financially assist eligible students in obtaining a post-secondary education. These loan and grant programs are only supposed to be offered to students who attend educational institutions that meet strict federal and state requirements. Unfortunately, many for-profit institutions fail to meet those requirements, and conceal that fact to continue receiving federal student loan proceeds. Many schools rely almost entirely on federal student aid to keep their programs running, and are willing to do and say anything, no matter how fraudulent, to keep those funds flowing.

The Center for Investigative Reporting this weekend aired a story detailing CPM’s counterfeit screws litigation on hundreds of public radio stations around the country.  You can listen here.  The story covers a Southern California medical equipment supplier’s scheme to use private plane rides, international vacations and cash-stuffed envelopes to recruit doctors to use his company to buy spinal surgery screws – many of which were apparently counterfeit.

Defendants in federal False Claims Act (“FCA”) cases often attempt to get cases dismissed by alleging that the whistleblower’s claims are based on information that was “publicly disclosed.” This type of defense is commonly referred to as a “public disclosure bar” defense. 

When a company charges the government for goods or services that were provided in a manner that violates laws, regulations, rules, or contractual provisions, those charges may violate the False Claims Act. This type of violation is often characterized as a “false certification” violation. As described by a California Court of Appeals, under the California False Claims Act, “a vendor impliedly certifies compliance with its express contractual requirements when it bills a public agency for providing goods or services.” San Francisco Unified School Dist. ex rel. Contreras v. Laidlaw Transit, Inc. (2010) 182 Cal.App.4th 438, 442. In Laidlaw, for example, the defendant—a school bus company—was found to have violated the California False Claims Act because it failed to comply with maintenance standards and pollution controls that were required in its contract with the government.

Op-Ed Columnist Nicholas Kristof wrote an important piece in today’s New York Times about the correlation between increasing economic inequality and the decline in union membership.  In addition to the article’s substance, what was noteworthy was Mr. Kristof’s mea culpa for previously “disdain[ing]” unions for their perceived corruption and nepotism.  See http://www.nytimes.com/2015/02/19/opinion/nicholas-kristof-the-cost-of-a-decline-in-unions.html?ref=opinion.  He admitted that he was wrong.

On December 23, 2014, Judge Troy L. Nunley of the Eastern District of California ruled in plaintiffs’ favor, denying defendants’ motion to dismiss. See United States ex. rel. Dalitz v. AmSurg Corporation, No. 2:12-cv-02218-TLN-CKD, 2014 U.S. Dist. LEXIS 177374 (E.D. Cal. 2014). This effectively allowed plaintiffs’ False Claims Act (FCA) case to continue.  

Last summer, Governor Jerry Brown signed AB-2053, which requires California employers with 50 or more employees to provide workforce bullying training in addition to the required sexual harassment training.  This training is now mandated for employers beginning January 1, 2015.  

Earlier this month, the federal Fourth Circuit Court of Appeals issued a landmark decision broadening liability for False Claims Act violations. The decision, United States ex rel. Badr v. Triple Canopy, Inc., No. 13-2190, -- F.3d -- (4th Cir. 2015), is particularly important, given that the Fourth Circuit covers areas surrounding Washington D.C. that are replete with government contractors.

This past week, the United States Supreme Court made District Courts’ decisions relevant again as they relate to the field of patent cases.  The law that had developed out of the Federal Circuit related to Markman heairngs (hearings regarding claim construction/scope of the patent) held that the standard of review on Markman hearings was de novo.  This was the law, even if the basis of the District Court’s ruling was founded on evidence presented by witnesses.  Under the Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. decision, where the claim construction was based on evidentiary underpinnings, those factual disputes are now to be reviewed under a “clear error” standard.