Harvard Professor Blows Whistle on Chinese Takeout False Claims

I blog today on the unbelievable correspondence from my former home-town of Boston, covered by Boston.com.

If you live in Boston, by now you know the story:

  1. Harvard Business School Associate Professor finds out he was charged $4.00 more for take-out food than he should have been.
  2. Local mom and pop restaurant immediately offers to make good on their debt (despite making the mistake of offering $3.00 rather than $4.00).
  3. Professor argues for triple damages and throws law all over the place.

Turns out the professor claims to be an expert fraud consultant, but his big-time clients may want a second opinion.

The professor also has a law degree, and he cites Massachusetts Chapter 93a to give him the rights to such treble damages. That is what caught my attention, since I know the potential for defendants’ attorneys to scream murder any time the False Claims Act imposes such liability. But it turns out that, like the False Claims Act, which has some pretty strict requirements to prove any claim, the MA law cited above makes it hard for stupid cases to create any liability. Some reasonable procedures under the MA law cited by the professor are (According to the MA Office of Consumer Affairs Website):

If your problem involves an unfair or deceptive practice, which is a violation of the Massachusetts Consumer Protection Act, the law requires you to send the merchant a letter 30 days before filing a claim in court. ( M.G.L. c. 93A). The letter must outline your complaint, the harm you suffered, and how you want the problem resolved. This is called a 30 Day Demand Letter.

The merchant must make a good faith response within 30 days, or it could subject him/her to triple damages and attorney’s fees. The 30 Day Demand Letter serves to encourage the merchant to negotiate and settle the claims out of court. It also establishes the amount of monetary damages you can recover if the charges are proven in court.

The professor has gotten enough free publicity out of this, so I won’t name him, but next time I’m in Brookline, I think I’ll check out the Sichuan Garden restaurant.

The Professor was offered full restitution of the amount he questioned on a Chinese take-out meal immediately after contracting the restaurant, and he still went forward to continue to threaten treble damages and a kind of class action lawsuit.

OK so this is why I’m writing the blog: The False Claims Act, like Massachusetts Chapter 93a and whatever other statutes the professor may have been quoting, does provide for treble damages.

Many defense lawyers argue that’s unfair, and I have no doubt they will be rushing to this obscene example as an attempt to prove their case.  As you can see from the MA Office of Consumer Affairs Website, there is simply no way the Prof would prevail under the consumer protection law he was citing. These laws are of course not meant to be used in every silly little dispute. Rather, they are designed for a serious dual purpose—to deal with serious consumer fraud on the one hand and fraud against the government on the other.

Chinese Takeout False ClaimsYes, under the False Claims Act there is liability, including treble damages when a defendant commits fraud.  Charging more than is advertised can of course be fraud.  But you have to do more than charge $4 on a take out meal (with prices that reflect your real price on other menus posted and circulated to similar customers) to get hit with treble damages under a False Claims Act allegation.

Sure, if a major hospital consistently and willingly up-codes its services, never takes any corrective action, does so to make more money, and lies to the United States about the service provided, they could be liable for treble damages. Such a facility would have to certify in writing what the charges are and that they comport with the highly regulated requirements of Medicare. Similarly, if a defense contractor flat-out lies about billing, that company can be liable for treble damages.  But an innocent mistake? A $4 charge? Immediate restitution offered the minute a manager of any kind is aware of the problem?

There was not even any allegation the prof got, say chicken, instead of lobster or something. No mention, even, of missing soy sauce or an uninspiring fortune cookie.

This case is worth looking at to remind ourselves that the False Claims act and all laws do not exist in a vacuum outside of common sense.  Treble damages are serious and they are meant for serious cases—not trivial, innocent mistakes.

* Tony Munter provides examples of Massachusetts law. He is not licensed to practice in the jurisdiction of Massachusetts.  The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Website contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this Website.