Becker Private Equity & Business Podcast
False Claims Cases with David Pivnick of McGuireWoods LLP 5-29-25
Thu, 29 May 2025
In this episode, Scott Becker talks with McGuireWoods partner David Pivnick about a major constitutional challenge to the False Claims Act, the potential impact on whistleblower lawsuits, and what it could mean for healthcare litigation and government recoveries.
Chapter 1: What is the significance of the False Claims Act?
This is Scott Becker with the Becker Private Equity and Business Podcast. We're thrilled to have recently passed 7 million downloads and been ranked at the top of the Apple Business News Rank Exist Month. And this is largely due to great listeners and great guests. One of our great guests is David Pivnik, who's a brilliant leader, lawyer, business strategist, and a lot more.
We talk to David often about leadership issues, business issues. He made his name as a top litigator handling white collar claims, often for private equity funds, but a fascinating, fascinating person. David, let me start with this. Talk to us for a second about, so what are the most interesting issues that you're following today? What's top of mind for you? What are you keeping your eyes on?
Sure, absolutely, Scott. Appreciate you having me on. You know, Business-wise, day-to-day, as you alluded to, I spend a lot of my time and energy defending False Claims Act cases, representing a wide range of providers, health systems, managed care insurers, as well as private equity funds. I often am focused on issues in that space.
Chapter 2: What ongoing legal challenges are associated with the False Claims Act?
One of them that is particularly notable to me right now is an 11th Circuit appeal in what's known as the Zafirop case. That is focusing on whether or not the False Claims Act and specifically its key TAM provisions allowing whistleblowers to bring lawsuits on behalf of the government is constitutional.
There's been many challenges to the constitutionality of the statute, but it hasn't been determined by the Supreme Court or really resolved with any finality. A couple of years ago in 2023, Justice Thomas issued a dissenting opinion
in a Supreme Court case where he noted that he thought it would be interesting, that there might be a challenge to the constitutionality and whether whistleblowers could proceed with claims. And I think that invited a lot of litigation.
Chapter 3: How could recent court cases affect whistleblower protections?
And Zafirov is a Middle District of Florida case where the judge, who's a President Trump appointee from his first term, granted judgment for the defendant and found that the Ketan provisions were not constitutional. And that case has since been appealed. And the briefing is now completed, as of about a month ago, before the 11th Circuit.
There's been amicus briefs that were filed from a variety of constituents, including the Department of Justice and other government officials, as well as amicus briefs on the other side. So both sides have briefed this very extensively. And it'll be interesting, with the 11th Circuit weighing in on constitutionality.
And I expect fully that the issue will make its way to the Supreme Court and likely get taken up by the Supreme Court. And that would have a massive impact on False Blames Act litigation generally and specifically on whistleblower litigation. So that's something that the briefing was completed in the first five months, first four months really of this year.
And it's certainly something I've been focused on and looking into it and will have a big impact on work that I'm participating in and representing clients in going forward. And then I always monitor what DOJ is focused on and where some of the key litigation efforts are going as well.
Chapter 4: What are the constitutional concerns regarding the False Claims Act?
Let me ask you about that. The false claims case has been around since the Civil War. What's the take on that? Can that possibly be ruled unconstitutional? Can we possibly not have key TM cases? Is that a possibility? Or would that get the Supreme Court and at some point they'd be like, no, of course we could do that. What's your take on that? Is there a good basis for not being constitutional?
I think there is. I think that the general concept here is under the Constitution, based on the Appointments Clause and Care Clause, There are certain authorities that are limited to the executive and where people have to be appointed to represent the government appropriately.
In this instance, the key to supervision sort of circumvent that and had whistleblowers with no basis or standing other than self-election, self-determining that they're going to file a lawsuit, coming in and taking over that. And while the government has the ability to investigate and intervene,
in cases where it declines to do so, and the DOJ is not running the case, you're left with private litigants making their own decisions. And so I think there's already, to my mind, as you pointed out, the False Claims Act is initially a Civil War enacted statute. To my mind, it is not intended to cover or was not intended to cover the wide array of purported wrongs that it currently covers.
I think it's already been taken beyond its intended utility. And particularly in the healthcare context, I think the False Claims Act is an inappropriate and overly blunt object for hammering out, in many instances, what is hyper-technical violations rather than sort of black and white fraud.
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Chapter 5: How does the False Claims Act impact healthcare litigation?
It was more intended to do things like billing for services not rendered or intentional upcoding, billing for treating dead people versus you know, any allegation of regulatory non-compliance can lead to potential liability under the False Claims Act with this heavy statutory penalty scheme, so long as the non-compliance is purportedly material.
So there's a lot of ability for folks to pursue non-fraudulent, at least, you know, as you or I or our listeners would contemplate fraud, conduct that doesn't really fit in that rubric, but can fit under the act. And in healthcare,
you know, where the statutory penalties right now are, you know, into the five digits per claim, you know, you could be looking at a situation where you build improperly for an E&M code If you got paid $150, give or take, for the evaluation management service, but your liability, if you fraudulently build that code, could be $25,000, it's somewhat outsized and nonsensical, frankly, in proportion.
I think there's already some practical and policy issues with the statute, which is not can't amount to me saying fraud is fine, don't worry about it. It's more saying there are appropriate ways to monitor it. And there's a big difference between fraud and regulatory noncompliance getting lumped in with fraud.
And so taking that framework and then applying the fact that, you know, with some limited exceptions, anyone can bring these claims on behalf of the government. I do think the constitutionality concerns are well taken.
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Chapter 6: What are the potential implications of the Zafirop case?
Let me ask you a question just to understand it further. would this knock out the key TAM statute entirely or just knock it out for particular types of claims?
I think if it was fair to be non-constitutional, the way it would practically work would be whistleblowers wouldn't be able to prosecute the claims. So it might not prevent whistleblowers from asserting claims, but it would certainly leave claims where the government declined to intervene and take over the prosecution in a situation where those claims would become
unconstitutional and therefore barred and subject to judgment or dismissal.
And currently, the government intervenes in a certain percentage of false claims cases. And when they intervene, the chances of recovery go up significantly. I don't have in front of me the percentage of claims. I remember it was about 25% that the government intervenes and maybe it's less than that. Do you know the percentage of times that the government intervenes in?
Because it seems as though this would knock out particularly all those cases where the government doesn't intervene.
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Chapter 7: How does the False Claims Act relate to regulatory compliance?
Yeah, so you're right on with the numbers. In any given year, it's in that 20% to 25% ballpark that the government intervenes. Now, it isn't necessarily the case that that the remainder would all go out if it was fair and unconstitutional, because part of what might happen is, you know, it's possible DOJ would intervene more frequently. There might be other steps that were taken to protect cases.
I do think there's a significant number of cases, some of which, you know, unfortunately for my clients, like I've had multiple cases where I've represented clients who really didn't do anything wrong, full stop, period. There was no
merit to it, but they are in a position where it is incredibly expensive to defend these cases and incredibly risky in case you have a judgment against because of that penalty scheme. There is a lot of cases I think annually that end up getting settled for relatively low amounts because people are ultimately concerned about the outside liability. I think a lot of those cases
would fall away, and I think, frankly, very much appropriately so. I think the bigger cases, both in terms of dollars and targets and the risk, and particularly where the conduct is egregious, the DOJ would be picking up anyway. And so those would not be falling away. And again, I don't view it as one where someone could get away
With wrongdoing, I view it more as avoiding improperly incentivizing people to bring claims knowing that there might not be anything there, but they're likely to be able to shake out a decent settlement if they can survive a motion to dismiss.
Right, because you end up in a spot where that number, that 20-25% number would go up somewhat, most likely. So it wouldn't completely knock out key TAM cases, but it would knock them out where the government doesn't intervene.
it'd be fascinating to see the ultimate impact on this because also of those 75% of the cases the government doesn't intervene in, those are the ones that are less likely to lead to successful outcomes for the plaintiff, the relator, as they call it. Fantastic.
David, can you talk a little bit about the context for healthcare, some sense of the amount of dollars recovered through KTM cases each year or some ballpark on it and what you see there?
Yeah, absolutely. And I mean, the numbers fluctuate year to year over the last five to 10 years, the number in total government fraud recoveries, it is typically in the $3 to $5 billion range. There's some exceptions slightly higher than the $5 billion mark, some exceptions that are in the $2 to $3 billion range, but that $3 to $5 billion
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