BMN Blog

JAN 09

Regulation Background

The False Claims Act (“FCA” or “Act”) is a federal anti-fraud statute that protects against persons and companies defrauding the government. The Act has been dubbed the government’s “primary litigation tool for recovering losses resulting from fraud.”[1] The FCA imposes civil liability on any one who “knowingly presents…a false or fraudulent claim for payment or approval” to the federal government.[2] It is used extensively to protect against fraud in healthcare.[3]

Actions brought against individuals and/or entities under the FCA are known as “qui tam” suits.[4] A private individual, formally identified as a “relator” or informally as a “whistleblower,” can bring an action under the FCA on behalf of the government. Once the action is brought by a relator, the government can then choose to intervene in the case and take it over from the relator. If the government chooses not to intervene, the relator has the right to conduct the action on behalf of the government. Relators who file under the FCA stand to receive a portion of any recovery from the suit as an incentive for those with knowledge to come forward.

In addition to intervention in a qui tam action, the FCA provides that the government may use alternative means to seek recovery from individuals and entities beyond the initial lawsuit (the “alternate-remedy provision”). Specifically, the FCA permits the government “to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty.”[5] If the government chooses to pursue an individual or entity through an alternative remedy, the Act allows the original relator “the same rights in such proceeding as such person would have had if the action had continued under this section.”[6] Thus in theory, the relator stands to claim a portion of the recovery even if the government pursues other means besides the initial qui tam case to obtain recovery.

U.S. v. Couch

Lori Carver worked at a pain management clinic in Mobile, which was run by two licensed physicians. During her employment, Ms. Carver discovered that the two physicians had submitted to federal health care programs what Carver believed to be fraudulent claims for payment. After consulting the U.S. Attorney’s office about her concerns, Ms. Carver brought a federal qui tam action against the clinic and physicians for the allegedly fraudulent payments. Thus far, the government has chosen not to intervene in the action, and the case is still pending.

Although the government chose not to intervene in the qui tam action, it nonetheless used the information Carver provided and began conducting a criminal investigation of the physicians’ actions. Almost two years after Carver filed her qui tam case, the government criminally charged both doctors with conspiracy to distribute controlled substances and conspiracy to commit healthcare fraud, among other claims, in three total indictments. All three indictments included criminal forfeiture counts. The case went to trial, and the jury convicted one physician of all counts and the other physician of all counts but one. The District Court entered a preliminary forfeiture order against the physicians.

Carver moved to intervene in the forfeiture proceeding under the FCA’s alternate-remedy provision, asserting that, as the relator in the initial qui tam case, she had a right to a portion of the forfeited assets in the criminal case. She averred that the alternate-remedy provision allowed her to intervene in the criminal case, so as to claim a share of the recovery she would have been entitled to if the government had intervened in her qui tam action.

The government challenged Carver’s motion, arguing that she had no right to intervene under the alternate-remedy provision of the FCA, because her qui tam case remained open. Additionally, the government asserted that as a private citizen, Carver could not intervene in criminal proceedings, and that the FCA does not permit relator intervention in criminal cases.

On appeal, the Eleventh Circuit held that, although Carver’s qui tam case was still pending and her potential property interest had not been adjudicated, her property interest was nonetheless not so “speculative” as to deprive the Court of jurisdiction in the matter. The Court held that Carver had standing to assert that the alternate-remedy provision gives her the right to intervene in this case under the FCA. This holding was opposite to the Ninth Circuit’s recent holding that a qui tam plaintiff did not even have standing to intervene in criminal forfeiture proceedings.[7]

Second, the Court held that, although Carver had standing to assert her rights under the alternate-remedy provision, the three applicable criminal forfeiture statutes barred third parties from intervening in forfeiture proceedings to claim an interest in property subject to forfeiture. While there were exceptions to the statutes’ prohibition against third-party intervenors, Carver did not meet any of the exception’s requirements.[8] Thus, she was barred from intervening as a relator in the criminal forfeiture proceedings based on the text of the criminal statutes. The Eleventh Circuit also noted however, that the bar does not prohibit the relator from all possible proceedings. Carver would still be entitled to a share of the recovery “to the extent that the qui tam defendant can deduct any forfeiture from the qui tam award.”[9]

Takeaways From U.S. v. Couch

The Couch holding interprets the breadth of whistleblowers’ rights to recover under the FCA alternate-remedy provision. First, availability of the alternate-remedy provision depends upon the text of the relevant criminal statute. The alternate-remedy provision of the FCA explicitly allows relators to claim a share of recovered assets if the government chooses to pursue alternative means of recovery as if it had been pursued under the initial qui tam case. However, Couch limits this provision to the language of the prosecuting statute. Here, the criminal statutes cited against the physicians placed an express bar to third party intervention, but provided certain exceptions. The Court then interpreted the statutes’ language to determine if Carver fit within either of the exceptions, based on her initial qui tam complaint—she did not. Because Carver did not meet the exception requirements, she was not allowed to claim a share of the recovery, despite the FCA’s alternate-remedy provision that expressly gave her that right. In short, the Eleventh Circuit’s holding stands for the proposition that a criminal forfeiture statute’s language takes precedence over the FCA’s alternate-remedy provision in terms of a relator’s right to intervene.

 

 

Second, a relator’s right to recover a share beyond the initial qui tam action is not unlimited. Although the Eleventh Circuit held that a qui tam plaintiff had standing to assert the alternate-remedy provision in a criminal proceeding, the Court held that criminal forfeiture statutes barring third party intervention take precedence over the relator’s rights under the FCA. Accordingly, under the Eleventh Circuit’s holding, a relator could theoretically recover a portion in a criminal forfeiture proceeding, so long as the criminal statutes do not explicitly prohibit recovery by third parties, or if the relator meets the statutes’ exception requirements. However, this holding also opens the door for the government to effectively prevent recovery by relators under criminal forfeiture proceedings if it prosecutes defendants under statutes explicitly barring third party intervention. Thus, while this Court’s holding expands a qui tam plaintiff’s standing in criminal forfeiture proceedings, it does not allow unlimited recovery under its alternate-remedy provision.

Conclusion

In summary, when a private individual brings an FCA claim against a health care entity and/or physicians and the government chooses not to intervene and, instead, pursues an alternate remedy, the individual may not be entitled to a share of the recovery under the alternate remedy, even though they would under the original qui tam case. This holding could potentially discourage whistleblowers from coming forward with fraud claims against their employers. If the government chooses to pursue criminal forfeiture proceedings in lieu of intervening in a qui tam case, it is likely that a relator will recover significantly less or no share at all.[10]

Health care employers and physicians should also be aware that the Eleventh Circuit’s holding additionally confirmed permissible overlapping civil and criminal recovery by the government. The Court held that although Ms. Carver could not intervene to recover criminal forfeiture assets, she was still allowed to pursue her qui tam case, and was entitled to a percentage of any recovery attained on behalf of the government in that matter. Thus, a health entity and/or physician could be doubly liable to the government for claims made under the FCA. While parallel criminal and civil liability is not a new concept, it is important to note that the Eleventh Circuit makes a point to state this possibility in the Couch opinion.

It will be interesting to see how other courts interpret this holding, if at all, especially when the Eleventh Circuit’s decision was opposite to the Ninth Circuit, creating a court split over this issue. Additionally, it will be worth noting how this decision is applied in practice—that being, how it ultimately affects a relator’s ability to recover under the FCA, and how the government chooses to pursue fraud claims against health care entities and physicians. Regardless, Alabama health care entities and physicians should take note of this decision, and look for future cases on this issue.

 

Hayley Scheer, J.D., LL.M. practices health law with Cabaniss, Johnston, Gardner, Dumas & O’Neal LLP.

 

 

 

[1] U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267 (5th Cir. 2010).

[2] 31 U.S.C. § 3799(a) (2006); see also U.S. v. Couch, No. 17-13-402, 3 (11th Cir. Oct. 17, 2018).

[3] See 31 U.S.C. §§ 3729–33.

[4] The U.S. Dept. of Justice, The False Claims Act: A Primer, 1, 2 (Apr. 22, 2011).

[5] Supra note 3 at § 3730(c)(5).

[6] Couch, supra note 2 at 3.

[7] Id. at 7 (citing U.S. v. Van Dyck, 866 F.3d 1130, 1133-34 (9th Cir. 2017)).

[8] The three criminal forfeiture statutes provided an exception to the prohibition of third party intervenors if they 1) had a legal right to the property before the defendant committed the offense or 2) are bona fide purchasers for value. Id. at 11 (citing 18 U.S.C. § 1963(1); 21 U.S.C. § 853(n); 18 U.S.C. § 982(b)(1)).

[9] Id. at 12.

[10]When the Department of Justice declines its right to intervene in qui tam cases, the amount of recovery (if any) drops dramatically. See U.S. Department of Justice, Civil Division, Fraud Statistics- Overview, October 1, 1987 - September 30, 2016 (Dec. 13, 2016, 3:01 PM), http://src.bna.com/kLL.

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