Digging Into FCA Stats: Part 2 – A Decade of Litigation Trends

Litigation associate Ralph C. Mayrell published this three-part series on the False Claims Act in Law360, Digging Into FCA Stats.

Every year, the U.S. Department of Justice issues a press release touting the billions it recovered from health care providers, government contractors, and others through lawsuits and investigations brought pursuant to the False Claims Act. FCA practitioners race to report those statistics and read the tea leaves.

But the DOJ’s annual press release lacks details that in-house counsel need to evaluate and budget for FCA litigation risk. It also does not reveal changes in how FCA cases are being litigated or the costs FCA cases impose on defendants.

This three-part article looks beyond the billions of dollars in aggregate recoveries to provide detailed statistics about the trajectory and outcome of the typical FCA case, using data obtained from the DOJ’s internal system for tracking FCA cases. We obtained this data by submitting a Freedom of Information Act to the DOJ.

The data includes unsealed cases that were resolved — i.e., dismissed, settled or taken to judgment — between January 2009 and June 2020, combined with case information from the Federal Judicial Center’s Integrated Database of Civil and Appellate Cases. This data makes it possible to answer questions about the course and outcome of the typical FCA case.^[1]

The first article addresses factors that affect in-house budgeting for FCA litigation: How long do FCA cases typically take to litigate? How often do FCA defendants prevail and do the odds change as cases progress? And how much do defendants pay to end FCA cases?

The second article discusses FCA litigation trends over the past decade: Has the DOJ decided to intervene and take over litigation in qui tam cases brought by private relators more or less often? Are cases taking more or less time to litigate after they are unsealed? Are defendants prevailing more or less often? Are defendants that settle paying more or less to resolve their cases?

The third article evaluates the outsized cost of FCA cases that the government leaves to private relators to pursue: How often do those cases end in recovery, and how much do defendants pay? How much time do defendants and courts collectively devote to these cases? And what is the government’s return on investment?

Is the DOJ intervening more or less often?

Whether the DOJ decides to intervene and take over litigation in an FCA lawsuit brought by a private qui tam relator correlates with the likely outcome of a qui tam case. Defendants avoided paying any recovery 90% of the time when the DOJ declined to intervene and left it to private relators counsel to litigate, and defendants paid the government 90% of the time when DOJ decided to intervene.

Given that intervention is a key indicator of the likely outcome of a qui tam case, a natural question is whether the DOJ’s practice of intervention has changed at all over the past decade.

The data on qui tam cases resolved in the past decade suggests that DOJ intervention has become more common. The DOJ intervened in only 20% of cases resolved in the DOJ’s 2010 fiscal year — or 75 cases — but in about 25% cases resolved in the 2018 and 2019 fiscal years — 147 and 131 cases — and in about 30% of cases resolved in the first-half 2020 fiscal year — 61 cases.

Are FCA cases taking more or less time to resolve?

Legal budgeting is driven in part by the timing of the shift from a case’s sealed investigation by the DOJ to unsealed litigation by the DOJ or the private relators to the case’s resolution through dismissal, settlement or judgment.

The first article in this series provided data about the expected timing of the phases of FCA cases on average over the past decade. But the data also shows that the time it takes to resolve FCA cases is getting longer.

In particular, qui tam cases have begun to take more time to resolve after they are unsealed. Between fiscal years 2011 to 2015, the median qui tam case that was unsealed and litigated beyond the first month after unsealing — and thus before an answer or motion to dismiss was filed — was resolved within less than a year of unsealing. That has inched up to between a year and a year and a half between fiscal years 2016 and 2020.

The increase is more significant among the top 25% of longest-litigated cases. From fiscal year 2012 to 2014, those cases were resolved in 1.7 years or more, but that jumped to 2.4 years or more in fiscal years 2016 to 2020. That slower pace could have implications for in-house budgeting if this trend continues.

Are defendants prevailing more or less often?

Assessing the likely outcome of an FCA case is challenging and driven principally by the unique facts of every case. In general, defendants tend to prevail in qui tam cases where the DOJ declines to intervene and leaves it to the private relator to litigate, and the government tends to prevail in cases where the government intervenes or brings the case directly.

The data shows, however, that there was movement within those groups, with defendants becoming less likely to prevail in all qui tam cases, regardless of whether the DOJ decided to intervene, but seemingly more likely to prevail in cases brought directly by the DOJ.

In both declined and intervened qui tam cases combined, 76% of cases ended with no payment by the defendant for cases resolved in fiscal year 2010. Defendants’ odds fell to 64% in 2018, 67% in 2019, and 61% in the first half of the 2020 fiscal year.

This trend is driven partly by the DOJ’s higher rate of intervention, discussed above, as defendants have become slightly less likely to prevail in those cases over the past decade. But defendants’ have also fared worse against private relators in cases where the DOJ declined to intervene, falling from a 91% success rate in fiscal year 2010 to 85% in 2018 and 81% in the first half of the 2020 fiscal year.

Surprisingly, since 2017, defendants’ odds of avoiding payment in cases brought directly by the DOJ appear to have improved dramatically. Between fiscal years 2009 and 2016, direct cases almost always ended in the defendant paying the government something, whether through a settlement or a judgment.

Between 2009 and 2016, only six out of 503 direct cases were resolved without any recovery by the government. But starting in 2017, the data shows a sudden increase in direct cases ending in no recovery for the government, with five such cases in fiscal year 2017, 20 in 2018, 51 in 2019 and 32 in the first half of 2020.

It is not clear what is happening. One possibility is that the DOJ, under the Trump administration, began to pull back from certain FCA cases starting in 2017. This would be consistent with the so-called Granston memorandum,^[2] in which the DOJ in January 2018 expressed its intent to use its power to dismiss the weakest qui tam cases. Perhaps the DOJ expanded that philosophy to direct cases too.

Another possibility is that the DOJ reevaluated how it deployed its investigative resources in light of the U.S. Supreme Court’s 2016 ruling in United Health Services Inc. v. U.S. ex rel. Escobar which made it more burdensome for the government to establish that alleged false claims were material to the government’s decision to pay.^[3]

A third less intriguing, but equally plausible, possibility is that the DOJ may have changed its data collection in 2017 to include not only direct cases that it decided to file, but also investigations that were dropped before complaints were filed. Unfortunately, the data cannot answer this question.

Are defendants paying more or less?

Defendants’ financial risk also has decreased slightly over the past few years. In 2010, half of all settlements or judgments in qui tam cases were for $1.3 million or less, which doubled to $2.6 million in 2016.

After that, however, the median recovery amount fell back to $1.3 million in 2018, $1.2 million in 2019 and $1.3 million in the first half of 2020. This trend is mirrored in both intervened and declined cases, though it is particularly significant in declined cases, where median recoveries since 2018 fell well below half a million dollars.

The data for direct cases again reveals some unexpected results. First, the number of settled cases increased markedly in 2020, with 58 direct cases settling in just the first half of 2020, compared to 25 to 40 cases in all prior years during the preceding decade. Meanwhile, the median settlement amount — the blue line in the chart below — has dropped dramatically.

In most years prior to 2016, the half of direct cases that settled did so for a median payment between $1 million and $4 million. Then, in 2016, it peaked at above $10 million, before starting a downward slope to $300,000 in the first half of 2020.

Driving that drop is an increase in the number of direct cases that ended in settlements where the defendant paid nothing to the government starting in fiscal year 2017. Whereas in 2010 to 2016, there had been a total of 10 cases settled without a payment, in 2017 there were 10, in 2018 there were 14 and in 2019 there were 19, representing about a third of the settlements of direct cases in each of those years.

Here, again, there could be more than one explanation. Perhaps the DOJ was more willing to resolve cases without requiring a payment for policy reasons, and instead sought compliance agreements or other commitments from defendants. It is also plausible that this reflects some sort of change in how the DOJ collects data. It is impossible to know from the data the DOJ provided.

Conclusion

The data makes clear that changes were afoot in FCA cases both before and during the Trump administration. On the one hand, in qui tam cases, the DOJ was intervening more frequently, and defendants were settling more often. Qui tam cases were also taking a little longer to litigate. Meanwhile, in cases brought directly by the DOJ, defendants seemed to be faring better, with more defendants avoiding paying the government anything, even where they agreed to some sort of settlement.

And there is no reason to believe that many of these trends have changed as a result of the Biden administration, as many started before the Trump administration. We will know soon enough what the Biden administration and the pandemic have done to FCA cases in the fall, when the next fiscal year rolls around and new data is available.

^[1] _{While this data is informative, it has important limitations. The DOJ’s data has obvious quality and consistency problems, and the DOJ omitted certain data. For example, the data is inconsistent in how it tracks the timelines for some cases with multiple defendants, and it has incomplete or inaccurate docket information for many cases, which makes it challenging to link the DOJ’s data to other data sources. Also, the scope of the data pull does not include cases that were sealed or remained pending as of June 2020, or cases that had not been reported to the DOJ Civil for tracking as of June 2020. Furthermore, the process of cleaning and structuring this data required judgment calls. We have endeavored to report statistics in a way that is not significantly affected by those judgments. That said, the statistics reported in this article are meant to be informational only. They are not and cannot be definitive and may not apply to any specific case, which will turn on the specific facts and law that apply to that case.}

^[2] _{Memorandum from Michael Granston, Director of the Commercial Litigation Branch, Fraud Section (Jan. 10, 2018), https://www.insidethefca.com/wp-content/uploads/sites/300/2018/12/Granston-Memo.pdf.}

^[3] _{136 S. Ct. 1989 (2016). Disclosure: Robbins Russell represented the defendant in United Health Services in the Supreme Court, and the author, at a previous firm, represented amici supporting defendant.}