Commercial Litigation Update

In its recent unpublished decision, United States ex rel. Stebbins v. Maraposa Surgical Inc., 2024 WL 4947274 (3d Cir. Dec. 3, 2024), the Third Circuit clarified that the public disclosure bar prevents whistleblower False Claims Act (FCA) qui tam actions arising from information gathered solely through publicly accessible databases.

As the Third Circuit explained, “[t]he FCA punishes the submission to the Government of fraudulent claims for payment under, for example, the Medicare and Medicaid programs.”  Id. at *1.  While the FCA encourages individuals, known as relators, to report government-related fraud by way of filing a qui tam suit, the public disclosure bar prevents a relator from bringing an FCA qui tam suit “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” in a “Federal report” or “from the news media” unless the relator is “an original source of the information.” 31 U.S.C. § 3730(e)(4)(A).  In the Third Circuit, “the public disclosure bar applies if either Z (fraud) or both X (misrepresented facts) and Y (true facts) are publicly disclosed by way of a listed source.” Stebbins, 2024 WL 4947274, at *2 (quoting U.S. ex rel. Zizic v. Q2Administrators, LLC, 728 F.3d 228, 236 (3d Cir. 2013)). 

In United States ex rel. Stebbins v. Maraposa Surgical Inc. et al., despite having no affiliation whatsoever with the defendants, the relator filed a qui tam action alleging, inter alia, that the defendants fraudulently sought reimbursement for the arteriograms performed in a physician’s office, rather than a licensed ambulatory surgery center, which the relator asserted violates Pennsylvania’s regulations.  Without deciding whether the defendants actually engaged in any wrongdoing, the Third Circuit held that the public disclosure bar prohibited the relator from proceeding with suit because the relator drew each piece of information supporting his FCA allegations from publicly disclosed databases.

Background

On December 10, 2024, the Supreme Court of Ohio issued its decision in Stull v. Summa, a medical negligence case in which the defendants argued that Ohio’s statutory peer-review privilege protected from discovery the file a hospital maintained on a resident physician, which included, among other things, quality reviews and assessments of the resident’s clinical competency and professional conduct. The Supreme Court of Ohio decided one issue: Does the peer-review privilege in R.C. 2305.252 apply to a healthcare entity’s files concerning resident physicians?

This case arose from the medical treatment of head injuries that the patient sustained during a car crash. The patient and his guardians filed a medical negligence lawsuit against the hospital and its employed healthcare professionals, including a resident physician who participated in the patient’s care. The plaintiffs alleged that the resident improperly intubated the patient, causing the patient to sustain a brain injury

As the dietary supplement industry continues to draw attention from Congress, state attorneys general, and class action lawyers, now comes another state law trying to prohibit the sale of over-the-counter (“OTC”) dietary supplements that target weight loss and muscle building to minors – this time, in New Jersey.

On October 28, 2024, by a majority vote of 56 to 17, with four abstentions, the New Jersey General Assembly passed Assembly Bill No. 1848, which, if it goes into effect, will prohibit the sale or delivery of OTC diet pills, weight loss, and muscle building supplements to minors, unless the minor is accompanied by a parent or guardian. Bill No 1848 is an exemplar of efforts intended to combat the misuse and abuse of these products and the potential causal relationship between these dietary supplements and eating disorders. Violators, including employees of retail establishments, may face a civil penalty of not more than $750.

The legislation sets forth that:

“no person, firm, corporation, partnership, association, limited liability company, or other entity shall sell, offer to sell, or offer for promotional purposes, either directly or indirectly by an agent or an employee, any over-the-counter diet pull or dietary supplement for weight loss or muscle building to a minor under 18 years of age, unless the minor is accompanied by a parent or guardian.”

Building on attempts in recent years to strengthen the Department of Justice’s (DOJ’s) white collar criminal enforcement, on September 15, 2022, Deputy Attorney General Lisa Monaco announced revisions to DOJ’s corporate criminal enforcement policies. The new policies, and those that are in development, further attempt to put pressure on companies to implement effective compliance policies and to self-report if there are problems. Notably, the new DOJ policies set forth changes to existing DOJ policies through a “combination of carrots and sticks – with a mix of incentives and deterrence,” with the goal of “giving general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior” through seven key areas: