By Jason N. Silberberg, Esq.
The number of False Claims Act (FCA) whistleblower actions filed has risen steeply in recent years, as the Federal government has stepped up its scrutiny of healthcare provider billing practices and personal injury attorneys have found a profitable new niche in representing provider employees who seek to blow the whistle on their employers as FCA “qui tam” relators. Providers accused of FCA violations should know, however, that they are not without the ability to strike back at former-employees-turned-qui-tam-relators by way of counterclaim.
The FCA is a powerful tool frequently used by the Federal Government to prosecute healthcare providers for the alleged submission of fraudulent claims to government payors, such as Medicare and Medicaid. More often than not, FCA suits are initiated by former employees of a provider turned-government-whistleblowers (commonly referred to as qui tam “relators“). If the Federal Government sees merit in a relator’s case, it will join the suit and the relator will receive a certain percentage of any monies recovered against the provider.
But providers are not without the power to hit back. Courts have consistently held that a defendant may file a counterclaim against a relator in an FCA action so long as its basis is “independent” of the fraud alleged by the relator. Because the FCA was designed to encourage whistleblowers to come forward, courts will not allow counterclaims that would work to punish relators for revealing alleged fraud or, likewise, that would work to “indemnify” the Defendant from the consequences of that alleged fraud. The District for the District of Columbia put it succinctly in U.S. ex rel. Miller v. Bill Harbert Intern. Const., Inc., 505 F.Supp.2d 20, at 27 (D.D.C. 2007), noting that “claims by an FCA defendant have been properly permitted where the success of the FCA defendant’s claim does not require a finding that the defendant is liable in the FCA case.” Id. (emphasis in original).
Notably, courts have allowed providers to countersue former-employee-relators for breaching the confidentiality clauses of their employment agreements where they have disclosed more information than was necessary to allege the fraud at issue in the case. (e.g. U.S. ex rel. Notorfransesco v. Surgical Monitoring Assoc., Inc., 2014 WL 7008561, at* 5 (E.D.Pa. 2014); U.S. ex rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1062 (9th Cir. 2011)). Here, too, the lynchpin for determining whether the counterclaim may go forward is whether its “success . . . rel[ies] on a finding that [the Defendant] is liable under the FCA” in the first place. Notorfransesco, 2014 WL 7008561, at* 5. Thus, if a relator were to disclose patient or customer lists within the context of an FCA action that were unrelated to the fraud at issue, this would likely provide the FCA-defendant with the grounds on which to file a robust counterclaim.
If you are an FCA defendant or the subject of an FCA-based government investigation, Frier Levitt can help. Contact us today to speak to an attorney.