Court Awards Attorney Fees to FCA Defendants Due to Relator's Fraudulent Conduct

The U.S. District Court for the District of Massachusetts recently ruled in Omni Healthcare, Inc., et al. v. MD Spine Solutions LLC, et al., awarding attorneys' fees to the defendants under the False Claims Act (FCA) due to fraudulent pre-suit conduct by the relator. The court found the relator's claims related to medically unnecessary PCR testing for urinary tract infections (UTIs) to be clearly vexatious and primarily intended for harassment.

This decision highlights the rare application of FCA's fee-shifting provision, which penalizes relators who misuse the statute's protections. The court detailed how Omni Healthcare's owner directed unnecessary tests to substantiate the lawsuit, knowingly submitting false claims that violated the FCA. Despite a prior $16 million settlement by the defendants on different claims, the court concluded the relator's misconduct was distinct and justified the fee award.

The ruling clarifies that while the FCA encourages whistleblowers to reveal fraud, it does not protect those who manufacture fraudulent claims to exploit the system. The court also addressed and rejected the relator's arguments against the fee award, emphasizing that fraudulent conduct by relators can warrant such penalties independently of the defendants' liability.

This case underscores important compliance and risk considerations for FCA relators and legal advisors, reflecting the FCA's balance between incentivizing legitimate whistleblowing and deterring abuses of the statute.