FCA “Qui Tam” Relator Sanctioned for Lawyers’ Scheme to Manufacture Evidence

ethicsBy Bailey McGowan, a 2017 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering her third year at Texas Tech University School of Law in the fall.

A double agent, an undercover operation, and deceit: No, these aren’t the well-worn plot elements of the latest James Bond movie. They are some of the tactics in a law firm’s scandalous attempt to manufacture the proof needed to survive a motion to dismiss in a False Claims Act (FCA) case, Leysock v. Forest Laboratories. The elaborate scheme exhibits the lengths to which deputized FCA plaintiffs and their lawyers will go to pursue their cut of a qui tam lawsuit’s routinely lucrative recovery. The federal court’s sanction for such behavior—barring the use of information fraudulently obtained in the plaintiff’s opposition motion—was an appropriate and laudable response, one that should embolden inspire other judges overseeing big-money litigation to take similar action against such blatant misconduct.

Plaintiff’s firm Milberg LLP represented realtor Timothy Leysock, a Florida sales representative for Forest Laboratories, Inc. Leysock filed a qui tam action claiming the pharmaceutical company’s off-label promotion of the drug Namenda violated the FCA. Namenda is approved to treat moderate to severe Alzheimer’s. Leysock claimed Forest promoted the drug for off-label uses specifically to Medicare patients. In the amended complaint, Leysock identified eight doctors by name and address and eight patients. The patients’ information included their “age, height, weight, dates of visits, diagnosis, treatment plan, and prescriptions.” The complaint also included the names and addresses of additional doctors who prescribed Namenda as well as a purported “nationwide survey” of doctors reflecting that 60 percent wrote off-label prescriptions of Namenda in reliance on Forest’s promotion.

The “nationwide survey” was actually drafted by Milberg attorneys and then given to Dr. Mark Godec, Milberg’s hired physician. Dr. Godec solicited doctors’ responses through a marketing and consulting agency that conducts research in the healthcare industry. The survey asked doctors about their off-label use of Namenda and Forest’s promotion of the drug.  Dr. Godec took the doctors’ responses, gave them to the Milberg attorneys, and then interviewed physicians based off a script approved by the attorneys. Doctors who had patients with mild Alzheimer’s and treated those patients with Namenda were invited to submit patients’ charts for review. They received $250 for the first chart and $150 for a second chart. At times during the “survey,” the doctors were told their answers would be anonymous and many were assured patient confidentiality would be protected. Instead, Dr. Godec passed the results to the Milberg law firm.

The US District Court for the District of Massachusetts found the Milberg firm’s conduct violated two Massachusetts Rules of Professional Conduct, which are modeled on the American Bar Association model rules. The court found the attorneys violated Rule 4.1(a), which requires lawyers to refrain from making knowingly false statements of material fact or law. The court also found the attorneys violated Rule 8.4(c), which prohibits lawyers from engaging in dishonest or deceitful misrepresentation. The court recognized there are exceptions to these rules, but held the attorneys purposefully engaged in “an elaborate series of falsehoods, misrepresentations, and deceptive conduct.”

The court clarified the ruse “went well beyond a mere concealment of identity and purpose in order to obtain evidence.” Instead, the attorneys devised a plan that took advantage of doctors’ willingness to share patient information with another doctor who claimed to be doing valuable research. Though the fake research study did not obtain patient names, their identities, the court explained, could be determined from the quantity and quality of the information collected. For example, two patients identified in the publicly-filed complaints were citizens of towns with populations less than 3,000 people. A person’s age, height, weight, and the pharmacy she used could easily expose her identity to others in such a small community. The intrusion on patients’ privacy was far from incidental, the court explained. The Milberg attorneys planned and carried out the invasion of the patient-physician relationship—which is protected by medical ethics codes and numerous state and federal laws—by relying on physicians’ trust of a fellow doctor. The court added that the targets of Milberg’s undercover operation were not the suspected wrongdoers (i.e., Forest), but rather innocent physicians duped into believing they were helping to improve the treatment of Alzheimer’s patients.

The Milberg attorneys attempted to justify the fake study by arguing that without the information it elicited, they could not meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). While acknowledging that additional research may be helpful in this type of case, the court came to the obvious conclusion that such a need does not justify a violation of ethical standards. From a legal perspective, the court also noted that Congress intended that an FCA qui tam relator base her allegations on personal knowledge, not concocted empirical evidence. The court was especially troubled by the fact that once the relator survived Forest’s motion to dismiss, his attorneys would be replacing the fake study’s so-called “findings” with new information gathered during discovery.

Relying upon its inherent sanction authority, the court stripped from the plaintiff’s complaint any information obtained during the false study. That information, the court noted, allowed Leysock to survive Forest’s initial motion to dismiss. Such a targeted sanction, similar to an approach upheld by the US Supreme Court in a 1978 case, Franks v. Delaware, appropriately punishes the relator and deters future relators from similar misconduct while not discouraging litigation against fraudulent contractors.

The financial incentives that motivate qui tam relators are undeniable. In 2016, the Justice Department raked in over $4.7 billion from FCA actions in Fiscal Year 2016, $2.9 billion of which arose from qui tam suits. Relators can receive up to 30% of what the government receives from qui tam suits. The heightened pleading standard for fraud allegations exists to curb the inevitable excesses inspired by such eye-popping figures. The Milberg attorneys’ elaborate scheme meant to directly circumvent that procedural check on frivolous suits, and the Massachusetts District Court is to be applauded for tailoring its sanction with the pleading standard in mind. The court also appropriately condemned the tactics featured in the scheme as a threat to doctors’ future participation in medical research.

Upon introducing the FCA in 1863, the bill’s primary sponsor, Senator Jacob Howard, explained the rationale behind the law’s qui tam provision was “setting a rogue to catch a rogue.” Such rogue empowerment, however, does not authorize relators to commit fraud themselves in order to expose contractors’ fraud. That message comes through quite clearly in Leysock, and is one that federal courts should bear in mind when presiding over False Claims Act litigation.

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