How to Dismiss a Whistleblower Case under the False Claims Act
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Recently, attorney Dr. Nick Oberheiden and his team obtained two rare dismissal orders in federal False Claims Act lawsuits. Purpose of this brief article is to provide an overview about the False Claims Act concept, the liability risk, as well as effective ways to dismiss frivolous and unfair allegations.
The “Whistleblower” Defense Dilemma
Whistleblower cases brought pursuant to 31 U.S.C. 3729 (the False Claims Act) can be more than just a nuisance to honest business owners and affected professionals. Irrespective of the validity of the allegations, defendants in a qui tam action have an obligation to address the accusations and resolve the case.
Whistleblower defense attorney Dr. Nick Oberheiden has represented a plethora of businesses, company owners, and professionals in qui tam actions across the entire country and has witnessed the emotional and financial burden such forced confrontation has on named defendants. After all, a relator, who is often a former employee or business partner with ambiguous agenda, disappoints the defendant personally and legally and forces a time-consuming and expensive defense—irrespective how frivolous and absurd the allegations are on their face.
What Is the Exposure in a Whistleblower Case?
The False Claims Act at 31 U.S.C. 3729 authorizes plaintiffs to bring suit against persons and entities that present false claims to the government. In return for blowing the whistle on the offense, the law provides recovery of civil penalties that will be divided between the plaintiffs and the government. These penalties can be astronomical. Each individual violation of the False Claims Act triggers a set of different penalty and damage types ranging from $ 10,000 and more per violation to possibly also include government attorney fees and treble damages. For example, a healthcare provider who routinely refers business to an entity in violation of federal Stark Law could quickly be liable for tens of thousands of dollars per self-referral. Similarly, a toxicology lab that is found liable of paying incentives and kickbacks could face an “invoice” from the government of hundreds of thousands of dollars involving only few claims.
When Is a Business Liable in a Whistleblower Case?
A defendant in a whistleblower case is liable if the plaintiff can prove four elements by a preponderance of the evidence: A false statement or fraudulent course of conduct, made with scienter, that was material, causing the government to pay out money or forfeit money due. See, e.g. United States ex rel. Hendow v. University of Phoenix, 461 F.3d 1166, 1174 (9th Cir. 2006). Put differently, plaintiff must prove a false or fraudulent claim that was material to the decision-making process which defendant presented, or caused to be presented, to the government for payment or approval with knowledge that the claim was false or fraudulent. See, e.g. Hooper v. Lockheed Martin Corp., 688 F.3d 1037, 1047 (9th Cir. 2012).
How Specific Does the Qui Tam Complaint Have to Be?
In general terms, a motion to dismiss under Rule 12(b)(6) challenges whether a claim has factual plausibility, that is, even if the court considers all factual allegations in the most favorable light to the plaintiff, the claim simply does not allow the court to draw the reasonable inference that the defendant did something wrong or is liable. See, e.g. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Importantly, mere allegations or recitals of the elements of fraud without any substance or plausibility are insufficient to survive a motion under Rule 12(b)(6). See, e.g. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
This requirement to plead with reasonable detail is not required by many state courts, but it is required for lawsuits brought in federal court. More so, because whistleblower cases typically allege some form of fraud (e.g. billing fraud in healthcare qui tam cases), the standards expected from the plaintiff who brings the case are even higher. In fact, under Rule 9(b), a plaintiff must state the circumstances of fraud or mistake “with particularity.” Courts have held that this heightened standard requires plaintiffs alleging fraud to outline and differentiate how each defendant caused or contributed to the alleged fraudulent behavior. See, e.g. Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007).
Dismissing a Whistleblower Case in Federal Court
The vast majority of whistleblower cases are spurious, frivolous, and belong dismissed. More so, many qui tam lawsuits are poorly written and mere recitals of Wikipedia content, general law descriptions, and entirely divorced from the actual facts in the case. Luckily, the Federal Rules of Civil Procedure contain a number of avenues to dispose absurd accusations and dismiss unfounded False Claims Act cases relatively early on in a case.
In general, there are two ways to arrive at a dismissal decision. First, after a qui tam is filed, the government attorney has an obligation to investigate each complaint to determine whether the government supports and intervenes into the case (essentially helps the relator) or gives notice of non-intervention. In the latter case, when the government concludes not to intervene, the qui tam styled “United States of America ex. rel. v. You” enters the ordinary private civil litigation process. Just like an ordinary federal litigation matter between two non-governmental parties, plaintiff has an obligation to serve the complaint on the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure to give the defendants notice of a lawsuit against them. Concurrently with defendants’ response to the lawsuit or shortly thereafter, the defendants have a first opportunity to ask the court to dismiss the case.
- Rule 12(b)(6): The most common approach in federal civil cases is to ask the court to dismiss the case pursuant to Rule 12(b)(6). Such motion questions whether the claims made, even if seen in the most favorable light for the plaintiff, state any claim to relief that is plausible on its face. In other words, mere generic recitations of the law without any factual support may lead a judge to see insufficient factual content and grant a dismissal. This was the court’s conclusion in United States ex rel. A.S. v. Client, in which the court saw no factual basis to maintain a claim and granted the request made by Nick Oberheiden and his team and dismissed the whistleblower case.
- Rule 12(c): Rule 12(c) provides that a party may move for judgment on the pleadings after the pleadings are closed. A judge must decide a motion to dismiss under Rule 12(c) with the same favorable perspective as under Rule 12(b)(6), that is, accept all allegations as true and correct. The court granted a Rule 12(c) motion in the case of United States ex rel. B.K. v. Client after Nick Oberheiden and his team “clearly establishe[d] on the face of the pleadings that no material issue of fact remains to be resolved and that is entitled to judgment as a matter of law.”
- Rule 9(b): Because qui tam cases allege fraud, they are subject to the strict pleading Rule 9, which requires a plaintiff to plead fraud detailed enough and with enough sufficient factual basis to meet the required standard of making fraud allegations “with particularity.” In both cases cited above, Nick Oberheiden and his team convinced the federal judge that the complaints against Nick’s clients fell short of that particularity requirement and were essentially just general allegations lacking any specificity.
About Dr. Nick Oberheiden
Nick focuses his practice on federal litigation matters, including civil and criminal government investigations and whistleblower defense cases. Nick has represented businesses of all sizes, business owners, and professionals against allegations of fraud in federal False Claims Act and Civil Investigative Demand proceedings across the United States. Notably, Nick has argued favorable outcomes in qui tam cases before the Washington D.C. headquarters of the United States Department of Health and Human Services, the Office of Inspector General, and the Department of Justice as well as before U.S. Attorney’s Offices in all parts of the country.
- 100% Avoidance of Criminal Charges
- 95% Avoidance of Any Civil Liability
If you or your business is under investigation by the OIG, FBI, the local U.S. Attorney’s Office or otherwise subject to a False Claims Act matter, feel free to call Nick directly at 888-680-1745 or contact him online for free advice, including on weekends.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.