The Federal False Claims Act

The False Claims Act and the Plaintiff Qui Tam

Procedural Aspects of the False Claims Act

THE FALSE CLAIMS ACT AND THE PLAINTIFF QUI TAM

1. THE QUI TAM PROVISIONS OF THE FCA

a. Who May Be a Plaintiff Qui Tam.

b. Who May Be a Defendant.

c. What Damages Are Available?

2. THE ANTI-RETALIATION PROVISIONS OF THE FALSE CLAIMS ACT

a. What is Protected Whistleblower Activity?

b. What Damages Are Recoverable?

c. Who may be a Defendant?

d. Statute of Limitations.

THE FALSE CLAIMS ACT AND THE PLAINTIFF QUI TAM

The False Claims Act [hereinafter the FCA] was passed in 1863 to help stop widespread procurement fraud against the Union Army. Because President Lincoln had not been able to limit procurement fraud by well-connected Army contractors, he included qui tam provisions in the original FCA. According to one contractor, one of Lincoln's purposes was to get after contractors who were selling sawdust as gunpowder. See Fred Strasser, When the Big Whistle Blows, Nat'l Law Journal, 5/8/89 at 1, 43 (discussing the history of the False Claims Act).

The term "qui tam" is derived from the phrase, "qui tam pro domino rege quan pro se ipsco in hac parte sequitur" or he "who brings the action for the king as well as for himself." The term "relator" is a term that has been used interchangeably with the term plaintiff qui tam under the FCA. See eg., Callahan & Dworkin, Do Good and Get Rich: Financial Incentives for Whistleblowing and the False Claims Act, 37 Villanova L.Rev. 273 (1992).

Following congressional investigations into defense-contracting procurement scandals and abuses in the 1980's, the United States Senate passed the 1986 amendments to the FCA. The 99th Congress passed the 1986 amendments to strengthen the qui tam provisions to make them "a more effective vehicle for private individuals to disclose fraud" which was thought to be necessary "both for meaningful fraud deterrence and for breaking the "current conspiracy of silence among government contract employees". S. Ref. No. 99-345. The amendments increased the amount that was recoverable by the plaintiff qui tam under the act, imposed a guaranteed minimum recovery and imposed civil penalties and fines. The amendments also cleared up a previous ambiguity in the FCA and eased the plaintiff qui tam's burden by requiring that the plaintiff qui tam prove only that the Defendant "knowingly" submitted a false claim for payment. (See 31 U.S.C. Section 3729(a)(1988)). The amendments specifically provided that the relator prove his or her case by only a preponderance of the evidence rather than by the clear and convincing standards that some courts had previously required. The amendments also added a specific anti-retaliation provision. (See 31 U.S.C. Section 3730(h)(1988).)

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1. THE QUI TAM PROVISIONS OF THE FCA

a. Who May Be a Plaintiff Qui Tam.

The FCA provides as follows:

A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

31 U.S.C. Section 3730(b).

1. Plaintiff Must Be the Original Source.

The 1986 Amendments to the FCA prohibit recovery by a relator for information that was already in the hands of the government or revealed in some public way before the claim was filed unless the claimant was the original source of the information.

Thus, 31 U.S.C. Section 3730(e)(4)(B), provides as follows:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

31 U.S.C. Section 3730 (e)(4)(B), provides as follows:

For purposes of this paragraph, original source means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.

The United States Government has successfully challenged a number of cases on the ground that the relator was not the original source. (See eg., United States ex rel. LeBlanc v. Raytheon Co., 913 F.2d 17, 20 (1st Cir. 1990); United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 123, 16-18 (2d Cir. 1990) (barring suit under FCA where plaintiff was not "original source" of publicly disclosed information); United States ex rel. Stinson, Lyons, Gerlin & Bustamante v. Prudential Ins. Co. of America, 736 F. Supp. 614, 622-623 (D.N.J. 1990)(holding information obtained by a law firm during discovery during suit alleging Medicare fraud did not qualify as an "original source" under the FCA).

2. Plaintiff May Be a Governmental Employee

The original FCA did not allow actions to be brought by governmental employees. The 1986 FCA Amendments, on the other hand, permit any person to bring suit unless he or she is not the original source of the information or in the case of certain claims brought by members of the armed forces. (See 31 U.S.C. Section 3730(e)(2)(A).)

3. Plaintiff can not bring FCA case based upon an on-going civil or administrative proceeding in a different forum.

In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.

31 U.S.C. Section 3730(e)(3)

4. A Plaintiff cannot bring an action under the FCA based upon the public disclosure of allegations or transactions in a criminal case...unless the action is brought by the Attorney General or the person bringing the action is the original source of the information. See e.g. United States v. Rockwell, 124 F3d 1194 (10th Cir. 1997) (Government permitted to amend its answer and to intervene in plaintiff qui tam lawsuit based upon information revealed in an already pending civil action against Rockwell).)

31 U.S.C. Section 3730(e)(4)(A).

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b. Who May Be a Defendant.

1. Certain Governmental Employees May Not Be Defendants

31 U.S.C. Section 3730(e)(2)(B), provides that certain governmental employees may not be Defendants, as follows:

No Court shall have jurisdiction over an action brought under subsection (b) against a member of Congress, a member of the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government when the action was brought...

2. States and Political Subdivisions of States May be Defendants.

The Eleventh Amendment does not bar FCA suits by the federal government against a state in federal court. See U.S. ex rel. Long v. SCS Business and Technical Institute, et al., DC No. 92-2092 (3/26/98). U.S. ex rel. Berge v. Board of Trustees of the University of Alabama, 104 F.3d 1453 (1997).

3. Private Persons and Entities may be Defendants. See United States ex rel. Lamar v. Bruke, 894 F.Supp. 1345 (E.D. Mo. 1995). (individual supervisor/manager may be liable under the FCA qui tam provisions but not under the anti-retaliation provisions of the FCA).

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c. What Damages Are Available?

1. Where the U.S. Intervenes

If the United States Government intervenes in an action brought by a plaintiff qui tam, and the case is successfully litigated to conclusion, then the plaintiff qui tam shall receive 15% to 25% of the process of the action depending upon the extent to which the plaintiff qui tam substantially contributed to the prosecution of the action. (See 31 U.S.C. Section 3730(d)(1)). Where the action is one which the Court finds to be based primarily on disclosures of specific information relating to allegations or transactions in a criminal, civil, or administrative hearing, in a Congressional, administrative or Government Accounting Office report hearing, audit or investigation, or from the new media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation. The plaintiff qui tam shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorney fees and costs. All such expenses, fees and costs shall be awarded against the defendant.

2. If the Government Does Not Intervene.

If the Government does not proceed with an action under this section, the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall be not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of such proceeds. Such a person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred plus reasonable attorney fees and costs. (See 31 U.S.C. 3730(d)(2).)

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2. THE ANTI-RETALIATION PROVISIONS OF THE FALSE CLAIMS ACT

31 U.S.C. 3730(h), states as follows:

Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this Section, shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorney fees.

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a. What is Protected Whistleblower Activity?

In Neil v. Honeywell, 826 F.Supp. 266 (N.D. Ill. 1993), affirmed 33 F.3d 860 (7th Cir. 1994), the plaintiff, Ms. Neil, discovered that her employer was falsifying ballistics test data and was delivering defective ammo to the United States Army. When she reported this to her superiors she was cut-off from the investigation and she was subjected to threats by her company's management. After she was forced to quit her job, Ms. Neil brought suit under the False Claims Act for unlawful retaliation pursuant to 31. U.S.C. 3730(h). The court held that the False Claims Act anti-retaliation provision should be broadly construed to include internal or intra-corporate whistleblowing even where the conduct does fall within the literal terms of the statute. The Neil Court concluded that "public policy demands that internal whistleblowers like the plaintiff in the present case be protected from retaliation." The Court went on to observe:

The False Claims Act is intended to put an end to fraud against the government by encouraging those with knowledge of such fraud to come forward. In order to further that purpose, public policy demands that internal whistleblowers like the plaintiff in the present case be protected from retaliation.

It would make little sense to protect an anonymous qui tam plaintiff who filed an extensive and time consuming lawsuit while ignoring someone whose bold conduct lead to a quick, voluntary and efficient disclosure of the fraud and reparation to the government. Thus, we hold that the whistleblower protection provision of the False Claims Act forbids discrimination against an employee who has made an intercorporate about fraud against the government.

826 F.Supp. at 272-73. See also Mike's v. Strauss, Ambinder and Friedman, 889 F.Supp. 746 (S.D. N.Y. 1995).

But see Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948 (5th Cir. 1994), in which the Fifth Circuit held that the plaintiff did not have a viable claim pursuant to 31 U.S.C. 3730(h), because although he had complained internally to Bell officials, he had failed to use the terms "illegal", "unlawful", or "qui tam" to his employers when he protested their activities. The facts in Bell, supra, were that the plaintiff had complained to Bell officials and had complained to Bell's government contracts officer about a 1.6 million dollar request that Bell had submitted to the federal government because it had not been verified. The plaintiff was a contracts administrator whose duty it was to ensure compliance. Robertson had complained to Doe who was the in-house counsel and who had a duty to warn and educate senior managers about the problems. The defendants were able to argue that the internal complaint was in the ordinary course of business and that they did not know that the individual employees were investigating or pursuing cases. Thus, the defendants were able to argue that they were not motivated by knowledge of the internal complaint when they terminated the plaintiff.

The Tenth Circuit appears to follow the Fifth Circuit. In United States ex rel. Ramseyer v. Century Health Care Corporation, 90 F.3d 1514 (10th Cir. 1996), the Plaintiff alleged that it was her responsibility to monitor compliance with the applicable Medicaid required minimum program components. Plaintiff further alleged that during her employment she became aware of widespread noncompliance with minimum program components for day treatment services. Although the Plaintiff regularly communicated the instances of noncompliance to her superiors, the defendants continued to submit noncomplying claims to the government that were ultimately paid by Medicaid. Although the Tenth Circuit acknowledged that intracorporate complaints may fall within the protective scope of 31 U.S.C. Section 3730(h), the Court concluded that the Plaintiff had not pled facts which would put defendants on notice that she was taking action in furtherance of a FCA action:

The amended complaint alleges only that plaintiff advised her superiors that defendants were not complying with the minimum program requirements of Medicaid. Yet plaintiff never suggested to defendants that she intended to utilize such noncompliance to government officials...nor did she provide any indication that she was contemplating her own qui tam action. Rather the monitoring and reporting activities described in plaintiff's complaint were exactly those activities plaintiff was required to undertake in fulfillment of her job duties, and plaintiff took no steps to put defendants on notice that she was acting in furtherance of an FCA action--eg., that she was furthering or intending to further an FCA action rather than merely warning the defendants of the consequences of their own conduct....We therefore hold that plaintiff's amended complaint fails to state a claim for retaliatory discharge under 31 U.S.C. Section 3730(h)...

90 F.3d at 1523.

See also Casarez v. Pelco Systems, 8 BNA IER 618 (C.D. Calif. 1993)(holding that in order for the Plaintiff to be able to pursue a claim under the anti-retaliation provision of the FCA, an FCA suit must actually be filed).

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b. What Damages Are Recoverable?

Two times the amount of back pay, front pay or reinstatement, compensatory (including emotional distress damages), punitive damages, attorney fees and costs have been held to be recoverable under the anti-retaliation provisions of the FCA. (See Godwin v. Visiting Nurse Ass'n Home Health Services, 831 F.Supp. 449, aff'd 39 F.3d 1173 (1993)).

c. Who may be a Defendant?

A defendant is the "employer". Although the term "employer" is not defined in the FCA, at least one district court, following cases decided under Title VII of the Civil Rights Act, has held that there is no individual (i.e. supervisor/manager) liability under the anti-retaliation provision.

d. Statute of Limitations.

The six year statute of limitations contained in 31 U.S.C. Section 3731 applies to claims brought under the 31 U.S.C. Section 3730(h) anti-retaliation clause. See Neal v. Honeywell, supra.

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