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The Marine Habitat and Waterways Improvement Fund and the Virginia Fraud Against Taxpayers Act



One loyal reader recently pointed out that this blog might have unintentionally drifted from one of its stated goals–namely, to give practice examples of the myriad situations in which Virginia Fraud Against Taxpayers Act might be useful.


Today’s example concerns the Marine Habitat and Waterways Improvement Fund, which was established in the year 2000 by an act of the General Assembly.  The statute is found at Virginia Code § 28.2-1204.2 et seq.  The statute provides that “Moneys in the Fund shall be used solely for the purposes of improving marine habitat and waterways, including the removal of obstructions or hazardous property from state waters.”   


Interestingly enough, one of the major sources of revenue for this fund is permits for one of two purposes:  (1) fees paid to the Treasurer of Virginia for a permit to “recover underwater historic property” and (2) permits to use “state owned bottom lands.”  I take example (1) above to mean treasure hunters, archaeologists, etc., looking for old shipwrecks off the Virginia Coast. 


Example number (2), permits “to use state owned bottom lands” primarily means the mining of sand from the bottom of the Chesapeake Bay.  The type of sand found at the bottom of the Chesapeake Bay–or most other bays, for that matter–is very different from the sand found on beaches or in a kid’s sandbox, and it is quite valuable. Among many other commercial applications, this sort of sand is used in the manufacture of concrete.     


For that reason, Virginia Code § 28.2- 1206(C) specifies that “When the activity or project for which a permit is requested will involve the removal of bottom material, the application shall indicate this fact. If granted, the permit shall specify a royalty of not less than $.20, nor more than $.60, per cubic yard of bottom material removed.”


Such royalties for the sand removed are to be paid to the Treasurer of Virginia, and used for the improving Virginia’s marine habitats and waterways–in other words, for the public good and for the preservation of our precious natural resources. 


Virginia’s part of the Chesapeake Bay is not the only place in the country with this sort of sand–California’s San Francisco Bay also has quite a bit of it.  Guess what happened there?


You got it–numerous companies submitted false claims to the state by mining sand in areas of the Bay for which they had not been issued a permit, and by mining more sand than they reported to the state of California.  Because the California statute is similar to the Virginia statute (in that both set a range of prices for one cubic yard of sand depending on the purpose for which it is mined) the companies also submitted false claims and made false records in order to decrease the price owed to the state for one cubic yard of sand. 


I would say the odds of something similar happening here in the Chesapeake Bay are pretty high–if for no other reason that the value of the sand and the low prices set by the Commonwealth of Virginia.  At a statutory price of $.20 to $.60 per cubic yard, the sand mined from the Chesapeake Bay is a real bargain. 

In California, the state charges $3.30 for one cubic yard of sand mined from the Bay, and the “street value” or commercial value of such
sand is around $12.50 per cubic yard.  That means the incentive for a company to rip off the Commonwealth is almost too much to pass up.    

To drop me a line and learn more about my firm or whether you might have a situation to which the Virginia Fraud Against Taxpayers Act applies, you may contact me here.


Zachary Kitts
Cook & Kitts, PLLC
        


  

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Breaking News: Virginia Office of the Attorney General to host Continuing Legal Education Seminar on the Virginia Fraud Against Taxpayers Act



Virginia Qui Tam Law.com is pleased to announce that the Virginia Office of the Attorney General will be sponsoring a Continuing Legal Education Seminar on the Virginia Fraud Against Taxpayers Act on October 3, 2008, from 2:00 to 5:00 PM.

The meeting is open to the entire Office of the Attorney General, as well as members of the private bar.   We also hope to attract Constitutional Officers such as Circuit Court Clerks, and others involved in the administration of Virginia Courts.   

The single most important aim, however, is to build the public-private partnership between Government attorneys and members of the private bar that is a crucial prerequisite to large scale enforcement of the Virginia Fraud Against Taxpayers Act.
Senator Grassley (R-IA) himself described the need for such a partnership when he led the charge to update the Federal False Claims Act in 1986: 

        
The law we vote on today is intended to encourage a working partnership between the Government and the qui tam plaintiff. The public will be well served by having more legal resources brought to bear against those who defraud the government… If the Government can pass a law that will increase the resources available to confront fraud against the Government without paying for it with taxpayers’ money, we are all better off. This is precisely what [the False Claims Act] is intended to do: deputize ready and able people who have knowledge of fraud against the government to play an active and constructive role through their counsel to bring to justice those contractors who overcharge the government. 132 Cong. Rec. H9382-83 (October 7, 1986).

  
The program will be an enhanced version of the seminar we put on in February through the Fairfax Bar Association, and the speakers will again be Special Assistant Attorney General Guy W. Horsley, Jr., Jeb White, who serves as Executive Director of Taxpayers Against Fraud, and myself.  The conference will be held in the Office of the Attorney General, located at 900 E. Main Street, Richmond, Virginia.  

There will be more details to follow, but in the interim anyone wishing to register should email me. 

Zachary Kitts
Cook & Kitts, PLLC
 

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U.S. District Court for the Eastern District of Virginia Ranks in Top Five District Courts for Qui Tam Filings


I had heard it said before that the U.S. District Court for the Eastern District of Virginia ranked in the top five districts for qui tam filings, but I now have located the proof.

The statistic comes from this Cook & Kitts, PLLC



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An Introduction to Qui Tam Litigation in the U.S. District Court for the Eastern District of Virginia–also known as the “Rocket Docket”



The United States District Court for the Eastern District of Virginia is known as the “Rocket Docket,” a title that Court has worn with pride for more than 40 years.  The name originated with Albert V. Bryan, the Judge for whom the Alexandria Courthouse is now named.  Judge Bryan had a tendency–which continues with most Judges some of the time and some Judges most of the time–to make rulings from the bench on complicated motions, including dispositive motions. 

Lest any reader think that these are mere lawyer war stories, consider this–of the 94 federal districts in our federal court system, the Eastern District of Virginia processes cases faster than any other.  National Institute for Trial Advocacy blog; this post will focus on the litigation of qui tam claims in such a fast-paced environment.  

In general, I think it is fair to say that lawyers who are paid only when they
win cases (i.e., contingency fee arrangements) are in favor of rigorous deadlines and a short discovery periods. 

However, some plaintiff-side qui tam lawyers are hesitant to file in the Eastern District of Virginia.  I can understand why in some instances.  It does makes sense, for example, to file in a place that will allow the government to have the maximum amount of time to investigate.  It also makes sense in some cases to file in a place that freely gives continuances. 

I also think, however, that some cases would be better filed in the E.D.Va than anywhere else in the country.  This is particularly true where the documentation in the possession of the relator makes the violation clear, and where the theory of liability is not going to change mid-stream.    

A lawyer considering whether to file his or her qui tam claim in the Eastern District has a number of things to consider.  First, in many situations, the government will be held to the 60 day limit for filing its answer to the sealed complaint and making its decision whether to intervene or not intervene.  In other cases, the United States will be held to something close to the 60 day time frame.  

Qui tam practitioners will recognize that this is unique.  Many courts will allow a case to remain under seal for years while the government’s investigation takes place.  Many times, such lengthy investigations are necessary due to ongoing criminal investigations or complicated factual issues; sometimes, they are the result of an overworked and understaffed DOJ.  Whatever the reason or reasons, while there are cases where lengthy investigative periods needed, there are other cases where such lengthy investigative periods are not necessary.  

After the case is unsealed and served on the defendants, the E.D.Va. continues with its brisk pace.  As the attached zkitts@cookkitts.com 
  

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Considerations for Settlement in Virginia Fraud Against Taxpayers Act cases



The issue of settling claims in a non-intervened qui tam case under the Virginia Fraud Against Taxpayer’s Act presents the same sort of thorny issues as settlement in a Federal False Claims Act case.  Most of the differences between settling a false claims case and a typical civil case arise out of the fact that the Commonwealth (or the Department of Justice in a federal case) must approve the settlement in all respects. 

In reviewing and approving settlement agreements, the Commonwealth will and should act to protect its interests in a number of ways, many of which might not be apparent on the face of the statute.  

An excellent memo from the Department of Justice’s Commercial Litigation Branch is a must-read for anyone interested in the VFATA.  The Cook & Kitts, PLLC    

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A look at the standing of qui tam relators under the Virginia Fraud Against Taxpayers Act



    In the course of blogging, from time to time people call or email me about various aspects of the Virginia Fraud Against Taxpayers Act as well as the Federal False Claims Act.  When I do receive such questions, along with the permission of the person asking the question, I sometimes use such topics for a post. 

    I recently spoke to someone about the standing of relators and the government in qui tam litigation.  More specifically, the question was: “Who are the parties to a non-intervened qui tam case, and who exactly does the qui tam relator and his or her attorney represent?” 

    As with most things in this area of law, there is no easy answer.  Certainly it is safe to say that the Commonwealth occupies a unique place in qui tam litigation under the VFATA.  

    For example, in a non-intervened case, the Commonwealth will receive a minimum of 70% of the money recovered by the private relator.  The Commonwealth can dismiss the relator’s qui tam complaint at any time over the objection of the relator, or settle the case with the defendants over the objection of the relator.  The Commonwealth can intervene at any time and limit the relator’s presentation of the case.  

    Moreover, the relator cannot settle the case without the participation of the Commonwealth, and without the Commonwealth’s signature on the settlement agreement and release.  Because the government will rarely agree to a broad release of claims, a high level of involvement in the drafting and negotiation of the settlement and release agreement is the norm for the United States Department of Justice, and the same thing should be true for the Commonwealth when it one day has to form an opinion on these matters.      

    Additionally, of course, the Commonwealth also has the power to receive copies of all pleadings, discovery, and deposition transcripts.  These are just a sample of the Commonwealth’s powers, and they certainly make the Commonwealth seem like a party to the case, if you ask me. 

    In the context of the Federal False Claims Act, an interesting but rarely discussed District Court opinion from Judge Ellis in the Eastern District of Virginia holds that a qui tam case prosecuted by a private relator is a suit “brought by a governmental unit.”  The case is U.S. ex rel Doe v. X, Inc., 246 B.R. 817 (E.D.Va. 2000).  

    The issue becomes important because the rights of the government in a non-intervened case are constantly on the table.  For example, defendants occasionally seek to limit the government’s use of the discovery produced by defendant.  Such actions seem to be rare, and I think that is because it is generally a stupid thing for a defendant to do.  

    In a non-intervened case, the defendant already has the biggest worry off of his or her plate–namely, that the government will prosecute the case with its limitless resources.  Thus, the last thing I would want if I represented a defendant in a non-intervened case would be to appear as if my client was trying to hide something or protect itself from some branch of the government.    

    I think largely for that reason, there is very little law available on the point of whether the government can be limited in its use of discovery material.  One important non-published decision is United States ex rel Stewart v. The Louisiana Clinic, et al., 2002 WL 31819130 (E.D.La. 2002).   


    The defendants in Stewart v. Louisiana Clinic proposed a protective order that limited the United States in its use of third-party medical records, allowing the United States to receive medical records only when they had been redacted and then only allowing their use for the purposes of that specific litigation.  The Court found no basis whatsoever for restricting the government in this way, and ruled that the government could use the information to the full extent of its statutory authority.     


    There will be more to follow, as we have just touched upon some of the major issues in this particular area of law.  As always, comments are welcome. 


    Zachary Kitts 
    Cook & Kitts, PLLC  
    
    

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Proof that one Medicare provider with a laptop can steal more than ten men with guns



In Mario Puzo’s novel The Godfather, Don Corleone says something along the lines of, “One lawyer with his brief case can steal more than ten men with guns.” 

Today the Washington Post has an excellent front page story by Carrie Johnson proving that one crooked Medicare provider with a laptop can steal even more than that–to be specific, one single South Florida Medicare/Medicaid provider bilked the United States out of $105 million. 

To access the article, click
here

Hopefully, this will show the importance of the other news of the day:  the House Judiciary Committee just announced that it will hold hearings on the False Claims Correction Act of 2008 next Thursday, June 19th.

While the House bill largely tracks the Senate bill, it includes a number of additional provisions, including a provision addressing the interplay between Federal Rule of CIvil Procedure 9(b) and the FCA. This bill includes sponsors from both sides of the aisle, and hopefully more will come on board soon.

More information to follow. 

Zachary Kitts 
Cook & Kitts, PLLC



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Breaking News: U.S. Supreme Court announces its decision in Allison Engine case



    The Supreme Court today announced its opinion in Allison Engine Co., Inc., et al. v. United States ex rel Sanders, et al. Case No. 07-214.  To read the opinion, click Cook & Kitts, PLLC


     

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Recovering Mandatory Attorney’s Fees under the Virginia Fraud Against Taxpayers Act


The topic of today’s post is the recovery of mandatory attorney’s fees under the Virginia Fraud Against Taxpayers Act in Virginia state court.  I find it interesting how many attorneys simply do not pay attention to maximizing the fee recovery under fee shifting statutes generally, although federal court practitioners tend to be a little more experienced in this area.  There is also a well-developed body of case law in the federal system dealing with attorney’s fee awards and the factors that courts consider in making an award; in Virginia state courts, there is considerably less guidance.  

In the Fourth Circuit the factors set forth in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974) generally govern.  Those factors (i.e., time and labor required; the novelty and difficulty of the legal issues involved; the skill and experience required to handle the case; the opportunity costs from being precluded from other work; the time limitations imposed on the lawyer; the result obtained, the reputation and skill of the attorney, and so forth) have been applied many times over the years.      

Additionally, federal practitioners in the D.C. area have the Laffey Matrix which is compiled annually by the Department of Justice’s Civil Division.  Although it does not have the force of law, the Laffey Matrix does track the Uniform Price Index compiled by the Department of Labor for attorney’s fees.  The Laffey Matrix also seems to be gaining popularity each year, and it is applied widely in major metropolitan areas.   

In Virginia state courts, however, the case law is sparse on attorney fee awards, although there is some guidance.  In the Circuit Court for Fairfax County, I strongly suggest not following the fee petition suggested by the Fairfax County Bar, which is only two or three pages long.  To be fair, the fee petition recommended by the FBA is probably quite sufficient for collections matters, or domestic relations cases, but as long as large fee awards are possible, I suggest practitioners follow the Virginia Supreme Court’s guidance.

The Virginia Supreme Court has held that, in evaluating the evidence regarding the reasonableness of counsel fees, the fact
finder may consider, (1) the time and effort expended by the attorney, (2) the nature of the services rendered, (3) the complexity of the services, (4) the value of the services to the client, (5) the results obtained, (6) whether the fees incurred were consistent with those generally charged for similar services, and (7) whether the services were necessary and appropriate. See, Schlegel v. Bank of America, N.A.,  271 Va. 542, 556, 628 S.E.2d 362, 369 (2006).  In making an attorney’s fee award, the trial court will be reversed only for an abuse of discretion.  Tazewell Oil Co. v. United Virginia Bank, 243 Va. 94 (1992). 

It is important to remember that attorney’s fees are mandatory under the VFATA, and should be seen as a major portion of damages from the very start of the litigation.  Even an award of a single $5,000 penalty under the VFATA would entitled the plaintiff to mandatory attorney’s fees.  In litigation under the Virginia Freedom of Information Act (FOIA), the Virginia 
Supreme Court has upheld sizable awards of attorney’s fees.  See, RF & P Corp. v. Little,  247 Va. 309, 440 S.E.2d 908 (Va.1994).  In this case, the Virginia Supreme Court upheld the trial court’s award of $133,000 in attorneys fees for violations of Virginia’s FOIA statute, even where petitioner did not prevail on all counts in the initial ccomplaint. 

A party entitled to an award of attorney’s fees must establish a prima facie case that the fees requested are reasonable.  Chawla v.
BurgerBusters, Inc., 255 Va. 616, 623, 499 S.E.2d 829, 833 (1998).  I have attached /files/116785-109034/bruggemann_decla.pdf”>example.       

These declarations were for an FLSA case, and so you would generally want to get declarations from attorneys familiar with false claims litigation under the Federal False Claims Act or the Virginia Fraud Against Taxpayers Act.  However, such specialized knowledge is not necessary to support the hourly fee rate, as we see here.

There is more Virginia case law available, and we will revisit this topic from time to time. 

Zachary Kitts
Cook & Kitts, PLLC