July 24, 2015

Court Slaps Down DOJ For Skimping On Whistleblower Award

By Gordon Schnell

It is a rare occasion where the Department of Justice gets judicially censured for shortchanging a whistleblower under the qui tam provisions of the False Claims Act.  But that is exactly what District Court Judge Robert F. Kelly (Eastern District Pennsylvania) did last week in United Sates ex rel. Ryan v. Endo Pharmaceuticals, Inc.  There, Judge Kelly came down hard on the government for awarding whistleblower Peggy Ryan only 19 percent of the $170 million settlement she helped secure.  He felt a 24 percent slice was much more appropriate given the substantial contribution she made to the government’s victory.  It is a ruling no-doubt being celebrated among whistleblowers and their lawyers, and the latest recognition by a court of the need to properly encourage and reward whistleblowers for the critical role they play in government enforcement.

Ryan filed her original qui tam action in 2005 alleging Endo violated the False Claims Act by engaging in an off-label marketing scheming under which the company promoted the drug Lidoderm for uses neither approved by the FDA nor medically accepted.  After almost a decade of investigation and hard-fought litigation — in which Ryan and her legal team played a leading role — Endo finally agreed to pay roughly $170 million to settle the matter.  Under the False Claims Act, Ryan is statutorily entitled to between 15 and 25 percent of that recovery.*  She asked for 24 percent.  The government would not go higher than 19 percent, arguing the downgrade was necessary because Ryan’s participation did not merit the higher number and the size of the settlement warranted a lower share.

Judge Kelly flatly rejected the government’s assessment.  He reasoned the “appropriate share determination hinges on the extent to which Ryan substantially contributed to the prosecution of the action.”  And considering Ryan’s contribution to the case, Judge Kelly concluded it was not even a close call she deserved her requested amount of close to the statutory limit.  “Ryan provided not only the spark for the investigation, but [] she nurtured the flame at the darkest times when the possibility of a favorable outcome seemed most remote.”

Judge Kelly catalogued some of Ryan’s more notable contributions and sacrifices as follows:

  • The government’s investigation into Endo’s alleged fraudulent practices was initiated only after Ryan filed her original whistleblower action.
  • Over the next three years, Ryan wore a wire to surreptitiously record over 200 hours of internal Endo discussions and meeting.
  • Ryan was successful in procuring direct evidence of an organizational strategy by Endo to market Lidoderm for off-label uses.
  • Ryan worked with the government in tailoring its subpoena to target the key documents and key witnesses at Endo, and to review the information obtained therefrom.
  • Ryan provided a “bounty” of internal documentary evidence.
  • Ryan and her legal team (the James Hoyer firm) produced a documentary video summarizing the evidence of Endo’s alleged fraud, which circulated within the government and re-sparked what had become a lagging investigation.

From all this, Judge Kelly concluded “it is clear that Ryan was indispensable to the investigation,” and without her assistance “the probability of the government recovering any funds for the [False Claims Act] violations would have been slim at best.”

Judge Kelly specifically rejected — as “counter-intuitive and without statutory support” — the government’s argument that Ryan’s award should be lower because the case never went to trial.  Applying such a deduction, the judge found, would actually punish whistleblowers for providing too much evidence and encourage them to hold some of it back for trial.  The judge was equally dismissive of the government’s sliding scale approach of lowering shares for larger settlements.  “If Congress had intended limitations, like in the case of large awards, it would have explicitly included them within the statutory framework.”

In sum, the judge found Ryan’s contribution to the government’s ultimate recovery from Endo “as nothing short of extraordinary.”  So congratulations to Peggy Ryan for a job well done and a reward well deserved.  And an equal congratulations to Judge Kelly for understanding and appreciating the essential role Ryan played, as most whistleblower play, in protecting the government and us all from fraud and misconduct.


* The statue provides for a mandatory whistleblower award of 15-25% of the government’s recovery for cases in which the government intervenes (which it did in this case), and 25-30% if the government does not.

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