The lawyers representing a whistleblower who claims Verizon bilked a group of federal agencies, including the Justice Department and Federal Aviation Administration, are trying to keep alive the suit in the face of a challenge from the telecommunications company.
Here's a central issue in the dispute: whether whistleblower Stephen Shea's complaint is too similar to the suit he brought against Verizon in 2007.
Shea collected tens of millions of dollars for his role in the earlier case against Verizon. The company settled last year for $93.5 million over allegations of improper billing for taxes and surcharges. Verizon didn't admit liability in the suit, which was only named the General Services Administration as a victim.
Verizon's lawyers, Wilmer Cutler Pickering Hale and Dorr partners Randolph Moss and Jennifer O'Connor, argue Shea's other suit in Washington's federal trial court, filed in 2009, alleges the same conduct and should be dismissed. Verizon's attorneys call Shea's second complaint a "near carbon copy" to the first one "that brings no new information to bear." A trial judge hasn't ruled on the request.
Yesterday, Shea's lawyers filed papers to try to convince the judge, Gladys Kessler, that the second suit is "materially distinct" and should be allowed to move forward. The attorneys, including Christopher Mead of Washington's London & Mead, argue that the second complaint against Verizon focuses on other federal agencies not named in the first suit.
The litigation explores the scope of several rules under the False Claims Act. The law permits whistleblowers to sue on behalf of the government. In some cases, prosecutors will get involved, sharing the proceeds of any award with the person who first brought the fraud allegations to light.
Shea's attorneys said, among other things, that the False Claim Act's "first to file rule," which prohibits a second whistleblower suit based on the same allegations in an earlier case, isn't in play in the case.
Shea, his lawyers noted, filed both lawsuits. There's nothing in the law, the lawyers argue, that blocks a person from filing two different whistleblower suits against the same company. The "first to file" rule promotes prompt disclosure of fraud.
Under the rule, the first person to file suit potentially gets to reap the benefits down the road. That's a big incentive not to dawdle. The rule also benefits companies by not forcing them to fight multiple cases that allege the same illegal conduct.
Whistleblowers "can’t race themselves to the courthouse," Mead said in court papers. "That incentive only makes sense if the first-to-file rule applies to third-parties unrelated to the original relator."
The government has an interest in stopping "piecemeal litigation," Shea's attorneys said. But the government "does not have an interest in discouraging relators from discovering additional fraud and coming forward with knowledge of that wrongdoing."
Shea's attorneys argue that Verizon could have tried to consolidate the two cases. Verizon, instead, only settled the first suit. The Justice Department intervened in Shea's first suit but has not jumped into the latest litigation.
The government, Shea's lawyers said, in an "ideal world" could have looked at every one of Verizon's federal contracts after the first whistleblower suit was filed. "But the government may not have investigated the other contracts for any number of reasons, including a lack of resources," the attorneys said.
Verizon's lawyers also contend Shea's newer suit is blocked because the "conclusory information" he has about the contracts was already publicly available. "He found it on the Internet," Verizon's attorneys said in court papers. (The "public disclosure bar" that governs whistleblower suits prohibits a person to base a complaint on information that's in the public domain.)
Shea's attorneys said yesterday in their court papers that "the publicly available contract information that Shea relied on in part contains no allegations of fraud, nor does Verizon suggest that it does."
Verizon's public disclosures, Shea's lawyers said, "never revealed a true state of facts—they did the opposite: the Verizon contract information demonstrates that Verizon repeatedly attempted to deceive the United States about the illegal surcharges."