Federal Appeals Court rules settling False Claims Act defendant may sue third parties

The Ninth Circuit Court of Appeals has ruled that the False Claims Act does not prevent a defendant who settles with the government without admitting liability from suing third parties whom the defendant asserts are responsible for any alleged violations. In the case on appeal, the defendant was Cell Therapeutics Inc. (“CTI”), which developed a leukemia drug approved by the Food and Drug Administration in 2000. When CTI marketed the drug for unapproved, off-label uses, a whistleblower sued the company on the government’s behalf, alleging Medicare fraud. CTI settled the case with the United States but failed to admit wrongdoing.

According to CTI, it was just following the advice of a consultant, now known as the Lash Group, which advised the defendant about which drug uses could be reimbursed by Medicare. But when CTI sued its consultant, the district court dismissed the claims, reasoning that defendants in False Claims Act suits could not sue third parties allegedly responsible for the defendant’s misconduct. The Ninth Circuit recently reversed that decision, holding that where a settlement does not contain an admission of liability, the defendant is not precluded from filing a third party claim. A contrary result, explained the appellate court, would only discourage False Claims Act defendants from settling with the government in the first place.

Read the full story from The American Lawyer.

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