Last year, we wrote about an internal memo from the U.S. Department of Justice addressing the dismissal of qui tam (whistleblower) cases.
The Granston Memo, so named because it was written by DOJ’s Director of Civil Fraud Section Michael Granston, outlined various factors government prosecutors should use to evaluate whether a False Claims Act (FCA) case filed by a whistleblower should be dismissed.
Questions arose as to whether the memo would serve as a bellwether for the dismissal of what the DOJ would determine as unwarranted FCA cases. Nearly a year later, we appear to be seeing the results of that memo come to fruition.
Last month, the DOJ filed a motion to dismiss eleven FCA lawsuits brought by a professional relator in seven judicial districts. Each suit raised the same allegations, that pharmaceutical companies and commercial outsourcing vendors violated the Anti-Kickback Statute by:
- Providing illegal remuneration in the form of “free nurse services,” such as visiting patients at home to provide instruction on how to properly administer their newly-prescribed medications.
- Engaging in improper “white coat marketing” by hiring independent contractor nurses to act as “undercover sales representatives,” who engaged in impermissible promotional activity.
- Helping physicians complete insurance documents, such as benefit verifications and prior authorization.
The relators in all eleven actions involved National Health Care Analysis Group, a pseudonym for a partnership comprised of limited liability companies set up by investors and former Wall Street investment bankers. It put itself out there as a healthcare research company with “no particular bias.” However, the information collected through what the DOJ described as being “under false pretenses” was used to file qui tam complaints.
Under the False Claims Act, a private citizen with firsthand knowledge of alleged fraud can file a whistleblower lawsuit on behalf of the government. The government then must decide whether to intervene and take over the case, or decline, in which case the whistleblower may move forward on their own. Such cases can result in sizable awards since recovery can include civil penalties of up to $11,000 for each violation plus treble damages, as well as attorneys’ fees and costs.
Even if the relator decides to move forward without the government’s assistance, the DOJ has the authority seek dismissal of qui tam cases over the relator’s objection.
The DOJ pointed out in its motion to dismiss that due to the expansive scope of the allegations it had “expended substantial resources investigating the NHCA Group matters” and after reviewing the facts declined to intervene in October 2017. While relators have the right to proceed, DOJ pointed out that right is not absolute, but rather “circumscribed by a number of limitations designed to ensure that the U.S. retains control over the declined action.”
Although in the past the DOJ traditionally has allowed such cases to move forward, the Granston Memo directed federal attorneys to be more aggressive about dismissing FCA suits lacking merit. It noted that even in cases where it did not intervene, the government often expends significant resources in monitoring these cases and sometimes must produce discovery or otherwise participate.
In addition, the memo noted: “If the cases lack substantial merit, they can generate adverse decisions that affect the government’s ability to enforce the FCA,” the memo stated.
In this particular case, the DOJ wrote in its motion to dismiss that the “sweeping allegations lack adequate support” and are “unlikely to yield any recovery sufficient to justify the significant costs the government will incur if the cases proceed” and would divert “the government’s limited resources away from other more meritorious matters.”
This wasn’t the first motion to dismiss based on what the DOJ determined would result in burdensome discovery and it likely will not be the last. The government appears prepared to weed out what it determines to be frivolous and costly litigation.
The Health Law Offices of Anthony C. Vitale is known for its representation of whistleblowers, as well as our ability to defend those who are the target of a whistleblower action. Contact us for additional information at 305-358-4500 or send us an email to firstname.lastname@example.org and let’s discuss how we might be able to assist you.