PROCEDURAL ASPECTS OF THE FALSE CLAIMS ACT

a. FCA Claim Must Be Pled With Particularity.

b. What is the Disclosure Statement?

c. Filing the Suit.

d. U. S. Gov't May Move for Extensions of Time.

e. Consequences of a Decision by the United States of America to Intervene.

f. Consequences of United States decision not to intervene in the action.

g. U. S. Government's Attempts to Intervene At Time of Settlement, Judgment or Post-Judgment.

h. Settlement and Consent to Dismiss.

i. Statute of Limitations.

PROCEDURAL ASPECTS OF THE FALSE CLAIMS ACT

a. FCA Claim Must Be Pled With Particularity.

Claims brought under the FCA must be pled with particularity. See United States v. Bouchey, 860 F.Supp. 890 (D.D.C. 1994) ("A sufficient FCA claim for fraud under Rule 9(b)[of the Federal Rules of Civil Procedure] must state the time, place and content of the misrepresentations, the fact misrepresented, and what was retained or given up as a consequence of the fraud. The claim also must state which individual made the misrepresentation." 860 F.Supp at 893). See also United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Blue Cross Blue Shield of Georgia, Inc., 755 F. Supp. 1040, 1052 (S.D. Georgia 1990)(in FCA claim, "the complainant must be able to connect the allegations of fraud to the defendant").

In response to a defendant's motion to dismiss or for a more definite statement pursuant to Fed. R. Civ. Pro. 12(e), the Plaintiff should recall the following arguments:

1. Under the particular circumstances of the case, the plaintiff should be held to a relaxed particularity requirement. This is particularly appropriate where the alleged fraud is perpetrated against third parties and not the plaintiff or where the information required to plead particularity is peculiarly within the Defendant's knowledge. (See Dominicus Americana Bohio v. Gulf & Western Industries, Inc., 473 F. Supp. 480 (E.D. N.Y.1979); Merrit v. Libby, McNiell & Libby, 510 F.Supp. 366 (E.D. N.Y. 1981); Allegaert v. Perot, 78 FRD 427 (E.D.N.Y. 1978); Somerville v. Major Exploration, Inc., 576 F.Supp. 902 (E.D.N.Y. 1983)).

2. The particularity requirement is relaxed where the issues involve numerous transactions occurring over a long period of time. (See Elster v. Alexander, 75 F.R.D. 458 (D.Ga. 1977); Haystrom v. Brentman, 572 F.Supp. 692, motion denied, 580 F.Supp. 773 (N.D. Ill. 1983)).

3. In Gibbons v. Udoras na Gaeltachta, 549 F.Supp. 1094 (E.D.N.Y. 1982) the Court held that Rule 9(b) is not a vehicle by which potentially meritorious claims are to be driven out of court because the plaintiff failed to allege facts that he could obtain only through discovery.

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b. What is the Disclosure Statement?

Before or simultaneously with the filing of the complaint, the whistleblower must file a disclosure statement furnishing substantially all material evidence and information that the Plaintiff possesses on the United States Government. See 31 U.S.C. Section 3730 (b)(2). The reason for requiring this disclosure, which is comparable to the disclosure required under FRCP Rule 26(a), is so that the United States Attorney can in the first instance decide whether or not to intervene in the action, and secondly to determine whether or not the plaintiff qui tam is the original source of information under the FCA.

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c. Filing the Suit.

A unique facet of qui tam litigation is that the complaint is filed under seal. The purpose of the seal is to give the United States of America time to evaluate the case and see if it want to intervene and/or prosecute the action. The complaint must remain under seal for at least 60 days and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information. (See 31 U.S.C. Section 3730(b)(3)).

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d. U. S. Gov't May Move for Extensions of Time.

The United States Government may move for extension of time during which the complaint remains under seal, for good cause shown. See 31 U.S.C. Section 3730 (b)(3). The defendant is not required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Rules of Civil Procedure. (See 31 U.S.C. Section 3730 (b)(3).)

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e. Consequences of a Decision by the United States of America to Intervene.

The FCA contains a number of provisions governing the role of and imposing responsibilities on the plaintiff qui tam in the event that the United States of America decides to intervene in the action.

31 U.S.C. Section 3730(c)(1), provides as follows:

If the Government proceeds with the action, it shall have the primary responsibility of prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).

31 U.S.C. Section 3730(c)(2), provides as follows:

(A) The Government may dismiss the action not withstanding the objection of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

(B) The Government may settle the action with the Defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good cause, such hearing may be held in camera.

(C) Upon a showing by the Government that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, such as-

(i) limiting the number of witnesses the person may call;

(ii) limiting the length of the testimony;

(iii) Limiting the person's cross-examination of witnesses;

or

(iv) otherwise limiting the participation of the person in the litigation.

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f. Consequences of United States decision not to intervene in the action.

The plaintiff qui tam has the right to conduct the litigation. (See 31 U.S.C. Section 3730(c)(3)). However, if the Government requests it shall be served with copies of all the pleadings filed in the action and shall be supplied with copies of all deposition transcripts, at the Government's expense. When a person proceeds with an action, the court, without limiting the status and rights of a person initiating the action, may nevertheless permit the Government to intervene at a later date upon a showing of good cause. (Id.)

Note that there is authority for the proposition that if the United States chooses not to intervene, it may nonetheless provide assistance to the defendant in the defense of the case. In United States ex rel. Department of Defense v. CACI Intern. Inc., 953 F. Supp. 74 (S.D.N.Y. 1995), the Department of the Defense generally assisted its contractor and submitted amicus curiae briefs on their behalf. The Plaintiff qui tam sought an injunction against the United States Government to prevent it from communicating with the Defendant (or filing amicus briefs on its behalf). The plaintiff claimed that as a qui tam relator it had replaced the government's counsel and that the plaintiff qui tam was now acting as the government's attorney. Plaintiff thus claimed that communication between the United States and the defendant should be prohibited according to the rules of ethical conduct. The Court rejected the argument as follows:

While the qui tam relator is empowered as a private prosecutor, it is not empowered to replace the government. United States ex rel. Kreindler & Kreindler v. [United Technologies Corp.] 985 F.2d 1148, 1153 (2d Cir.), cert. denied, 508 U.S. 973, 113 S.Ct. 2962, 125 L.Ed 2d 663 (1993)("the FCA qui tam provisions do not usurp the executive branch's litigation function because the statute gives the executive branch substantial control over the litigation."); United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 760 (9th Cir. 1993), cert denied, 510 U.S. 1140 (1994)("the fact that relators sue in the name of the United States does not mean that they wield government powers...The fact that relators sue in the name of the government is significant only with respect to their standing to sue...")...

953 F.Supp. at 77.

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g. U. S. Government's Attempts to Intervene At Time of Settlement, Judgment or Post-Judgment.

1. 31 U.S.C. 3730 (c)(3), provides that when a person (plaintiff "qui tam") proceeds with the action, the court may permit the government to intervene at a later date upon a showing of "good cause."

2. Good cause encompasses inadequate representation.

The United States may move to intervene post-settlement and even post-judgment in the event the United States shows inadequate representation by the qui tam plaintiff. . (See U.S. ex rel. McGough v. Covington Technologies, 967 F.2d 1391 (9th Cir. 1992).) The Court reasoned that the FCA specifically provides that the United States must consent to any dismissal. (See 31 U.S.C.  3730(b)(1) ("the action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting"). The Ninth Circuit noted that the Defendants had failed to show prejudice because there was no danger that settlement would "seriously disrupt a delicate or complex settlement." (Id. at 1395). The court applied the standard for intervention as a matter of right under F.R.C.P. Rule 24(a)(2), which includes requirements of: (a) timeliness; (b) the intervenor must have an interest in the property or in the transaction and (c) the intervenor must show that its interest may be impaired or impeded if intervention is not granted.

The court went on to conclude that intervention would be allowed in this case where the plaintiff qui tam had chosen to voluntarily dismiss a Defendant with prejudice:

[T]he government does not need to stand idly by while the qui tam Plaintiffs voluntarily dismiss a Defendant. ...It is one thing for the government to rely on the quality of the qui tam's representation in pursuing a case to judgment. It is quite another to hold the government bound by a deal made by the qui tam plaintiffs without the government's knowledge or consent to voluntarily dismiss its claims, with prejudice against one of the defendants. When this recurs, it cannot be said that the qui tam plaintiffs representation of the government's interest was adequate.

967 F.2d at 1395-96.

3. "Good Cause" requirement is designed to protect the interests of the relator. It may also require a showing of "new evidence" not previously known to the government. (See U.S. ex rel. Stone v. Rockwell Intern. Corp., 950 F.Supp. 1046 (D. Colo. 1996), aff'd 124 F.3d 1194 (10th Cir. 1997).) In U.S. ex rel. Stone, supra, the District Court emphasized that the plaintiff qui tam did not object to intervention and that the United States Government had shown that the Department of Justice Civil Division was not privy to evidence that had been developed during the on-going criminal investigation which had resulted in a plea agreement in the companion criminal case.

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h. Settlement and Consent to Dismiss.

a. Various courts have held that the United States Government does not have an absolute right to block a settlement except during the initial 60 day period after the United States receives the complaint and the material evidence and information. Thus is United States ex rel. Killingsworth v. Northrop Corporation, 25 F.3d 715 (9th Cir. 1994), the Ninth Circuit reasoned as follows:

According to the Senate Report, the new provision permitting intervention after the sixty day examination period was added to expand the "limited opportunity for Government involvement" and provide the government the option of intervening in "situations where new and significant evidence is found" after the government initially declines to intervene. S. Rep. No. 345, 99th Cong., 2d Sess. 26-27 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5291-92. We conclude that Congress's intent to place full responsibility for False Claims Act litigation on private parties, absent early intervention for good cause, is fundamentally inconsistent with the asserted "absolute" right of the government to block a settlement and force a private party to continue litigation.

...

The language in the statute requiring both the government and the court to consent to a dismissal came from the initial qui tam statute of 1863. The format and intent of the amended statute, however, do not preserve the government's absolute right to bar a dismissal without intervention except during the first sixty days plus any extension granted after the private person has filed a qui tam complaint. Section 3730(b) must be read as a whole. The private person bringing the action must provide full information to the government while the complaint is held in camera under seal for at least sixty days. During this time period, the government may elect to intervene and proceed with the action. Section 3730(b)(2). The government for good cause may seek an extension of the sixty day period while the action remains sealed. Section 3730(b)(3). Finally, before the end of the sixty day period or any extensions, the government shall either proceed with the action or notify the court that it declines to take over the action Section 3730(b)(4). In the latter case the private person bringing the action shall have the right to conduct the action. Section 3730(c)(3).

Thus the consent provision contained in Section 3730(b)(1) applies only during the initial sixty day (or extended) period. Of course, if the government for good cause exercises its right to intervene at a later date, see Section 3730(c)(2)(D)(3), its ability to control the litigation arises from its posture as an intervenor...

25 F.3d at 722.

See also, United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Providen Life and Accident Insurance Company, 811 F.Supp. 346 (E.D. Tenn. 1992)(holding that the consent to dismiss language contained in 31 U.S.C. Section 3730(b)(1), must be read in context of the statute as a whole and when so read, is intended to ensure that legitimate claims brought by a qui tam plaintiff are not dismissed before the United States has been notified of the claims and has had an opportunity to decide whether the Untied States should take over the conduct of the action. However, once the Untied States declines to intervene, the qui tam plaintiff has the right to conduct the action and dismiss or settle the case without the consent of the Attorney General. The decision by the Attorney General not to intervening and conduct the lawsuit is tantamount to consent by the Attorney General to have the action dismissed). (See also, Minotti v. Lensink, 895 F.2d 100, 104 (2d Cir. 1990); United States ex rel. Laughlin v. Eicher, 56 F. Supp. 972, 973 (D.D.C. 1994).)

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i. Statute of Limitations.

31 U.S.C. 3731, provides that a civil action under section 3730 may not be brought more than six years after the date on which a violation of 3729 is committed, or more than three years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States changed with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

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