November Newsletter

Stark Act • Anti-Kickback Statute • False Claims Act • Qui Tam
Co Martin Me

Federal Case Report Newsletter
November 2011

This Month: By:
MartinMerritt PLLC
• Medical City Dallas Qui Tam Case Health Law and Litigation
• FCA Deadline for Seeking Attorneys Fees
• Contesting Gov’t Intervention as Untimely 8499 Greenville Avenue
• FCA Defendant not Liable Unless it Suite 206
Dallas, Texas 75231
Participated/Encouraged the Claim. 214.952.1279
• Unsealing Qui Tam Record: Gov’t Can’t 214.503.7301 (Fax)
Hide the Ball. martin@dallasphysicianlaw.com
www.dallasphysicianlaw.com
• Purpose of Sealing
Not Board Certified by the Texas Board of Legal Specialization

UNITED STATES OF AMERICA and STATE OF TEXAS, ex rel. L. DAVID PORTER, Relator, v. HCA
HEALTH SERVICES OF OKLAHOMA, INC., AFZAL NIKAEIN, MEDICAL CITY HOSPITAL, and TEXAS
MEDICAL SPECIALITY, INC., Defendants.
Civil Action No. 3:09-CV-0992. United States District Court, N.D. Texas, Dallas Division
(October 11, 2011).

[Martin Merritt’s notes: This is a Medical City Hospital, Dallas case in which HCA, the sole non-Texas Defendant
sought to transfer venue to its home in Oklahoma. A second issue surrounded the Iqbal/ Twombly 12(b)(6)
challenges. The court declined to grant the motion where the sole arguable basis for transfer of venue,
inconvenience to witnesses, would do no more than merely shift the inconvenience of travel from HCA witnesses to
the other defendant’s witnesses. The court further expressed disfavor with transfer to Oklahoma when the plaintiff’s
allege HCA defrauded the State of Texas. ]

Opinion Excerpts. The Federal False Claims Act ("FCA") permits nationwide service of process on a defendant.
See 31 U.S.C. § 3732(a). When determining whether a federal court may exercise personal jurisdiction over a
defendant in a suit based upon a federal statute that provides nationwide service of process, the Fifth Circuit has
indicated that so long as the defendant has had minimum contacts with the United States, the Due Process clause of
the Fifth Amendment requires no further inquiry. See, e.g., Bellaire Gen. Hosp. v. Blue Cross Blue Shield, 97 F.3d
822, 826 (5th Cir. 1996); Busch v. Buchman, Buchman & O'Brien, Law Firm, 11 F.3d 1255, 1258 (5th Cir. 1994).

Since HCA is an Oklahoma resident, it is by definition a citizen of the United States. Therefore, HCA has the
requisite contacts required to exercise personal jurisdiction over Defendants under the FCA's provision for

Stark Law • False Claims Act • Anti-Kickback Statute• Qui Tam
Federal Case Report Newsletter. November, 2011
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nationwide service of process. Thus, the Court DENIES HCA's motion to dismiss for lack of personal jurisdiction.

[As to Venue] The FCA states: "Any action under section 3730 [31 U.S.C. § 3730] may be brought in any judicial
district in which ... any one defendant can be found, resides, transacts business, or in which any act proscribed by
section 3729 [31 U.S.C. § 3729] occurred." 31 U.S.C. § 3732(a). HCA, being one of the listed defendants, resides,
transacts business, and can be found in the Western District of Oklahoma, Additionally, some of the alleged
violations occurred in that district. [On the issue of whether Oklahoma is a better district] As to location of
documents, "[b]ecause modern technology permits the rapid transfer, sharing, and copying of documents, the
location of documents and business records usually receives little weight in the transfer analysis." See e.g.,
Sarmiento v. Producer's Gin of Waterproof, Inc., 439 F. Supp. 2d 725, 732 (S.D. Tex. 2006); E.E.O.C. v. Mustang
Mobile Homes, Inc., 88 F. Supp. 2d 722, 726 (W.D. Tex. 1999).

The second private interest factor is the availability of compulsory process to secure the attendance of non-party
witnesses. "Since the defendant bears the burden to demonstrate that transfer is appropriate, the defendant, `must
specifically identify the key witnesses and outline the substance of their testimony.'" Patent Compliance Group, Inc.
v. Hunter Fqn Co., No. 3:10-CV-0359-P, 2010 U.S. Dist. LEXIS 108966, at *5 (N.D. Tex. 2008) (Solis, J.) (citation
omitted). HCA has failed to identify any of its non-party witnesses who reside outside of the Northern District of
Texas or more than 100 miles from this Court. If HCA is referring to its employees as non-party witnesses, this Court
does not recognize employees in that way since they may be compelled by their employer to appear. See Patent
Compliance Group, 2010 U.S. Dist. LEXIS, at *5. For this reason, the Court finds that this factor does not weigh in
favor of transfer.

The availability and convenience of witnesses has been held to be the most significant factor in deciding a § 1404(a)
motion to transfer. See Bush v. Robertson, No. 3:05-CV-2043-L, 2006 WL 1222031, at *5 (N.D. Tex. May 5, 2006).
HCA insists a transfer to the Western District of Oklahoma is for the convenience of all parties involved. "A transfer
of venue must not simply `shift the expense and inconvenience from one party to the other.'" See Patent Compliance
Group, 2070 U.S. Dist. LEXIS, at *7. Here, HCA is one of four Defendants, among which it is the only one outside
the Northern District of Texas. The Court finds this factor disfavors transfer because it would merely shift the burden
from HCA to Porter and the other defendants.

Finally, a change of venue would simply shift the burden of travel from HCA's witnesses to the other parties'
witnesses. HCA has not shown that Oklahoma is a more convenient venue for the witnesses. In sum, the private
interest factors favor the denial of HCA's Motion to Transfer Venue to the Western District of Oklahoma. Here,
Plaintiff alleges HCA defrauded the State of Texas. Therefore, Texas and its residents have an interest in the
resolution of this case. See In re Volkswagen of Am., Inc., 545 F.3d 304, 318 (transfer analysis should consider
"those actually affected — directly or indirectly — by the controversies and events giving rise to a case.") The Court
finds the local interest factor weighs against transfer out of this district.

The Court finds that HCA has not established that the Western District of Oklahoma is a clearly more convenient
forum. Instead, the Court concludes that transfer would serve primarily to shift the inconvenience from one party to
another. HCA's motion to transfer venue is DENIED.

[On the 12 b.6 Motion to Dismiss] One type of FCA claim is the "false certification" claim. The term "false
certification" generally refers to a case in which a defendant who makes a claim for payment from the government
submits a document expressly certifying compliance with the law, when the defendant did not in fact comply with the
requirement, rendering the certification, and therefore, the claim for payment "false". Claire M. Sylvia, The False
Claims Act: Fraud Against the Government § 4.33 (Apr. 2011). In United States ex rel. Thompson v. Columbia/HCA

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Healthcare Corp, the Fifth Circuit described the "false certification" theory of FCA liability in this way: when "the
government has conditioned payment of a claim upon a claimant's certification of compliance with, for example, a
statute or regulation, a claimant submits a false or fraudulent legal claim when he or she falsely certifies compliance
with that statute or regulation." 125 F.3d 899, 902 (5th Cir.1997). The Thompson court also recognized that "claims
for services rendered in violation of a statute do not necessarily constitute false or fraudulent claims under the FCA."
Id. Rather, a claimant submits a false claim where he falsely certifies compliance with a statute or regulation, and the
government has conditioned payment upon that certification. Id.

The issue of whether the government has conditioned Medicare payment on CLIA compliance is a complex one —
requiring the Court to go outside the Complaint to extrinsic evidence, such as manuals, testimony, and administrative
rulings. To consider such evidence at this time would effectively convert this 12(b)(6) motion to a summary
judgment motion. Because this case is in the motion to dismiss stage, the Court will review the facts and allegations
in the Complaint in the light most favorable to Porter, In doing so, the Court concludes there is plausible ground on
which Porter's FCA claim rests. The Court will consider summary judgment evidence at the summary judgment
stage. Defendants' motion to dismiss Porter's FCA claim is hereby denied.

THE COMMONWEALTH OF MASSACHUSETTS, v. SCHERING-PLOUGH CORPORATION, SCHERING
CORPORATION, & WARRICK PHARMACEUTICALS CORPORATION, Civil Action No. 03-11865-PBS.
United States District Court, D. Massachusetts.
(September 23, 2011.)

[Martin Merritt’s Notes: This case is similar to/ a companion of Massachusetts v. Schering-Plough Corp., ___
F.Supp. 2d ___, 2011 WL 1575198 (D. Mass. Apr. 27, 2011); Massachusetts v. Mylan Labs., Inc., 608 F. Supp. 2d
127 (D. Mass. 2008). Much the same as “fraud” is not “mail fraud” unless the defendant placed the fraud into the
mail system; fraud underlying a false claim is not actionable where the defendant’s conduct, however fraudulent,
had nothing to do with the filing of the claim with the government. The narrow issue in this case is whether the
fraudulent activity alleged can support a False Claims Act violation, where there is no evidence the other defendant
played a part in the submission of the claims. Here, pharmacists acted independently of the defendant when they
allegedly submitted the false claims. The court, in ruling against the commonwealth observed: "Not all fraudulent
conduct gives rise to liability under the FCA. [T]he statute attaches liability, not to the underlying fraudulent
activity or to the government's wrongful payment, but to the claim for payment." Here the pharmacists' claims were
factually false because the reported Usual and Customary prices (different pricing benchmarks from WACS) were
inaccurate, but defendants had "no role in causing [the claim to be filed]."

Opinion Excerpts: The Commonwealth of Massachusetts claims that Schering-Plough Corporation, Schering
Corporation, and Warrick Pharmaceuticals Corporation caused the Massachusetts Medicaid Program to overpay for
the generic drug Albuterol by fraudulently inflating the "Wholesale Acquisition Cost" ("WAC") of the drug. The
Commonwealth argues that the spreads between defendants' reported prices and "true" WACs ranged from 100% to
700%. Albuterol is a drug used to prevent and treat respiratory problems caused by lung diseases such as asthma.

After a lengthy trial, the jury returned a verdict in favor of the Commonwealth, finding that defendants committed
fraud and violated the Massachusetts False Claims Act ("MFCA")and the Massachusetts Medicaid False Claims Act
("MMFCA"). (See Jury Verdict, Docket No. 934.) After trial, defendants filed a motion seeking judgment as a
matter of law in their favor or, alternatively, a new trial. "Not all fraudulent conduct gives rise to liability under the
FCA. [T]he statute attaches liability, not to the underlying fraudulent activity or to the government's wrongful
payment, but to the claim for payment." (internal citations and quotations marks omitted). The touchstone must still
be a false claim.

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Here the pharmacists' claims were factually false because the reported Usual and Customary prices (different pricing
benchmarks from WACS) were inaccurate, but defendants had "no role in causing that independent falsehood."
Schering-Plough Corp., 2011 WL 1575198, at *6. The independently false representations made by defendants—the
false WACs—were not presented to MassHealth with the pharmacists' claims and the pharmacists had never made
any representations about WACS. Instead, the WACs were published in First DataBank and, subsequently, were one
of four prices contained in the state's regulatory pricing file used to determine the reimbursement price. Id. at *4.
Therefore, under Prong 1, defendant is not liable for causing the submission of a false or fraudulent claim based on
the WAC unless the Court determines the regulatory pricing file to be part of the claim presented to the government
by the pharmacist. The Court has already considered and rejected this argument by the Commonwealth, and nothing
in Hutcheson or Westmoreland affects the Court's previous factual ruling.

UNITED STATES OF AMERICA ex. rel. ALICE C. YANNITY, MAUREEN C. McNABB, and TRACEE
URQUHART, -Relators,v. J&B MEDICAL SUPPLY COMPANY, INC., a Michigan corporation, Defendant. Case
No. 08-11825. United States District Court, E.D. Michigan, Southern Division.

[Martin Merritt’s Notes: This case is noteworthy for its discussion of when and under what circumstances, the court
should order the unsealing of a Qui Tam action. Civil litigators are intimately familiar with the fact that criminal
investigative agencies will not release their files during the pendency of an ongoing and contemporaneous criminal
investigation. However, in a False Claims Act Case, the government is the real party in interest. Sealing of the
government’s files could seriously impact the defense of a qui tam case against the relator. The government alleged
it should be permitted to essentially hide the ball, while the defendant attempts to defend itself with nothing but the
original complaint. ]

Opinion Excerpts: The Defendant asks the Court to unseal the entire file in this matter, inasmuch as it — as of
November 11, 2010 — had only received copies of (1) the order of October 6, 2010, (2) the complaint, and (3) the
Plaintiffs-Relators' jury demand. It notes that due process requires the Court to grant access to the complete file in
order for the Defendant to properly defend itself. Further, it asserts that to the extent the Government resists
unsealing the documents for fear of jeopardizing its ongoing investigation, the Court should conduct an in camera
review of any purportedly confidential or protected documents to assess the propriety of keeping them sealed.

Under 31 U.S.C. §§ 3730(b)(4) and (c)(3), if the Government elects not to proceed by taking over a qui tam action,
the Plaintiffs-Relators "shall have the right to conduct the action." Although the Government is entitled under such
circumstances to be served with copies of all pleadings and certain discovery material, there is no express right to
keep files sealed from the Defendant indefinitely. U.S. v. CACI International Inc., 885 F. Supp. 80, 81 (S.D.N.Y.
1995). That being said, the statute does not specifically address whether file materials beyond the complaint are to be
unsealed once the Court enters its order. Several courts, after having considered this issue, have found that a court
has the authority to retain the filed documents under seal, or conversely, to make them fully available to the parties.
See e.g., U.S. ex. Rel. Howard v. Lockheed Martin Corp., No. 1:99-285, 2007 WL 1513999, *2 (S.D. Ohio May 22,
2007); U.S. ex rel. Yannacopolous v. General Dynamics, 457 F. Supp.2d 854, 858 (N.D. Ill.2006); U.S. ex rel.
Health Outcomes Technologies v. Hallmark Health System, Inc., 349 F. Supp. 2d 170, 173 (D. Mass. 2004).

The Government opposes the Defendant's request for relief on grounds of confidentiality relating to its ongoing
investigation. It submits that the following factors should be considered by the Court when seeking to determine
whether to disclose specific judicial records: (1) the need for public access to the documents at issue; (2) the extent
of previous public access to the documents; (3) if anyone has objected to the proposed disclosure, (4) the identity of
the objecting person; (5) the strength of any asserted property and privacy interests; (6) the possibility of prejudice to

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those persons who have opposed disclosure; and (7) the purposes for which the documents were introduced during
the judicial proceedings. EEOC v. Nat'l Children's Ctr., Inc., 98 F3d 1406, 1409 (D.C. Cir. 1996). The Government
also asserts that (1) the Defendant does not argue that its request is based on the need by the general public to have
access to such documents, (2) the challenged sealed documents have not been disclosed publicly or to the Defendant,
(3) the Defendant has not asserted any property interests in the matters under seal, and (4) it has a privacy interest in
protecting the integrity of its investigation, its deliberations, as well as the thought processes of its attorneys.

Notwithstanding these assertions, the Court believes that its decision must be guided by a different standard than that
suggested by the Government. In qui tam actions that are similar in nature to the case at bar, courts are asked to
balance the need for disclosure against the harms that could arguably flow from unsealing the documents. See e.g.
Yannacopolous, supra at 858; U.S. ex rel. Mikes v. Straus, 846 F. Supp. 21, 23 (S.D.N.Y. 1994); U.S. ex rel.
O'Keefe v. McDonnell Douglas Corp., 902 F. Supp. 189, 191 (E.D. Mo.1995). Courts routinely take note of the
strong presumption in favor of public access to judicial records in resolving these cases. U.S. v. Bon Secours Cottage
Health Services, 665 F. Supp. 2d 782, 785 (E.D. Mich. 2008) ("While public access to judicial records is not
absolute, the strong presumption in favor of public access is not easily overcome. . . . Significantly, the presumption
in favor of public access to court filings is especially strong where, as here, the filings involve matters of particular
concern to the public, such as allegations of fraud against the [G]overnment.")) (internal citations and quotations
omitted).

Upon applying this analysis here, the Court finds that the Government has not sufficiently established the risk of
harm it might incur from a disclosure of the sealed records in this matter. Having reviewed the Government's
requests for extensions and the documents that have been previously furnished by the Plaintiffs-Relators, the Court is
not persuaded that an unsealing of the records would jeopardize its investigation, could cause harm to any
prospective witness, or otherwise disclose its confidential methods for examining allegations of fraud and, possibly,
criminal activity. To the contrary, the investigatory procedures discussed in the Government's motions, as well as the
documentary evidence, suggest that it has gathered routine information from entities that a lay person could readily
identify as likely sources for a FCA investigation.

As to the competing interests of the Defendant in this matter, the Court disagrees with the Government's view that the
Defendant is embarking on "an unwarranted fishing expedition," or that its request for information is "overly broad
and speculative." (Govt's. Resp. at 8). As the accused party, it is entitled to explore any relevant defenses and to
understand the basis, if any, of the allegations being lodged against it. Lockheed Martin, supra at *3. Thus, in the
absence of a showing by the Government that unsealing the record carries a significant risk of specific harm to its
interests, the Court will grant the Defendant's request to unseal the entire record in this matter.

To that end, the Government is directed to provide the Court with a written in-camera description of the items within
the currently-sealed file that it believes contain confidential or sensitive information that should be redacted or
otherwise exempted from disclosure within a period of fourteen (14) days from the entry of this order. Any failure by
the Government to do so within this time frame may result in the imposition of appropriate sanctions.

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UNITED STATES OF AMERICA ex rel. NAJMUDDIN PERVEZ, v NORTH SHORE-LONG ISLAND JEWISH
HEALTH SYSTEM, INC., NORTH SHORE UNIVERSITY HOSPITAL, LONG ISLAND JEWISH MEDICAL
CENTER, and ERNST & YOUNG LLP, Defendants.
No. 06 Civ. 1114 (DLC).United States District Court, S.D. New York.
(July 11, 2011.)

[Martin Merritt’s Notes: In this FCA/Qui Tam case, the Plaintiff/Relator successfully recovered $560,000 out of a
$2.9 million dollar settlement, but failed to move the court for an award of attorneys fees until 5 months post
judgment. The court held that the motion is time-barred, as the motion must be filed no later than 14 days from the
date of the judgment.]

Opinion Excerpts: The relator in the above-captioned action, moves for an award of expenses, attorneys' fees and
costs pursuant to 31 U.S.C. § 3730(d)(1) ("§ 3730(d)(1)") of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq.
The defendants have objected to the motion as untimely under Rule 54(d)(2)(B), Fed. R. Civ. P., and Local Rule
54.1(a).[1] Pervez contends that § 3730(d)(1) entitles him to an award of reasonable expenses, attorneys' fees and
costs. The defendants maintain that Pervez cannot recover such an award since his application is untimely pursuant
to Rule 54(d)(2)(B), Fed. R. Civ. P.

Section 3730(d)(1), titled "Award to qui tam plaintiff," provides in relevant part that "if the Government proceeds
with an action," any individual who is entitled to a share of the Government's proceeds "shall also receive an amount
for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and
costs." 31 U.S.C. § 3730(d)(1). "All such expenses, fees, and costs shall be awarded against the defendant." Id.

The Federal Rules of Civil Procedure require "[a] claim for attorney's fees and related nontaxable expenses" to be
"made by motion unless the substantive law requires those fees to be proved at trial as an element of damages." Fed.
R. Civ. P. 54(d)(2)(A). Such a motion "must be filed no later than 14 days after the entry of judgment," absent "a
statute or a court order provid[ing] otherwise." Fed. R. Civ. P. 54(d)(2)(B)(i). Unless there is "a statute or order of
the court such as a local rule, [a] district court [must] . . . find `excusable neglect' under Rule 6(b)(2) to extend the
time to move for attorneys' fees after the expiration of Rule 54's fourteen-day deadline."[2] Tancredi v. Metropolitan
Life Ins. Co., 378 F.3d 220, 227-28 (2d Cir. 2004) (emphasis supplied). [Because no excusable neglect exists, the
court denied the motion for attorneys fees as untimely.]

UNITED STATES OF AMERICA, PETER C. CURNIN, Relator, v. BALD HEAD ISLAND LIMITED, MARK
D. MITCHELL, MICHAEL K. MITCHELL, No. 7:03-CV-174-F(1).
United States District Court, E.D. North Carolina, Southern Division.

[Notes: This case illustrates the method by which a Qui Tam/FCA case must be dismissed, where the relator no
longer wished to prosecute pursuant to FRCP Rule 41 (a)(1)(A)(I). A Qui Tam action "may be dismissed only if the
court and the Attorney General give written consent to the dismissal and their reasons for consenting." 31 U.S.C. §
3730(b)(l). ]

Opinion Excerpts: “A voluntary dismissal pursuant to Rule 41 (a)(1)(A)(i) generally is self-executing, and operates
to dismiss a complaint without any action by the court. Marex Titanic, Inc. v. Wrecked & Abandoned Vessel, 2 F.3d
544, 546 (4th Cir. 1993). Under the False Claims Act, 31 U.S.C. § 3729 et seq., however, a qui tam action such as
this one "may be dismissed only if the court and the Attorney General give written consent to the dismissal and their
reasons for consenting." 31 U.S.C. § 3730(b)(l). See also U.S. ex rel. Littlewood v. King Pharmaceuticals, Inc., ___

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F.Supp.2d ___, 2011 WL 3805607 at *11 (D. Md. Aug. 29, 2011).

Here, the consent of the United States Attorney for the Eastern District of North Carolina, via an Assistant United
States Attorney, appears in the Notice of Dismissal [DE-60] itself. The Government indicates that it consents to the
dismissal of the action because

“[t]his case has an extensive procedural history, and questions have been raised about whether
service of process was properly or timely effected. The interests of justice would be best served by
allowing this case to be dismissed without prejudice.

Notice of Dismissal [DE-60] at p. 2 ("Consent of the Government").

For the reasons stated by the Government, the court consents to the dismissal ofthis action. See 31 U.S.C. §
3730(b)(1). This case is therefore DISMISSED and the Clerk of Court is DIRECTED to close this case.

UNITED STATES OF AMERICA, ex rel. and ELIN BAKLID-KUNZ, Relator, v. HALIFAX HOSPITAL
MEDICAL CENTER, d/b/a Halifax Health, a/k/a Halifax Community Health System, a/k/a Halifax Medical
Center and HALIFAX STAFFING, INC., Defendants.
Case No. 6:09-cv-1002-Orl-31DAB. United States District Court, M.D. Florida, Orlando Division.

[Martin Merritt’s Notes: When is it too late for the Government to intervene? In this Qui Tam case, the government
continued to decline to intervene, stating it had not completed its investigation, while reserving the right to
intervene. After it had delayed 15 months, the government moved to intervene. The relator did not oppose
intervention, but the defendant did. The court seems to be of the opinion (without precisely deciding) that the
relator is the only party who could object to the late intervention, because the relator would lose a percentage of the
award, if intervention were to be allowed.]

Opinion Excerpts: Case law construing the "good cause" requirement of 31 U.S.C. § 3730(c)(3) is scarce. At least
one court has found that the requirement was implemented to protect the interest of relators. In U.S. ex rel. Stone v.
Rockwell Intern. Corp., 950 F.Supp. 1046 (D.Col. 1996), the Court reviewed the Senate Report regarding the 1986
amendment to the False Claims Act, which implemented the "good cause" requirement for government intervention.
The 1986 amendments altered the reward provisions of the False Claims Act, permitting relators to recover 25 to 30
percent of the alleged fraud if they proceeded alone, but only 15 to 25 percent if the government intervened. Id. at
1048-49. Given the new reward provisions, the Stone court noted, "[g]overnment intervention late in the proceedings
may be unfair to a relator who has expended considerable resources to advance the case and then loses up to half of
the reward for bringing the action." Id. at 1049. As set forth in the motion, the Relator in this matter does not oppose
the Government's intervention. . . .[ the Defendant’s arguments mostly going to a defense on the merits, are
irrelevant.]

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UNITED STATES OF AMERICA, Plaintiff, v. JOSEPH EDELSTEIN, SUZANNE EDELSTEIN, THOMAS B.
BOND and HOLLAND PHARMACY, Defendants.
Civil Action No. 3:07-52. United States District Court, E.D. Kentucky, Central Division, Frankfort.
September 29, 2011.

[Martin Merritt’s Notes: Must a defendant actually present the claim directly to the government for liability to
attach under a former version of the FCA, or is presentation to the government contractor sufficient? In this case,
two pharmacists sold free samples, and then billed medicaid administration contractors in Kentucky for the
prescription. Under the former version of the False Claims Act, the Act expressly states one may not present the
claim to the government or its employees for payment. Here, the defendant’s moved for summary judgment on the
grounds they merely submitted the claim to an intermediary contractor.]

The Government asserts claims under the version of the FCA that was in effect at the time the Complaint was filed.
Specifically, the Government asserts claims under 31 U.S.C. §§ 3729(a)(1), 3729(a)(2), and 3729(a)(3). Congress
amended the FCA in 2009 with the Fraud Enforcement and Recovery Act ("FERA"). Pub. L. No. 111-21, 123 Stat.
1617 (2009).

Thus, for a claim under subsection (a)(1), the plaintiff need not present evidence that the defendant himself presented
the false claim to the Government, but there must be evidence that the defendant submitted a false claim and that the
claim was ultimately submitted to the Government for payment or approval. See Marlar v. BWXT Y-12, LLC, 525
F.3d 439, 445 (6th Cir. 2008)(citing Allison Engine Co., 471 F.3d at 614).

In Count I of its Complaint, the Government asserts a claim under former subsection 3729(a)(1) against Bond,
Edelstein, and Holland Pharmacy. That subsection prohibits any person from "knowingly present[ing], or caus[ing]
to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for
payment or approval. . . ." 31 U.S.C. § 3729(a)(1)(emphasis added).

To understand this argument, it is necessary to explore the case law leading up to Congress's decision to amend the
FCA with FERA. That decision was in direct response to the Supreme Court's decision in Allison Engine Co. v.
United States ex rel. Sanders, 553 U.S. 662 (2008) by which the Supreme Court sought to resolve a conflict between
the Sixth and D.C. Circuit Courts of Appeals regarding the proper interpretation of subsections (a)(2) and (a)(3) of
the FCA.

In Allison Engine, the district court had held that all three sections of former Section 3729(a) required a showing that
the false claim at issue had actually been presented to the Government for liability to attach. Allison Engine, 471
F.3d 610, 613 (6th Cir. 2006). At trial, the plaintiffs did not present any evidence that any invoice was actually
presented to the Government. Instead, they presented evidence that all of the money paid to the defendants ultimately
came from the Government. Id. at 613. The district court held that this was insufficient as a matter of law to establish
liability under each of the three subsections of the FCA and granted the defendants' motion for judgment as a matter
of law. Id. The Sixth Circuit reversed, holding that subsections (a)(2) and (a)(3) only require evidence that the false
claim at issue was ultimately "paid with government funds." Id. at 615.

In reviewing the Sixth Circuit's decision in Allison Engine, the Supreme Court stated that it conflicted with the D.C.
Circuit's holding in United States ex. rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004). 553 U.S. at
668. In Totten, the district court dismissed the complaint alleging that the defendants violated subsection (a)(1) by
submitting false invoices to Amtrak. Totten, 380 F.3d at 490. The D.C. Circuit affirmed, finding that "Amtrak is not

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the Government," and that, under the plain language of 3729(a)(1), "claims must be presented to an officer or
employee of the Government before liability can attach." Id. at 490.

With Allison Engine, the Supreme Court undertook to resolve this conflict. 553 U.S. at 668. It concluded that "it is
insufficient for a plaintiff asserting a §3729(a)(2) claim to show merely that `[t]he false statement's use . . . result[ed]
in obtaining or getting payment or approval of the claim,' or that `government money was used to pay the false or
fraudulent claim'" as the Sixth Circuit had held Id. at 665 (citations omitted). Instead, the Supreme Court held that
the focus should be on the defendant's intent. Thus, for a claim under subsection (a)(1), the plaintiff need not present
evidence that the defendant himself presented the false claim to the Government, but there must be evidence that the
defendant submitted a false claim and that the claim was ultimately submitted to the Government for payment or
approval. See Marlar v. BWXT Y-12, LLC, 525 F.3d 439, 445 (6th Cir. 2008)(citing Allison Engine Co., 471 F.3d at
614).

[Here, summary judgment was denied because the government failed to introduce evidence that the contractor passed
the claim on to the government for payment.]

THE UNITED STATES OF AMERICA, ex rel. NORMAN RILLE and NEAL ROBERTS v. ACCENTURE LLP,
et al.No. 4:04CV00985-BRW. United States District Court, E.D. Arkansas, Western Division. October 11, 2011.

[Martin Merritt’s notes/comments: Procedure upon settlement. Following settlement, the court dismissed with
prejudice the main case against the defendant with prejudice, while retaining jurisdiction over the question of how
the relators shall divide the settlement and the amount of attorney’s fees.]

Opinion Excerpts: The parties have reached an agreement to settle this litigation. The United States and Accenture
agree that each will bear its own costs, expenses and attorneys' fees. The Relators, Norman Rille and Neal Roberts,
and Accenture have not yet reached agreement as to payment of attorneys' fees, costs and expenses if any, pursuant
to 31 U.S.C. § 3730(d). The United States and the Relators have not yet reached agreement as to the relators' share
of the proceeds of the settlement of this matter pursuant to 31 U.S.C. § 3730(d). Accordingly, in light of the
Settlement Agreement, the Court rules as follows:

IT IS ORDERED that this case is DISMISSED without prejudice as to Relators with respect to the determination of
relators' share or relators' attorneys' fees, costs and expenses and otherwise with prejudice as to Relators and with
prejudice as to the United States to the extent of the "Covered Conduct" in the Settlement Agreement between the
United States, Relators and Accenture and otherwise without prejudice as to the United States. The Court retains
jurisdiction over this matter to enforce the terms of the Settlement Agreement.

The Court also retains jurisdiction over this matter for purposes of determining appropriate attorneys' fees, costs and
expenses, if any, to be paid to Relators by Accenture pursuant to 31 U.S.C. § 3730(d), and for purposes of
determining an appropriate relators' share of the proceeds of the settlement of this case pursuant to 31 U.S.C. §
3730(d). The United States and Accenture each will bear its own costs, expenses, and attorneys' fees.

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MartinMerritt PLLC

Page 9

W. HOWELL; DR. ANUPAM BISHAYEE Dr. Helene Z. Hill, App UNITED STATES OF AMERICA, EX REL. DR. HELENE Z. HILL,
v.
UNIVERSITY OF MEDICINE & DENTISTRY OF NEW JERSEY; DR. ROGER ellant.
No. 10-4364.

United States Court of Appeals, Third Circuit.
Argued: September 13, 2011.
Filed: October 20, 2011.

[Martin Merritt’s notes: Generally, opinions cannot form the basis of a fraud claim. This rule was applied here to
claims that a grant application was based upon false data. The court disagreed and granted MSJ.]

[Opinion Excerpts] At issue is whether the District Court erred in granting summary judgment for defendants, the
University of Medicine & Dentistry of New Jersey, Howell, and Bishayee, in this qui tam action under the False
Claims Act. 31 U.S.C. § 3729 et seq. We will affirm the judgment of the District Court. The University of Medicine
& Dentistry of New Jersey (UMDNJ) employed both the appellant, Dr. Helene Hill, and the appellees, Dr. Robert
Howell and Dr. Anupam Bishayee in its radiology department where they all collaborated on preliminary research to
support a grant application to the National Institutes of Health (NIH) to fund further investigation into the "bystander
effect."[1] The crux of Dr. Hill's complaint is that data used in support of this grant application was fabricated.

To establish a prima facie case under the False Claims Act (FCA) a plaintiff must prove: (1) the defendant presented
or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent;
and (3) the defendant knew the claim was false or fraudulent. Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176,
182 (3d Cir. 2001). Because "[e]xpressions of opinion, scientific judgments or statements as to conclusions which
reasonable minds may differ cannot be false," United States ex rel. Jones v. Brigham and Women's Hosp., 750 F.
Supp. 2d 358, 366 (D. Mass. 2010), FCA liability will not attach.

THE UNITED STATES OF AMERICA, et al., ex rel. MARY KATHLEEN DANNER, Plaintiffs,
v.
QUALITY HEALTH CARE INC., et al., Defendants.
Case No. 11-4026-CM-KMH.

United States District Court, D. Kansas.
October 18, 2011.

[Martin Merritt’s Notes: This case explains the proper purpose of “sealing” qui tam complaints. Here the Relator
sought dismissal without prejudice in order to conduct more investigation. She feared unsealing would allow
another to “jump” her claim. The court denied the motion to reseal the record, holding “private investigation” is
not the purpose of sealing under the qui tam provisions of the FCA.]

[Opinion Excertps] Relator's concern about continuing her private investigation misconstrues the purpose of the
sealing provisions in the FCA. The FCA requires the complaint to be filed under seal to protect the government's
investigation—not relator's private investigation. See Lujan v. Hughes Aircraft Co., 67 F.3d 242, 245 (9th Cir. 1995)
(explaining that the seal provisions of the FCA recognize the need to allow the government to fully evaluate the
private enforcement suit); United States ex rel. Pilon v. Martin Marietta Corp., 60 F.3d 995, 998-1000 (2nd Cir.
1995) (discussing purposes of seal requirements); United States ex rel. Herrera v. Bon Secours Cottage Health
Servs., 665 F. Supp. 2d 782, 785 (E.D. Mich. 2008) (concluding that "the seal was intended to allow the Government
an opportunity to adequately investigate the defendant's alleged fraud").

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MartinMerritt PLLC

Page 10

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