Private parties cannot pursue claims on the government’s behalf if the government could not pursue those claims itself.

 — John Masslon, WLF Senior Litigation Counsel

Click here for WLF’s brief.

WASHINGTON, DC— Washington Legal Foundation (WLF) yesterday urged the U.S. Court of Appeals for the Seventh Circuit to reverse a decision greatly expanding the False Claim Act’s scope.  WLF argues that Eli Lilly lacked the scienter necessary for FCA liability and that allowing relators to pursue claims the government could not have pursued is unconstitutional.

The case arises from a qui tam lawsuit filed by a frequent litigator. After the pharmaceutical industry changed to fee-for-service agreements with wholesalers, companies took two different approaches to calculating the average manufacturer price for drugs. Eli Lilly took the more conservative approach given the lack of guidance from federal regulators. The relator, however, argued that everyone got it wrong, and that Lilly’s approach overcharged the government. A jury found in the relator’s favor and ordered Lilly to pay over $180 million in damages.

In its amicus brief supporting Lilly, WLF argues that Lilly lacked the scienter necessary for FCA liability. Just last term, the Supreme Court clarified that when a party subjectively believes that it is complying with the law and that belief is objectively reasonable, the party does not act with the mens rea necessary for FCA liability. But here the District Court disregarded that holding and entered judgment against Lilly because of its reasonable subjective interpretation of federal law.

WLF’s brief also argues that the judgment in this case raises serious Article II problems. Under basic tenets of administrative law, the government cannot pursue claims for violating a statute or regulation that does not put the party on notice of legal requirements. Here, Lilly was not on notice of what the relevant statute required, despite repeated attempts to get guidance on the issue. Allowing a relator to pursue the claims essentially allows private parties to enforce federal law. The Constitution leaves that job to the President alone. WLF’s brief was prepared with substantial pro bono assistance from Shane A. Pennington of Porter Wright Morris & Arthur LLP.

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