For the Greater Good or for Great Profits: The False Claims Act and Qui Tam Actions

By Natasha Kang

Natasha Kang is a senior at University of California, Davis.

Whether they’re seen as famous or infamous, whistleblowers have been providing game-changing information about Watergate, the Vietnam War, and most recently, the National Security Agency leaks provided by Edward Snowden. However, sometimes whistleblowers blow on behalf of the government, with the added bonus of a share of the reward.

Drug makers are popular targets for such whistleblowers because of the bounties offered under the False Claims Act (FCA) including up to 30% of all amounts recovered and attorney fees. [1] Lawyers who are employed by individuals seeking these bounties without real knowledge about fraudulent happenings pursue what are known as “parasitic” lawsuits. The FCA is a federal statute that sets penalties for “falsely billing the government, over-representing the amount of a delivered product, or under-stating an obligation to the government.” [2] Enforcement of the FCA authorizes action taken by the Justice Department or, in a unique provision of the act, by private individuals through qui tam lawsuits. 
 

A qui tam action is brought by a private individual, under the name of a “relator,” on behalf of the government. In the action, the federal government is seen as the true plaintiff, though the relator is entitled to a share of the reward if the case is successful. Under the FCA, the government may sue for the reimbursement of funds it has improperly paid because of false claims. As a preventative measure against profit-seeking whistleblowers, Congress has passed a statute creating a public disclosure bar that lets courts dismiss actions that have the “same allegations” already “publicly disclosed.” [3]

The public disclosure bar as well as the first-to-file bar and Wartime Suspension of Limitations Act make the case for the plaintiffs of the Purdue Pharma L.P. v. United States ex rel. May. [4] Purdue has submitted a petition for a writ of certiorari with the Supreme Court appealing the Fourth Circuit of Appeals decision of December 12, 2013, which vacated the district court’s dismissal of the first qui tam lawsuit on the grounds of res judicata, meaning a matter may not be litigated once again if it has already been judged on the same merits. [5] As it turns out, this is the second of qui tam actions against Purdue. The first was when relator Mark Radcliffe filed a qui tam action after Purdue had laid him off, claiming physicians were being misled about the “potency and cost-savings” of the OxyContin drug he marketed for them and were paying disproportionately high reimbursements. [6] When appealed, the circuit judge affirmed the dismissal. [7] The second qui tam action was filed by Mark Radcliffe’s wife and a former subordinate that had worked under him at Purdue, with almost identical allegations put forth as in the first qui tam action.

The petition filed by Purdue presents the following questions to the Supreme Court: (1) Whether  the FCA’s public disclosure bar prohibits similar claims prior to public disclosures or if it bars a claim only if the plaintiff derives his knowledge from prior disclosures, (2) if the FCA’s first-to-file bar precludes an action filed on the same facts as an earlier-filed action, and (3) if the Wartime Suspension of Limitations Act suspends the period of limitations for a civil claim like an FCA claim brought forth by a private party.

This case is already providing new tips for whistleblowers and employers alike on qui tam actions and the safeguarding value of a general release. Whistleblowers must seek counsel early on to avoid being barred from seeking qui tam action. For employers, the language of a release must be crafted effectively to prevent a lawsuit from former employees for wrongdoing or discrimination Furthermore, a court may decide to proceed with a former employee’s claims barred by an “unambiguous release” if it is in the public interest, placing priority over a private contract. [8] For the foreseeable future, it seems employers will be keeping a close eye on the proceedings of this petition.

[1] Washington Legal Foundation, “Purdue Pharma L.P. v. United States ex rel. May”, April 24, 2014, http://www.wlf.org/litigating/case_detail.asp?id=765.
[2] Ibid.
[3] 31 U.S.C. ch. 37 § 3730 (2011).
[4] Purdue petition for writ of certiorari.
[5] Fourth Circuit Opinion on Purdue Pharma L.P. v. United States ex rel. May (2013) (Radcliffe II).
[6] Karen F. Green, David W. Ogden, Jonathan E. Paikin, Kimberly A. Parker, and Howard M. Shapiro, WilmerHale, “False Claims Act Development,” April 2, 2010, http://www.wilmerhale.com/pages/publicationsandnewsdetail.aspx?NewsPubId=89367.
[7] United States ex rel. Radcliffe v. Purdue Pharma, L.P., 582 F. Supp. 2d 766, 783 (W.D. Va. 2008) (Radcliffe I).
[8] R. Scott Oswald and David Scher, “Corporate Counsel: You Might Want To Re-Examine That General Release,” Pharmaceutical Compliance Monitor, March 26, 2014, https://www.pharmacompliancemonitor.com/corporate-counsel-might-want-re-examine-general-release/6567/#more-6567.
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