Qui Tam Relationships – The Government and Relators – It’s Complicated

By James P. Ellison –

The relationship between the federal government and qui tam relators is defined in part by statute and case law, but that law does not fully capture the often complex and varying relationship between qui tam relators and the government on whose behalf they bring suit. 

Relationship on the Rocks:  The March 6, 2009 announcement from the U.S. Attorney’s Office for the Southern District of New York that, the day before, it had achieved  closure on a settlement it had reached with a defendant in the fall of 2007 showed that  sometimes the government relator relationship can be a rocky one.

According to the release, the government had agreed to terms with Weill Medical College of Cornell University over a year ago, but the relator who initiated the lawsuit objected to the settlement, and challenged it in court.  That challenge was denied by Judge William H. Pauley on March 5, 2009, allowing the settlement to move forward.  Under the terms of the settlement Weill Medical College will pay $2.6M to settle civil fraud charges arising out of federal grant applications.  The government alleged that the principal investigator for those grants failed to disclose the full extent of her research activities (which according to the government exceeded 100% of her available time). 

Indeed, the government can even dismiss a qui tam case over the objection of a Relator.  In Hoyte v. American National Red Cross, the Department of Justice successfully moved to dismiss a qui tam case, over the strenuous objection of the Relator.  On March 4, 2008, the D.C. Circuit ruled that the Justice Department has virtually unfettered discretion to dismiss a qui tam action, even if the government has not intervened in the case.  (Hyman, Phelps & McNamara, P.C. represented the defendant in the case.)

Lending a Helping Hand: The February 25, 2009 announcement out of Main Justice announcing the unsealing of suit against Forest Laboratories for alleged off-label promotions and ant-kickback violations shows how the government can help.

Not only did the government intervene in two existing qui tam lawsuits, but it filed its own Complaint in Intervention.  We have previously noted (here and here) that a number of courts have imposed stricter pleading requirements on relators who bring off-label cases.

Frequently, the relator (often a former sales employee) does not have access to claims data (which would be in the possession of the physician or other practitioner who submitted the claim for reimbursement to a federal healthcare program).  In contrast, the government has that information, and apparently can put it into easy to read charts, thus making challenges to the specificity of fraud allegations considerably more difficult. 

Too Early toTell: Lastly, while the February 19, 2009 press release out of the U.S. Attorney’s Office for the Northern District of California announcing the government's intervention in another off-label case is seemingly a statistically bad sign for defendants, Scios Inc. and Johnson & Johnson (according to 2008 statistics, 98.5% of the money recovered last year was in cases in which the U.S. intervened), it is not clear what this means for the government relator relationship.  The press release notes that: “The qui tam or whistleblower actions contain additional allegations.  However, the United States is only intervening with regard to allegations that Scios marketed the drug Natrecor for serial infusions in outpatient setting.”  On one hand, the relators may be pleased that they have the government’s help on those particular allegations.  On the other hand, if – down the road – the the government seeks to settle the case without giving value to the relator-only allegations, things could get complicated.