---

» Click here for registration and full details on Qui Tam 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] We are here today with Jon Haray. Jon is a partner at DLA Piper, and we’re talking about a panel that he will be moderating at the Qui Tam Conference this year, on February 28 and March 1, 2019.

Jon, your panel is on parallel civil and criminal investigations. If there’s a criminal component in a case, how does that change a False Claims Act case for you as defense counsel?

Jonathan W. Haray: Well, it changes things quite a bit as a defense lawyer. It probably changes things just as much for relators’ counsel, and for every practitioner who’s involved — and that’s one of the things we want to talk about on this panel at the conference this year: What are the things you need to be thinking about when you’ve got a parallel civil/criminal False Claims Act investigation?

Oswald: So let’s just say that it’s a case where there is a parallel proceeding … and you find out [about] that criminal component. How does that normally happen?

Haray: That’s one of the things we want to talk about during the conference because, when you have a criminal investigation that’s going side-by-side with a civil False Claims Act investigation, you might see the government using traditional — old-school — law enforcement techniques.

So the defense, or the company that’s involved, might find out about this because they get a grand jury subpoena, which wouldn’t happen in a civil case obviously. You could find out because there’s a search warrant executed at a business, [again] something that wouldn’t happen in a civil case. And there’s a host of other ways that the government might act differently in a criminal case than what you’d expect to see in a traditional civil case.

Oswald: And if there’s both a criminal and civil component to the case, you might be dealing with two different Assistant United States Attorneys — one on the criminal side and one on the civil side?

Haray: Often that’s the case. Well, always that’s the case — because there’s a line between the civil and criminal components within the Department of Justice and with the other agencies that they deal with. So normally you would have a civil AUSA involved in a case, or counsel from an agency that’s involved in an investigation, and then you’d have a criminal Assistant U.S. Attorney, or a trial attorney from the Department of Justice that would be handing the criminal side of the investigation.

Oswald: Got it. And how does that dynamic change things? Is the criminal case in the forefront? Is the civil case taking a backseat? How does that work?

Haray: In my experience, if criminal prosecutors get involved in a case, that tends to take over the case in a lot of ways. For one thing, companies tend to view it as a much more serious case if a criminal investigation kicks off. Naturally the prosecutors who are handling the criminal side are going to take the lead when that happens, so that’s what I would expect to happen in a parallel investigation.

Oswald: Let’s talk about the end of a case where there’s both a civil and criminal component. When do you talk to your client about a global resolution? When does that make sense?

Haray: If your client is a company and you’re on the defense side of one of these cases, … you want it to be a global resolution. It doesn’t make much sense for most businesses to resolve part of a case and have the rest of the case be ongoing. If you’re going to resolve it, and enter some resolution with the government or with a relator, you want to get it all done at once.

Oswald: Got it. So I suspect on our panel at the Qui Tam Conference we might be hearing a little bit about global resolution. Give us a sense of some other things, if I’m sitting in the audience, that I can expect from your panel.

Haray: One of the things we want to talk about at the panel is — we want to look at a parallel civil and criminal False Claims Act investigation from the perspective of all sides. So we’re going to have relators’ counsel, we’ll have in-house counsel, we’ll have outside defense attorneys, and we’ll have a government attorney.

What we want to do is shed some light on what everybody is thinking, and what are the issues that they need to be focused on when they’re trying to, one, respond to an investigation but also [when] resolving a case. And if it’s a case that’s going to get resolved, how all those different players — what they need to expect from the process.

Oswald: So if, let’s say, I’m relators’ counsel, I’m going to get a good sense of the kind of things that defense counsel is dealing with at resolution, so that I can factor that into how I’m dealing with that case?

Haray: Right. For a relator, they need to understand some things that are going be in the mind of a defendant or a company. If they’re involved in the investigation, what are the issues that are important to the other side that they need to focus on? If there’s regulatory issues, if there’s a potential criminal investigation going on, everybody in the negotiation needs to know what the other side has on its plate.

Oswald: I just learned that we have something in common: We are both basketball coaches for our children. That must be fabulous. Tell us a little bit about that.

Haray: Well Scott, I’m a budding basketball coach. You’re an established basketball coach.

Oswald: [Laughing] I don’t know about that.

Haray: But it’s true: I’ve started trying to help with coaching my seven-year-old son’s basketball team, which has been a huge thrill for me — and hopefully not too embarrassing for him.

Oswald: Jon, thank you.

Haray: Thanks a lot.

Oswald: [Addressing camera] We look forward to seeing each of you at this year’s Qui Tam Conference. It’ll be on February 28 and March 1, 2019, here in Washington. You can register at fedbar.org/quitam19. We look forward to seeing you.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. Jonathan W. Haray is a partner at DLA Piper.

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

 

 

---

» Click here for registration and more details on ‘The FCA Today’ in Houston on Feb. 21, 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] Welcome, everyone, to our ‘False Claims Act Today’ Houston edition. We’ll be in the Southern District of Texas, in Houston, on February 21, 2019. Today we have with us Mitch Kreindler of Kreindler & Associates. Mitch will be in our relators’ counsel seat for ‘False Claims Act Today.’

Mitch, give us a sneak preview. What can you expect from you on the panel?

Mitchell R. Kreindler: Well, I think this is going to be a great panel. Obviously I’ll give the point of view from relators’ counsel standpoint — but it’s infrequent that you get together everybody who’s involved in these kinds of actions. You’ll have defense counsel, relators’ counsel. We’ll have someone from the government. And maybe most interestingly, we’ll have a judge from the Southern District in Houston.

Oswald: Wonderful. So give us a little sense of being relators’ counsel: What kind of cases? We know about healthcare, for instance, but what other kinds of cases — maybe that one doesn’t expect under the False Claims Act — do you see across your desk? Visas, customs types cases? See any of those at all?

Kreindler: We actually have under seal right now a case that involves visa fraud. Some of those different avenues for fraud make [for] a more difficult challenge in terms of finding damages under the False Claims Act. But obviously the federal government is the largest purchaser of everything in the United States, so there’s a lot of room for any kind of procurement fraud where the government is involved in purchasing anything from paper clips to rocket launchers.

Oswald: Whistleblowers come into your office and they want to know a little bit about what to expect. What kind of advice are you giving to whistleblowers?

Kreindler: Usually when it comes to advice I think it’s really: Paper your case. Make sure you have the proof and the information to back up what you’re claiming. The False Claims Act is not a tip statute; it’s a statute where you need to come in and really prove your claims.

Then, once they’ve gotten to the point where we can move forward on that basis, it’s always: Be patient, because these cases take a long time to resolve — anywhere, probably, from three to five years. And many of the larger ones take much longer. So it requires a lot of patience, because nothing happens quickly.

Oswald: So there’s a lot of activity in the beginning and then kind of a lull over time?

Kreindler: Hurry up to wait.

Oswald: I got it. So let’s talk about our venue, the Southern District of Texas. Let’s say that one is considering filing a False Claims Act case in the Southern District of Texas. What are some of the things that relators’ counsel might consider?

Kreindler: Well, one of the things that I think most people don’t know is that the Southern District has some really terrific AUSAs. There are some very, very strong attorneys on the government side who not only are good at their jobs, but really enjoy working with relators — and do see relators as being partners in False Claims Act cases. That’s not something that you find in a lot of jurisdictions around the country. So that’s number one.

Number two is really just making sure that you come in with a strong case. I don’t think that’s different from other jurisdictions, where the more information you have, the more you’ve thought through your theory of liability, the more detailed your allegations, the better reception you’re going to get.

Oswald: So relators’ counsel can actually expect to work with the AUSA on the case in the Southern District of Texas if they file out there?

Kreindler: Absolutely. They really do set up a strong partnership where they don’t just report to you every few months. Usually you will work very closely, hand-in-hand with the government on those cases.

Oswald: What do you like the most about being whistleblower counsel?

Kreindler: I like being able to facilitate people’s stories.

People who are whistleblowers have had a hard time finding a path to stop the fraud. Sometimes they think they’re nuts, right, because they think they’re the only one who sees it — because at their company they’re being told to shut up, just go along to get along. And maybe their spouse is telling them, ‘You need this job, keep your head down and shut up.’

And so when they finally find someone like myself, it’s like suddenly the cloud has lifted, and the burden is lifted off their shoulders, and they find a partner to help them push these allegations.

So I sleep well every night. We’re always on the side of right. We’re on the side of good. We’re always partnering with the government to try to stop fraud — so it’s a very rewarding practice from that standpoint.

But really, advancing the whistleblower’s claims and helping the whistleblower get their story out is probably the most rewarding thing.

Oswald: Mitch, tell us a little about you. When you’re not lawyering, give us a sense of where you spend your time.

Kreindler: Well, in the last couple of years my wife and I have become empty-nesters. So this creates a whole new freedom — and anybody who’s got kids will like to know that empty-nesterhood is a reward for years and years of parenting. We’ve been doing a lot of travel and I think that will probably continue at least for the foreseeable future. We’re just kind of enjoying that time.

Oswald: Mitch, thank you.

Kreindler: Thank you, Scott.

Oswald: [Addressing camera] And to everyone, our conference will be on February 21, 2019, in Houston. You can sign up at fedbar.org, and we look forward to seeing you there.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. Mitchell R. Kreindler is the founder of Kreindler & Associates.

 

---

» Click here for registration and more details on ‘The FCA Today’ in Houston on Feb. 21, 2019

---

 

 

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] Hello everyone. We are here with Ashley Hardin, who is a partner at Williams and Connolly. She is going to be moderating one of our panels at this year’s Qui Tam Conference on February 28 and March 1, 2019.

Ashley, your panel is on statistical sampling.

Ashley W. Hardin: Yes!

Oswald: Tell us a little bit about what statistical sampling is — and for those who are mathematically challenged, how it applies to our cases in the False Claims Act arena.

Hardin: Sure. Well, I’m also mathematically challenged and that’s why I think this is an interesting topic. It’s a really hot topic in FCA litigation — and not just FCA litigation, but in other types of mass cases where there are lots of claims at issue, [where] there might have been lots of alleged misconduct. If you’re talking about a Medicare or Medicaid [case], you might be talking about multiple claims, sometimes thousands or millions.

Statistical sampling is a way to take a smaller subset of those claims, analyze those, present evidence to the jury of those, and then extrapolate the findings regarding those claims to the broader universe. That’s controversial, as you might imagine, depending on what side of the side of the “v” you’re on.

Oswald: I’ll bet. And so from being on the defense side of the “v,” how do you feel about statistical sampling?

Hardin: Generally, we’re quite opposed to statistical sampling on the defense side because from a False Claims Act perspective — [how] we view [it] in the defense bar — it can be a due process violation. And it’s the plaintiff’s burden — [that’s] usually the defense argument — to prove every single claim is false, to prove that there was intent to defraud with every single claim. And you can’t always take a small subset and extrapolate it.

So again, going back to the Medicare or the Medicaid example, if you’re talking about claims that [some treatment was] alleged to be medically unnecessary, you can’t take what may have been necessary or unnecessary for one patient and extrapolate it to what may have been the case for a different group of patients — especially if you’re talking about different groups of people, different groups of doctors, perhaps over different time periods, widely different time periods. So it can be a real challenge to defend against that.

Oswald: So how do courts deal with that due process conundrum? Where do the courts come out?

Hardin: Well, there has been an allowance for statistical sampling to prove damages — not in all cases, but in some. There are certainly some district courts that have allowed that.

There has been much more reluctance to allow sampling to be used to prove liability. No court of appeals has actually weighed in on that. There was a case a couple of years ago in the Fourth Circuit that I think the bar on both sides had hoped would provide some guidance. The Fourth Circuit ended up not reaching the question — and so it remains really an open issue, and there’s not a lot of guidance on either side on whether that’s allowable.

That’s really much where the debate is: Damages, it’s much more accepted that that can be allowed. Liability, that’s where the due process issues really come into play.

Oswald: So if I’m sitting in the audience and I’m getting ready to watch the panel, what can I expect? What am I going to see?

Hardin: Well, I hope that there’ll be a background about the legal landscape, talking about what cases have said. Where have courts allowed [sampling] for damages? Where have courts allowed it for liability? Where have courts not allowed it for either of those things? Sort of a background.

Also, we have a statistician or an economist on the panel [who] I hope can explain, for those of us who are mathematically challenged: What is a sample, what types of samples are there, what makes a good one?

And then, for the lawyers: How do you challenge the other side’s expert who is putting forth the sample — and what do you want to look for, and where are the weak spots, and what do you want to make sure you have in your expert? And then, perhaps, avenues for attack[ing] the other side’s experts.

Oswald: And maybe even a little bit about how to best work with experts in a case like this?

Hardin: Sure, sure. That’s great in terms of — because there’s lots of different types of samples, and having someone be able to sit down at the beginning of your case and talk to you about what might be useful. If you’re the plaintiff, what you might want to try to do, [or] if you’re the defense, what you might expect the plaintiff is trying to do, so that you can build your case really from the start — and try to build your damages case and your liability case around, you know, what the claims may be and what the defenses may be.

Oswald: Tell us a little bit about you. You’re a partner at Williams & Connolly. That takes up, I’m sure, an enormous amount of time. When you’re not lawyering, where do you spend your time?

Hardin: I spend my time mostly with my four young children, so there isn’t much room for anything other than them. I have two boys and two girls. My two boys are big athletes, and so we spend lots of our Saturdays and Sundays at various games of some sort, traveling here and there.

My daughters are four, so we are doing all kinds of fun preschool activities and they’re really developing — they’re twins and coming into their own little personalities.

So it’s busy, but lots of fun.

Oswald: Ashley, thank you.

Hardin: Thank you!

Oswald: [Addressing camera] I want to thank all of you that have signed up for the annual conference already. If you haven’t done so, you can do so at the Federal Bar Web site, which is at fedbar.org/quitam19. We look forward to seeing you in 2019 on February 28 and March 1.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. Ashley W. Hardin is a partner at Williams & Connolly LLP.

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

 

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] So we’re here with Kate Seikaly and we’re here to talk about materiality. During our annual conference on February 28 and March 1, 2019 — at the Federal Bar [Association] Qui Tam Section’s annual conference — we will have a panel on materiality.

Kate, tell us a little bit about your panel, your panelists, and maybe some of the topics that you’d like to cover.

Katherine J. Seikaly: Sure. So we are going to cover as much as we can about materiality in the time we have allotted. We’ve got representatives of the defense bar, the relator’s bar, and [the U.S. Department of Justice]. We’re going to start with pleading materiality and what relator’s counsel can do to build up their complaint on that point. And then [we’ll] talk a little bit about motions to dismiss and arguments that can be made by the defense bar early.

But I think the bulk of our panel will talk about discovery process, summary judgment, and trial on those issues — with a real focus on discovery, because I think that’s becoming a big area and somewhat a new area for a lot of the practitioners. So we’re going to give them some practical tips on where to go, what to look for, and what to get on materiality.

Oswald: So if I’m in the audience and I’m there to see the panel on materiality, what can I expect? Maybe something new that I wouldn’t have expected going in?

Seikaly: Well, I think one thing that just happened recently and [that] I expect to talk a lot about on our panel is the Department of Justice’s amicus brief in the Gilead case that they filed a couple weeks ago with the Supreme Court. That touches on materiality in every possible way: On how it should be pled in a complaint, and then their statement that the discovery process [in that case] would be expected to be burdensome and that they don’t want to proceed in that fashion.

So I expect that to be a theme that we carry through and use as a guide for the panel and these very important issues.

Oswald: Why has materiality become such a hot topic?

Seikaly: After the Escobar decision I think that everybody needs to address it in every case. And I think the defense bar recognized that, now that the Supreme Court has said it’s a rigorous standard and it’s got to be pled with particularity, … they’ve got a new defense to raise both on motions to dismiss and on motions for summary judgment.

And I think the relator’s bar recognized that, and they’re now doing more to plead it upfront and discover it up front. And then, you know, if we get into discovery, then it’s got to be addressed there, too — which, even in an unintervened case, brings the government back into it.

So I think all sides of the bar are at the table on this one. And it’s very complicated, particularly in cases that have been under seal and the government has investigated for a long time. I think that presents very unique issues that people are going to have to deal with. The Escobar decision was a groundbreaking moment for our bar and we’re still feeling the effects of it in all phases of these litigations now.

Oswald: Give us a sense of the advice you’re giving to your clients at Reed Smith. You know, when you’ve got a client and you’re talking about materiality, what kind of advice are you giving to them right now?

Seikaly: It’s interesting. I’m not sure we can give much advice in terms of what they can be doing. But it’s certainly impacting how we’re handling these investigations.

If we get a new [investigative demand], or a new request from the government, years ago we would proceed with the basic facts: Who was involved, where are the documents, what are we looking for? But now I think we hone in on materiality right away and we have a different perspective on it — that it’s not just an obvious, “Is it in the contract or is it not in the contract?”

[Instead,] it’s very much, “We have to look at the conduct of the parties throughout their interactions.” We have to look at any regulations, the contract terms. So it really is impacting how we deal with these cases upfront — and then that could impact, if there is a suit filed, how we deal with it in the litigation phase.

Oswald: So [if] the government continues to pay [a defendant], whether it’s in the healthcare context or it’s in the procurement context, what effect does that potentially have on the issue of materiality?

Seikaly: Well I think we in the defense bar would say it has a huge impact — and that certainly if the facts are known and the government continues to pay, I think you have a strong materiality argument there.

I think there is a very attractive materiality argument when the government learns of the allegations, either through a sealed qui tam or some other reporting, and conducts a very long investigation, and during the course of that very long investigation continues to pay. I think that — there are some cases on that, going both ways, but that’s exactly what we’re looking at.

So [it’s] not just, “What does the contract say?” but “What has the government been doing in the time that these allegations have been known to them?”

Oswald: Does it matter how the government is treating other contractors in terms of paying over [this] time — does that matter?

Seikaly: I think it does. Because I think it colors whatever this breach or violation is that’s being alleged: Do they really think it impacts their payment decision?

I know in a case I handled a few years ago, the government took the position in discovery that they would not be producing documents or information relating to other participants in the industry. And frankly there was enough discovery out there about our client specifically that it wasn’t really a fight we were willing to have.

But I think it’s possible that, in a different context, that’s somewhere the defense bar should push a little bit. And frankly, even the relator’s bar: I mean, I think there’s stuff out there that if they are denying other contractors claims and something happened with this contract for whatever reason, it shouldn’t be on different footing but appears to be — I think that could certainly argue in favor of finding materiality for that violation.

Oswald: So it really sounds like the Department of Justice is between a rock and a hard place, in dealing with this.

Seikaly: I think so, I absolutely think so.

And, you know, one thing I think we’ll talk about on our panel is the difference in this context between an intervened case and a non-intervened case. Because when you’re in the intervened case, discovery’s a little bit easier: At least you can go through the Department of Justice. The United States is there at the table. [In] unintervened cases, you’ve got to go to the agencies. The [DOJ] takes the position they’re not — you know, while they’re the real party in interest, they are not a party to this litigation. You can’t just issue Rule 45 subpoenas, and you can’t serve them on the [DOJ].

So I do think the department is in a tough spot here between two very aggressive bars, and we’re all feeling each other out and figuring out the right way to go with it. Those are exactly the issues that I hope to flesh out a little bit in our panel.

Oswald: So Kate, tell us a little about you. When you’re not lawyering, representing clients in False Claims Act matters, where are you spending your time?

Seikaly: Well, I have two small children, three and four — two little girls — so mostly I look forward to sleep when I can find it. But on the weekends, I do try to spend a lot of time with them. And we do live here in the D.C. area, so we’re spending a lot of time trying to enjoy that part of our lives.

Oswald: Kate, thank you.

Seikaly: Thanks!

Oswald: [Addressing camera] We want to thank each of you who’ve already registered for the Qui Tam Conference. For those who have not, you can register at fedbar.org/quitam19.

We look forward to seeing you on February 28 and March 1, 2019.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. Katherine J. Seikaly is a partner at Reed Smith LLP.

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

 

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] We are here with John Thomas. John is the immediate past chair of the Qui Tam Section of the Federal Bar Association.

And John, at our conference this year, in Washington on February 28 and March 1, 2019, we have a panel — it’s going to be the first panel, really an annual update.

John R. Thomas: That’s right. Our plan is to — this will be the second year we’ve done it — to have an annual update. It’ll be the first panel of the [first] day and we’ll focus on some of the notable case law updates from the previous year.

Oswald: Who do we have as our panelists for the panel?

Thomas: Our two panelists are Claire Sylvia with Phillips & Cohen and Stuart Delery with Gibson Dunn.

Oswald: So give us a sense of — you know, I’m sitting in the audience, I’m here for the first panel. I’ve got my coffee, I’ve got my Danish, and I’m here to learn something. What am I going to learn in this hour that we’ll all have together?

Thomas: I think the most important thing about our panel is, as we all know, the False Claims Act is operating in a very small universe of cases and we don’t always get the opportunity to have the Supreme Court make clear what the final word is. We don’t even necessarily get enough trials or enough appellate cases to know what the final word is.

So the idea with the annual update is to look across the country at the ten or so most notable cases of the year. And not just cases — I think we are going to also talk about policy developments coming from [the Department of Justice], and notable settlements. The idea being, maybe we can get a glimpse of what the big picture is as the law evolves.

Oswald: So give us a sense of a couple issues we might hear about — a couple of the cases that you and the other panelists are going to review.

Thomas: I think, you know, we’ll continue to discuss the aftermath of [United Health Services, Inc. v. U.S. ex rel. Escobar], you know, from 2016. We’re still seeing how Escobar is working its way through the appellate courts, as well as the district courts.

Oswald: It’s really reverberating through the courts.

Thomas: It’s reverberating, and so we’re continuing to see Courts of Appeals apply it. I think we’re going to [review] a couple of Escobar cases, most likely. [And we’ll] have a few items to discuss in terms of DOJ policies that have come out over the last year — seeing how those are, in practical terms, really impacting on the ground.

Oswald: So what do you look forward to on the panel, in terms of its content?

Thomas: Well, both Stewart and Claire are real masters in this area of the law, so I think it’ll be a wonderful opportunity to see their insights from both the relator’s and the defense perspective. Both of them — of course, Claire has a [False Claims Act] treatise and Gibson Dunn obviously has its very notable year-end review. So I think we’re going to all get a huge benefit from their perspectives, because they definitely have a very eagle-eyed perspective on the law.

Oswald: So I understand you have some news: You just switched firms — you’re at a new firm. Tell us a little about it.

Thomas: I did. I’m with the firm Healy Hafemann Magee. I’m going to be opening — I am opening the Virginia office for them. It’s about ten attorneys; we’re all current or former military. All the other partners are Marines with whom I served. Some of them I’ve known for a pretty long time. We’ve definitely — you know, we’ve dug fighting holes together. So it’ll be a fun new adventure. I’m going to continue to work on False Claims Act work and white-collar work with them, and — yeah, it’s very exciting.

Oswald: John, that’s great!

Thomas: Thanks!

Oswald: [Addressing camera] We look forward to having everybody join us on February 28 and March 1, 2019 in Washington. It’s the second annual conference of the Federal Bar’s Qui Tam Section. You can register at fedbar.org/quitam19. We look forward to seeing you in February.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. John R. Thomas is a partner at Healy Hafemann Magee.

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

By R. Scott Oswald

Lately it’s become reasonable to ask: Is there any arbitration provision — however lopsided and unfair — that the U.S. Supreme Court won’t deem enforceable under the Federal Arbitration Act (FAA), a 90-year-old statute that modern corporations have wielded to push their disputes out of public courts and onto the secret, tilted field of arbitration?

Thanks to trucker Dominic Oliveira, the answer is finally yes: The FAA retains at least one court-approved carveout.

In a unanimous decision today in New Prime Inc. v. Oliveira, the Supreme Court agreed with Mr. Oliveira that the FAA doesn’t apply to provisions in agreements with workers “engaged in foreign or interstate commerce,” regardless of whether such workers are independent contractors.

The court didn’t sketch the outer limits of this carveout, although the 8-0 opinion by Justice Neil Gorsuch — whose previous FAA opinion, not eight months ago, was profoundly anti-labor — implied that only transportation workers would qualify for an exception.

(Justice Brett Kavanaugh didn’t take part in Oliveira, which was argued before he took his seat on the court.)

Still, a win is a win. The court’s recent FAA jurisprudence may have revived the Gilded Age fiction that employment agreements are voluntary contracts — when, in truth, most workers have no option but to accept their terms — but Oliveira at least proves that the justices’ historical predilections may cut both ways.

Here, a worker-friendly outcome was reached by entering the minds of 1920s legislators.

Background

Mr. Oliveira’s contract with New Prime, an interstate trucking company, purported to classify him as an independent contractor — that is, not an employee in the modern legal sense — and specified that disputes would be settled via arbitration.

Mr. Oliveira nonetheless sued New Prime in federal court for failure to pay him and other drivers, who he claimed actually were employees, properly under the Fair Labor Standards Act (FLSA). New Prime tried to kick the case to arbitration under the FAA via two arguments:

• First, that an arbitrator must decide whether the FAA covers Mr. Oliveira’s agreement with New Prime; and
• Second, even if a court winds up deciding the question, that the FAA certainly does cover Mr. Oliveira’s agreement.

New Prime lost badly in the lower courts, and fared no better at the highest level.

It’s worth noting that the gateway issue in Oliveira was qualitatively different from that in Henry Schein, Inc. v. Archer and White Sales, Inc., another FAA case that the court decided just last week. In Henry Schein, a 9-0 opinion from Justice Kavanaugh held that courts must enforce a valid delegation to an arbitrator, even if the dispute is over arbitrability — and even if the outcome seems entirely predetermined.

In Oliveira, by contrast, the gateway matter was whether the FAA applies at all. To rely on the FAA to enforce the delegation of such a question, wrote Justice Gorsuch, is to put the cart before the horse:

The parties’ private agreement may be crystal clear and require arbitration of every question under the sun, but that does not necessarily mean the [FAA] authorizes a court to stay litigation and send the parties to an arbitral forum.

In short, a court can’t apply the FAA to a contract before deciding whether the FAA governs the contract — self-evident, perhaps, but worth three pages of the Oliveira opinion.

The Meatier Matter

Justice Gorsuch then moved to the substantive question: Does the FAA govern the agreement between Mr. Oliveira and New Prime?

The FAA includes a carveout for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” For years, transportation companies such as New Prime have tried to avoid this provision by framing their workers as independent contractors — who, because they are not “employees” in today’s legal sense, supposedly cannot enter a “contract of employment.”

The trouble with this distinction, said Justice Gorsuch, who cultivates a reputation as a historical stickler, is that it wasn’t operative when the FAA was written:

To many lawyerly ears today, the term “contracts of employment” might call to mind only agreements between employers and employees …. But this modern intuition isn’t easily squared with evidence of the term’s meaning at the time of the Act’s adoption in 1925. At that time, a “contract of employment” usually meant nothing more than an agreement to perform work. As a result, most people then would have understood [the FAA] to exclude not only agreements between employers and employees but also agreements that require independent contractors to perform work.

Any 1920s legal authorities who used the term exclusively for so-called master/servant relationships, he continued, “appear to represent at most the vanguard, not the main body, of contemporaneous usage.”

Mr. Oliveira therefore falls directly into the FAA’s carveout, along with all similar independent contractors, and can’t be compelled into arbitration under that law. Barring another development upon remand, he would seem free to pursue the merits of his FLSA claim.

What It All Means

Today’s decision is helpful to truckers and other independent transportation workers, at a minimum: With admirably clear language, Oliveira removes the prospect of forced arbitration clauses being rammed down their throats under the FAA. Their employment agreements remain subject to regular contract law, of course, but that’s friendlier ground in many states.

How about that phrase, “any other class of workers engaged in foreign or interstate commerce”? Could this FAA carveout, newly confirmed to be rock-solid, reach past traditional freight workers? Could it reach, for instance, warehouse workers for Amazon? Uber drivers?

Well, perhaps not, given Justice Gorsuch’s reliance on divining the intent of lawmakers from a previous century. But the carveout certainly includes truckers, who already are fairly different from “seamen [and] railroad employees” — and “any other class” is pretty broad. As Justice Ruth Bader Ginsburg noted in her brief concurrence in Oliveira, quoting Justice Stephen Breyer in West v. Gibson, itself an employment case:

Words in statutes can enlarge or contract their scope as other changes, in law or in the world, require their application to new instances.

In Oliveira, the justices expressly declined to apply that principle to “contracts of employment” — and rightly so, since it would have changed the law’s meaning.

Now that we see a small crack in the court’s pro-employer FAA absolutism, however, perhaps some further testing is in order.

—–

R. Scott Oswald is managing principal of The Employment Law Group, P.C.

(Note: This version has been edited slightly from the version published by Law360.)

 

 

---

» Click here for registration and full details on Qui Tam 2019

---

 

(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] Hi, it’s Scott Oswald, chair of the Qui Tam Section of the Federal Bar Association, and we are here today with Traci Buschner.

Traci is a partner at Guttman, Buschner and Brooks in the District [of Columbia]. She is moderating a panel at this year’s annual conference on February 28 and March 1, 2019, on ethics in qui tam matters.

Traci, give us a sense of both our panelists and, maybe, a little something that we can expect. If I’m in the audience and I’m attending the panel, what can I expect to see?

Traci L. Buschner: Thanks Scott. I’m really happy to be chairing the ethics panel this year. Last year I was on a panel about qui tam settlements with some other lawyers, and we had a really good time. So I’m really excited this year about handling the ethics part of it.

The panelists that we have set up are some really fascinating people who have a lot of experience. I think [they’ll] bring a broad knowledge base to the panel, and hopefully we will be able to interact: That’s what we’re planning for our panel, is to have an interactive discussion about ethics.

Some of the panelists we have are David Wiseman, who is a senior person in the [Department of Justice’s] commercial litigation department. He actually has a very interesting job at DOJ — he’s an ethics, or professional responsibility officer within DOJ, so he’ll bring some of the more sticky problems that DOJ has to deal with. He has to help the lawyers over there navigate those problems.

And then we have Precious Gittens, who’s at Hooper, Lundy & Bookman. She’s a defense lawyer, but [also was] a longtime Assistant U.S. Attorney for the District of Columbia, and has a fabulous background doing white-collar criminal defense. I think she’ll give us a lot of information about the inside of qui tam cases, especially where there’s a parallel criminal investigation.

And then we have Kathleen Clark, who’s at the Washington University Law School in St. Louis, and whose area is professional responsibility. She has a very rich background as well. She served [as counsel for] the Senate Judiciary Committee, has been a former [judicial] clerk, and has written pretty extensively in the whistleblower area, especially on ethics.

So that’s our panel. And what we have decided to do is a short fact pattern that will present problems for the relator, for the defense, and for the government. We will question the audience and get their feedback as to how these problems can be resolved — so we’re looking forward to that and we think it might be kind of fun …

Oswald: So if I’m in the audience —

Buschner: … or as fun as ethics can be. [Laughs.]

Oswald: So if I’m in the audience, I can expect to play a role?

Buschner: Yes, we’re thinking that it will involve some sort of way that you can — I think it’s an electronic system we’re going to try to use, where you can cast your vote for an A, B or C answer. And then we will discuss those.

Oswald: So I know one of the topics that relator’s counsel deal with all the time, that’s an ethics issue, is cases that are under seal.

Buschner: Right.

Oswald: And so we have our case under seal, and maybe there’s an inquiry of some sort — or maybe there’s another filing we want to make with a different agency. How do we deal that with that from an ethics standpoint?

Buschner: Right. So the statute itself requires the relator to seal the case when it is filed. Although the federal statute requires sealing for 60 days, they often become sealed for much longer, as we know, because the government needs more time to investigate.

So during that time, the relator sometimes can get more information; they can decide, perhaps, that maybe another government entity might be involved, a state or local government; [or] sometimes the information is the subject of a congressional inquiry.

Would the judge consider a disclosure to an agency or to Congress to be a violation? I think you always have to think about that, even if the likelihood of the information being disclosed to, say, the press, or to third parties, or to the public at large, might be very small. I mean you’re the one who will be disclosing this information — and [you] will be on the hook if something happens.

I think one of the ways that you can solve that issue is to go to the government and seek their guidance. We have done so in the past, and normally the U.S. Department of Justice will have some way to solve that problem whereby you will be covered and your client will be covered.

Oswald: And I’m hearing from you to do that before …

Buschner: [Laughs] Before, yes!

Oswald: [Laughs] Before the fact?

Buschner: Before you think about, yes, disclosing it.

And always think, you know, you have to be super careful. So even if it’s like a new state, or whatever, I think you have to go through that thought process of, “What does the seal say, what are the particular words?” At least letting the government know — [because] if the government has a problem with it, they’re the real party in interest.

And if you have to go [before] the judge, then you want the DOJ on your side saying, “Yes, we knew this was going to occur, yes, we agreed with this,” or “Yes, we took these particular precautions” so that the information wouldn’t become unsealed or to known to others who are not supposed to know the information.

Oswald: Tracy, thank you.

Buschner: You’re welcome!

Oswald: [Addressing camera] And we want to invite all of you to this year’s Qui Tam Conference. It is on February 28 and March 1, 2019. We look forward to seeing you there.

———-

R. Scott Oswald is managing principal of The Employment Law Group, P.C. Traci L. Buschner is a founding partner of Guttman, Buschner & Brooks PLLC.

 

---

» Click here for registration and full details on Qui Tam 2019

---