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Qui Tam Practice in Virginia: Filing Under Seal in Virginia Circuit Courts

    One issue specific to qui tam practice in Virginia state courts is the structure of the Circuit Courts and the implications of that structure for filing the complaint under seal.  Unlike in states such as Maryland, Virginia has no uniform case management system in use in every Circuit Court.  

    The Clerk of the Court in Virginia is a Constitutional Office.  The Clerk is elected every eight years in a county-wide election, and is free to implement whatever case management system he or she feels appropriate, with virtually no oversight from the Virginia Supreme Court.  Given the disparities in size and wealth between the various counties in the Commonwealth, it is no surprise that the system that works quite well in Craig County might not work as well in Fairfax County, and vice versa.  Given the sparsity of the statute’s use, those preparing to file a case under the Virginia Fraud Against Taxpayers Act should be aware that there almost certainly will not be a mechanism in place for filing a qui tam case under seal. 

    This is not a problem that should be taken lightly.  The case absolutely must be filed under seal in order to comply with the statute, and that automatically makes things like generating a case number (while not publicly disclosing the name of the parties) and generating a receipt for the filing fee (again, without publicly disclosing the names of the parties) fairly complicated.  Again, the answer to these problems will be different in each Circuit Court, further complicating the issue.  
 
    On the other hand, because the Clerk is an elected officer, they do tend to be more responsive and helpful than a non-elected official might be.  When I filed the first Virginia Fraud Against Taxpayers Act case in Fairfax County, I found John Frey and his staff to be extremely professional and helpful.  My advice is the following: 

    (1) Be sure you call the Clerk personally and give him or her a heads up about a week in advance.  This gives them time to read the statute and think it over, and consult with Judges, members of their staff, and so forth.  

    (2) You must file the case with the Clerk in person, and make an appointment in advance to do so.  Walk the Clerk’s Office through the whole procedure, and make certain that they understand that the normal procedures for sealing cases are not relevant to this case, because even the names of the parties cannot be made public.  

    (3)    Politely request that the Clerk of Court either become the point of contact, or designate one specific person to be the point of contact.  This is crucial, because after the complaint leaves your hands, if one specific contact person is not assigned you may find yourself unable to get any information about the case.  Remember that whatever case management system the Clerk’s Office has in place works very well for them, but it is not designed to handle complaints filed under seal.     
 
    (4)  When the Court order unsealing the case is issued, go back and read direction number (3) above.  The standard processes the Clerk’s Office has in place to enter orders signed by Judges will not catch the order unsealing the case, and again, extra follow-up is important.  You need to double check that the case is actually unsealed, and I again recommend going there in person and asking to see the file (or searching the information on-line if your Circuit Court is one that is available on-line). I have heard antidotal evidence of a case or two in Circuit Courts being served on the defendants and actively litigated without having been formally unsealed.  Don’t let this happen to you.    

    (5)  Once the case is unsealed, make sure the summons are issued.  The rules of the Virginia Supreme Court call for summonses to be issued upon request by the plaintiff; the VFATA, on the other hand, calls for summonses to be issued upon a court order.  Thus, without follow-up, the summonses may not issue automatically.

    Once you have cleared these hurdles, litigation should, in theory, proceed just like any other case in Circuit Court. 

Zachary A. Kitts
Cook & Kitts, PLLC
http://www.cookkitts.com

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The Deficit Reduction Act of 2005 and the Virginia Fraud Against Taxpayers Act: One Year Anniversary




March 13, 2008 marked the one year anniversary of the Virginia Fraud Against Taxpayers Act’s /files/116785-109034/DRA_regs.pdf”>Deficit Reduction Act of 2005.  In a nutshell, the Commonwealth now gets an extra 10% of all monies received in false claims cases brought under the Virginia statute.  

This is one of the biggest reasons for Virginia’s jump in recoveries for Medicaid fraud.  

Almost immediately, the Commonwealth began to experience the benefits of passing a OIG-approved false claims act.  On May 10, 2007, for example, a nationwide settlement of more than $600 million was announced against the Purdue Frederick Company, Inc.  Virginia’s cut was a total of $58.8 million dollars.

Next week, we will begin looking at what this has meant for the Commonwealth’s budget in the past year.  


Zachary A. Kitts
Cook & Kitts, PLLC
http://www.cookkitts.com
zkitts@cookkitts.com  

 

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LexisNexis and the National Institute for Trial Advocacy (NITA) to publish new practice commentaries on the Federal False Claims Act




LexisNexis  will soon be publishing updated Practice Commentaries for the Federal False Claims Act (31 U.S.C.S 3729 et seq).  The Practice Commentaries are published as part of a joint project with the National Institute for Trial Advocacy(NITA), and are designed to assist practitioners without prior experience in technical areas of practice.

I know this because I will be writing them myself.  As some of you may know, this past summer I completed the Practice Commentaries on the Fair Labor Standards Act (29 U.S.C.S. 201 et seq.) which are now available electronically and in the print versions of the United States Code Service. 

Headquartered at the University of Notre Dame, NITA is a leading provider of legal education programs and materials.  In partnership with NITA, LexisNexis also delivers more than a dozen other practice-oriented NITA titles, such as “A Practical Guide to Federal Evidence,” “Arbitration Advocacy,” and “The Effective Deposition: Techniques and Strategies That Work.”

Zachary A. Kitts
Cook & Kitts, PLLC
http://www.cookkitts.com    

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Qui Tam Practice Example: Documentation of a Qui Tam Claim is not to be taken lightly by potential relators






One does not have to in employment law or qui tam practice very long before being confronted with a situation along the following lines:
  


An employee comes to the lawyer for representation in a whistleblower situation.  The employee provides the attorney with documents from the employer that the employee considers to be confidential.  The employee had legitimate access to the documents, but had not sought the employer’s permission to remove the documents.  The lawyer’s review of the documents establishes that they contain no information protected by the attorney-client privilege or any other privilege recognized in Virginia.  The only sense in which the documents are confidential is that the employer does not wish anyone outside the company to know of the contents of the documents.  Were litigation pending, the documents would be subject to discovery.  However, at this time, neither party has filed a lawsuit. 
 
 a. What are the attorney’s obligations regarding the documents: must he notify the employer, must he return the documents, and may he use the information?


The above hypothetical is from Virginia Legal Ethics Opinion 1786, and any lawyer interested in qui tam practice under the Virginia Fraud Against Taxpayers Act or the Federal False Claims Act should pay careful attention both to this opinion and to this area of law. 

In formulating its answer, the Committee identified four factors as important ethical considerations:  (1) the nature of the documents, (2) the nature of the sources of the information, (3) the method used by the client to gather the information, and (4) whether the attorney directed the client to gather the information. 

The first thing the Committee pointed out is that the attorney can only use the information if Virginia Ethics Rules 3.4(a) and 4.4 are not violated.  Rule 3.4(a) provides that


A lawyer shall not obstruct another party’s access to evidence or alter, destroy, or conceal a document having evidentiary value for the purpose of obstructing another party’s access to evidence.  A lawyer shall not counsel or assist another person to do any such act.   

If the potential relator removed the only originals from his or her employer, Virginia lawyers would clearly have a duty to take corrective measures.  Just what those corrective measures are would depend on the specifics of each situation.  Where the potential client is still employed by the potential defendant, the first and most obvious step is to have them replace the documents.

A much more difficult situation arises where the aspiring plaintiff/relator no longer has access to his or her former place of employment.  The deliberations required in each instance for lawyers practicing in this area must focus on discerning when the duty of confidentiality applies and when the attorney is within one of the exceptions outlined in the rule.  It is also important to note that Virginia Ethics Rule 8.4(a) prevents a lawyer from using another person as an instrumentality to accomplish something the lawyer herself could not do ethically. 

The attorney must consider both confidences (i.e., information protected by the attorney/client privilege) and secrets (i.e., information the client has asked to be kept inviolate or that may embarrass or be detrimental to the client) in deciding whether the situation presents an exception to the duty of confidentiality.  
 
Where the potential privilege is a creature of statute, one should of course look for a statutory exception. For example, HIPAA–which must be the most feared statute in the medical community, as well as the least understood–provides specific exceptions for whistleblowers who clandestinely copy and remove patient files that prove fraud, provided they have a reasonable belief that fraud is occurring and provided they share the records only with professionals for the purposes of learning whether fraud has been committed. See, 45 C.F.R. § 164.502(j).     

The Committee also specifically cited the False Claims Act, and the duty it places on the lawyer and the plaintiff to file the original suit under seal, and keep all information pertaining to the suit confidential for a directed period of time.  Where a specific whistleblower statute precludes the lawyer from sharing the information the opposing party, Virginia Ethics Rules 3.4(a) and 4.4 would not require the lawyer to breach that legal duty, the Committee found.

LEO 1786 simply deals with the lawyer’s duties and risks–what risks are there for the clients and potential whistleblowers?

Lest any potential qui tam relator think there is little to no risk to blowing the whistle, he or she should read the recent Virginia case of JDS Uniphase v. Jennings, 473 F.Supp.2d 697 (E.D.Va. 2007). JDSU filed suit against its former employee for breach of contract, breach of fiduciary duty, conversion, and violation of the Virginia Uniform Trade Secrets Act.  Jennings had copied documents during his employment in order to provide support, he claimed, for a potential whistleblower claim under Sarbanes-Oxley.   
 
In ruling against Jennings and granting summary judgment to JDSU, the Court’s analysis seemed to focus on the fact that it was a Sarbanes-Oxley-style claim and as a result, the documents could easily be subpoenaed or obtained via a document request once the matter was in litigation.  Moreover, Sarbanes-Oxley exists, in large part, to prevent companies from destroying documentation of wrongdoing.   

It seems likely that the Court might not make the same ruling in a False Claims Act action.  The sorts of materials a whistleblower might want to document and copy in a False Claims case might not be subject to statutory protection like the materials Jennings copied in JDS Uniphase

Finally, it is quite important to note that Judge Ellis concludes his opinion with the following:  
  
    Although summary judgment on JDSU’s breach of contract claim must be granted as to liability, the extent of the breach and the  appropriate remedy remains to be determined. In particular, it remains to be determined (i) which, if not all, of the documents Jennings  removed are proprietary within the meaning of the PIA, (ii) whether any remedy besides return of the documents to JDSU is appropriate, and  (iii) whether JDSU intends to pursue its other causes of action in this matter. 

Thus, defendants must still show damages as a result of the breach.

The simple fact is that, in the absence of specific statutory protections such as those provided for in HIPPA,  the merits of the underlying claim factor into the level of risk that a potential whislteblower faces for copying and collecting documents during his or her employment.   

This writer has yet to see a published opinion in which an employer had a viable counterclaim against a whistleblower who copied and documented actual fraud in the workplace.  In other words, employers who have violated the False Claims Act, or the Virginia Fraud Against Taxpayers Act and are sued by an employee armed with enough evidence to support the claim, have bigger fish to fry.  Such employers tend to spend little time worrying about the copying of documents.

Despite cases such as JDS Uniphase, employees who feel threatened by the fraudulent activity of their employer are going to continue to take steps to protect themselves and their interests.  The fact that there are risks–potentially even severe ones–is not likely to serve as a deterrent, because they understand that they face severe risks either way.    


ZAK
Cook & Kitts, PLLC

http://www.cookkitts.com
zkitts@cookkitts.com
    

  

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Virginia Achieves A-minus Rating for Good Government


The Pew Center on the States announced this week that Virginia received an A-rating overall for the performance of our state government.  See, http://www.pewcenteronthestates.org/ 

Virginia is one of only three states to receive an A- rating, with the other two being Utah and Washington. The national average is B-.

Interesting, and perhaps most relevant to readers of this blog, is that Virginia receive an A- rating because, according to the Pew Center, Virginia lags in management of expenditures of state funds, particularly in construction projects. 

To date, the Commonwealth has never used to Virginia Fraud Against Taxpayers Act to hold construction companies accountable when they mismanage funds or fail to deliver promised results.  


Anyone who doubts the potential efficacy of the Virginia Fraud Against Taxpayers Act to keep construction companies honest needs only to look at the Federal False Claims Act to see the possibilities.  

ZAK 
http://www.cookkitts.com 
zkitts@cookkitts.com 
 

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Qui Tam Resource Tip: the Project on Government Oversight


The Project on Government Oversight http://www.pogo.org maintains an excellent on-line database at http://www.contractormisconduct.org  which lists companies responsible for misconduct on federal contracts.  Some might find it incredible that the feds do not maintain a centralized federal database of contractor misconduct; the POGO database is an effort to meet the definite need for centralized, publicly available information on how hundreds of billions of dollars of taxpayer money is spent.     

The database also includes contractors responsible for misconduct in state and local contracts, but there do not seem to be any entries under this heading.  I am frankly a little surprised that California, with its long history of qui tam prosecutions, does not have a single entry here.  Any thoughts? 

ZAK
zkitts@cookkitts.com
http://www.cookkitts.com