Recent False Claims Act Decisions

Here are a few False Claims Act (FCA) decisions that took place from July 18-22, 2011. One case analyzed the Federal FCA and two analyzed its state counterparts.

1) In USA, ex rel. Brady Folliard v. Synnex Corporation, et al, the U.S. District Court for the District of Columbia (July 19) held that a relator’s complaint was barred pursuant to the FCA’s first-to-file rule by a previous relator’s complaint, which alleged the “same material elements,” even though the previous complaint was dismissed under F.R.C.P. 9(b) for failure to plead fraud with particularity. Both complaints alleged that HP and other defendants sold products to the General Services Administration (“GSA”) that were listed as coming from countries encompassed by the Trade Agreements Act (“TAA”) when, in fact, the products came from non-TAA countries, such as China. While Folliard’s complaint included allegations that Cisco, in addition to the defendants named by the first-filed complaint, misrepresented the country-of-origin clause, the court noted that the first-filed complaint “pertaining to HP products gave the government sufficient notice to discover the allegedly fraudulent Cisco products.” The court held that, “[a]lthough there may be some cases in which a prior complaint dismissed for failure to plead with particularity would not preclude subsequent complaints, this is not one of them.”

2) In Knox County ex rel. Environmental Termite & Pest Control, inc. v. Arrow Exterminators, Inc. (Tenn. July 20, 2011), the court held that a relator qualifies as an “original source” under the Tennessee False Claims Act, even when a relator relies on public documents in uncovering the alleged false claims. The court emphasized the importance of the analysis conducted by the relator with regard to those public documents. Interestingly, in deciding this case, the Supreme Court of Tennessee implicitly recognized that corporations have standing under the TFCA, and can use the statute to bring claims against competitors.

3) In State of Utah v. McKesson Corp., (N.D.Cal. July 19, 2011), the court analyzed the application of the statute of limitations in a claim for restitution and civil penalties under Utah’s False Claims Act. In discussing when the claim accrued, the court cited Attorney General of Utah v. Pomeroy, (Utah 1937), stating “where fraud is an element of an action itself, and a statute does not provide otherwise, the statute of limitations does not begin to run until the fraud was discovered or reasonably could have been discovered.”