New SCOTUS Opinion on the Federal False Claims Act
Today SCOTUS issued its opinion in United States ex rel Eisenstein v. City of New York, et al., holding that if the United States declines to intervene in a False Claims Act case initiated by a qui tam relator, the United States is not considered a "party" to the litigation for purposes of determining when a party must file its notice of appeal.
Federal Rule of Appellate Procedure 4 and 28 U.S.C. § 2107 both provide that parties generally have 30 days in which to appeal lower court decisions. However, when the United States or a U.S. officer or agency is a party to the litigation, all parties have 60 days in which to appeal. Thus, the question arose whether a party had 30 or 60 days in which to note an appeal in a non-intervened qui tam case.
As readers of this blog are aware, questions regarding the government's status and role in non-intervened qui tam cases often become complex. There is no question that the United States remains the real party in interest in non-intervened cases. For example, the United States always has notice of every FCA case filed by a qui tam relator, and is always at least minimally involved in every such case. The United States will also receive at least 70% of the total recovery in any non-intervened FCA case.
Today's opinion confirms what FCA practitioners have known all along—the question of whether the government is a party to non-intervened FCA litigation has to be answered on a case-by-case basis.
Introducing the New and Improved Federal False Claims Act!
As I mentioned a week or two ago, the Federal False Claims Act has been updated and improved by the Fraud Enforcement and Recovery Act of 2009.
While the amendments to the FCA fall short of those proposed in the still-pending False Claims Correction Act of 2009, the amendments are important and were needed.
Top qui tam defense lawyer Jack Boese has produced a red-lined version of the new Federal False Claims Act, which I am sharing here.
I will write more later about the amended statute, once I have had a chance to think it through a little more. I am wondering, however, how many states will immediately act to amend their own state false claims acts to incorporate the new changes.
Stay tuned for more updates.
JOHN BROWNLEE FOR ATTORNEY GENERAL OF VIRGINIA IN 2009
With a little under two weeks remaining in the Republican primary for Attorney General of Virginia, Republican convention-goers are faced with a choice between John Brownlee, Ken Cuccinelli, and Dave Foster. This blog has covered the Virginia AG's race in some detail, despite the fact that this is a legal and not a political blog. Today I want to explain the very specific reasons why I have waded into the waters of the Virginia AG's race, and will continue to do so up through the primary and into the general election in November.
The 2009 Virginia Attorney Generals' race is important to this blog because the Virginia Fraud Against Taxpayers Act can become a real weapon in the Commonwealth's fight against fraud, waste and abuse, and because the policing of our state's budget and reducing fraud, waste, and abuse is too important to be left up to chance.
Of course, every single person in the race for Attorney General says that they are against fraud, waste, and abuse of government money, and I am sure they really are. The reason there is so much fraud, waste, and abuse in the Commonwealth's budget—and the reason we are not doing a better job of policing it—is not that the politicians are profiting, or because we lack the political will to do something about it, but rather because much of our political leadership simply does not know what to do, and they lack the vision and dedication to figure it out.
That is why I am supporting John Brownlee for Attorney General.
I litigate cases for a living, and that gives me a chance to see first-hand the wide range of skills and abilities present among my fellow members of the bar. All lawyers may be created equal in the sense that anyone with a law license can practice any kind of law in a state where they are licensed, but believe me, all lawyers are not equal in their experience, skills, and aptitudes.
I have devised my own colloquial label for the lawyers I respect and admire. I simply call them "real lawyers." Virginians need to pick a real lawyer to be our next Attorney General, but the requirements don't stop there. If the only requirement for AG was that we pick a real lawyer, Dave Foster would fit the bill just fine.
Virginians need to pick a real lawyer as our next Attorney General, but that is not all. We need someone is going to come to the job with the intent of enforcing the law.
When it comes to litigation by or against the Commonwealth, the buck stops on the desk of the Attorney General. It is the AG that makes the final call on whether to settle a case or press forward, and everyone in the office knows that. We need an AG who is used to making the tough calls in high-stakes litigation.
And that is why we need John Brownlee as our next Attorney General. Brownlee was not just any old U.S. Attorney—he was an important one, and one with a national reputation.
But don't take my word for it.
In May 2007, after a five year investigation, Mr. Brownlee convicted Purdue and its top executives of illegally misbranding their pain medication OxyContin. The company and executives paid over $634 million in fines, and the executives were placed on 3 years probation and ordered to perform 400 hours of community service.
The settlement was one of the largest financial penalties ever imposed on a drug company. Moreover, Brownlee insisted that Purdue's top executives plead guilty to criminal acts.
And consider this—prior to Brownlee's handling the Oxycontin case, Purdue had won hundreds and hundreds of lawsuits over Oxycontin. The only time Purdue had paid even one dollar was as part of a settlement to the West Virginia AG's office, and that settlement was only $10 million or so.
The New York Times claimed that “Purdue suffered a crushing defeat in May at the hands of Brownlee when the company and three top executives pleaded guilty to criminal charges.”
On July 31, 2007, Brownlee testified before the U.S. Senate Judiciary Committee regarding his investigation of Purdue and its executives.
During the hearing, Senator Jeff Sessions (R-AL), referring to Mr. Brownlee, stated, “you stepped up, you led the fight, you really crushed their defense ultimately, and I am sure with this much at stake, they had some of the best lawyers in America involved in defending the case. This fine young United States Attorney committed several years of his life to this case and did something nobody else has done: put an end to this OxyContin abuse, which is an absolute national problem.”
United States Senator Ben Cardin (D-MD) stated that Brownlee’s work “will have a major impact on corporate conduct in our country."
Here is a question for all of the Cuccinelli supporters—what was the difference in Brownlee's case, which had a major impact on corporate conduct in the United States, and the hundreds and hundreds of cases Purdue Pharma won, or the one West Virginia case where they paid a paltry $10 million?
The difference was John Brownlee himself. Brownlee had the intelligence, the conviction, and the drive to do something no one had ever done before—and he did it with one of the smallest USAOs and of the smallest USAO budgets. (For you Cuccinelli fans, USAO stands for "United States Attorney's Office.")
Brownlee is the kind of man we need for our next Attorney General.
Does anyone ever recall the New York Times ever saying anything about Ken Cuccinelli? Has Ken Cuccinelli's work ever had an impact on anything? I don't think so—you see, he is simply not significant enough in the grand scheme of things to register on the radar.
John Brownlee also prosecuted one of the most important national security cases of 2007. In March 2007, after a six year investigation, Mr. Brownlee convicted ITT Corporation, the 12th largest supplier of sophisticated defense systems to the United States military, of violating the International Traffic in Arms Regulations (ITAR). ITT was convicted of illegally transferring classified and controlled night vision technology to foreign countries, including China, and agreed to pay $100 million in penalties. Mr. Brownlee was the first federal prosecutor to convict a major defense contractor of violating the ITAR.
The investigation and prosecution of ITT Corporation created important industry reaction. Global Watch, a web based Newsletter of the International Import-Export Institute called the convictions “record breaking” and “precedent setting” and claimed that Mr. Brownlee’s work would have a “significant long-term impact on the trade compliance community worldwide.”
The Wall Street Journal wrote that John Brownlee’s “ITT case is bound to send shivers through the U.S. defense industry, which increasingly views international trade as vital for long-term growth.”
ITT Corporation admitted that between March 2001 and August 2001, ITT Corporation exported defense related technical data to Singapore, the People’s Republic of China and the United Kingdom without having first obtained a license or written authorization from the U.S. Department of State. The technical data included information about a laser counter measure known as a “light interference filter” for military night vision goggle systems.
In both of these cases, the buck stopped on John Brownlee's desk, and he answered the call. Being a litigator, which is essentially what the Attorney General does, means having to make tough calls. It also means having the experience and judgment to know when to press forward, and when to settle.
Simply put, not all litigation experience is the same. There is a world of difference between the litigation experience of Ken Cuccinelli and the experience of John Brownlee.
John Brownlee also displayed his legal acumen in a number of important public-corruption prosecutions, environmental prosecutions, and myriad other sorts of litigation. I mention the above cases because they are indicative of Brownlee's status as a legal giant, and because he accomplished these things with an office much, much smaller than the Attorney General's office.
It also important to understand that Brownlee was appointed U.S. Attorney at the tender age of 35 years old, when he had a mere five or six years of legal experience. This is important because he rose to the occasion, and proved that he was able to learn on the job and master completely new areas of law under the gun.
Being a lawyer is not about always knowing the answer folks, but you had better know how to find the answer and where to look. And then, you better have confidence in your abilities such that you stick by your answer when other people are second-guessing you.
Dave Foster is also accustomed to practicing at the highest levels of the legal profession, and he might make a fine AG. Foster also reads this blog, and did me the honor of making the only blog comment I know of by a candidate on this blog.
However, in my opinion, although both Brownlee and Foster both represent the highest levels of the legal profession, Brownlee is preferable to Foster due to Brownlee's incredible legal experience, and the resources with which Brownlee worked.
In all fairness to Foster, very few people can match Brownlee is this aspect.
Moreover, it remains to be seen if Foster could make the switch from defensive litigation to affirmative civil enforcement. Foster is accustomed to a deep-pocket litigation budget and clients with endless resources, and he would have neither in the OAG.
By way of contrast, Ken Cuccinelli has practiced at the other extreme of the legal profession. Cuccinelli's career has been spent processing a series of small, routine legal matters such as DUIs, divorces, child custody disputes, collection matters, and so forth. There is no evidence of Cuccinelli ever doing anything out of the ordinary in his legal career.
The question Republican convention-goers have to answer, then, is this: If you had to pick one of these three men to be your lawyer in high-stakes, complex litigation, against a cadre of skilled, highly capable lawyers and with your life, liberty, and property on the line, which one would you pick?
Virginia Republicans should pick John Brownlee as our next Attorney General.
THE FEDERAL FALSE CLAIMS ACT IS REVAMPED FOR THE TWENTY-FIRST CENTURY!!!!
In 1986, with the budgetary strains caused by the cold-war, and with fraudsters draining the U.S. Treasury with impunity, Congress acted by revitalizing the False Claims Act.
Today, Congress once again strengthened the False Claims Act, and brought that Act into the twenty-first century with passage of the Fraud Enforcement & Recovery Act of 2009. Passage of the Act was a beautiful example of bipartisan cooperation and civility, I should add!
The Fraud Enforcement and Recovery Act of 2009 is rumored to be on its way to President Obama, who has promised to quickly sign this bipartisan legislation. In a nutshell, the Fraud Enforcement and Recovery Act of 2009 removes many of the judicially created limitations and qualifications to the False Claims Act.
This much-needed legislation will modernize the Act, allowing the False Claims Act to reach modern-day fraud schemes. It will also remove many of the impediments to the Government's investigative powers, strengthen anti-retaliation protections, and clarify many of the procedural questions that have derailed qui tam actions in recent years.
This is a giant first step forward for our country's fraud-fighting efforts. The bipartisan support for this legislation demonstrates, once again, that when it comes to fighting fraud, politics takes a back seat to doing the right thing. Now that Congress has plugged the False Claims Act liability loopholes, we look forward to Congress addressing the rest of the problems identified in the False Claims Act Corrections Act of 2009.
No question about it, this is an historic day—more precisely, tomorrow will be the historic day, if the President signs the Act into law tomorrow. As I point out in my Practice Commentary on the False Claims Act (LexisNexis, 2009) changes to the Federal False Claims Act always accompany major changes in American society, and tomorrow is no different.
THE MINNESOTA FALSE CLAIMS ACT IS SIGNED INTO LAW
We began the 2009 state legislative season with a list of states paying a federally mandated penalty for not having a false claims act.
Today, I am happy to report that the Minnesota False Claims Act has been signed into law. Minnesota appears to be the only state passing a state-FCA this session, but that whittles the list of non-complying states down to 27.
Congratulations to Minnesota TAF members Brian Wojtalewicz, Gerald Robinson, and Neil Thompson on their newly enacted state law. My understanding is that it becomes law next summer.
It also seems that the MN law has some strange provisions regarding vicarious liability and a "right to cure" provision. Time will tell whether the law is approved by the federal government for compliance with the federal Deficit Reduction Act.
Congratulations again!
State Qui Tam Legislative Updates
Sadly, as the last of the state legislative sessions wind down this month, it appears that we do have a single new state False Claims Act to report. Kansas appears to have passed a non-qui tam state statute, which can only be enforced by that state's OAG.
There is a glimmer of hope from Minnesota, however, as both houses of the MN state legislature have apparently passed slightly different versions of a "true" FCA—that is, one with qui tam provisions which allow a private individual to file suit in the name of the state to recover treble damages, civil penalties, and attorney's fees and costs for fraud on the state.
Important New Opinion from the U.S. District Court for the Eastern District of Virginia Addresses the Seal Requirements of the Federal False Claims Act
An important new opinion issued today by the U.S. District Court for the Eastern District of Virginia (Alexandria Division) discusses the mandatory disclosure and seal requirements of the Federal False Claims Act. The opinion can be found on Westlaw as United States ex rel. Ubl v. IIF Data Solutions, et al., 2009 WL 1254704 (E.D.Va.) or by clicking here.
Those provisions, which are found in 31 U.S.C.S. sec. 3730(b)(2), famously require a qui tam plaintiff (or "relator" as plaintiff's are known in the parlance of qui tam) to serve a written disclosure memorandum and all material evidence on the government as a first step in the case. Then, and only then, should the relator file his complaint under seal with the Court. The matching Virginia Fraud Against Taxpayers Act provision, which is identical to the federal statute, is found at Virginia Code sec. 8.01-216.5.
Most qui tam lawyers are of the opinion that the above requirements are procedural and not jurisdictional . This is the view adopted by Judge O'Grady in his opinion.
Previously, I posted on the topic of whether the provisions of Va. Code 8.01-216.5 apply to the Virginia Attorney General's Office. In other words, would the OAG need to file a self-initiated VFATA complaint under seal. Judge O'Grady's opinion provides further support for my position.
The specific issue in the May 5 opinion is an amended complaint filed by the relator, and defendants' motion to dismiss on the grounds that relator did not comply with the seal requirements of the statute.
Taxpayers Against Fraud Education Fund files Amicus Curiae Memorandum in Support of the Department of Justice's Motion to Dismiss in ACLU, et al. v. Eric Holder, et al., 1:09cv042
Today the Taxpayers Against Fraud Education Fund filed its motion and memorandum in support of the motion to dismiss filed by the United States Department of Justice.
While I acted as local counsel in filing the brief, the real work of drafting TAFEF's position was handled by Cleveland Lawrence, Jeb White, and Marc Vezina.
Oral argument is set for June 12, 2009 at 10:00 AM. Stay tuned for more updates.
Fools--or in this case, the Government Accountability Project, OMB Watch, and the ACLU--Rush In Where Angels Fear to Tread
A lawsuit currently pending in the U.S. District Court for the Eastern District of Virginia seeks to have most the Federal False Claims Act declared unconstitutional. The complaint for declaratory and injunctive relief was filed by the American Civil Liberties Union, OMB Watch, and the Government Accountability Project on January 15, 2009.
The official Department of Justice response is due today. On a practical level, I have previously addressed the necessity of the seal in qui tam litigation, and the numerous interests served by requiring qui tam relators to file their cases under seal. In addition to the practical reasons, there are a number of very sound legal reasons why the complaint should be dismissed, and I am sure DOJ's brief will state them very well.
A number of amicus briefs are expected as well—stay tuned for more.
News from the Virginia Attorney General Race--Former Attorney General Jerry Kilgore Endorses John Brownlee for Attorney General in 2009
Former Virginia Attorney General Jerry Kilgore announced this morning that he has endorsed John Brownlee's bid to secure the Republican nomination for that post. Kilgore also announced that he has agreed to serve as General Chairman of Brownlee's campaign.
"We need a strong candidate for Attorney General and that's why we are here today," said Kilgore. "It's important for our Party and for our ticket that Republicans unite around the candidacy of John Brownlee."
Kilgore noted that he had moderated several debates between the three Republican candidates for Attorney General this year, and had anticipated staying neutral until a nominee was selected on May 30. "However,"
Kilgore said, "one candidate stood out at those debates. One candidate demonstrated an understanding of the office, an understanding of the issues and an understanding of how to win this campaign. That candidate was John Brownlee.
"I have been impressed with John's abilities to attract supporters in every region of our Commonwealth. He has impressed me with his e-campaign and willingness to use new technologies in reaching voters....He will have the ability to bring together business and social conservatives and focus on the winning formula for the Attorney General's office.
"John Brownlee already has run an office very similar to the Attorney General's office. Like John, I served in the U.S. Attorney's office. Like the Virginia Attorney General's office, the U.S. Attorney's office deals with much more than criminal cases. They deal with every civil matter that the United States becomes a party to in the respective district."
Kilgore also mentioned the importance of Brownlee's experience as a former prosecutor. "Virginians, for more than a quarter century, have elected an experienced prosecutor as their Attorney General when given the choice between a candidate with prosecutorial experience and no prosecutorial experience, and 2009 will be no exception.
"Importantly, John has worked with the entire law enforcement community in Virginia - federal, state and local. They understand his abilities and why he would be a great Attorney General. That's why John has been endorsed by so many Sheriffs and Commonwealth's Attorney throughout the Commonwealth."
Brownlee said Kilgore's decision to join the campaign was a "significant moment" that placed his campaign in a "unique position" going forward in the nominating contest.
"This is a man who has dedicated his entire life to public service....He served as Attorney General for nearly four years, and was a very successful Attorney General. His efforts led to a better and safer Virginia.
"This is a man who knows; he knows the job, he knows the people, he knows the challenges. And the fact that he would stand here today and put his seal of approval on our campaign means so much to Lee Ann and me."
Kilgore, who was elected Attorney General by a wide margin in 2001, said he would take an active and visible role in Brownlee's campaign between now and the Virginia Republican Convention on May 29 and 30, 2009.
"The Virginia Republican Party is at a crossroads," concluded Kilgore. "As we near our Convention, we must unite behind the ticket that will not only bring us together as a Party but will win in November. That ticket should include John Brownlee as our next Attorney General."
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