Whoda’ thought it – Rooting out fraud and safeguarding taxpayers from illegal conduct are among the Justice Department

The Justice Department announced Thursday that it had secured nearly $2 billion from lawsuits filed under the False Claims Act’s qui tam provisions in the year ending Sept. 30. And it promised to do more. Tony West, assistant attorney general for the civil division, said in a statement, “Rooting out fraud and safeguarding taxpayers from illegal conduct are among the Justice Department’s highest priorities.”

Given the importance being placed on False Claims Act cases, a decision out of the 9th U.S. Circuit Court of Appeals (pdf) on Wednesday should take on greater significance, especially for parties that end up settling but don’t admit to any wrongdoing. (To us, that seems to be pretty much everybody.) The 9th Circuit ruled that the False Claims Act does not preclude a settling defendant from seeking recovery and bringing claims against a third party for its alleged violations. h/t CLS

Yoo hoo, down here Mr. West, we’re waiting for you to walk that talk and join the Rigsby qui tam.  Meanwhile, Law.com has more on the 9th Circuit decision.

The case before the appeals court involved a company called Cell Therapeutics Inc., which developed a drug to treat leukemia that the Food and Drug Administration approved in 2000. But the company also marketed the drug for other uses, and a whistleblower at CTI sued the company on behalf of the government, claiming that CTI was ripping off Medicare. CTI eventually settled the case with the government and the whistleblower for $10.5 million, but it did not admit any wrongdoing.

Along the way, CTI sued a consultant outfit known today as the Lash Group, which advised CTI on what uses of the drug were reimbursable by Medicare. But the district court threw the case out, concluding that qui tam defendants could not bring such cases. The 9th Circuit reversed that decision, finding that the settlement did not preclude CTI from pursuing claims against third parties.

“Expanding the effect of a settlement to bar independent claims against third parties of claims for indemnification or contribution apart from FCA liability would inevitably tip the equation toward trial rather than settlement, even where settlement would be in the best interest of the parties,” wrote Judge Margaret McKeown for the court. “The bottom line is that a settlement agreement under the FCA should not, absent specific and clearly identified intent to the contrary, be viewed as an admission of liability that precludes non-FCA claims against third parties.”

Orrick, Herrington & Sutcliffe partner Daniel Dunne, who argued the case for CTI, hailed the decision, according to The Associated Press. “For the first time here, the Ninth Circuit has now swept away the rationale for all of that law,” said Dunne. “That’s a very important development. With hundreds of billions of dollars of stimulus money being sprinkled across the country, you can expect qui tam lawsuits to be a growth industry.

Something to think about over this football weekend –  when it comes to rooting out fraud in the insurance industry, the only play we’ve seen from Justice is a punt!

3 thoughts on “Whoda’ thought it – Rooting out fraud and safeguarding taxpayers from illegal conduct are among the Justice Department”

  1. DOJ has lawyers who know what to do on Medicare or contract fraud cases but not much flood or property insurance litigation experience.

  2. A life time job in Mississippi for any DOJ employee seeking to end fraud as we know it. Add to wit, not much on corporate court fraud as well.

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