1st Circ. Flips $34M FCA Award To New Whistleblower
Law360 (May 6, 2019, 11:21 PM EDT) -- The First Circuit on Monday rejected a lower court's view of how the federal government learned of allegedly fraudulent billing by drug-testing giant Millennium Health, flipping a $34 million False Claims Act award from one whistleblower to another.
In a unanimous opinion, the First Circuit found that a whistleblower named Mark McGuire alerted the government to illicit billing that generated the bulk of a $256 million settlement with Millennium in 2015. Although a now-deceased whistleblower named Robert Cunningham filed an earlier FCA suit against Millennium, it was McGuire's suit that identified the "essential facts" underlying the settlement, according to Monday's opinion.
The settlement stemmed from allegedly fraudulent schemes involving "custom profiles" of urine samples and free "point-of-care cups" that have been characterized as kickbacks. Cunningham's complaint was lacking in information on those schemes, but McGuire's complaint described them in detail, making him the "first-to-file" whistleblower entitled to a share of Millennium's payout, the opinion said.
"McGuire has established that he was the first to file a claim alleging the essential facts of Millennium's custom profile fraud and point-of-care cup kickback scheme," the First Circuit wrote. "He has also adequately pleaded that the government's recovery from Millennium constitutes the proceeds of the . . . settlement of the claims he brought."
Thomas M. Greene of Greene LLP, counsel for McGuire, told Law360 on Monday that his client learned of the alleged fraud while working as a hospital lab director and interacting with Millennium employees.
"Cunningham was claiming he was first to file, and McGuire was claiming he was first to file, and the [First Circuit] took that on and found as a matter of law that McGuire was first to file," said Greene, saying he was pleased with the decision. "So the $34 million that's being held by the government as relator's share goes to McGuire."
Several other whistleblowers have filed separate suits against Millennium. The federal government has left it to the whistleblowers and the courts to sort out how the award should be divvied up. According to Monday's opinion, McGuire has "reached an agreement" with some of the whistleblowers, but others have aligned with Cunningham's estate.
The First Circuit's decision on Monday overturned its own precedent on a technical aspect of the FCA. At issue is whether the FCA's first-to-file provision is "jurisdictional" or "nonjurisdictional."
Monday's opinion concluded that the provision is nonjurisdictional, which limits the first-to-file analysis to allegations within FCA complaints and excludes extrinsic information. That's important because a lower court cited "documents and information [Cunningham] provided the government, which are not contained in his complaint," to conclude that Cunningham was the first to alert the government to Millennium's alleged fraud.
The First Circuit cited several reasons for revisiting its precedent, including a 2015 decision by the U.S. Supreme Court in Kellogg Brown & Root Services Inc. v. Carter, which dealt partly with the first-to-file provision. The high court's decision contained "a clear implication ... that the court did not consider the first-to-file rule to be jurisdictional," the First Circuit wrote.
According to Monday's opinion, the D.C. and Second Circuits have also found the first-to-file provision to be nonjurisdictional after the KBR v. Carter decision, while the Fourth Circuit has held that it remains jurisdictional.
Attorneys for Cunningham's estate could not immediately be reached for comment on Monday.
U.S. Circuit Judges Juan R. Torruella, Sandra L. Lynch and O. Rogeriee Thompson sat on the panel.
McGuire is represented by Thomas M. Greene, Michael Tabb and Ryan P. Morrison of Greene LLP.
Cunningham's estate is represented by Michael B. Bogdanow and Robert Foster of Meehan Boyle Black & Bogdanow PC.
The case is McGuire v. Estate of Robert Cunningham et al., case number 17-1106, in the U.S. Court of Appeals for the First Circuit.
--Editing by Michael Watanabe.
Read more at: 1st Circ. Flips $34M FCA Award To New Whistleblower - Law360
Law360 (May 6, 2019, 11:21 PM EDT) -- The First Circuit on Monday rejected a lower court's view of how the federal government learned of allegedly fraudulent billing by drug-testing giant Millennium Health, flipping a $34 million False Claims Act award from one whistleblower to another.
In a unanimous opinion, the First Circuit found that a whistleblower named Mark McGuire alerted the government to illicit billing that generated the bulk of a $256 million settlement with Millennium in 2015. Although a now-deceased whistleblower named Robert Cunningham filed an earlier FCA suit against Millennium, it was McGuire's suit that identified the "essential facts" underlying the settlement, according to Monday's opinion.
The settlement stemmed from allegedly fraudulent schemes involving "custom profiles" of urine samples and free "point-of-care cups" that have been characterized as kickbacks. Cunningham's complaint was lacking in information on those schemes, but McGuire's complaint described them in detail, making him the "first-to-file" whistleblower entitled to a share of Millennium's payout, the opinion said.
"McGuire has established that he was the first to file a claim alleging the essential facts of Millennium's custom profile fraud and point-of-care cup kickback scheme," the First Circuit wrote. "He has also adequately pleaded that the government's recovery from Millennium constitutes the proceeds of the . . . settlement of the claims he brought."
Thomas M. Greene of Greene LLP, counsel for McGuire, told Law360 on Monday that his client learned of the alleged fraud while working as a hospital lab director and interacting with Millennium employees.
"Cunningham was claiming he was first to file, and McGuire was claiming he was first to file, and the [First Circuit] took that on and found as a matter of law that McGuire was first to file," said Greene, saying he was pleased with the decision. "So the $34 million that's being held by the government as relator's share goes to McGuire."
Several other whistleblowers have filed separate suits against Millennium. The federal government has left it to the whistleblowers and the courts to sort out how the award should be divvied up. According to Monday's opinion, McGuire has "reached an agreement" with some of the whistleblowers, but others have aligned with Cunningham's estate.
The First Circuit's decision on Monday overturned its own precedent on a technical aspect of the FCA. At issue is whether the FCA's first-to-file provision is "jurisdictional" or "nonjurisdictional."
Monday's opinion concluded that the provision is nonjurisdictional, which limits the first-to-file analysis to allegations within FCA complaints and excludes extrinsic information. That's important because a lower court cited "documents and information [Cunningham] provided the government, which are not contained in his complaint," to conclude that Cunningham was the first to alert the government to Millennium's alleged fraud.
The First Circuit cited several reasons for revisiting its precedent, including a 2015 decision by the U.S. Supreme Court in Kellogg Brown & Root Services Inc. v. Carter, which dealt partly with the first-to-file provision. The high court's decision contained "a clear implication ... that the court did not consider the first-to-file rule to be jurisdictional," the First Circuit wrote.
According to Monday's opinion, the D.C. and Second Circuits have also found the first-to-file provision to be nonjurisdictional after the KBR v. Carter decision, while the Fourth Circuit has held that it remains jurisdictional.
Attorneys for Cunningham's estate could not immediately be reached for comment on Monday.
U.S. Circuit Judges Juan R. Torruella, Sandra L. Lynch and O. Rogeriee Thompson sat on the panel.
McGuire is represented by Thomas M. Greene, Michael Tabb and Ryan P. Morrison of Greene LLP.
Cunningham's estate is represented by Michael B. Bogdanow and Robert Foster of Meehan Boyle Black & Bogdanow PC.
The case is McGuire v. Estate of Robert Cunningham et al., case number 17-1106, in the U.S. Court of Appeals for the First Circuit.
--Editing by Michael Watanabe.
Read more at: 1st Circ. Flips $34M FCA Award To New Whistleblower - Law360