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Exhibit Group 26. LEGAL ARTICLES not cases

EXHIBIT

GROUP 20

LEGAL

ARTICLES


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Contents

Exhibit Group 26. LEGAL ARTICLES not cases ........................... ................................ ........................... ... 1

500. Brian Walsh (2010) Without Intent The Heritage Foundation.................................. .................. 4

501. Seeking More Scienter: The Effect of False Claims Act Interpretations ........................... ........... 6

502. Fraud Enforcement and Recovery Act (FERA), Cooks and Perla ............................... ............... 8

503. THE OVERCRIMINALIZATION PHENOMENON ........................... ................................ ............... 12

504. BECAUSEOF:FCA DAMAGES AND PENALTIES......................................... ...................... ......... 14

505. Procuring Audit Services in Government ............................... ........................... ....................... 16

506. US ex rel Miller v Bill Harbert DC Circuit Joins The Retroactivity Debate Over FERA ................. 22

507. The False Claims Act Amendments: The Curious Conundrum of Retroactivity ......................... 24

508. The Newly-Amended False Claims Act is Beginning to Stir Trouble in Courts ....................... .... 26

509. Common Law Claims As Adjuncts To A False Claims Action ............................... ...................... 28

510. False Claims Act: Wave of the Future ......................... ................................ ....................... ...... 38

511. TESTIMONY OF ALFRED J. LONGHI ........................ ................................ ...................... ............ 40

512. Unlikely Source May Be Raising Summary Judgment Bar ............................. ....................... .... 42

513. Eleventh Circuit Affirms Dismissal of FCA Case under FRCP 9(b) ............................ .................. 46

514. FRAUD Basic Legal Concepts ....................... ................................ ...................... ...................... 50

515. Fraud by Hindsight ........................... ........................... ........................ .............................. ..... 52

516. Pleading Securities Fraud ........................ ................................ ...................... .......................... 56

517. UNUSED .............................. ......................... ................................ ...................... .................... 58

518. UNUSED .............................................................................................................................. 59

519. With Respect to CAMPBELL ........................ ................................ ...................... ...................... 60

520. US ex rel Miller v Bill Harbert Intl ConstrDC Circuit Joins The Retroactivity Debate

Over FERA ...................................................................................................................................... 62

521. Contract Fraud One Year After FERA OOPS 2010............................ ......................... ................ 64

522. BuildingNYCsInnovationEconomy ......................... ................................ ...................... ............ 66

523. A Ruling That Applies Some Common Sense To The False Claims Act Government Contracts

Blog 70

524. When Molehills Become MountainsThe Implications OfUS ex rel Longhi v Lithium Power

Techs For SBIR Grantees And Beyond ................................................................................................. 72

525. Litigating Qui Tam Actions: Doctors, Double Jeopardy, Excessive Fines and The False Claims Act

82


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526. United States v. Santos: Proceeds in Federal Criminal Money Laundering Statute, 18 U.S.C.

Section 1956, Means Profits, Not Gross Receipts ...................................... ....................... ............ 84

527. Over-Criminalization of Conduct/Over-Federalization of Criminal Law ............................ ........ 86

528. Courts Reject Application of FERAs Retroactivity Provision to Pending Cases ......................... 88

529. Allison Engine, The False Claims Act, and Healthcare Fraud .............................. ...................... 90

530. THE DANGERS OF SUMMARY JUDGMENT: GENDER AND FEDERAL CIVIL LITIGATION .............. 92

531. Eleventh Circuit Affirms Dismissal of FCA Case under FRCP 9(b) ............................ .................. 96

532. New Compliance Challenges: False Claims Act Amendments FERA With More Pending .......... 98

533. Summary Judgment and the Vanishing Trial: Implications of the Litigation Matrix. ............... 100

534. The Unconstitutionality of Summary Judgment: A Status Report ............................... ........... 104

535. Information Infrastructure for Healthcare ............................ ........................... ..................... 106

536. Technologies for Advanced Imaging Systems ............................ ........................... ................. 108

Exhibit Group 27. References without Articles ............................. ........................... .......................... 110

537. Beatson, J. (1991) The use and abuse of unjust enrichment: essays on the law of restitution 111

538. Neyers, Jason W. McInnes, M., Pitel, Stephen G. A.; (2004) Understanding unjust enrichment.

112

539. Smith, L. D. (1997)The law of tracing .......................... ................................ ...................... .... 113

540. Oliver Wendell Holmes (1920) Rock Island v US ............................. ....................... ................ 114

541. Rule of Lenity ............................... ................................ ...................... ................................ .. 115


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500. Brian Walsh (2010) Without Intent The Heritage

Foundation

Page 9

The third problem, regulatory criminalization, occurs when Congress delegates its legislativeauthority to define criminal offenses to another body, typically an executive branch agency.Delegation empowers the unelected officials who direct that agency, such as the Department of theTreasury or the Environmental Protection Agency, to decide what conduct will be punishedcriminally, rather than requiring Congress to make that determination itself. In this way, theexecutive branch of the federal government plays a substantial role in causing overcriminalization,far beyond the Presidents constitutional authority to veto or sign legislation.

In the usual case of regulatory criminalization, Congress delegates its criminal lawmaking authorityby passing a statute that establishes a criminal penalty for the violation of any regulation, rule, ororder promulgated by the agency or an official acting on behalf of that agency. Some of these

provisions includemens rea terminology; for example, criminal responsibility might extend toanyone who knowingly violates any regulation.56 However, statutes authorizing regulatorycriminalization often fail to include any mens rea terminology, and nothing guarantees that theresulting criminal regulations will themselves include a mens rea requirement, let alone adequateones.

Beyond the constitutional concerns inherent in this delegation of criminal lawmaking authority, theactual practice of regulatory criminalization significantly increases the scope and the complexity offederal criminal law. In addition to the thousands of criminal offenses spread through the 49 titles ofthe United States Code, according to estimates tens of thousands of criminal offenses are similarlyscattered throughout the over 200 volumes of federal regulations.57These regulations almost always

proscribe conduct that is, at least in part, malumprohibitum. As a result, vast expanses of conduct arecriminalized without any systematic congressional oversight and without providing any form ofnotice to the ordinary person that his everyday activities may be subject to criminal punishment.

The practice of regulatory criminalization compounds the problems created by unclear, impreciselegislative drafting. Some or all of the elements of a particular criminal offense may be codified inregulations far removed from the actual statute that contains the mens rea requirement. Further, theelements that make up the complete offense can be spread across numerous regulations. For example,section 506(g)(2) of H.R. 3968 would impose a criminal penalty on any person whoknowinglyviolates any other environmental protection requirement set forth in title III or anyregulation issued by the Secretaries to implement this Act, any provision of a permit issued under thisAct (including any exploration or operations plan on which such permit is based), or any condition or

limitation thereof.58 While the mens rea requirement, knowingly, is located in the statutoryprovision, all of the prohibited conduct would be defined in any number of regulations and evenindividual permits issued as part of the regulatory and statutory scheme.


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501. Seeking More Scienter: The Effect of False Claims Act

Interpretations

Murray, Michael F., Seeking More Scienter: The Effect of False Claims Act Interpretations (March 1,

2008). Yale Law Journal, Vol. 117, No. 981, 2008. Available at SSRN: http://ssrn.com/abstract=1338602


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502. Fraud Enforcement and Recovery Act (FERA), Cooks

and Perla

http://www.profilermag.com/Downloads/Article-Issue3_FERA_2009_web.pdf

Profiler Magazine Page 24-28, 2009

The Fraud Enforcement and Recovery Act (FERA), enacted on May 20th, 2009,

expanded the federal governments ability to investigate and prosecute fraud by amending key

civil and criminal fraud provisions and appropriating nearly half a billion dollars for increased

enforcement. FERAs most far reaching change, however, will likely be its amendments to the

False Claims Act (FCA). Because of these provisions, a wide range of previously exempt

business transactions are now subject to potential liability.

Before FERA, the FCA imposed liability for false statements made to the government or

false statements made to induce the government to pay a false claim. After FERA, the FCA

purports to impose liability for false claims made to any recipient of federal funds, regardless of

whether the entity presented the false claim to the government or otherwise meant for the

government to pay the allegedly false claim.

FERA also purports to expand liability for retaining money owed to the government.

Before FERA, retaining money owed to the government could result in liability only if the entity

used a false statement for the purpose of concealing, avoiding, or decreasing an obligation to the

government. After FERA, plaintiffs in FCA actions (known as relators) likely will argue that

any entity that failed to repay the government may be liable under the FCA even without having

made any false statement whatsoever.


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Before FERA, most courts had held that only false statements material to the

governments decision to pay a claim could be actionable under the FCA. FERA, however, made

materiality an explicit element for two of the FCAs seven liability subsections. FERA also

resolved a split among the courts on how such a materiality requirement should be applied. Some

courts regarded a false statement as material only if the government would not have paid the

claim if it had known of the inaccuracy. FERA rejected that and defined material as anything

having a natural tendency to influence, or being capable of influencing, the payment or receipt

of money or property. Under FERA, a falsity may now be considered material even if it had

no impact on the governments payment decision. Additionally, FERA removed the language to

get a false or fraudulent claim paid or approved by the Government from the former subsection

(a)(2), directly abrogating the Supreme Courts decision in Allison Engine Co. v. United States

ex rel. Sanders, 128 S.Ct. 2123, 2129-30 (2008). Relying on the language that FERA deleted, a

unanimous Court in Allison Engine held that imposing liability without evidence of an intent to

extract payment from the government would expand the FCA well beyond its intended role of

combating fraud against the Government. Id. at 2128. After FERA, however, relators may

contend that the FCA now provides a cause of action for false statements made to virtually any

recipient of federal money regardless of whether the entity ever intended to induce payment by

the government.

[ *** ]

FERA codified a broadly defined materiality element into subsections (a)(1)(B) and

(a)(1)(G). In suits under those subsections, FERA makes alleged false statements actionable only

if they hav[e] a natural tendency to influence, or [are] capable of influencing, the payment or


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receipt of money or property. This change resolved a split among the courts. Under this

definition, a falsity may be considered material even if it had no actual impact on the

governments payment decision. At least in some cases, this may lessen significantly the

evidentiary burden on the government or the relator.

Most of FERAs amendments apply to suits based on conduct occurring on or after May

20, 2009. FERA, however, purports to make its changes to subsection (a)(1)(B) apply

retroactively to cases pending on June 7, 2008, two days before the Supreme Court announced its

decision in Allison Engine. The changes to the FCA specific relation-back provisions apply

retroactively to cases pending on May 20, 2009. At best, these retroactive provisions threaten to

resurrect previously determined lawsuits.

FERAs changes to the FCA, coupled with the half a billion dollars appropriated for

enforcement, underscore the governments intent to pursue perceived fraud against the United

States. This has implications for anyone who does business with the myriad entities now

receiving federal funds. Companies that have not previously considered their exposure to

liability from the government should take a hard look at their potential liability. Under the new

law, any person or entity that submits a claim to virtually any recipient of federal funds faces a

potential FCA lawsuit without regard to whether the underlying allegedly improper conduct had

any impact on the United States treasury.

FERA will undoubtedly lead to increased litigation risk and attendant costs. When

coupled with the governments investment in enforcement, it makes good business sense to

review existing compliance programs as soon as possible.


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503. THE OVERCRIMINALIZATION PHENOMENON


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504. BECAUSEOF:FCA DAMAGES AND PENALTIES

The remarkable recoveries generated by the False Claims Act areattributable in part to its

somewhat unique damages and penalties provisions.These provisions can yield forfeitures vastly

out of proportion to the allegedviolation and, because of this heightened litigation risk, tend also

to forcesettlements in cases that defendants might otherwise litigate and win. Much ofthe FCA's

power therefore derives from its potential for quasi-criminal sanctionsthat have less to do with

remediation than with simple punishment.Because of the potential for draconian sanctions under

the FCA, itsdamages and penalties provisions are often vigorously contested. This papersurveys

the evolving state of the law as courts struggle to interpret and apply theseprovisions to an ever-

broadening range of conduct.


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505. Procuring Audit Services in Government

AGA CPAG Research Series:Report No. 19February 2009

Page 4

While the term audit has broad meaning, in this research paper the term audit is used in

the manner intended in Government Auditing Standards (commonly referred to as GAGAS),

which is issued by the U.S. Government Accountability Office (GAO). In short, in government

an audit is an engagement performed by an independent auditor that adheres to all the

requirements of GAGAS. These standards include (1) ethical principles, (2) general standards,

such as auditor independence, competence, and quality control and assurance, and (3) field work

and reporting standards, such as the standards of the American Institute of Certified Public

Accountants (AICPA) for financial audits and attestation engagements and the requirement to

obtain sufficient, appropriate evidence. GAGAS covers a broad range of engagements from the

audit of the financial statements to an audit of the performance of a program or operation to the

performance of specific agreed-to procedures. GAGAS requires professional rigor and the

application of specialized skills when performing an engagement.

For all intents and purposes, GAGAS can only be met by (1) an independent government

auditor, such as GAO, a federal Inspector General (IG), an appointed or elected state or local

auditor or a government internal audit organization or (2) a CPA firm. Government auditors and

CPA firms are subject to oversight of their work through external peer review. Government

auditors are also subject to oversight by legislative and/or government regulatory bodies. The

work of CPA firms is also subject to regulatory oversight from state licensing boards. Whether

government auditors or CPA firms, the auditing profession is characterized by independence and


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a dedication to providing high-quality professional work that is subject to strong ethical

requirements and grounded in rigorous professional standards. The requirement to adhere to

rigorous professional standards in performing an engagement along with a legal and regulatory

oversight structure governing the performance of the work are what distinguish audits and

attestation engagements from other types of evaluative engagements.

The goal of this guide is to help government managers make the right decision when

procuring audit services. The guide provides a resource to help non-auditors understand the

distinction between audit and other professional services that have an evaluative nature. Readers

will have a better understanding of what they are buying when they procure an audit. They will

know the differences between types of engagements provided by auditors and between audits

and non-audit evaluative services. They will learn that audit organizations also provide non-audit

services and how they differ from audit engagements performed in accordance with GAGAS.

Readers will also know what they may not be getting when they procure a non-audit evaluative

services or consulting engagement.

2. Are there legal, regulatory or contractual requirements or any expectations of outside stakeholders,

such as the U.S. Congress, a state legislature, or a city council or local board of supervisors, which would

require or favor a GAGAS audit rather than another type of evaluative service?If yes, an audit under

GAGAS should be procured. Go to step 5

Can Government Audit Organizations and CPA Firms Perform Non-Audit orAdvisory Services?

This brings us to the question of whether government

auditors and CPA firms can provide non-audit advisory services in addition to conducting

audits. The answer is yes. In fact, it happens every day. What an audit organization cannot do is


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cite adherence to GAGAS in reporting on this work. GAGAS does not cover professional

services other than audits and attestation engagements. Government auditors and CPA firms

regularly provide non-audit or advisory services. However, the range and amount of such

services may vary greatly and there are limits if the organization wishes to retain its ability to

audit the entity for which the non-audit services are being provided.

While GAGAS does not provide standards for non-audit services, it does cover the

situation when audit organizations provide non-audit services for an entity for which the audit

organization also provides audit services. Because auditor independence is one of the linchpins

of auditing, GAGAS provides criteria for evaluating whether non-audit services would cause an

impairment, in fact or appearance, to the audit organizations ability to subsequently perform

audits of the entity. (See paragraphs 3.01 to 3.30 of GAGAS for a full discussion of auditor

independence requirements.) This is very important because management of an entity may go to

its auditor for non-audit advisory services and should understand where the line is drawn.

As a rule of thumb, GAGAS provides two overarching principles to assess the impact on

independence if an auditor performs non-audit services for an entity it may currently audit or

wishes to audit in the future. These two principles are simple in construct, while getting to the

heart of auditor independence:

Auditors must not provide non-audit services that involve performing

management functions or making management decisions.

Auditors must not audit their own work or provide nonaudit services in

situations in which the non-audit services are significant or material to the


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subject matter of the audits (meaning, those audits performed by the auditor now

or in the future).


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506. US ex rel Miller v Bill HarbertDC Circuit Joins The

Retroactivity Debate Over FERA

ConclusionInAllison Engine, Judge Rose meticulously examined the intent and

application of the FCA under applicable Supreme Court precedent to conclude that the act is

punitive in both respects and, thus, cannot be applied retroactively under theEx Post Facto

Clause of the Constitution. The D.C. Circuit, in taking an apparently contrary position inMiller,

entirely bypassed theAllison Engine analysis by seizing solely on the fact that the FCA is not a

criminal statute to conclude that its retroactive application does not implicate constitutional

concerns. However, this conclusion ignores the fact that the history, objective and remedies of

the FCA all speak to the punishment of individuals who violate its provisions as opposed to any

solely remedial purpose to compensate the Government for the losses it incurs. Finally, as

Allison Engine has been certified for interlocutory appeal to the Sixth Circuit, the D.C. Circuits

entrance into the fray may well have also set the stage for a circuit split that will require the

Supreme Courts intervention to resolve


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507. The False Claims Act Amendments: The Curious

Conundrum of Retroactivity

Volume 22, Number 5, June 2010 The Health Lawyer

In December 2009, inHopper v. Solvay Pharmaceuticals, the only circuit court opinion thusfar dealing with the retroactivity issue, the Eleventh Circuit agreed with the district courts inScience Applications and Allison Engine that the retroactivity language of FERA applies toclaims that were pending on or before June 7, 2008 and not cases that were pending.63

Although those courts have found that claim has the meaning defined in the FCA, nonehave analyzed what it means for a claim to be under the FCA and whether that qualifyinglanguage alters the meaning of claim in the FCA. Given that issue, the host of other issuesdiscussed above, and the recent decisions in Science Applications, Allison Engine, and SolvayPharmaceuticals, courts are certainly only at the beginning of scrutinizing the application of

4(f)(1) of the 2009 Amendments.

ConclusionCongresss implementation language in section 4(f) of FERA leaves a good deal of wiggle room

for FCA plaintiffs and defendants to fight over whether the changes to the FCA apply

retroactively and to a given case.


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508. The Newly-Amended False Claims Act is Beginning to

Stir Trouble in Courts

http://www.natlawreview.com/article/newly-amended-false-claims-act-beginning-to-stir-trouble-

courts-0

Stacey A. Borowicz

With the passage of the Fraud Enforcement and Recovery Act of 2009 (FERA) on May 20,

2009, several landmark changes to the False Claims Act were signed into law (an analysis of

those changes is found here). Early indications are that Congresss attempt to make the newly-

amended False Claims Act retroactive is proving troublesome in federal courts.

It is no secret that FERAs changes were efforts by Congress to rebuke several noteworthy

federal cases, such as Allison Engine Co., Inc. v. U.S. ex rel. Sanders, 128 S.Ct. 2123 (2008),

that increased the government's burden of proof. In Allison Engine, the Supreme Court required

the government to prove fraudulent intent in order to establish liability under the False Claims

Act. With FERA, Congress attempts to nullify the Allison Engine decision by removing the

intent requirement under the False Claims Act.

Although FERAs amendments to the False Claims Act were signed into law on May 20, 2009,

Congress also integrated a retroactivity clause that made the amendments applicable to all

claims pending on or after June 7, 2008, just two days before the Allison Engine decision. The

application of the retroactivity clause was immediately brought to the surface because Allison

Engine was already on remand to the District Court.

On October 27, 2009, the District Court granted the defendants motion to preclude the

retroactive application of the newly-amended False Claims Act, or alternatively to declare

FERAs retroactivity clause unconstitutional. The District Court interpreted the retroactive

clause in FERA to apply only to pending claims rather than pending cases. The District

Court also concluded that, even if the retroactivity clause was interpreted to apply to cases, its

application would violate the Ex-Post Facto Clause of the U.S. Constitution. The District Courts

interpretation is consistent with decisions in other federal courts, such as United States v. Science

Applications International Corp., No. 04-1543(RWR), 2009 WL 2929250 (D.D.C. Sept. 14,

2009).

The dispute is far from over. On December 28, 2009, the government intervened in Allison

Engine and joined the relators in filing motions seeking an interlocutory appeal to the Sixth

Circuit Court of Appeals to review the District Courts decision. Dinsmore&Shohl will continue

to monitor these developments.


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509. Common Law Claims As Adjuncts To AFalse Claims

Action

Common Law Claims As Adjuncts To A False Claims ActionBy Steven D. Gordon1

When the Government files an action under the False Claims Act2 or intervenes in a qui

tam FCA action filed by a whistleblower, it frequently adds common law claims. Most often,

these are claims for payment by mistake and unjust enrichment.3 Because the focus of the action

is the statutory FCA claim, these common law claims typically are treated as tagalongs.

Despite the profusion of judicial decisions addressing the FCA, there are relatively few cases

discussing these adjunct common law claims. This article reviews and analyzes these alternative

claims for relief.

Standing

Initially, it should be noted that only the Government has standing to bring these common

law claims. Although private relators (whistleblowers) have standing to file an FCA claim in the

name of the Government, they lack standing to file the common law claims. The congressional

grant of private standing to sue in FCA cases does not extend to common law causes of action.

Accordingly, such common law claims are subject to dismissal if filed by a relator.4

Governing Law

A threshold issue in analyzing these claims is whether they are governed by state or

federal law. In some cases, the common law claims are asserted by the Government, or treated

by the court, as arising under state common law.5More often, however, they are asserted and

treated as claims arising under federal common law. Some courts have suggested that the power


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of the U.S. to recover sums illegally or erroneously paid is part of the U.S. inherent authority,

albeit asserted through a common law cause of action.6 Other courts have reasoned that remedies

involving the rights of the U.S. arising under a nationwide federal program are governed by

federal, not state, law.7Nonetheless, state law still may be utilized in some circumstances as a

reference for fashioning the federal remedy.8

Elements of the Claims

Payment by Mistake

The essence of the common law claim of payment by mistake, also known as payment

under mistake of fact, is that the Government is entitled to recover payments made under an

erroneous belief that was material to the decision to pay.9 The elements of the claim are that

(1) payments were made,

(2) under the belief that they were properly owed,

(3) the belief was erroneously formed, and

(4) the mistaken belief was material to the decision to pay.10

There is no requirement that the defendantknow that the payments were mistaken.11

Recovery may be had even if payments were received by the defendant without knowledge of

their inappropriateness.12

Although not confined to situations involving Government contracts, this doctrine covers

most mistakes in contract performance, such as erroneous overcharges or delivery of non-


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conforming goods. But it may not reach certain mistakes that occur in the formation of a

Government contract. For example, it does not apply to a contractors mistakenly inflated bid for

a fixed-price contract because that does not involve a mistaken belief by the Government that

influenced payment of the contract price.

The Government got the fixed price it bargained for, even if that price was higher than

the contractor had intended.13 In contrast, the doctrine should permit recovery if a contractor

miscalculates its costs in bidding for a cost-reimbursable contract because the Government relies

on the contractors mistaken representation when it makes payment.

Unjust Enrichment

The elements of a federal common law claim for unjust enrichment are:

(a) the Government had a reasonable expectation of payment,

(b) the defendant should reasonably have expected to pay, or

(c) societys reasonable expectations regarding person and property would be defeated by

nonpayment.14

An alternative formulation is that the Government must establish

(1) that it conferred a benefit on the defendant,

(2) an appreciation or knowledge by the defendant of the benefit, and

(3) the acceptance or retention by the defendant of the benefit under such circumstances

as to make it inequitable for the defendant to retain the benefit without payment of its value.15


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Restitution may be appropriate without regard to the recipients innocence, provided he

or she had knowledge of the circumstances giving rise to the unjust enrichment claim.16

The general rule is that an action for unjust enrichment will not lie if there is an express

contract between the parties, although there are some exceptions to this rule.17

Relationship between Common LawClaims and the FCA

Claims for payment by mistake and unjust enrichment are essentially alternatives to each

other.18 Payment by mistake usually involves payments made pursuant to a contract, whereas the

doctrine of unjust enrichment applies to situations in which there is no legal contract.19 Thus, the

theories appear to be mutually exclusive,20 although some decisions do not acknowledge this

limitation. Moreover, if recovery is obtained on an FCA claim, no relief can be obtained on these

equitable claims because (a) an adequate remedy has been had at law and (b) any further

recovery would be duplicative and unwarranted. 21Nonetheless, because federal rules allow

pleading in the alternative, courts have permitted the simultaneous pursuit of these common law

claims along with FCA claims, and despite the existence of a contract.22

Use of Common Law Claims to ExpandLiability

From the Governments perspective, there are two principal reasons to assert claims for

payment by mistake and unjust enrichment in addition to or in lieu of an FCA claim. First is a

fallback theory of liability, permitting recovery in situations in which the evidence is insufficient

to prove that the defendant had the culpable knowledge or intent necessary to sustain an FCA

claim. Second, the Government sometimes uses common law claims to pursue recovery from

individuals who did not participate in an FCA violation, but allegedly benefited from it.


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Liability under the FCA turns on the defendants state of mind. [T]he False Claims Act

condemns fraud but not negligent errors or omissions.23 The notion of presenting a claim

known to be false does not mean the claim is incorrect as a matter of proper accounting, but

rather means it is a lie.24 Thus, [w]here there are legitimate grounds for disagreement over the

scope of a contractual or regulatory provision, and the claimants actions are in good faith, the

claimant cannot be said to have knowingly presented a false claim.25In contrast, the

defendants knowledge and intent are irrelevant to a claim for payment by mistake. The only

issue is whether the Government had a mistaken belief that was material to the decision to make

a contested payment.

Similarly, the FCA does not reach persons who did not participate in a violation of the

Act, even though they may have known about the violation or benefited from it. Mere knowledge

of a fraudulent claim with nothing more does not constitute an FCA violation.26 Indeed, an

allegation that a defendant knew about and benefited financially from a fraud and did nothing to

stop it is insufficient as a matter of law to state a claim under the FCA.27But the Government

can cast a wider net with common law claims.

Limitations Period

The FCA contains its own limitations provision, which requires that an action be brought

within

(1) six years after the violation occurred or

(2) three years after the date when facts material to the right of action are (or should be)

known, but


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(3) in no event more than 10 years after the date of the violation.48

The limitations period for common law claims brought by the U.S. is established by 28

USCA 2415

, which sets a six-year period for contract claims and a three-year period for tort

claims.49 A tolling provision excludes from these time limits all periods during which facts

material to the right of action are not known and reasonably could not be known.50 Although a

few decisions hold that the three-year tort limitations period applies to claims for unjust

enrichment, the great weight of authority is that the six-year limit for contract claims applies.51

Claims for payment by mistake also are subject to this six-year limit.52 In contrast, a common

law fraud claim is subject to the three-year limit.53

Generally, causes of action for unjust enrichment and payment by mistake accrue upon

the occurrence of the wrongful act giving rise to the duty of restitution. 54 Accordingly, some

courts have held that the cause of action accrues when the defendant submits the claim for

payment,55although others have held that a new cause of action accrues with each payment

actually made by the Government.56 In any event, in applying the appropriate time limit, courts

have been willing to invoke the tolling provision. For example, they have excluded the period

until completion of a Government audit that disclosed alleged overcharges on a Government

contract.57Because of the operation of this tolling provision, the limitations period for common

law claims could be even longer than the period for an FCA claim arising from the same nucleus

of facts.

A final limitations issue, in circumstances in which the Government intervenes in a qui

tam case and adds common law claims, is whether those claims relate back to the filing date of

the relators original complaint for purposes of determining whether they are time-barred.


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Previously, there was a split in authority as to whether such common law claims should relate

back.58 But the amendments to the FCA enacted as part of the Fraud Enforcement and Recovery

Act of 2009 resolve this issue. Congress provided that if the Government intervenes and files its

own complaint or amends a relators complaint, the Government pleading shall relate back to the

filing date of the original complaint to the extent that the claims therein arise out of the conduct,

transactions or occurrences set forth, or attempted to be set forth, in the original complaint.59

Pleading Issues

Federal Rule of Civil Procedure 9(b) requires that, in alleging fraud or mistake, a party

must state with particularity the circumstances constituting fraud or mistake. This rule applies to

claims of payment by mistake.60 It is less clear whether it also applies to claims for unjust

enrichment that are premised on fraud or mistake.61 One court has held that a claim for unjust

enrichment must allege that (a) the plaintiff conferred a benefit upon the defendant, (b) the

defendant accepted and retained the benefit, and (c) it would be unjust for the defendant not to

pay the plaintiff the value of the benefit. The court went on to rule that the third element of

unjustness is sufficiently established for pleading purposes by the companion FCA claim.62

Certainly, as a practical matter, a complaint that adequately alleges an FCA claim should also

sufficiently set forth adjunct common law claims of payment by mistake and unjust

enrichment.63

Conclusion

As a practical matter, in most cases the importance of these common law claims will be

inversely proportional to the strength of the FCA claim. In cases in which the FCA claim is

strong, the common law claims are likely to be treated as surplus. But in those cases in which the


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FCA claim is weak or nonexistent, the common law claims assume a central role. Familiarity

with the law governing these claims then is at a premium.


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510. False Claims Act: Wave of the Future

Small, Dan;(October 2009). Compliance & Ethics Professional. False Claims Act:Wave of theFuture. www.corporatecompliance.org, Page 30 ff.

The second case, Longhi, comes on the governments grant side. The case involved researchgrants so, like the recovery programs, the government was not buying a specific product orservice. The Fifth Circuits July 9, 2009 opinion upholds a 2007 District Court FCA decision, sothe FERA amendments were not in effect. But, the court references those amendments, and givesa glimpse of their likely use in three key respects. First, as to false documents, the work wasactually done, and there were no real false invoices, but the court held that there were falsestatements in the original application, therefore the entire contract amount was fraudulently

induced. Second, as to materiality, the court held that the government need not show that thefalse statements actually caused the government to act, only that they, have the potential toinfluence the governments decisions. Finally, since the defendant did the work required underthe contract, they argued that any damages should be reduced by the value of that work.However, in a holding we are likely to see repeatedly in recovery funds cases (where unliketraditional cases, the government did not end up with a specific product or service), the Courtdisagreed. Without the fraudulent inducement, the funds might have gone to another moreworthy recipient. Thus, the Court upheld damages of triple the entire original contract amounts.


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511. TESTIMONY OF ALFRED J. LONGHI


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512. Unlikely Source May Be Raising Summary Judgment Bar

Brody, Steven G. and Chow, Gary K.,

November 16, 2009

New York LAW Journal.

Unlikely Source May Be Raising Summary Judgment Bar High Courts threepleadings rulings begin to impactBy Steven G. Brody and Gary K. Chow

DURING THE PAST three years, the U.S. Supreme Court has raised the standards for the

specificity of pleadings in Ashcroft v. Iqbal,1 Tellabs Inc. v. Makor Issues & Rights, Ltd.,2 and

Bell Atlantic Corp. v. Twombly.3 Courts and commentators have focused generally on the

implications of those decisions for motions to dismiss, rather than motions for summaryjudgment.

But the reasoning underlying Iqbal, Tellabs and Twombly also has affected summary judgment

analysis, notwithstanding that courts traditionally have deemed the standards for these two

motions to be separate and distinct.

While the full impact of the decisions has yet to be realized, it appears that Iqbal and Twombly

will make it more difficult for plaintiffs to rely on conclusory allegations when confronted with

summary judgment motions. Tellabs, if taken to its logical conclusion, should have a profound

impact on summary judgment motions in the federal securities law context, with plaintiffs being

required to show that the inference of scienter that they attempt to draw from the evidence is at

least as compelling as any opposing inference.

Important procedural differences exist between motions to dismiss and motions for summary

judgment. Federal Rule of Civil Procedure 12(b)(6) permits a court to grant a motion to dismiss

for failure to state a claim where a plaintiff has failed to allege facts sufficient to sustain a

claim under applicable law.4

In contrast, summary judgment may be rendered only if the pleadings, the discovery and

disclosure materials on file, and any affidavits show that there is no genuine issue as to any

material fact and that the movant is entitled to judgment as a matter of law.5

Unlike Rule 12(b)(6) motions, summary judgment motions are typically brought after the

conclusion of discovery and involve a review of evidence. Where the non-movant bears the

burden of proof at trial, the movant may discharge its initial responsibility by showing that there

is an absence of evidence to support the non-moving partys case6 or by identifying evidence


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that would negate the non-movants claims.7 The non-moving party may defeat the motion by

raising a triable issue of material fact.8

Implications of Twombly and Iqbal

In Twombly, an antitrust case, the Supreme Court altered the notice pleading requirements ofRule 8(a)(2) by establishing a more stringent standard for the specificity of pleadings (and

thereby more stringent standards for motions to dismiss under Rule 12(b)(6)).9

Previously, the Court in Conley v. Gibson permitted motions to dismiss for failure to state a

claim only where it appears beyond doubt that the plaintiff can prove no set of facts in support

of his claim which would entitle him to relief.10 In other words, courts only required factual

allegations to render claims conceivable for plaintiff

to avoid dismissal.11 Twombly overruled Conley and instituted a stricter, plausibility standard,

which requires enough fact[s] to raise a reasonable expectation that discovery will reveal

evidence of illegal agreement.12

Subsequently, in Iqbal, the Supreme Court clarified that Twomblys plausibility standard

applies beyond the antitrust context.13 Iqbal also emphasized the insufficiency of conclusory

allegations, noting that they are not entitled to the assumption of truth.14 Moreover, Iqbal

extended both these principles to allegations of malice, intent, knowledge and other states of

mind, notwithstanding Rule 9(b)s provision that such elements can be pled generally.15

Commentators have suggested that the heightened pleading standards articulated in Twombly

and Iqbal have blurred the procedural distinction between motions to dismiss and summary

judgment.16 While the focus typically has been on the increased rigor of the motion to dismissstandard, those two decisions also have been used to enhance a plaintiffs burden on summary

judgment, particularly where a moving defendant challenges the sufficiency of the pleadings.

Because conclusory allegations are insufficient at the motion to dismiss stage under Iqbal and

Twombly, they certainly are insufficient at the summary judgment stage.17

[]

Second Circuit Case Law Trends

There has been a subtle, and still uncertain, development in summary judgment law in the

Second Circuit.

In Miner v. Clinton County, the Circuit held that [a]lthough the burden of demonstrating that no

material fact exists lies with the moving party, [u]nless the nonmoving party offers some hard

evidence showing that its version of the events is not wholly fanciful, summary judgment is

granted to the moving party.35 Lower courts in the Second Circuit have increasingly cited to


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this wholly fanciful language in ruling on summary judgment motions,36 particularly where a

plaintiff has failed to provide evidence to support a claim.

For example, in Bender v. Alvarez, a 1983 case, plaintiff brought suit against defendant law

enforcement officers for false arrest, alleging that defendants planted evidence.37 In granting

summary judgment, the court cited the wholly fanciful language and found that [p]laintifffails to provide any evidence demonstrating that the evidence was planted in his residence except

for his unsupported statement.38

It is too early to tell whether the wholly fanciful language will have a significant impact on

summary judgment decisions in the Second Circuit. Regardless, no court has applied that

language in a PSLRA scienter determination, and there is no indication that any court would do

so. Indeed, if the comparative evaluation requirement articulated in Tellabs were extended to

summary judgment motions in the PSLRA context, that evaluation would be incompatible with

the wholly fanciful language.

Conclusion

The general trend in the law has been to make pretrial dispositive motions a more useful tool for

disposal of weak or frivolous lawsuits. That trend dates back at least to the Supreme Courts

1986 triumvirate of summary judgment decisions (Celotex, Liberty Lobby and Matsushita), and

has been advanced recently by the Courts decisions in Twombly, Tellabs and Iqbal, as well as

by statutes such as the PSLRA.

Future decisions will tell whether the recent enhancements in Rule 12(b)(6) law will have a

lasting impact on summary judgment law.


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513. Eleventh Circuit Affirms Dismissal of FCA Case under

FRCP 9(b)

http://www.martindale.com/government-contracts-law/article_King-Spalding-LLP_930838.htm

Eleventh Circuit Affirms Dismissal of FCA Case under FRCP 9(b)

by Michael E. Paulhus View Biography

King & Spalding LLP View Firm Credentials

Atlanta Office

March 2, 2010 Previously published on February 22, 2010

In United States ex rel. Sanchez v. Lymphatx, Inc., No. 09-14275 (11th Cir. Feb. 18, 2010), the Eleventh

Circuit affirmed the district courts dismissal of a relators allegations of False Claims Act violations

arising from Medicare billing fraud, finding the relator failed to plead specific details of false claims. Slip

Op. at 4. The relator alleged Lymphatx billed Medicare for uncovered services provided by massage

therapists to treat lymphedema, swelling caused by impairments in the bodys lymphatic system. Slip

Op. at 3 n.2. Medicare does not pay for massage treatment for this condition if provided by a massage

therapist. Id. The decision bolsters defendants Federal Rule of Civil Procedure 9(b) arguments in the

Eleventh Circuit by undermining the holding of United States ex rel. Walker v. R&F Properties of Lake

County, Inc., 433 F.3d 1349 (11th Cir. 2005), which allowed a relator to survive a Rule 9(b) motion

without pleading specific details of false claims.

In Walker, the court affirmed a district courts decision permitting a nurse practitioner to survive a Rule

9(b) motion even though she could not plead details of individual fraudulent claims. Id. at 1360. The

court in that case examined the context of the relators understanding of the defendants billing

practices and found it significant that the relator knew she did not have a Unique Provider Identification

Number and had discussed the companys billing practices with the office administrator. Id. In Sanchez,

the relator claimed to be the defendants office manager with personal knowledge of billing practices,

which under Walker might have been sufficient to survive a Rule 9(b) motion even in the absence of

pleading the submission of specific false claims. The court in Sanchez, however, focused on the relators

failure to allege at least some examples of actual false claims, and her inability to lay a complete

foundation for the rest of [her] allegations, rather than Sanchezs status as purported office manager.

Id. at 4-5 (quoting United States ex. rel. Clausen v. Lab Corp. of Am., 290 F.3d 1301, 1314 n.25 (11th Cir.

2002)). The court stated in a footnote:


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Sanchezs vague allegations that she found [unspecified] documentation and discovered or

learned that the defendants had submitted false claims, by contrast, leaves us wondering whether

[she] has offered mere conjecture or a specifically pleaded allegation on an essential element of the

lawsuit, Clausen, 290 F.3d at 1313. In any event, to the extent that Walker conflicts with the specificity

requirements of Clausen, our prior panel-precedent rule requires us to follow Clausen. See Walker v.

Mortham, 158 F.3d 1177, 118889 (11th Cir. 1998).

Slip op. at 5 n.4. The court affirmed dismissal of Sanchezs four counts alleging Medicare fraud, but

remanded a fifth count alleging retaliation under 31 U.S.C. 3730(h), which it found only had to meet

the pleading standard of Federal Rule of Civil Procedure 8(a).


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514. FRAUD Basic Legal Concepts


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515. Fraud by Hindsight

http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1025&context=lsrp_papers

byMituGulati , Jeffrey J. Rachlinski , Donald C. Langevoort

INTRODUCTION

"In sum, the complaint is an example of alleging fraud by hindsight."

-Judge Henry Friendly, in his 1978 opinion Denny v. Barber1

Most people today believe that Enron's CEO, Ken Lay, knew his subordinates were rigging the corporate

books. Likewise, it is not hard to believe that the managers at MCI, WorldCom, and Tyco knew their

businesses were performing badly even as they issued rosy forecasts. It also is hard to believe thattwenty years ago the management at Apple failed to predict that the Macintosh predecessor, "Lisa,"

was a doomed product, whose release was a futile act intended only to boost stock prices. Most of us

recognize, however, that hindsight colors these beliefs. Events tend to seem more predictable than may

have been the case.2 One could recount this tale for a thousand other corporate failures. What looks

today like fraud, in many circumstances might have once been nothing more than misplaced optimism.

Small wonder then that courts worry about "fraud by hindsight" in cases alleging securities fraud.

Hindsight blurs the distinction between fraud and mistake. People consistently overstate what could

have been predicted after events have unfolded-a phenomenon psychologists call the hindsight bias.3

People believe they could have predicted events better than was actually the case and believe thatothers should have been able to predict them. Consequently, they blame others for failing to have

foreseen events that reasonable people in foresight could not have foreseen.4 In the context of

securities regulation, hindsight can mistakenly lead people to conclude that a bad outcome was not only

predictable, but was actually predicted by managers.5 Even in the absence of any misconduct, a bad

outcome alone might lead people to believe that corporate managers committed securities fraud. The

hindsight bias thus creates a considerable obstacle to the fundamental task in securities regulation of

sorting fraud from mistake.

Punishing mistakes as if they were fraud undermines the deterrent function of securities regulation.6 If

corporate managers are as likely to be punished for bad decisions as for acts of fraud, then the securities

laws provide little real disincentive to engage in fraud. The recent financial scandals raise precisely this

concern. How could managers at Enron and others who were manipulating revenue reports have

thought that they could continue to do so indefinitely? Indeed, given the high likelihood of getting

caught, few instances of alleged securities fraud make much sense.7 This question has many answers,

but one of them might well be the inability of the courts in securities fraud cases to sort fraud from

mistake accurately.8


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Courts' difficulties with sorting fraud from mistake accurately is not the result of ignorance of the basing

effects of hindsight. Courts cite concerns with hindsight in nearly one-third of all published opinions in

securities class action cases.9 As the epithet at the beginning of this Article shows, courts seem generally

aware of the problem posed by judging securities fraud cases in hindsight. judges routinely admonish

plaintiffs not to rely on hindsight to support allegations of fraud in pleading securities claims.

Increasingly, the doctrine against "fraud by hindsight" ("FBH") has become a hurdle that plaintiffs in

securities cases must overcome

The FBH doctrine arises from judges' awareness that knowledge of the bad outcome biases judgments in

favor of concluding that fraud had occurred, even if it had not.10 Arguably, the FBH doctrine reveals

judges to be intuitive psychologists, struggling to correct for the influence of the hindsight bias on

litigation.11 A properly debiased system of litigation would accurately sort the cases of fraud from

innocently mistaken predictions, thereby maintaining the deterrent function of the securities fraud

system. The FBH doctrine might thus reflect an effort to debias the adjudication process in securities

cases.

The relationship between the FBH doctrine and the hindsight bias, however, might be epiphenomenal.

The notion that a serious bias in judgment affects the system, however, gives judges a legitimate

justification for departing from the notice pleading system and actively judging cases on the merits at an

early stage of litigation. Several aspects of both securities litigation and the hindsight bias support this

"case management" over a "debiasing" account of the FBH doctrine. First, the influence of hindsight on

judgment is notoriously difficult to avoid.12 It might be unrealistic to suppose that courts have

developed a sensible response in just the few decades of active private securities litigation. second,

although securities cases often include high-profile claims that might be attractive for judges to resolve,

these cases also commonly produce a quagmire of discovery disputes and time-consuming procedural

motions. Third, judges are also somewhat suspicious of these cases and might be motivated to policethem early in the litigation process. Rather than a debiasing effort, the FBH doctrine might be one of

several mechanisms courts have developed for managing securities fraud actions in the federal

courts.13


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516. Pleading Securities FraudAbstract:

In the roughly five years since the Private Securities Litigation Reform Act of 1995 became law, courts

and commentators have devoted considerable attention to two questions relating to the requirement, set

forth in section 21D(b)(2), that a complaint alleging securities fraud must "state with particularity facts

giving rise to a strong inference that the defendant acted with the required state of mind." Those

questions concern: (1) What constitutes "the required state of mind" in suits under section 10(b) and Rule

10b-5? And (2) Are facts indicating a defendant had a motive and the opportunity to engage in fraud,

standing alone, sufficient to create a strong inference that that defendant acted with the required state of

mind?

Courts and commentators have devoted far less attention to whatI call the Basis Requirement - the

portion of section 21D(b)(1) that requires a plaintiff to specifying not only "each statement alleged to have

been misleading" and "the reason or reasons why the statement is misleading," but also, with respect to

every allegation made on information and belief, "all facts on which that belief is formed." This article

argues that issues relating to the Basis Requirement in the long run will prove to be far more significantthan the issues relating to motive, opportunity and degrees of recklessness that have preoccupied courts

and commentators to date.

A threshold question is the amount and quality of corroborating information a plaintiff must include in her

complaint. The article explains why, in order to implement Congress' goal of discouraging the filing and

prosecution of speculative claims of securitiesfraud, courts must adopt an interpretation of the Basis

Requirement similar to that adopted by the Ninth and First Circuits inIn re Silicon Graphics Securities

Litigation and Greebel v. FTP Software, respectively. Only by doing so will courts prevent plaintiffs from

continuing to make speculative allegations of fraud and then relying on the discovery process to seek

evidence to support their claims.


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517. UNUSED


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518. UNUSED


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519. With Respect to CAMPBELL


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520. US ex relMiller v Bill Harbert Intl ConstrDC Circuit

Joins The Retroactivity Debate Over FERA


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521. Contract Fraud One Year After FERA OOPS 2010


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522. BuildingNYCsInnovationEconomy

Page 3Despite all of this, New York City has onlyscratched the surface when it comes to tapping theeconomic potential of its scientific research institutions.Elsewhere, universities and research centershave helped spark the emergence and growth oftechnology sectors by producing a steady flow of newstart-ups that locate and expand nearby. That highrate of new business formation helped those regionsestablish a critical mass of tech-related businesses,which in turn attracted entrepreneurially-mindedfaculty and students to local institutions and prompted

venture capital firms that specialize in technologyenterprises to open offices there. This pattern hasnever taken hold in New York, however, and largelyas a result, the city has never managed to develop adecent-sized innovation economy

Page 3Limited support among institutional leaders forentrepreneurship is apparent in other crucial ways.For example, New York research institutions offercomparatively fewer opportunities for their scientiststo access entrepreneurship training and advice; there

are only limited examples of collaboration and crosspollinationbetween science departments and businessschools here. Some New York institutions havea reputation for driving a hard bargain with their scientistsduring the licensing process, an approach thatsometimes deters faculty and post-doctoral researchersfrom going the entrepreneurial route. And city institutionshave not been as accommodating to facultywho wish to take a temporary leave of absence to pursuea business opportunity associated with their researchdiscoveryin stark contrast to Stanford, MITand other institutions that often go to great lengths toencourage their scientists to start businesses.


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Page 14A 2008 report by the Ewing Marion KauffmanFoundation confirms that New York universities havenot played a major role in seeding high-tech firms.According to the report, no New York City universityranked among the top ten institutions in the nationat which more than 600 key U.S.-born tech founders

received their terminal (highest) degree.47After thetop universities, each school on the list had one or twofounders, says VivekWadhwa, the primary author ofthe study. The fact that New York didnt figure anywhereon the list is the only significant fact.A final problem is that too many of the technologystart-ups that are hatched by local scientistsinside the halls of city research institutions end up

being established elsewherefrom Boston and SanDiego to Northern New Jersey. Out of 84 companiesspun off from Columbia between 1983, when it

produced its first start-up company, and the middleof 2008, 60 are still in business but only seven ofthem maintain significant operations in the city.48

Even worse, just one of the 14 start-ups producedby Rockefeller University over the last 15 years remainsin the city.49The shame of this is that New York City frequentlymisses out on the tremendous economic

benefits of technology start-ups that were createdhere. One missed opportunity is the jobs: while manytech startups never succeed, some end up achieving

phenomenal growth and creating dozens or hundredsof jobs, with revenue benefits accruing to thecity through taxes. Another is the chance to establisha critical mass of technology companies as wellas a community of seasoned entrepreneurs, both ofwhich are fundamental to the formation of an entrepreneurial

ecosystem.Reasons for the citys longtime failure to retaincompanies spun out of local research institutionsinclude everything from the high cost of living and

pricy real estate to a dearth of commercial lab space.Many previous studies have pointed out that spaceissues were at the heart of the problem, including a1999 report by the Center for an Urban Future anda 2001 study by the New York City Investment Fund,which concluded: Lack of affordable commerciallab space is the primary reason why New York Cityhas failed to develop a biotechnology industry cluster.

New York City-based companies have had to lookoutside the city and state for space to accommodate

growth, primarily moving their research and manufacturingfacilities to Massachusetts and New Jersey The lack of space is consistently cited as a reasonfor their departure.50


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523. A Ruling That Applies Some Common Sense To The False

Claims Act Government Contracts Blog


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524. When Molehills Become MountainsThe Implications

OfUS ex rel Longhi v Lithium Power Techs For SBIR Grantees And

Beyond

In U.S. ex rel. Longhi v. Lithium PowerTechs. Inc., 513 F.Supp.2d 866 (S.D. Tex. 2007),

2008 WL 62207 (S.D. Tex. Jan. 3, 2008), the U.S. District Court for the Southern District of

Texas ruled that a small business that made false statements to obtain Small Business Innovation

Research (SBIR) grants violated the False Claims Act and must pay the Government treble

damages on all amounts received under the grants, plus the maximum civil fine per grant.

Identifying what it considered a novel issue of law, the Court addressed for the first time the

proper way to calculate damages for a fraudulently induced research grant. The defendant

urged the Court to adopt the benefit of the bargain theory, arguing that the Government

received what it paid for, i.e., high-quality research, and therefore was not damaged. The Court,

however, determined that the grant work was valueless to the Government.

This Feature Commentanalyzes the liability and damages decisions inLonghi and discusses

the impact on SBIR grantees, as well as other recipients of research and development (R&D)

funding

[,,,]

Legal AnalysisThe first issue facing the Court was whether LPT was liable under the

FCA for making false statements in its proposals for the four SBIR grants in question. On cross-

motions for partial summary judgment, the Court ruled that LPT violated the FCA by making in

its SBIR proposals several knowingly false statements and misrepresentations that were

crucial and material to the Governments decision to select LPTs proposals. LPT:


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y misrepresented its corporate status and history in the ASMDC Phase I proposal by

claiming that it had been in business since 1992, although it did not incorporate as

a business until five months after proposal submission;

y made false statements about its available facilities in the ASMDC Phase I grant

proposal;

y misrepresented cooperative arrangements that it claimed to have with the

University of Houston and Polyhedron Laboratories in all four SBIR proposals;

and

y misrepresented the amount of related work it had performed in the Air Force

SBIR proposals by not disclosing the funding received for the ASMDC Phase I

and BMDO Phase II grants.

Noting that the falsity of a claim is determined at the time of submission, the Court found

that a number of these statements were not true when LPT submitted the proposals. Moreover,

the Court determined that LPT made these statements either with actual knowledge of their

falsity or with a reckless disregard for their truth. The Court also accepted the Governments

argument that a false statement made in a Phase I proposal tainted the Phase II proposal

because, under SBIR terms and conditions, a Phase I grant is a precondition to the receipt of a

Phase II grant.

To demonstrate that LPTs false statements were material under the FCA, the

Government provided declarations from the scientists who evaluated the ASMDC Phase I and

Air Force proposals. The scientists asserted that the false statements made by LPT were crucial

and material to their decision to fund LPTs SBIR proposals. In response, the defendant argued


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that the Government has made a mountain out of a group of small molehills in arguing that the

allegedly false statements were material. The Court, however, found that LPT embellished a

whole series of molehills so it could present a mountain of experience, facilities, and novelty to

attract the reviewers. Therefore, the Court found that LPT fraudulently induced the Government

to award the SBIR projects.

In its damages decision, the Court first recognized that no other circuit had addressed the

proper way to calculate damages for a fraudulently induced research grant. In arguing that the

Government was not damaged, the defendant urged the Court to adopt a benefit of the bargain

theory or the closely related no harm, no foul approach because the Government got what it

paid forthe research proposed in the SBIR proposals. Thus, according to LPT, the Government

was not damaged.

The Court found that the Government did not receive the benefit of its bargain for two

primary reasons. First, the Court noted, in most cases in which courts apply the benefit of the

bargain approach, the contract at issue is a procurement contract with a tangible end product such

as a bridge or widget. In contrast, the SBIR projects, according to the Court, produced no

tangible end product. Second, the Court described the congressional intent underlying the SBIR

program as providing assistance to small business concerns to enable them to undertake and to

obtain the benefits of research and development in order to maintain and strengthen the

competitive free enterprise system and the national economy. 15 USCA 638(a). According to

the reviewing scientists, they would not have selected LPT for award if its proposals had been

truthful. Thus, by submitting false proposals, LPT prevented the Government from receiving the

intangible benefit that it had anticipated, e.g., helping deserving small businesses develop


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innovative new products. Although the Court rejected LPTs position that the Government

received the benefit of the bargain, it nonetheless examined the value of the work LPT

performed. On this issue, the Court concluded that since the legislative history of the SBIR

demonstrates that the value of the program lies not in innovation, but in innovation by eligible

small businesses, it is clear that any alleged end-product of the Four Contracts is valueless from

the governments standpoint.

Because the Government received nothing of value, the Court found that the proper

amount of actual damages was three times the $1.66 million value of the grantsor $4.97

million. However, the Court rejected the Governments request for civil penalties on each of the

54 invoices submitted under the four projects, determining that the fine should attach only once

to each project. Specifically, the Court noted that in its earlier decision it made no finding on the

falseness of the individual invoices. Rather, the Court found that the false statements were the

four projects themselves and that falseness was imputed to the invoices. Because the defendants

fraud was systematic and knowing, the Court assessed the maximum penalty per grant, for a

total of $43,000.

Implications and ConclusionsLonghis impact on SBIR recipients and the broader

R&D community is potentially far-reaching. As the Court noted in its damages decision,

todays SBIR is big business. For instance, in fiscal year 2007, the Department of Defense and

the National Institutes of Health awarded over $1.7 billion in SBIR grants. As SBIR dollars

grow, the Phase I SBIR grant process becomes increasingly competitive. In 2001, nearly 30

percent of all Phase I applications at NIH received funding, but in 2006, only 19 percent of NIH


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on any of those types of requirements induced the award and that, as a result, the full amount of

the funding is the appropriate damages in an FCA suit.

Third, the damages model applied by the Longhi Court yields essentially the maximum

available FCA damages (putting aside the penalties) inasmuch as LPT received no credit for

any work it performed. Thus, decisions such as Longhi create an incentive for a potential relator

to file qui tam actions against participants in the SBIR program. Defending against an FCA case

is burdensome for even the largest companies; for a small business, it likely will be even more

so. In short, SBIR awardees should be aware that being a small business does not mean that they

are immune to FCA suits, especially qui tam actions filed by former or disgruntled employees.

Although some aspects of the Longhi decision are potentially far-reaching, there are

reasons why the case should be afforded only narrow application. Perhaps most significant is that

the Longhi decision involved the fraudulent inducement of an award intended to benefit only

eligible small businesses. Most research programs do not have the strict eligibility criteria that

govern the SBIR program and, therefore, are not as susceptible to a fraudulent inducement

argument.

It also is important to bear in mind that the allegedly false statements in Longhi were

made during the application process. If an FCA complaint were based, for example, on allegedly

fraudulent postaward accounting activity instead of on misstatements made during the

application process, the Government or a qui tam relator likely would not be able to argue

successfully that the Longhi damages model should be applied.


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In addition, among the false statements the Longhi Court identified was LPTs failure to

identify its Army support in the SBIR proposal submitted to the Air Force. Applicants for grant

support generally must disclose to funding agencies what is referred to as other support,

although the presence of related or overlapping work does not mean that a second project will be

denied funding. NIH, for example, makes clear that it will work with an applicant to resolve

financial, budgetary or scientific overlap between projects. It therefore seems likely that the

testimony of the scientific reviewers in the Longhi decision was integral to the Courts

conclusion. Absent such unequivocal and unchallenged testimony, the Government could not

establish the direct causality between a false statement and a funding decision on which the

Longhi Court relied.

More generally, the Longhi Courts conclusion that the research LPT provided was

valueless is in some respects difficult to square with the purposes underlying federal R&D

support. The Court acknowledged a distinction between the procurement of goods or services

and the award of funds for research purposes, but arguably discounted that difference in

assessing the appropriate measure of damages. For example, although R&D work is not

necessarily expected to produce bridges or widgets, the Court remarked that the absence of a

bridge or widget at the end of a project supported its finding that LPTs work produced no

tangible benefit to the Government.

Federal Acquisition Regulation 35.002 provides that the primary purpose of contracted

R&D programs is to advance scientific and technical knowledge and apply that knowledge to the

extent necessary. Similarly, NIHs description of its SBIR program is to us[e] small businesses

to stimulate technological innovation, strengthen[] the role of small business in meeting Federal


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R/R&D needs, [and] increase[] private sector commercialization of innovations developed

through Federal SBIR R&D. To discount the value of work performed under a SBIR award or

any other R&D project because it does not generate something tangible seems inconsistent with

the purpose of R&D.

The Court also noted that any value to the Government was lessened or eliminated

because LPT would own any battery technology developed and could market it to non-

Government customers. That finding overlooks Congress intent, through the Bayh-Dole Act, to

create a regulatory regime under which small businesses are encouraged to take title to

patentable inventions developed with federal support. Moreover, the Government receives a

permanent royalty-free license for any such invention and is free to provide that license to other

contractors to produce the technology for Government purposes. So although LPT may own

the technology, the Government can derive benefit out of the license if it so chooses.

Overall, the Longhi decision could be significant for SBIR applicants. It also has

potentially broad effect on other R&D programs and institutions performing basic research.

However, the Longhi damages model is not easily applied to many FCA cases involving basic

research or R&D work.


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525. Litigating Qui Tam Actions: Doctors, Double Jeopardy,

Excessive Fines and The False Claims Act


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526. United States v. Santos: Proceeds in Federal Criminal

Money Laundering Statute, 18 U.S.C. Section 1956, Means

Profits, Not Gross Receipts


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527. Over-Criminalization of Conduct/Over-Federalization of

Criminal Law


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528. Courts Reject Application of FERAs Retroactivity

Provision to Pending Cases

Courts Reject Application of FERAs Retroactivity Provision to Pending Cases

October 30, 2009

Since the Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law by

President Obama on May 20, three federal courts have rejected the application of FERAs

retroactivity provision to cases pending on June 7, 2008. Collectively, these three courts held

that FERAs amendment to former 31 U.S.C. 3729(a)(2) (now renumbered and codified at 31

U.S.C. 3729(a)(1)(B)) does not apply retroactively to cases because (i) Congress did not

explicitly provide for such retroactive effects per the Supreme Courts Landgraf analysis; (ii)

Section 4(f)(1) of FERA applies only to claims pending, not cases; and (iii) the retroactive

application of the False Claims Act (FCA) would violate the U.S. Constitutions Ex Post Facto

Clause. FERAs retroactivity provision and these three cases are discussed below.1 While this

question will continue to be litigated, the developing case law provides important and compelling

precedent that will aid in the assessment and defense of FCA matters.


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529. Allison Engine, The False Claims Act, and Healthcare

Fraud

Scott R. Ebner

Cleveland-Marshall College of Law

http://works.bepress.com/scott_ebner/

SelectedWorks is a trademark of The Berkeley Electronic Press.


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530. THE DANGERS OF SUMMARY JUDGMENT:

GENDER AND FEDERAL CIVIL LITIGATION

Summary judgment in the federal courts is an area of civil practice in which there has been

considerable change over many years.3 Rule 56 of the Federal Rules of Civil Procedure (FRCP)

provides that summary judgment can only be granted if there is no genuine issue as to any

material fact and . . . the moving party is entitled to a judgment as a matter of law.4 Historically,

summary judgment was disfavored, and was not to be granted liberally because of the preference

for jury trial. Cases that presented issues of credibility and weight of evidence were deemed

inappropriate for summary judgment. However, the trilogy of Supreme Court decisions in

1986Matsushita,5Liberty Lobby,6 and Celotex7provided impetus and encouragement to

district courts to grant summary judgment.8 Federal trial judges are now more likely to grant

summary judgment,9 depriving litigants of the opportunity for jury trial (and the chance to havethe merits of their claims determined by a more diverse group of decision makers).10 For this

reason, the federal summary judgment industry11 has been the subject of much recent

scholarly attention.12 Increasing concern with the vanishing trial in federal civil cases13

makes summary judgment a particularly important subject of inquiry.

[...]

The critical role of summary judgment in cases involving women plaintiffs discussed in this

Article is a new dimension of research on civil litigation, gender discrimination, and gender bias

in the federal courts. As a teacher and scholar of procedure and gender and law, and a formercivil rights lawyer, much of my teaching and writing has centered on the intersection of gender

and procedure.40 This Article details this intersection in the context of summary judgment in

order to deepen understanding of both gender cases and procedure. Looking at summary

judgment through the lens of gender focuses on the troubling operation of current summary

judgment practice in concrete contexts. Examining cases of women plaintiffs through the lens of

summary judgment offers new insights to analysis of gender discrimination litigation. Many

major womens rights cases that have brought about important changes in the law were originally

dismissed on summary judgment. Some of these cases were recuperated on appeal or in the

Supreme Court, where there was ultimate recognition of the merits and, indeed, the significance,

of the legal claim.41 If the litigants had not been able to appeal, and there had not been reversalon appeal, those claims would have been lost. Many other innovative claims concerning issues of

gender may have been lost because they were dismissed on summary judgment and were not

appealed. Thus, as Judge Wald has cautioned, the role that summary judgment plays in cutting

off the development of the law warrants concern.42 In cases that involve subtle aspects of gender

bias, there are special risks.


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In this Article, I explore the way in which gender plays a role in cases involving summary

judgment in federal court, utilizing both qualitative and quantitative analysis, and focusing on a

range of cases involving women plaintiffs.43 I argue that judicial decision making in gender

cases illustrates the way in which current summary judgment practice permits subtle bias to go

unchecked, and reveals the dangers of summary judgment generally. I do not suggest that cases

involving women plaintiffs are the only, or even the worst, examples of these problems. My

concern is with both the troubling development and use of summary judgment to dismiss cases

involving gender claims and problems with summary judgment practice generally; the

application of summary judgment in cases involving women plaintiffs in ways that suggest

gender bias, as well as the implications of increased use of summary judgment for the American

civil justice system


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531. Eleventh Circuit Affirms Dismissal of FCA Case under

FRCP 9(b)

In United States ex rel. Sanchez v. Lymphatx, Inc., No. 09-14275 (11th Cir. Feb. 18, 2010), the

Eleventh Circuit affirmed the district courts dismissal of a relators allegations of False Claims Act

violations arising from Medicare billing fraud, finding the relator failed to plead specific details of false

claims. Slip Op. at 4. The relator alleged Lymphatx billed Medicare for uncovered services provided

by massage therapists to treat lymphedema, swelling caused by impairments in the bodys lymphatic

system. Slip Op. at 3 n.2. Medicare does not pay for massage treatment for this condition if provided

by a massage therapist. Id. The decision bolsters defendants Federal Rule of Civil Procedure 9(b)

arguments in the Eleventh Circuit by undermining the holding of United States ex rel. Walker v. R&F

Properties of Lake County, Inc., 433 F.3d 1349 (11th Cir. 2005), which allowed a relator to survive a

Rule 9(b) motion without pleading specific details of false claims.


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532. New Compliance Challenges: False Claims Act

Amendments F

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