Alerts and Updates
Discovery Ruling in District of Minnesota May Have Far-Reaching Implications for FCA Defendants
October 8, 2019
Importantly, the FCA provides for reduced damages against a defendant who, during the government’s period of investigation, provides the government with the facts relevant to the alleged misconduct.
In a concise, six-page discovery order, a federal judge in Minneapolis may have just started the proverbial shifting of tectonic plates undergirding routine defense procedures in False Claims Act (FCA) litigation by requiring a defendant in an FCA lawsuit to produce the information provided to the Department of Justice (DOJ) during the DOJ’s process of determining whether to pursue the matter.
The FCA creates liability for persons or entities found to have knowingly submitted false claims to the government or having caused others to do so. Like some other federal laws, the FCA creates a private right of action; under the act, a private party—a whistleblower or “relator”—may bring a qui tam action on behalf of the government. When initially filed, the court seals the complaint pending the government’s investigation of the case. If the government chooses, it may intervene and pursue the matter. If not, the relator may pursue the case on its own. (In either case, the relator is entitled to a percentage of the government’s recovery.)
Importantly, the FCA provides for reduced damages against a defendant who, during the government’s period of investigation, provides the government with the facts relevant to the alleged misconduct. Companies often do cooperate for at least two reasons: first, the defendant can reduce its potential exposure; second, it can help shape the narrative.
When telling their side of the story, FCA defendants routinely invoke the federal rules of evidence and other confidentiality safeguards to protect the presentation from disclosure, either to the person bringing the FCA claim or other third parties. This has generally been an effective maneuver. However, U.S. ex rel. Higgins v. Boston Scientific Corp., No. 11-cv-2453 (D. Minn. Aug. 28, 2019), may change this calculus.
In Higgins, the relator brought a qui tam action alleging that Boston Scientific Corp. (BSC)—a company that manufactures and sells medical devices—caused medical professionals to submit false claims for reimbursement to federal health care programs. During the government’s investigation, the DOJ issued an investigative demand to BSC; in response, BSC turned over documents and made presentations to the DOJ.
After the government decided not to pursue the case, the relator, Steven Higgins, opted to prosecute the case on the government’s behalf. To support his case, he sought all of the documents and information provided by BSC to the DOJ during its investigation. When BSC objected to the request, Higgins moved to compel the production of documents and the magistrate judge granted the motion. BSC objected to the magistrate’s decision and sought relief from the district judge, presenting four key arguments:
- First, BSC argued that Federal Rule of Evidence 408 shielded the documents from discovery;
- Second, BSC asserted that public policy favors protecting communications between defendants and the government in qui tam cases, as disclosure of such communications will hinder the government’s ability to settle FCA cases;
- Third, BSC contended that the Eighth Circuit created an expectation of confidentiality for information provided to the government during FCA investigations; and
- Fourth, BSC reasoned that the work-product doctrine protected the documents presented to the government.
The court disagreed with each of the arguments. Judge Ericksen found that (1) the rules of evidence do not govern discovery and the FCA does not prohibit disclosure of the information provided to the DOJ; (2) the FCA’s provisions, rather than the DOJ’s policy, dictate when material may be disclosed; (3) the Eighth Circuit case involved claims of attorney-client privilege, not the work-product doctrine; and (4) the magistrate judge was not “clearly erroneous” in determining that BSC waived the work-product privilege by intentionally disclosing the material to an adversary (the DOJ) in the litigation.
The required disclosure of materials provided to the DOJ is significant not only for the parties in this case, but for all defendants who potentially face qui tam suits, which is a significant group. In 2018, there were 645 qui tam fraud cases filed in the United States, resulting in total recovery (from both settlements and judgments) of $2.1 billion. Companies’ knowledge that what they say or provide to the DOJ during its investigation may be disclosed—and used against them—by a qui tam plaintiff later on could very well dictate how, and whether, they choose to cooperate with the government.
Although this decision from the District of Minnesota will not cause an overnight shift in how discovery is handled in FCA cases nationwide, companies should certainly expect qui tam plaintiffs to rely on Judge Ericksen’s opinion in arguing that the materials provided to the DOJ should be disclosed. Whether, and to what extent, these arguments will work remains to be seen.
For Further Information
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