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Client Alerts 45 results

Client Alert | 1 min read | 02.28.25

The Top FCA Developments of 2024

FY 2024 saw continued growth in False Claims Act enforcement, with a record year for new qui tam and government-initiated actions, and the highest total recovery in three years. Enforcement of pandemic-related fraud and cybersecurity noncompliance increased, and health care, procurement, and small business fraud violations were again priority areas. A groundbreaking opinion from the District Court for the Middle District of Florida may have teed up a potentially landscape-shifting decision about the viability of the qui tam mechanism in the not too distant future. And a landmark administrative law decision at the U.S. Supreme Court may impact many FCA cases to come. Significant decisions regarding retaliation, excessive fines, the first-to-file rule, and the public disclosure bar were also handed down by courts of appeals. Crowell attorneys discuss these highlights and others in a “Feature Comment” published in The Government Contractor.

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Client Alert | 2 min read | 01.16.25

AG Nominee Pam Bondi Confirms Commitment To Defending Constitutionality of False Claims Act as Qui Tam Provisions Face Scrutiny in the Courts

Yesterday, less than an hour into the first day of confirmation hearings for attorney general nominee Pam Bondi, Senator Chuck Grassley (R-IA) questioned Bondi on her commitment to defending the constitutionality of the False Claims Act (FCA) if she is confirmed. Bondi responded that she would “of course” defend the constitutionality of the FCA and that she understands the importance of whistleblowers, the FCA’s protections, and “the money it brings back to our country.” Senator Grassley’s questioning indicated he was focused on the FCA’s qui tam provisions, as it comes on the heels of U.S. ex rel. Zafirov v. Florida Medical Associates, Inc., -- F.Supp.3d --, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024), a first-of-its-kind decision from Judge Kathryn Kimball Mizelle, who held that the FCA’s qui tam provisions improperly appoint a relator “an officer of the United States” in violation of the Appointments Clause in Article II of the Constitution, and are therefore unconstitutional. Senator Grassley appeared to be seeking assurances about Bondi’s willingness to ensure the Department of Justice continues to defend the FCA’s qui tam provisions and commit the resources necessary to do so.

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Client Alert | 1 min read | 10.22.24

Trick or Treat? What You Need to Know About a First-of-its-Kind Decision Declaring FCA Qui Tam Provisions Unconstitutional

Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida recently declared the False Claims Act qui tam provisions unconstitutional in U.S. ex rel. Zafirov v. Fla. Med. Assocs., LLC, -- F.Supp.3d --, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024), turning up the heat on a simmering constitutional fight that is increasingly likely to reach the Supreme Court in the next few years. Judge Mizelle's decision was the first to strike down the FCA qui tam provisions, but not the first to consider the issue. Arguments challenging the constitutionality of the qui tam provisions proliferated after Justice Thomas indicated some doubt about the qui tam device in his dissent in U.S. ex rel. Polansky v. Exec. Health Res., 599 U.S. 419 (2023). But every other judge to consider the issue has upheld the constitutionality of the qui tam provisions.

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Client Alert | 5 min read | 10.08.24

In the Upside Down: District Court Upends Decades of False Claims Act Precedent in Declaring Qui Tam Provisions Unconstitutional

In a novel False Claims Act (FCA) ruling, on September 30, 2024, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida upended decades of FCA jurisprudence in declaring the qui tam provisions of the FCA unconstitutional in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024). This decision follows Justice Thomas’ dissent in the recent Supreme Court decision, U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), where he posited, “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” While Justice Thomas’ implicit constitutional challenge was not entirely new to FCA practitioners, including it in his Polansky dissent, with Justices Kavanaugh and Barrett in a concurring opinion noting their agreement that the Court should consider the constitutional questions in an appropriate case, swung wide open a door of opportunity for defendants and their counsel to attempt to dismiss FCA qui tam suits on constitutional grounds. Judge Mizelle’s decision in Zafirov is the first of its kind to actually dismiss a qui tam suit on constitutional grounds, and will likely lead to an avalanche of similar motions in nearly every non-intervened lawsuit brought by a relator.

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Client Alert | 2 min read | 05.02.24

False Claims Act Settlement Illustrates Value of Disclosure and Cooperation

A recently-announced False Claims Act (FCA) settlement illustrates how government contractors and other FCA defendants can take advantage of a Department of Justice (DOJ) policy that rewards voluntary self-disclosure to, and subsequent cooperation with, the government.

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Client Alert | 1 min read | 03.12.24

The Top FCA Developments of 2023

2023 brought many important False Claims Act developments for companies with business involving government funds. While overall recoveries remained down compared to pre-2022 levels, the total number of settlements and judgments exceeded any prior year. Those settlements and judgments also highlight areas of particular focus for the Government, including cybersecurity compliance, pandemic fraud, and small business fraud, among others. Of particular note, 2023 saw the U.S. Supreme Court issue decisions concerning the Government’s authority to dismiss qui tam actions and the critical element of scienter/knowledge that will have wide-reaching impact. The courts of appeals also issued significant decisions on damages, materiality, and more. Crowell attorneys discuss these highlights and others in a "Feature Comment" published in The Government Contractor.

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Client Alert | 3 min read | 03.04.24

Counterclaims Against Compliance-Officer-Turned-Relator Survive Motion to Dismiss

A recent decision in a non-intervened qui tam suit in the Northern District of Georgia provides an example of a defendant threading the needle to avoid dismissal of its counterclaims despite those counterclaims arguably implicating the conduct that the relator alleged violated the False Claims Act (FCA). It also stands as a rare instance where a company’s counterclaims against an FCA relator have survived early court scrutiny and, as such, provides FCA defendants with a potential strategy to combat opportunistic relators.

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Client Alert | 3 min read | 08.02.23

He’s a Material Guy in a Material World: Senator Grassley Proposes FCA Amendments to Weaken Materiality Defense Where Government Pays Despite Knowledge of Non-Compliance

The continual push and pull between the courts and Congress over the contours of the False Claims Act (“FCA”) has once again spawned proposed legislation unfavorable to FCA defendants, this time poised to curtail defense arguments that continued government payment of claims in the face of alleged noncompliance with contractual or other legal requirements demonstrates a lack of materiality.

Client Alert | 10 min read | 06.21.23

See(2)(A) You Later: Supreme Court Holds that DOJ Has Broad Dismissal Authority Even After Unsealing

On June 16, 2023, the U.S. Supreme Court, in United States ex rel. Polansky v. Executive Health Resources Inc., held that the Government may seek dismissal of a False Claims Act (“FCA”) qui tam suit over a relator’s objection so long as it intervenes in the litigation, either during the initial seal period or afterward. The Court also held that, when handling such a motion, district courts should apply Federal Rule of Civil Procedure (“FRCP”) 41(a), the rule generally governing voluntary dismissal of suits. And in a dissent that—in the long run—may end up being more impactful than the Court’s holding, Justice Thomas (joined in a concurring opinion by Justices Kavanaugh and Barrett) questioned the constitutionality of the qui tam provisions themselves.

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Client Alert | 6 min read | 04.12.23

Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA

Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022). The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.

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Client Alert | 1 min read | 03.08.23

The Top FCA Developments of 2022

2022 was a busy year for the False Claims Act. While recoveries were down, new cases reached a record mark, and settlements addressed multiple important and developing enforcement areas, from cybersecurity to small business fraud, bid rigging, Trade Agreements Act compliance, pandemic fraud, and more. Of particular note, the U.S. Supreme Court held argument concerning the Government’s authority to dismiss qui tam actions, and it will soon hear consolidated cases as to the critical element of scienter. And circuit courts issued key decisions involving pleading standards and merits issues. These highlights and more are discussed by C&M attorneys in a “Feature Comment” published in The Government Contractor.

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Client Alert | 2 min read | 03.06.23

Hundreds of Millions of Potential Liability Result from Federal Jury False Claims Act Verdict Against Ophthalmology Product Distributor

In a prime example of the significant interplay between the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”), a federal jury has returned a verdict of more than $43 million in damages against Cameron-Ehlen Group, Inc., which does business as “Precision Lens,” and its owner. The verdict in this long-running and closely watched fraud case out of the U.S. District Court for the District of Minnesota comes after a six-week trial, with the jury ultimately finding that the defendants paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare, resulting in the submission of 64,575 false claims between 2006 and 2015. While the jury calculated damages at the massive sum of $43 million, that number may grow exponentially after the court applies the FCA’s treble-damages calculation (increasing the liability to $129 million) and statutory penalties of between $5,500 and $11,000 for each of the 64,575 claims (resulting in additional penalties of $355 million to $710 million). All told, the total FCA liability is expected to range between $485 million and $839 million.

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Client Alert | 21 min read | 12.28.22

FY 2023 National Defense Authorization Act: Key Provisions Government Contractors Should Know

The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023, signed into law on December 23, 2022, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that provide new opportunities for contractors to recover inflation-related costs, authorize new programs for small businesses, impose new clauses or reporting requirements on government contractors, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2023 NDAA also includes the Advancing American AI Act, the Intelligence Authorization Act for FY 2023, and the Water Resources Development Act of 2022, all of which include provisions relevant for government contractors.

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Client Alert | 2 min read | 09.12.22

DoD Will Consider Contract Adjustments Addressing Inflation

On Friday September 9, 2022, the Principal Director for DoD Defense Pricing and Contracting (DPC) issued a Memorandum titled “Managing the Effects of Inflation with Existing Contracts.” The Memorandum provides guidance to Contracting Officers about the range of approaches available to address the effects of inflation on the Defense Industrial Base. Of note, it highlights two paths contractors may pursue to recover for inflation under fixed-price contracts.

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Client Alert | 4 min read | 08.03.22

The CHIPS Are Down and Incentives Flow as Congress Attempts to Vitalize the U.S. Semiconductor Industry

Last week, the United States Congress passed the $280 billion CHIPS and Science Act of 2022 (CHIPS Act)[1] to bolster domestic semiconductor and microchip manufacturing in the United States. The bipartisan legislation will facilitate federal investments in the form of grants, loans, and loan guarantees to eligible entities and create significant business opportunities for companies in the U.S. The legislation also provides funding and new programs to boost advanced workforce training and research and development in a range of scientific and technology areas. The legislation now awaits the signature of President Biden, who hailed its passage as “exactly what we need to be doing to grow our economy right now.”

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Client Alert | 2 min read | 06.27.22

Procurement Collusion Strike Force Nabs Another Military Contractor in Bid Rigging Scheme

On June 23, 2022, a federal grand jury returned an indictment against Army contractor Envistacom LLC and two of its executives alleging participation in a fraudulent scheme that deprived the federal government of competition and making false representations to the government in furtherance of the conspiracy. The indictment also charged the executive as a co-conspirator, and asserts the conspirators coordinated in the preparation of so-called “competitive quotes” submitted in connection with 8(a) set aside contracts. The quotes were allegedly fraudulently inflated in order to all but guarantee the government customer would sole source the award to the conspirators’ pre-determined bidder. This indictment represents the fruits of yet another investigation by the Department of Justice’s Procurement Collusion Strike Force (“PCSF”).

Client Alert | 2 min read | 06.22.22

U.S. Supreme Court Poised to Resolve Two FCA Circuit Splits

Yesterday, the U.S. Supreme Court granted certiorari in Polansky v. Executive Health Resources Inc., No. 19-3810 (3d Cir. Oct. 28, 2021), which involves the Government’s authority to dismiss a relator’s qui tam action pursuant to 31 U.S.C. § 3730(c)(2)(A) of the False Claims Act. In Polansky, the U.S. Court of Appeals for the Third Circuit held the Government must intervene in FCA suits before moving to dismiss and that, where responsive pleadings have been filed, a court has wide discretion to permit or deny the Government’s exercise of dismissal authority. This cemented two circuit splits. The first split is between the Third, Sixth, and Seventh Circuits, which require the Government to intervene before moving for dismissal of an FCA suit, and the D.C., Ninth, and Tenth Circuits, which do not require the Government to intervene before moving for dismissal of an FCA suit at any point in the litigation. The second is a three-way split among the Circuits regarding the standard of review a court must apply when determining whether the Government can dismiss a qui tam action over a relator’s objection: the Third and Seventh Circuits apply the Rule 41(b) standard, the D.C. Circuit considers the Government’s dismissal authority unfettered, and the Ninth Circuit applies a “rational relation” test requiring the Government to demonstrate a valid government purpose and a “rational relation” between the dismissal and that government purpose. The Supreme Court is now poised to resolve both of these splits.

Client Alert | 4 min read | 04.08.22

President Issues DPA Determination to Promote Domestic Supply of Strategic and Critical Materials for Large-Capacity Batteries

In an effort to boost the domestic mining industry for critical minerals, on March 31, 2022, President Biden issued Presidential Determination 2022-11, the Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended (“Presidential Determination”). The Presidential Determination states that sustainable and responsible domestic mining, beneficiation, and value-added processing of strategic and critical materials for the production of large-capacity batteries, including lithium, nickel, cobalt, graphite, and manganese, are essential to national defense. The Presidential Determination will allow the Department of Defense (“DoD”) to pursue various investment, purchase commitment, and purchase vehicles to support strategic and critical material mining and production in the United States pursuant to Title III of the Defense Production Act (“DPA”).

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Client Alert | 4 min read | 03.10.22

The FCA Does Not Assess Liability Through Ambush: Fourth Circuit Joins the List of Circuits Applying Safeco Inquiry to Legally False Claims

In U.S. ex rel. Sheldon v. Allergan Sales, LLC, No. 20-2330 (4th Cir. Jan. 25, 2022), the U.S. Court of Appeals for the Fourth Circuit applied the scienter analysis for “reckless” conduct articulated by the Supreme Court in Safeco Insurance Co. of America v. Burr, 551 U.S. 47 (2007) to the False Claims Act (“FCA”) in affirming the dismissal of a qui tam complaint for failure to plead scienter. In a 2-1 decision, the Fourth Circuit joined the Third, Seventh, Eighth, Ninth, and D.C. Circuits, holding that an objectively reasonable interpretation of an ambiguous statute or regulation cannot serve as the basis for liability unless authoritative guidance warns the defendant against such an interpretation. Sheldon adds increased support to defendants facing FCA allegations where the governing provisions are vague or ambiguous and is particularly notable as a pleading rather than merits stage ruling.

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Client Alert | 1 min read | 02.25.22

The Top FCA Developments of 2021

2021 was another busy year in False Claims Act enforcement and litigation. Significant decisions were issued across the circuits, spanning government dismissal authority, materiality, scienter, Rule 9(b) pleading standards, the Eighth Amendment’s Excessive Fines Clause, and more. The year also saw proposed amendments introduced by Senator Chuck Grassley aimed at strengthening the statute and overruling certain case law developments, as well as a renewed and confirmed focus on COVID-19 funding fraud enforcement and the launch of a new cybersecurity fraud initiative. These highlights are among the important developments discussed by C&M attorneys in a “Feature Comment” published in The Government Contractor.

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