False Claims Act

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On Monday, Judge McMahon denied a series of outstanding post-trial motions in the long-running Omnicare litigation, in which the Government alleged under the False Claims Act (FCA) that Omnicare filed over 11.5 million false claims with government programs for prescription medication dispensed without a proper prescription. In April, the jury found for the Government, awarding…

In an opinion Monday, Judge McMahon imposed over $900 million in damages and statutory penalties under the False Claims Act on long-term care pharmacy services provider Omnicare after a jury verdict finding that Omnicare submitted claims to the government for medications that lacked valid prescriptions.

The actual damages to the government were approximately $136 million, but that amount was then statutorily trebled and coupled with statutory penalties. Omnicare argued that the Constitution limited the government to a one-to-one ratio of actual damages to penalties. It relied on State Farm Mut. Automobile Co. v. Campbell, 538 U.S. 408 (2003), which found a jury award of $145 million in punitive damages on top of $1 million in actual damages violated due process and which suggested that in some cases a one-to-one ratio might be the maximum allowable.

But Judge McMahon disagreed, finding that the case was governed by the Constitution’s “excessive fines” clause, not the due process clause implicated in State Farm:Continue Reading Judge McMahon Concludes That $900 Million In False Claims Act Damages and Penalties Is Not Constitutionally Excessive Because Amount Was “Serious” But Not “Surreal”

In an opinion last week, Judge Pauley dismissed a second amended False Claims complaint brought by a former Moody’s managing director who claimed that Moody’s false ratings caused various government overpayments  (our coverage of the dismissal of the original complaint is here).

The opinion notes that, as a consequence of the dismissal, the plaintiff was not eligible to share in an $864 million settlement between Moody’s and the government for violations of FIRREA and parallel state laws, even though the plaintiff was apparently helpful to the government:
Continue Reading Judge Pauley: Moody’s Whistleblower Whose False Claim Act Case Was Dismissed Cannot Share in Related Government FIRREA Settlement

In an opinion last week, Judge Sullivan concluded that the False Claims Act did not allow a “relator” (a private citizen suing on behalf of the government for fraud against the government) who voluntarily dismissed his case to share in the proceeds from a case that the government later filed on its own.

The False Claim Act states that, when a relator brings a claim, the government may choose whether to intervene and take over the case, or may “may elect to pursue its claim through any alternate remedy available,” and in either case the relator should typically share in the recovery.  The relator argued that the government’s separate litigation was an “alternate remedy,” but Judge Sullivan, while acknowledging the issue was one of first impression in the Second Circuit, disagreed:
Continue Reading Judge Sullivan: Qui Tam Plaintiff Who Voluntarily Dismisses Case Cannot Share in Proceeds from Settlement of Later-Filed Government Case

Today, Judge Pauley dismissed a False Claims Act case (described as a “sprawling . . . Homeric ‘Catalogue of Ships’ for the 2008 financial crisis”) brought against ratings agency Moody’s by a former managing director.  The amended complaint alleged that Moody’s lack of independence and conflicts of interest led to false credit ratings that caused a myriad of “false payments” by the government, ranging from underpayment of FDIC premiums to an overvaluation of the AIG bailout.

Judge Pauley found that in order to succeed, the plaintiff would have to show that the government (not a private entity) had relied on Moody’s false ratings or that Moody’s had directed other financial institutions to submit false claims to the government.  The allegations in the amended complaint did not meet this requirement:
Continue Reading Judge Pauley Dismisses False Claims Act Case by Moody’s Whistleblower

In a 90-page opinion today, Judge Gardephe largely denied Novartis’ motion to dismiss a government suit alleging that it paid doctors kickbacks by hosting sham speaker events that allegedly “served as little more than upscale social outings designed to induce doctors to write prescriptions for Novartis drugs.”  He rejected Novartis’ argument that the complaint lacked sufficient detail under Rule 9(b):
Continue Reading Judge Gardephe Allows DOJ to Proceed With Suit Accusing Novartis of Using “Sham” Speaker Events to Pay Doctors Kickbacks

In an opinion today, Judge McMahon denied Novartis’ motion to dismiss the government’s False Claims Act suit (covered in this prior post), which accuses Novartis of giving certain specialty pharmacies  “rebates” — which the government considers kickbacks — to have them switch their patients to two Novartis drugs, Exjade and Myfortic.  The alleged scheme resulted in Medicare and Medicaid paying for claims that were tainted by the alleged kickbacks. Novartis argued that the complaint did not specify which specific prescriptions were false, but Judge McMahon found the complaint sufficiently detailed:
Continue Reading Judge McMahon Allows Kickback Suit Against Novartis to Proceed