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This article was originally published on IP Watchdog.

An employee comes to you with a recipe for your competitor’s “secret sauce.” You know she worked for your competitor before coming to work for you.  How do you respond? It’s an important question, because it may go to the core integrity of your organization and because exploring this trade secret conundrum may offer some decision-making principles that businesses can apply when addressing other difficult decisions that they are being called to make in these stressful COVID-19 times. 
Continue Reading To Disclose Or Not To Disclose: Responding to Trade Secrets Misappropriation by an Employee?

The United States District Court of the Eastern District of Pennsylvania recently issued a decision unsealing a False Claims Act case over the objections of the government, the relator and the defendant.[1] In United States ex. Rel. Brasher v. Pentec Health, Inc. No. 13-05745, 2018 WL 5003474 (E.D.P.A. Oct. 16, 2018), a case initially filed five years ago, the government filed a motion to continue the seal – which happened to be its eleventh such motion – arguing that additional time was necessary, in part, to finalize its decision whether to intervene in the action, as well as to pursue settlement options. The Court disagreed.
Continue Reading District Court Determines that the Eleventh Time is NOT the Charm

In Part II of our series, we discussed government knowledge. When the government knows of a claim’s falsity, but nevertheless pays the claim, the falsity of the claim is not material to the government’s decision to pay. In other words, the falsity of the claim must not matter to the government and, consequently, there can be no liability under the implied certification theory.

But what about the situation in which the government could have refused payment, but did not have actual knowledge relating to the claim’s alleged falsity? Could the fact that the government retains the option to refuse payment be sufficient to establish materiality? Escobar says no. In so holding, Escobar rejected the Government’s and First Circuit’s pre-Escobar view of materiality (that any statutory, regulatory, or contractual violation is material so long as the defendant knows that the Government would be entitled to refuse payment were it aware of the violation).
Continue Reading Materiality Part III: It Is Not Enough That The Government Could Refuse Payment—The Question Is Whether The Government Would Refuse Payment

On January 9, 2017, the Supreme Court denied certiorari in United States ex rel. Purcell v. MWI Corp., No. 16-361, ending one of the longest running False Claims Act cases in history—18 years and 136 days, to be exact. We followed this case closely in previous blog posts here, and here. The case is significant because it held that there is no False Claims Act liability for a contractor’s objectively reasonable interpretation of an ambiguous contract provision. On the one year anniversary of the Supreme Court’s denial of certiorari, this objectively reasonable D.C. Circuit opinion remains good law.
Continue Reading MWI Lives On One Year After the Supreme Court Denied Certiorari

Editor’s Note: This is the second in a five-part series on how U.S. district courts and courts of appeal have applied the materiality standard set forth in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).

In the context of implied certification cases brought under the False Claims Act (FCA), materiality is simply whether an alleged statutory, regulatory, or contractual violation has some bearing on the government’s decision to pay claims. It follows that when the government knows of an alleged statutory, regulatory, or contractual violation and pays a claim anyway, then that violation could not possibly have been material to the government’s payment decision. For this reason, the government’s knowledge of alleged violations and its subsequent behavior in the face of that knowledge have tremendous implications for false certification defendants.
Continue Reading Materiality Part II: Government Knowledge

On December 21, 2017, the United States Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics for fiscal year (FY) 2017. The press release measures the DOJ’s total haul at $3.7 billion. Although this is a significant piece of news in its own right, we analyze these statistics each year for any potential trends. (See our post on the 2016 statistics, here, and our full analysis of the 2016 statistics in Robert T. Rhoad’s West Year-In-Review conference brief, available here.) And this year, like the years before it, the trendlines have been far from uninteresting.
Continue Reading DOJ Releases its 2017 False Claims Act Recovery Statistics

The story behind the Trinity Industries False Claims Act (FCA) litigation is one that is becoming too familiar for companies that do business with federal and state governments. Luckily, that story now has some silver lining, after the Fifth Circuit recently overturned a massive $663 million jury verdict against the company.
Continue Reading Head on Collision: 5th Circuit Crashes Into Massive $663M Guard Rail Jury Verdict on Materiality Grounds

Editor’s Note: This is the first in a five-part series on how U.S. district courts and courts of appeal have applied the materiality standard set forth in Universal Health Services, Inc. v. U.S. ex rel. Escobar.

In Escobar, the Supreme Court described several factors that a district court should consider in assessing whether a particular contractual, regulatory, or statutory violation was material to a government’s decision to pay. One of those factors was whether a “reasonable man [acting on the Government’s behalf] would attach importance to [the representation] in determining his choice of action in the transaction.” at 2003.  It follows that a reasonable person would not attach importance to a violation that is “minor or insubstantial.” Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 2003 (2016) (emphasis added). So how have the district courts handled this “reasonable man” objective standard? And what types of violations are minor or insubstantial? This article explores the answers to those questions.
Continue Reading Materiality Part I: Distinguishing Important Representations from the Minor or Insubstantial