Overlawyered » qui tam

Qui tam suits against for-profit colleges

Walter Olson — Thu, 15 Sep 2011 14:43:09 +0000

The WSJ editors wonder to what extent the feds, who have been pursuing a campaign lately to bring the colleges to heel, are coordinating with the private False Claims Act bar. Meanwhile, Rogier at Nobody’s Business spots some ironies in the Justice Department’s suit against Education Management Corp.: “pushing low- to medium-value degrees is something that law schools — including some of the best in the country — do habitually, every day. All of higher education does, with no exceptions I’m aware of.”

An unconstitutional patent false-marking statute

Walter Olson — Tue, 01 Mar 2011 05:33:10 +0000

Along with the Cato Institute’s Center for Constitutional Studies, I’ve filed an amicus brief (a first for me) urging the U.S. Court of Appeals for the Federal Circuit to recognize the constitutional flaws in the federal “false marking” statute, which empowers private parties to sue over inaccurate (in practice, mostly expired) patent markings on products and collect fines of a generally criminal/punitive as opposed to civil/compensatory nature. Here’s our argument in a nutshell, from the Cato website:

Recognizing an opportunity to make quick and easy money, private attorneys have been suing companies under the False Marking Statute, 35 U.S.C. § 292. This law allows any person to sue to enforce a federal criminal statute that prohibits anyone from labeling an unpatented product with a patent number or to advertise a product with a patent number that is not actually patented. The penalty for violating this law is $500 per offense, which has been interpreted to mean each and every product falsely marked. For instance, if a business is charged with falsely marking 100,000 products, it could be liable for $50,000,000. Private attorneys suing under this statute seek massive amounts in damages and then try to settle with the defendant for a fraction of that cost (still a large amount of money). Companies often settle even if the case against them has little merit because they do not want to risk such a massive amount in damages. The longtime toy manufacturer Wham-O, however, successfully defended such a lawsuit in court, provoking the plaintiffs’ lawyers to appeal to the Federal Circuit (the only appellate court below the Supreme Court that can hear patent cases). Cato, along with our senior fellow Walter Olson — who has studied these patent marking cases — filed an amicus brief supporting Wham-O on constitutional grounds. We argue that the False Marking Statute fails to give the executive branch, through the attorney general, control over the enforcement actions brought at its behest. By allowing any person to sue and then receive half of the damages, the law abrogates the executive power to enforce the law and places it in the exclusive hands of the private attorney. In the 1988 case of Morrison v. Olson, the Supreme Court upheld the independent counsel statute because it gave the Attorney General “sufficient control” over the independent counsel’s hiring, firing, and the scope of their investigation. Other courts have held that for a private person to prosecute what is called a “qui tam” action under the False Claims Act — essentially stepping into the shoes of the government — the government must maintain “sufficient control” over the litigation. The False Marking Statute does not provide sufficient control, or any control, and therefore violates Article II’s “Take Care Clause,” the font of the executive branch’s enforcement duties. Ultimately, the separation of powers, the foundation for the governmental structure created by the Framers, ensures that laws are enforced by someone accountable to the people, the Executive. The False Marking Statute divests the president of this authority, so the Federal Circuit should strike it down as violating the Constitution’s separation-of-powers structure.

My colleague Ilya Shapiro has more on the case at Cato at Liberty. Incidentally, a federal judge in Ohio just ruled in a separate case that the statute is, indeed, unconstitutional; you can read about that at Volokh Conspiracy, Point of Law, the WSJ Law Blog, and WLF Legal Pulse. Earlier on false marking suits here.

Tags: constitutional law, patent marking, qui tam

“New Financial Regulations Will Make Whistleblowing Lucrative”

Walter Olson — Thu, 22 Jul 2010 15:05:25 +0000

I’m quoted in this report by Dunstan Prial of FoxBusiness.com and in this report by David Savage of the Los Angeles Times on the large-scale bounty incentives in the Dodd-Frank financial regulation bill, which bring us closer to an “informer model of law enforcement” that “encourages people to be disloyal to their friends and co-workers.” Earlier here and here. Other coverage of the whistleblowing provisions: Coyle/NLJ, Koehler/FCPA Professor, Baer/Prawfsblawg.

Tags: Foreign Corrupt Practices Act, publicity, qui tam, whistleblowers

Dodd-Frank whistleblower provisions

Walter Olson — Fri, 16 Jul 2010 13:12:59 +0000

There are lots of them tucked into the bill, and they will probably come at a significant cost for companies in the economy’s financial sector, as I explain in a new post at Cato at Liberty (earlier; more on qui tam and whistleblower matters more generally).

Tags: banks, mortgages, qui tam, whistleblowers

Informants rejoice

Walter Olson — Fri, 28 May 2010 17:04:48 +0000

It seems the Senate-passed financial reform bill includes whistleblower bounties and other legal goodies. [Whistleblower Law Blog] On tax informants, see our post of Wednesday.

Bonus: Amy Kolz at American Lawyer (”Serial whistle-blower Joseph Piacentile makes millions helping the government uncover fraud. That’s how the False Claims Act is supposed to work. Or is it?”). And David Walk at Drug and Device Law assails as “dumb,” credulous, and based upon a biased sample a New England Journal of Medicine feature on whistleblowing in the pharmaceutical industry:

The New England Journal of Medicine bills itself as “the world’s most influential medical journal,” and it unquestionably publishes groundbreaking articles about medicine. But all too often in recent years the NEJM has strayed from what it knows — medicine – into what it doesn’t – law and public policy, particularly tort policy. No longer content with editorials encouraging litigation against anyone but doctors, the NEJM now publishes public policy advocacy pieces dressed up as scientific studies, with the implicit suggestion that those studies should get the benefit of the NEJM’s good name in public policy debates.

Tags: pharmaceuticals, qui tam, securities litigation, whistleblowers

Lucrative world of IRS informant bounties

Walter Olson — Wed, 26 May 2010 20:26:24 +0000

It’s attractive enough to have lured private equity money:

Three years ago, the I.R.S. began offering bigger rewards — 15 percent to 30 percent of whatever money the government recovered — in a move that has turbocharged the agency’s whistle-blower program. …

Among the lawyers, hedge funds and investors who may provide the financing for class-action lawsuits and whistle-blower cases against government contractors, the reinvigorated I.R.S. program has attracted attention.

[N.Y. Times]

Tags: qui tam, taxes, whistleblowers

New at Point of Law

Walter Olson — Sat, 20 Feb 2010 21:28:54 +0000

Things you’re missing if you aren’t checking out my other site:

Iowa federal judge hits EEOC with $4.5 million attorney fee award over “sue first, ask questions later” litigation strategy;
Jim Copland continues his weeklong blogging of Trial Lawyers Inc.: K Street with posts on the plaintiff’s bar’s Washington, D.C. presence (with discussion of CPSIA, employment litigation, qui tam, and arbitration, among other topics); state lobbying; and public relations, including legal academics, the media, and consumer groups;
Hmm: House committee conveniently subpoenas Toyota defense documents that plaintiffs had been seeking to unseal (and more on Toyota);
Obama administration plans crackdown to make more employers reclassify independent contractors as employees;
Trial bar stirs pot in Florida politics;
Feds swoop down on 2003 settlement to demand that parties reimburse Medicare as provided by retroactive law.

Tags: arbitration, CPSIA, CPSIA and Congress, EEOC, Florida, loser pays, Medicare, on other blogs, politics, qui tam, retroactive, subpoenas, Toyota, trial lawyer earmarks

Open season for “false marking” bounty-hunters?

Walter Olson — Thu, 07 Jan 2010 13:26:04 +0000

In June we reported on a boomlet in freelance lawsuits accusing companies of marking their products with outdated patent numbers or with other violations of a federal statute that prohibits the use of false or misleading patent marks on products. On December 28 the Federal Circuit issued a decision that may greatly stimulate the activities of what are already being called “marking trolls”. It holds that courts have discretion to impose the law’s $500 penalty per mislabeled item sold, which means that total penalties might rise to gigantic levels; lawyers who bring the cases then split the proceeds with the federal government in qui tam fashion. Coverage: George Best and Jeffrey Simmons/Foley & Lardner, Robert Matthews, Jr., Patently-O, Rebecca Tushnet and more, Patent Prospector.

Tags: patent law, patent marking, qui tam

“How Litigators Tried to Sneak a Pet Earmark into Health Reform”

Ted Frank — Tue, 24 Nov 2009 16:48:23 +0000

The Progressive Policy Institute (!) criticizes a provision almost snuck into the health-care bill that would have been a windfall for trial lawyers at the expense of the rest of us. Earlier and earlier on Overlawyered, which was the first to publicize the provision.

Tags: Medicare, politics, qui tam, trial lawyer earmarks, U.S. House of Representatives

Medicare Secondary Payer expansion, cont’d

Walter Olson — Wed, 05 Aug 2009 12:36:26 +0000

James Glassman at The American takes a look at the attempt to slip through a massive expansion of industrywide tort liability as part of the House health-care-reform bill a couple of weeks ago, a story that seems to have been broken for the first time in this space.

Tags: accolades, Medicare, qui tam

Overlawyered » qui tam

Qui tam suits against for-profit colleges

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An unconstitutional patent false-marking statute

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“New Financial Regulations Will Make Whistleblowing Lucrative”

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Dodd-Frank whistleblower provisions

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Informants rejoice

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Lucrative world of IRS informant bounties

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Open season for “false marking” bounty-hunters?

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