The BLT: The Blog of Legal Times

Justices Limit Qui Tam Cases But New Health Care Law Does Opposite

The new, landmark health care reform law made its first appearance in a Supreme Court decision Tuesday involving whistleblower claims under the federal False Claims Act.

In Graham County Soil and Water Conservation District v. U.S. ex rel. Wilson, Justice John Paul Stevens, writing for a 7-2 majority, held that whistleblowers whose allegations are based on publicly disclosed information in state or local reports and investigations are barred from filing so-called qui tam lawsuits.

The Court’s decision—which also drew the first dissenting opinion by Justice Sonia Sotomayor-- said the act’s public disclosure bar was not limited to federal sources of information.

But as Justice Stevens noted, both in his opinion and his summary on the bench, the Patient Protection and Affordable Care Act, signed by President Obama on March 23, limits the public disclosure bar to federal sources of information. The new act, however, is not retroactive, so the Court’s decision will apply to claims filed before its effective date.

The False Claims Act authorizes both the attorney general and private qui tam “relators” to recover from anyone who makes false or fraudulent claims for payment to the United States. Karen Wilson, a Graham County employee, had alleged that the conservation district and a number of local and federal officials had violated the act by knowingly submitting false claims for payments for flood repair work authorized in 1995 contracts with the federal government. Wilson’s suit was based, in part, on a state audit report.

The Supreme Court case focused on the meaning of the word “administrative” in the act’s provision which bars qui tam actions based on public disclosure of allegations or transactions in “a congressional, administrative, or Government Accounting Office [GAO] report, hearing, audit, or investigation.” After examining the text, history and public policy behind the act, the majority concluded that the word encompassed disclosures made in state and local sources.

Justice Sotomayor, joined by Justice Stephen G. Breyer, dissented, saying the act’s plain text and Congress’ intent to expand qui tam actions suggested a more reasonable reading of the provision was to limit the public disclosure bar to federal sources of information.

John Boese, partner in the Washington office of Fried, Frank, Harris, Shriver & Jacobson, who filed a brief supporting the county on behalf of the Washington Legal Foundation, said the majority had the correct interpretation. “To say that a qui tam relator can take what’s in a public state agency report, file a claim and get 30 percent of what the government recovers doesn’t make sense from a public policy perspective,” he said. The new health care reform act takes effect May 23, he added, so claims submitted prior to that date will be affected by the Court’s decision.

FTC's Pay for Delay Case Against Cephalon Moves Forward

The Federal Trade Commission's crusade against "Pay for Delay" patent settlements between brand name and generic drug makers got a boost yesterday when a district court judge refused to dismiss a 2008 antitrust suit against Cephalon Inc.

The case, now consolidated in U.S. District Court for the Eastern District of Pennsylvania, involves reverse payment settlements over the drug Provigil. The medicine, used to treat excessive sleepiness in people with sleep disorders, had sales of over $920 million in 2008.

The FTC in court papers describes the case as “a straightforward story of anticompetitive conduct.”

In late 2002, four generic companies filed drug applications with the Food and Drug Administration to make generic versions of Provigil. Each claimed it could make the drug without infringing Cephalon’s only remaining unexpired patent on Provigil – narrow coverage related to distribution of a certain particle sizes.

Cephalon sued the companies - Barr Laboratories, Inc.; Mylan Laboratories, Inc.; Teva Pharmaceutical Industries, Ltd., and Ranbaxy Pharmaceuticals, Inc.– for patent infringement, but by 2005, generic competition seemed imminent.

According to the FTC, “Cephalon therefore entered a series of settlement agreements under which it compensated each generic company – more than $200 million collectively – to abandon its patent challenge and forgo entry until April 2012.”.

The FTC charged that this violates Section 1 of the Sherman Act and should be declared a per se antitrust violation. The consolidated case includes other plaintiffs as well – King Drug Co., Vista Health Plan, and Apotex Inc.

“To date, neither the Third Circuit nor any judge in this district has established a framework under which reverse payment patent settlements should be analyzed,” wrote Judge Mitchell Goldberg in his March 29 decision refusing to dismiss the case.

After reviewing cases in other circuits, including at least one involving the FTC, Goldberg found “sufficient facts have been alleged to establish that the agreements in question grant greater rights than those conferred under the patent... plausible antitrust allegations have been pled.”

Cephalon is represented by Wilmer Cutler Pickering Hale and Dorr partners James Burling, Hartmut Schneider and special counsel Wendy Terry. Burling could not be reached for comment.

FTC lawyers include Markus Meier, Bradley Albert, Elizabeth Hilder, Saralisa Brau, Mark Woodward and Jeffrey Bank.

FTC Chairman Jon Leibowitz in a statement said that the decision “seems to reflect a growing understanding—first in Congress now in the courts—that brand name drug companies must not be allowed to make pay-offs to their generic competitors to keep low-cost generic drugs off the market. These deals are costing American consumers $3.5 billion a year in higher drug costs.”

The health care bill included a provision strongly supported by the FTC that would have banned most reverse payment deals, but it was removed from the legislation in the final days of negotiations.

Prosecutors, Defense Snipe Over Speedy Trial Clock in FCPA Case

Justice Department prosecutors are fighting back against the demands of some criminal defense lawyers that the government not be allowed to control the pace of the department's most ambitious Foreign Corrupt Practices Act case, unfolding in federal district court in Washington.

Twenty-two executives and employees in the arms dealing business have been charged in the U.S. District Court for the District of Columbia with attempting to bribe a fictitious foreign official in order to secure a cut of a $15 million contract. The case is the largest-ever prosecution of individuals for FCPA crimes and marks the first large-scale use of an undercover sting in the department’s fight against foreign corruption.

Defense lawyers for 18 of the 22 defendants are challenging the prosecution’s request to stop the speedy trial clock, saying that the government has had ample time to investigate and prepare the case for trial. Charges were announced in January, capping an investigation that lasted for more than two years. Most of the defendants were arrested that month at a trade show in Las Vegas. Some of the defense lawyers have said they are prepared to go to trial this summer.

Prosecutors want to stop the speedy trial clock, saying that the cases are complex and likely involve novel legal issues. To support the "complex" designation of the case, the prosecution argues that the cases include "voluminous" discovery and a "wide-ranging" alleged conspiracy. The prosecution has not announced whether it plans to group certain defendants together for trial or go at defendants one by one.

“If these cases will involve litigation over the scope of the charged conspiracies, discovery issues and various substantive legal issues—as the defense has claimed they will—the cases should be designated complex,” Assistant Chief Hank Walther of the department’s Fraud Section said in court papers filed Monday night. Assistant U.S. Attorney Matthew Solomon of the Fraud & Public Corruption Section of the U.S. Attorney’s Office in the District of Columbia was also on the filing.

In the court papers, the prosecutors quote snippets of statements made in recent court hearings by several of the defense lawyers, including O’Melveny & Myers partner Kenneth Wainstein, Orrick, Herrington & Sutcliffe partner Michael Madigan and Mayer Brown partner David Krakoff. The prosecution quotes the lawyers to build an argument that the defense demands for information justify tolling the speedy trial clock.

Federal defendants have a right to trial within 70 days of an indictment. Designating a case "complex" could block any defendant's request for a trial within the speedy trial window. (Alternatively, prosecutors have also asked that time be excluded from the clock to allow for trial preparation.)

“The defense cannot have it both ways,” Walther and Solomon wrote in yesterday’s filing. “If this case will involve significant litigation over legal matters related to entrapment, the scope of the FCPA, discovery, and/or the scope of the conspiracy, then the cases should be designated as complex.”

Judge Richard Leon of the federal district court in Washington has scheduled a hearing for May to assess the speedy trial dispute. Until then, the speedy trial clock has been temporarily stopped.

Lovells to Shutter Chicago Office Before Hogan Merger

Lovells is beginning the process of closing down its Chicago office ahead of the firm's May 1 merger with Hogan & Hartson. The decision, which still has to be approved by Lovells' partners, was made by the management team of Lovells, though Hogan & Hartson has been informed of it.

In a statement today, Lovells managing partner David Harris said the decision to shut down the office came after reviewing the seven-partner office's finances.

“This is an area which has seen changes in work patterns and the office has been affected by a number of significant conflict situations,” Harris said. “Despite the best efforts of partners in Chicago and elsewhere, this has had an impact on the office's overall performance in recent years and the position is not expected to change.”

The closure is scheduled to be completed by Oct. 31.

For Hogan, which does not have a Chicago office, closing the office means the firm will not add a presence in the Windy City when it merges with Lovells. That said, according to Lovells Web site, the merger will add about 45 lawyers to Hogan's New York office.

The loss of the Chicago office is the latest in a series of departures from both firms as the merger deadline looms nearer.

In January, three counsel and of counsel left Lovells' New York office for Robins, Kaplan, Miller & Ciresi, citing conflicts. Hogan's Warsaw office also opted out of the Hogan-Lovells merger when it joined K&L Gates earlier this month. And last week, news broke that 18 partners left Hogan's Berlin office to start their own firm, Raue, instead of joining the megafirm.

The Morning Wrap

Hostile Reception: U.S. Supreme Court justices didn't embrace with open arms "foreign-cubed" securities fraud class actions, The National Law Journal reports. The Court heard arguments in Morrison v. National Australia Bank, brought by Australian investors in U.S. courts to challenge statements made by Australia's largest bank. The district and appellate courts both found no U.S. jurisdiction over the suit.

9 Teens Charged: Nine teens are charged in Massachusetts with crimes that include stalking and harassment tied to the suicide of a 15-year-old classmate, The Boston Globe reports.

iPhone Wars: Apple Inc. is planning to produce a new iPhone that could open up sale of the device to phone carriers other than AT&T, The Wall Street Journal reports. The new iPhone would work on the CDMA wireless network--the system that AT&T's chief competitor, Verizon Wireless, uses.

Staying Away: The Tribal Supreme Court Project isn't complaining that the U.S. Supreme Court has not granted review of any Indian law cases in the current term, according to a report in The National Law Journal. Fearing hostile justices, some attorneys shy from the court even after a loss. The project has a zero-for-five record before the Roberts Court. "We view this Court as not favorable on our issues," Richard Guest, senior staff attorney at the Native American Rights Fund, said.

Police Lab Scandal: Prosecutors in San Francisco have already dropped more than 350 drug cases and more than a thousand cases are under review following a scandal in the police crime lab, The Recorder reports. Police shut down the lab in early March amid allegations that a former technician had stolen and used cocaine from evidence samples she tested.

Venable Adds New Partner to M&A Practice

Former DLA Piper partner Anthony Rosso has joined Venable’s mergers and acquisitions practice in its Baltimore office.

Rosso, 42, has counseled clients on more than 40 merger, acquisition and disposition transactions in the past four years. He focuses mostly on mid-market deals. His clients have included RONCO Consulting Corp., which was acquired by defense contractor Wackenhut Services Inc. in 2008, and private equity firm Allied Capital Corp.

He expects mid-market activity to pick up during the second half of 2010. “There are a lot of good companies ready to move to the next level,” Rosso said. “There’s a lot of pent-up demand.”

Rosso, who worked in DLA Piper’s Baltimore office for the previous 15 years, joins Venable as a partner. According to this year’s Am Law 100 survey, revenue in 2009 remained basically flat for Venable. The firm has about 85 lawyers in its business transactions group, said public relations manager Charles Wilkins.

Metro Wreck Headed for Trial in 2011

Lawyers working on the fallout from the fatal Washington Metro wreck in June 2009 have agreed to go to trial next year to begin resolving victims' suits for compensation.

In a hearing today in the U.S. District Court for the District of Columbia, lawyers for the plaintiffs and for the defendants agreed on a Sept. 20, 2011, date. That’s when they plan to bring at least one test case before a jury, with the possibility of settling other cases based on the outcome, said Patrick Regan, a name partner in Washington’s Regan, Zambri & Long and a lawyer for some of the plaintiffs.

More than 20 lawyers piled into the courtroom to update Judge Reggie Walton on the progress they’re making in the case. William Gandy, who is leading the defense team for the Washington Metropolitan Area Transit Authority, told Walton that the trial schedule is “ambitious” but he did not object. Instead, Gandy, a partner at Wilson Elser Moskowitz Edelman & Dicker, asked that Walton hold a conference every 60 days to gauge whether the case is on track. Walton agreed.

Nine people were killed and 76 were injured when two trains collided on Metro’s Red Line last summer. About 20 lawsuits filed on behalf of the passengers or their estates are being consolidated for the purpose of gathering and sharing evidence. Together, the lawsuits could mean millions in damages for the transit system and other defendants.

Lawyers for the passengers will lay out their case anew Thursday, when they’re scheduled to file a master complaint covering all the plaintiffs. They’ll have until May 2011 to finish the discovery process. U.S. Magistrate Judge John Facciola — whom Walton today called “our guru in that field” — has been charged with managing discovery.

The plaintiffs’ lawyers said their master complaint will include one new defendant: Maryland-based engineering company ARINC Inc., a WMATA contractor. A spokeswoman for the company did not have an immediate comment. Alstom Signaling Inc. and Ansaldo STS USA Inc. are also defendants in the cases.

Panel: Courts Wrong to Downplay Racial Effects

For many Americans, the election of President Barack Obama symbolized the beginning of a new post-racial era. For a panel of six law professors speaking at Georgetown University Law Center on Friday, this line of thinking poses a serious threat to a half-century of racial progress.

Mario Barnes, a University of California, Irvine School of Law professor, said the U.S. Supreme Court under Chief Justice John Roberts Jr. has essentially said “get over it” in ruling on laws made to help minorities overcome racial barriers. He highlighted the case of Parents Involved in Community Schools v. Seattle School District No. 1 , a 2007 ruling that struck down the district’s use of racial tiebreakers to maintain racial diversity when divvying up students among schools.

Barnes said the goal of a race-neutral society envisioned in Brown v. Board of Education has not yet been met. Amid ongoing racial inequality in education and the workforce, he said the legal profession must remain skeptical of the “utopian belief in post-racialism,” warning that it could “lead to color blindness.”

“Frank acknowledgment of that reality is a detriment to our ideals,” said Gerry Spann, a Georgetown University Law Center professor, but it has to be done.

Trina Jones, another Irvine law professor, said judges should take into account the historical effects of racism on today’s society when looking at the potential impact of striking down laws meant to close racial disparities.

Anthony Alfieri, who focused on problems in inner cities, said a “school to jail pipeline” has essentially been created for too many minorities across the country. "We have kids being kicked out of middle school and high school and being condemned to a life of incarceration," said Alfieri, a University of Miami School of Law professor.

Georgetown Law hosted the panel as part of Friday’s symposium on “Post-Racialism in American Law and Lawyering.”

Kevin Johnson, dean of the University of California, Davis School of Law, extended the discussion to the role of racial profiling of immigrants. He said courts have failed to uphold the Supreme Court’s standard in U.S. v. Brignoni-Ponce, which said it is a Fourth Amendment violation to stop a vehicle, except at the border itself, for the purpose of questioning the occupant’s immigration status without specific facts and reasonable suspicion.

Johnson said this precedent has been violated repeatedly by the U.S. Border Patrol in its efforts to curtail illegal immigration. He said he hopes to see the issue highlighted more as Congress dives back into the immigration reform debate.

Angela Onwuachi-Willig, a University of Iowa College of Law professor, spoke specifically about hairstyle discrimination, an issue she said ties to general attitudes about race in the U.S. In multiple cases, she said courts have upheld bans by employers regarding particular hairstyles natural to black women in violation of the Civil Rights Act of 1964. "Braids, locks and twists should be protected under Title VII," she said.

D.C. Bar Gears Up for Election Season

The D.C. Bar nominations committee has announced who is in the running for some of the bar's top leadership positions. Vying for president-elect for the 2010–2011 term are Darrell Mottley, a partner at Banner & Witcoff, and Laura Possessky, a name partner at Gura & Possessky.

Mottley (Virginia Tech, George Washington Law) focuses on patent procurement and litigation in the computer, e-commerce, electrical, mechanical technologies, and medical device areas. He is currently serving as chair of the D.C. Bar Council on Sections.

Possessky (U. Penn, Georgetown Law) chairs Gura & Possessky’s media and entertainment practice and advises clients on contract negotiations, deal structuring, intellectual property, media transactions, and rights protections issues. She is currently a member of the D.C. Bar’s board of governors.

The president-elect serves for one year before becoming president, and continues in office a third year as immediate past president. Kim Keenan of The Keenan Firm is currently serving as D.C. Bar president. Ronald Flagg, a partner at Sidley Austin, is the president-elect.

Under the D.C. Bar’s by-laws, the nominations committee names at least two and no more than three candidates for each position up for election. If a member of the D.C. Bar is not tapped by the nominations committee, he or she may still appear on the ballot by submitting a petition with at least 100 signatures of active bar members by 5 p.m. on April 12. Petitions can be obtained here or by contacting Ngoc Huynh in the bar’s executive office at 202-737-4700, ext. 3221.

Running for bar secretary are Habib Ilahi, of counsel at Schertler & Onorato, and Patrick McGlone, vice president and deputy general counsel at ULLICO Inc. For treasurer candidates, the committee named Andrea Ferster, solo practitioner, and Sherrese Smith, legal adviser for media, consumer and enforcement issues at the Federal Communications Commission. Both the secretary and treasurer serve one-year terms.

The committee named 10 candidates for the five open positions on the bar’s board of governors. Those candidates are H. Guy Collier Jr. of McDermott Will & Emery; Stephen Glover of Gibson, Dunn & Crutcher; Charles Kerby III of Liberte Group; Bridget Bailey Lipscomb of the Justice Department; Lorelie Masters of Jenner & Block; Robert Okun of the U.S. Attorney’s Office for the District of Columbia; Marianela Peralta of Littler Mendelson.; Veta Richardson of the Minority Corporate Counsel Association; Alfreda Robinson of George Washington University School of Law; and R. Justin Smith of the Justice Department.

For the three open seats on the American Bar Association’s House of Delegates, the committee nominated Arthur Burger of Jackson & Campbell; John Cruden of the Justice Department; Robert Hildum of the Office of the Attorney General for the District of Columbia; Beth Law of the Consumer Specialty Products Association; Karen Lockwood of The Lockwood Group; and Lucy Thomson of Computer Sciences Corp.

Mottley and Possessky will make their case to voters about why they should be chosen president-elect at an April 28 forum, to be held at the bar’s headquarters at 1101 K Street N.W.

Ballots will be distributed to the bar’s active members on May 5. They must be returned by June 4.

Australian Law Students Win Jessup Moot Court Competition

The final round of the Philip C. Jessup International Law Moot Court Competition was held this past weekend in Washington, and this year's champion hails from Down Under.

The team from the Australian National University took top honors, besting New York’s Columbia Law School in the final match on Saturday.

Though the team from Columbia Law came in second, one member, Kevin Lin, was awarded the Stephen M. Schwebel Prize for Best Oralist. Schwebel, who served as president of the International Court of Justice from 1997 until 2000, presided over the final round. The other judges on the panel were Dame Rosalyn Higgins, another former ICJ president, and Harold Koh, who is currently serving as the U.S. State Department’s top lawyer.

The tournament requires every team to research and argue the same set of facts that raise questions of international law. This year’s case focused on the hypothetical discovery of oil on an island whose sovereignty is under dispute. The case also raised investment disputes sparked by the discovery of oil.

The tournament pitted teams from around the world against one another in a round-robin tournament last week, which was narrowed down to the final two teams on Saturday. This year’s field of competitors included 105 teams from 76 different countries. In the quarterfinals round, the Columbia Law School and Australian National University teams competed against teams from Slovenia’s University of Ljubljana and India’s Nalsar University of Law.

“This year’s case involved some classic issues of international law. It involved issues of how countries interact with each other. But it also raised the question of where companies that are interested in developing natural resources fit in,” said Amity Boye, executive director of the International Law Students Association, which organizes the competition. White & Case sponsored the international rounds.

The awards were presented Saturday night during a ceremony at the Capital Hilton. “It was a great event overall. We were especially pleased with the diversity of the teams that made it to the final rounds,” Boye said.