by Charles Walter & Edward P. Richards, III, 16 IEEE Engineering In Medicine And Biology Magazine, (May-June 1997) #3 p. 93-95.
In a previous article  we reported that a Baltimore jury ordered the University of Alabama and three scientists to pay $1.9 million in fines and damages for violating the False Claims Act (FCA). The 4th Circuit Court of Appeals has reviewed the case and reversed. The 4th Circuit's opinion contains good news and bad news for plaintiffs using the FCA as a means of punishing research misconduct.
As described previously, what makes the FCA interesting is that anyone who knows about your misconduct can bring a lawsuit in the United State's name for civil damages and fines. Thus, suit can be brought by any person in your lab or institution with a story that an attorney believes can convince a jury that you have violated the FCA. This is called a "qui tam relator," or private attorney general provision. These are used to encourage individuals to file lawsuits that further the government's interests, without depleting the limited funds the Justice Department has to keep scientists in line. To encourage this altruistic behavior, the qui tam relator gets to keep 25-30% of the damages and fines assessed against you, with the rest going to the government.
From the point of view of state universities, a fundamental issue is whether the Eleventh Amendment to the U.S. Constitution provides immunity to the states from FCA suits wherein the U.S. Attorney General exercises the government's option to decline to become involved.
The Eleventh Amendment prohibits citizens of the United States and any foreign state from commencing or prosecuting any suit against one of the United States. Clearly, the Eleventh Amendment does not provide immunity to the states from suits by the U.S. Government. But does this amendment insulate the states from qui tam relators in FCA suits?
According to the 4th Circuit's opinion, Eleventh Amendment immunity is a red herring because the real party in interest in FCA suits is always the United States, even when the Attorney General permits a qui tam relator to pursue the action on the government's behalf. The statute states:
"If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action."
The 4th Circuit characterized this election process as "a cost-benefit analysis" of the anticipated costs and benefits of proceeding, rather than a decision that the claim is without merit or should not be pursued. Based on this reasoning, qui tam relators have standing to commence and prosecute FCA suits against state colleges and universities, and there is no immunity from such actions based on the Eleventh Amendment because the U.S. Government is the real party in interest.
The next issue addressed by the 4th Circuit is whether the false record or statement in a FCA suit must be material to the Government's decision to fund the claim. The relevant portion of the civil FCA provides,
(a) Any person who--
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; ...
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person....31 USC 3729(a).
Thus, the statute anticipates that the Government sustains damage because of the use of the false record or statement to get the claim paid. This language imposes a materiality requirement which, in the 4th Circuit, depends on whether the false statement has "a natural tendency to influence governmental action on the claim or is capable of influencing governmental action" on the claim. In the context of FCA claims against applicants for federal research grants, this means that the Government or its relator must show that a false statement in a document submitted to the granting agency had a natural tendency to influence funding of the grant or that it is capable of influencing funding of the grant.
Dr. Pamela Berge was a doctoral candidate in nutritional sciences at Cornell University. She brought her FCA claims against the University of Alabama at Birmingham (UAB), 3 researchers at UAB (Sergio Stagno, Charles Alford, and Robert Pass), and a doctoral candidate at UAB supervised by Pass (Karen Fowler).
Scientists at UAB have been studying cytomegalovirus (CMV), the most common infectious cause of birth defects, since 1971, and over the years have accumulated the leading database on maternal and congenital CMV in the world. A significant part of the funding for this research has been provided by grants from the National Institutes of Health (NIH), in particular grant HD‑10699, "Perinatal Infections, Immunity and Maldevelopment Research Program Project," administered by NIH's National Institute of Child Health and Human Development (NICHD). This grant is renewable every five years, with years 11 to 15 relevant to this case. Alford was the principal investigator for this project, although Stagno and Pass were closely associated with it. All three are internationally recognized as leading authorities on CMV.
Berge decided to do her doctoral research on CMV as a possible cause of low birth weight. She arranged access to and extensive assistance with UAB's database through Stagno, and she worked closely with Stagno and his colleagues while she was in residence as a visiting graduate student at UAB from February to August 1987. After Berge returned to Cornell, she made three additional trips to Birmingham during which she made presentations of her work. She completed her dissertation in May 1989 and received her Ph.D. Berge thereafter attempted to publish papers based on her dissertation, in the Journal of the American Medical Association, Epidemiology, and the Journal of Infectious Diseases, but these manuscripts were rejected by these journals.
In the meantime, Fowler decided in June 1988 to do her dissertation on the relationship between CMV and sexually-transmitted diseases and began working with Pass. After Fowler had begun her data analysis, based in part on UAB's existing database and in part on original medical records, she consulted completed dissertations, including Berge's, to choose a format. She defended her dissertation in May 1990. The following month, Fowler presented her research at a meeting of the Society of Epidemiological Research. Berge was in the audience and became shocked at what she considered to be plagiarism of her own work by Fowler.
Berge brought her allegations to Stagno's attention but did so in such a way that ultimately Stagno and his colleagues determined they could no longer collaborate with her. Two investigations of the allegations were conducted at UAB, but the allegations were found to be baseless. Dissatisfied with these results, as well as those produced from the other avenues she pursued, Berge next obtained copies of UAB's grant applications and annual reports through a Freedom of Information Act (FOIA) request and then brought this litigation. As the basis for her qui tam action under FCA, Berge alleged that UAB had made false statements to NIH in its annual progress reports under its grant. In particular, these alleged false statements were that
(1) UAB misled NIH in year 11 about the amount of data that had been computerized;
(2) UAB had included an abstract of Berge's work in year 12 without mentioning her name, thereby overstating UAB's competence and progress in epidemiology;
(3) UAB, although including Berge's name on the abstracts in years 13 and 14, had "submerged" her research so that serious questions about one of UAB's central theses would not be noticed; and
(4) UAB misled NIH in year 15 by including abstracts of Fowler's work which plagiarized Berge's.
After a ten‑day jury trial, the jury returned a verdict in favor of Berge, finding False Claims Act liability against all defendants except Fowler but assessing damages only against UAB in the amount of $550,000. This amount was trebled to $1.65 million, and the district court imposed a civil fine of $10,000 against all the defendants, jointly and severally, except Fowler. The district court awarded Berge as relator 30% of the United States' total recovery, or $498,000. The jury also found the four individual defendants liable for conversion of intellectual property in differing amounts, imposing a total of $50,000 in compensatory damages and $215,000 in punitive damages.
The Defendants requested a judgment in their favor as a matter of law and a new trial. This means that they asked the trial judge to overrule the jury and rule that, as a matter of law, Berge had not proved that the statements that she claimed were false were in fact false, or alternately, even if false, that they were not material to NIH's decision to fund grant HD‑10699. The trial judge denied the motion, and this appeal followed.
The Bad News: What a Jury Cannot Determine in FCA Actions
The main issue addressed by the 4th Circuit was whether the Government and relators in civil FCA actions are entitled to a jury determination of whether the statements in question are false, and, if so, whether they had a natural tendency to influence funding or were capable of influencing funding.
The Seventh Amendment to the U.S. Constitution guarantees the right of a trial by jury in civil suits at common law, where the value in controversy exceeds $20. This amendment has been in force since November 3, 1791, so it does not guarantee a right to a trial by jury in civil suits that were not "suits at common law" on November 3, 1791. For example, it is not a violation of the Seventh Amendment to deny plaintiffs jury trials in civil actions against foreign states because such actions were not permitted at the common law of November 3, 1791.
Although false claims of the sort contemplated by the FCA could be brought as "suits at common law" in 1791, the 4th Circuit side-stepped the Fourth Amendment issues with two alternative approaches.
The first approach involves two parts: The first part assumes that the falsity of the statements is always a question of law to be decided by the judge rather than a question of fact for the jury. The second part assumes that the materiality of false statements is also always a question of law to be decided by the judge rather than a question of fact for the jury.
Using this approach, the 4th Circuit first focused generally on testimony of the NICHD program officer with responsibility for UAB's grant. This testimony was to the effect that Berge's contributions were not central to UAB's project, and that the progress reported by UAB was satisfactory for a recommendation of continued funding without Berge's contribution. Apparently, the Attorney General was on record as admitting that NICHD had determined that the information Berge alleged was false or misrepresented was not material to its funding decisions. However, the 4th Circuit's own materiality standard is not whether a false statement causes funding, but rather whether it has a natural tendency to influence funding or is capable of doing so. In effect, the 4th Circuit treated its own question of law as a question of fact, and then proceeded to make the determination notwithstanding the jury finding in the district court.
A troubling aspect of this use of the program officer's testimony is how a single NIH functionary could know the full effect of Burge's contribution on the funding decision for a 5-year grant, much less whether or not the omission of Berge's contribution had a natural tendency to influence funding or is capable of doing so? Funding decisions for 5-year grants are much more complex than that. Since the jury heard the program officer's testimony in person in the context of all the other testimony presented, they were in a much better position to evaluate the weight to give it.
The 4th Circuit next focused on Berge's assertion of UAB's alleged misstatement concerning the extent of computerization in year 11. It concluded that because the program officer testified that the principal purpose of the project was the collection of data, not its computerization, and that UAB's data collection "is considered to be the largest single source of information on maternal and congenital CMV in the world," UAB fully complied with NIH's expectation on the collection of data. Thus, without referring to the jury findings on the subject in the district court, the appeals court found that, as a matter of law, "UAB did not mislead NIH about the extent of computerization."
The 4th Circuit next overruled the jury's finding that the failure to attribute Berge's work in the progress report was a material false statement, and held that omission of Berge's name from the abstract submitted as part of the year 12 progress report was not material because NIH did not require the inclusion of names. Once again shifting its standard for materiality, the appeals court said that liability under the False Claims Act cannot arise unless the defendant has an "obligation" to disclose omitted information. Apparently, the appeals court felt that this "obligation" must be a specific agency requirement rather than a professional obligation or an obligation to a third party such as the obligation within the research profession to give proper attribution to another scientist. In effect, the appeals court overruled the jury and found that, as a matter of law, UAB's failure to attribute Berge's role in the abstract of the study submitted in the grant application was not a material false representation.
However, according to the 4th Circuit's own opinion, the jury, who heard all the evidence in the case, found that the "failure to attribute Berge's abstract to her and obtain her permission to use it was a material false statement."
The 4th Circuit seems uncomfortable with its position on this point, and justifiably so. It therefore sought further support from the irrelevant fact that Stagno was a co-author and therefore co-owner of the copyright in their abstract, and therefore had a right to use it independently, "subject only to a duty of accounting for profits to other co-owners." According to this standard, Berge should have received a share of any benefits Stagno received from the grant proceeds. Even if it "was perfectly proper for Stagno to use the abstract as he did," it does not follow that failure to attribute Burge's role is or is not a false statement capable of affecting NIH's funding decision.
The 4th Circuit next found Berge's claim of the "submergence" of her work in the progress reports for years 13 and 14 "inexplicable." However, the appeals court may have confused what Berge meant by "submergence" with giving Berge credit for what she said in her abstracts because it refutes Berge's claim by pointing out that in each year's progress report, much of the discussion quotes Berge's abstracts, with attribution. However, if Berge's point was "submergence," the issue is not attribution for her earlier abstracts, but rather whether citing those abstracts "submerged" her interpretation of her work at the time progress reports for years 13 and 14 were submitted. The appeals court stated,
"If Berge's work supported the hypothesis that there was a downside risk to a live vaccine, the development of which she claims was a central goal of UAB's project, then it was incumbent upon her to note that implication in her work, which she did not. The omission is her own fault, not UAB's. An ex post facto realization of the possible importance of this implication cannot support a charge of falsity at the time the report was submitted."
Whether or not Berge's work was "submerged" depends on when Berge recognized the implications of her work and communicated them to Stagno. If it was before the progress reports were submitted, the inclusion of the abstracts was arguably "submergence" and the statements were arguably material false statements; if it was afterwards, they were not. Nevertheless the appeals court determined, as a matter of law, that UAB's statements omitting the possible importance of Berge's research were not false.
Thus, 4th Circuit found, perhaps contrary to the jury's findings in the district court, that, as a matter of law, certain statements that Berge alleged were false were in fact not false. In addition, the appeals court overturned the jury finding that material false statements were in the progress report and held that, as a matter of law, no material false statements were made.
The Seventh Amendment is not so easily bent. The 4th Circuit is on very weak ground assuming that the falsity of statements is ever a question of law. It is not on much firmer ground assuming that materiality of false statements is always a question of law. While it is true that materiality is often a purely legal issue underlying the admissibility of a statement, here materiality is being considered in the context of causation. Causation per se is not a legal question although the sufficiency of evidence to support a finding of causation is.
Thus, the 4th Circuit's backup approach was to subject Berge's evidence to the test of whether a "reasonable juror" could find (1) that the statements are false, or, if they are false, (2) that they could have had a natural tendency to influence funding or were capable of doing so. Using their two-way approach, the 4th Circuit stated that, at best, Berge failed on her burden of showing materiality; at worst, she could not even show that the statements were false and held that in either case, judgment as a matter of law is appropriate because Berge failed to prove an essential element of her case.
After listening to evidence for ten days, the district court jury found that Berge proved all the essential element of her case. This is what the 4th Circuit said about that jury:
"... no reasonable jury could possibly conclude that a multi‑million dollar grant, continually renewed over a period of more than a decade, undertaken by three internationally-respected scientists engaged, in part, in the collection of the world's leading database on CMV, would be reduced or eliminated due to UAB's lack of expertise in an area that could only be bolstered by the work of an unknown graduate student."
The three judges hearing this appeal were obviously more impressed with the scientists' reputation ("internationally recognized as leading authorities on CMV") than they were with their student ("an unknown graduate student") or even the jury who heard the evidence in the district court. Assuming that these characterizations of the parties are correct, the jury nevertheless believed that the scientists had made materially false representations in the progress reports to NIH. The judges' bias overflows when the opinion states,
"The hubris of any graduate student to think that such grants depend on the results of her work is beyond belief. That is not the way Big Science works. Assuming arguendo that all of Berge's allegations were true and UAB had made these false statements, it is hard to imagine that NIH's decision-making would have been influenced by them.
These judges apparently have no idea of where data for progress reports comes from, much less how granting agencies make funding decisions or how "Big Science" works. Perhaps the only hubris here is for three such appeal court judges to disregard 10 days' work by a jury of our peers.
1. "The False Claims Act and Scientific Misconduct", Charles Walter and Edward P. Richards, III, 14 IEEE Engineering in Medicine and Biology Magazine # 5 p 652 (1995).
2. False Claims Act - 31 USC 3729 et seq.
3. U.S. ex rel. Berge v. Board of Trustees of the University of Alabama, 104 F.3d 1453, 65 USLW 2515, 41 U.S.P.Q.2d 1481 (4th Cir.(Md.), Jan 22, 1997) (NO. 95-2811)
4. Thus, 28 USC 1330(a) of the Foreign Sovereign Immunity Act permissibly limits the jurisdiction of the U.S. Courts over foreign states in civil cases to nonjury actions.
End of Document
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