A federal appeals court recently ruled in favor of a California whistleblower, reviving his False Claims Act suit against his former employer, progressive lens manufacturer Shamir USA.
The ruling hinged on a determination of whether the company’s prior public statements about its rewards program — which the whistleblower alleged violated the FCA and Anti-Kickback Statute — barred the lawsuit.
On Feb. 3, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed the lower-court ruling that dismissed the case, unanimously siding with the whistleblower and cautioned lower courts of “the dangers of allowing a generalized description of a program that could give rise to fraud in public documents” serving “to prevent the pursuit of legitimate fraud.”
The whistleblower, a former manager for the company, filed suit against it in the U.S. District Court for the Central District of California.
According to the 9th Circuit’s opinion, the whistleblower alleged Shamir violated federal law by submitting and causing others to submit fraudulent bills to the government as a result of kickbacks provided by eyecare professionals.
Specifically, he alleged that the company knew government insurance plans reimbursed optical lenses based on the purported invoice price and induced eyecare professionals to purchase their products by offering discounts and rebates to lower the price of their products, providing eyecare professionals with invoices containing inflated prices.
The whistleblower alleged the scheme resulted in the government paying for the eyecare professionals’ discounts.
A lower-court judge dismissed the suit after finding the whistleblower’s allegations to be substantially similar to information Shamir previously disclosed through promotional articles in optical-industry publications.
Under the False Claims Act, a whistleblower can bring an action on behalf of the government against companies that knowingly submit, or cause others to submit, fraudulent claims for payment to the federal government.
Such suits are barred, however, if the fraud alleged in an FCA suit has already been publicly disclosed, unless the whistleblower is deemed to be an original source. Additionally, the so-called public disclosure bar is triggered if the disclosure was publicly disseminated through news media and the whistleblower’s lawsuit is based upon the allegations or transactions publicly disclosed.
The 9th Circuit disagreed, concluding that “the information disseminated was so innocuous that there was no public disclosure of a transaction or allegation of fraud in the first instance, as required under the FCA.” The panel sent the case back to the lower court, allowing the case to proceed.
The False Claims Act was originally signed into law in 1863 to help combat fraud by suppliers to the U.S. government during the Civil War. Today, it remains one of the federal government’s most effective weapons in fighting fraud on the government. It incentivizes whistleblowers, or relators, as they’re known, to report a fraud on the government by rewarding them with a percentage of the amount the government successfully recovers because of the whistleblower’s FCA case.
Whistleblowers play an important role in helping the government uncover fraud. With over 30 years of experience litigating fraud and employment cases, Keller Grover is uniquely positioned to represent whistleblower clients. The firm has recovered billions for its clients.
We are here to help those who want to report wrongdoing. For advice about how to handle suspected fraud, contact Keller Grover for a free and confidential consultation.