Integrity is doing the right thing, even when no one is watching[1]
Attorneys are increasingly availing themselves of the Federal False Claims Act (“Act”) as a powerful resource to prosecute allegations of fraud, particularly in the healthcare field. The number of filings of these cases increased substantially over the last decade, and the statute continues to serve as a critical enforcement mechanism for both relators and government prosecutors. This article provides a general overview of the Act for those representing the whistleblowers as well as those representing defendants.
Historical Background
Congress passed the Act in 1863 at the height of the Civil War in an attempt to address the rampant fraud in the procurement of supplies and materiel for the Union. President Lincoln signed the legislation into law on March 2, 1863, and the statute soon became known as the “Lincoln Law.”
The Act was amended in 1943 during the World War II, once again in response to profiteers selling inferior products to the United States Military. Those amendments proved less effective, resulting in few cases being filed in the years that followed
In 1986, at the height of the Defense Department build-up during the Reagan Administration (remember $500 hammers?), Congress again amended the Act to further combat procurement fraud and encourage the filing of cases. Many contend that these amendments made the statute an effective tool to remedy fraud perpetrated on the United States.
More recently, the Patient Protection and Affordable Care Act (“ACA” or “Obama Care”) included further amendments to the Act clarifying ambiguities that had emerged through inconsistent court rulings and broadening the scope of liability in several key ways Congress also enacted certain financial incentives for states to pass False Claims Act legislation. Those states with a statute may share in recoveries made in their enforcement. Today, thirty-two states (including New Jersey) and the District of Columbia now have False Claims Acts.
Overview of the Act
In its simplest terms, an individual or entity may violate the Act if they present, or cause to be presented, a false claim for payment – or if they made a false statement or record to get a claim paid – to the United States Government with knowledge of the falsity. “Knowledge” can be actual knowledge or deliberate ignorance or reckless disregard of the truth or falsity of the information. This standard is meant to encourage – and not discourage – the filing of claims.
The statute contains a qui tam[2] provision allowing an individual citizen or entity, referred to as a “relator,” to sue on behalf of the Government. If successful, they receive a percentage of the recovery. The relator may also assert personal employment claims for wrongful termination under Section H of the Act. The Government does not participate in or share in the recovery for employment claims.
Relators must voluntarily disclose their belief that a violation of the Act occurred. They must also list the evidence supporting those claims prior to filing a complaint – a “disclosure statement.” Providing documentation to the Government in response to a subpoena may impact whether disclosure was done “voluntarily.”
After disclosure, cases are filed in court under seal. The Government has sixty days to investigate a case and decide whether to intervene. In reality, intervention decisions can often take years and seals are routinely extended for months. Certain courts, however, are becoming less inclined to grant extensions without some explanation by the Government as to need.
The Public Disclosure Bar and the Original Source Exception
The Act bars courts from reviewing qui tam cases when allegations contained in the complaint are based on publicly disclosed information – the “public disclosure bar.” The public disclosure bar is jurisdictional and prevents a relator from pursuing a claim. A practitioner must review this issue very closely.
There is, however, an “original source exception.” A relator is not barred from pursuing a matter under the Act, if the relator was an original source of the publicly disclosed information. Notably, a relator does not need to be an “insider” to satisfy this requirement.
Thus, a court must determine if the allegations underlying a case have been publicly disclosed. If they have been, the court must then determine if the relator is an original source of the information supporting the allegations. A determination must be reviewed in the context of rejecting suits which the government can pursue itself, while promoting those which the government cannot.
The First-to-File Doctrine
After a relator files a suit, no person other than the Government can file a related action based on the same facts underlying the relator’s action. This doctrine is known as the “first-to-file bar.” Quite simply, only the relator who first files an action may proceed. Those filing afterwards cannot. Again, the reasoning is to limit filing multiple suits for the same conduct.
This may arise in many ways. For instance, does the first-to-file bar preclude the filing of a later complaint when an earlier complaint is rendered jurisdictionally defective because the relator was not an original source of the publicly disclosed information? Depending on the jurisdiction, it may and a practitioner must be aware of these potential pitfalls.
Some courts, however, recognize that if public disclosure is an issue, the first-to-file bar prohibits only those complaints filed after a complaint that fulfills the jurisdictional requirements. The originally filed complaint does not exist for purposes of the first-to-file bar if the court lacks jurisdiction over the complaint. Thus, it is necessary to closely review the rule and relevant authority in the jurisdiction in which you practice.
Conclusion
Professionals across industries are becoming increasingly exposed to potential liability under the Act. As noted above, issues can surface in a variety of contexts, and navigating the Act requires a careful understanding of its procedural and substantive requirements. Practitioners must remain vigilant to effectively represent clients, whether advancing or defending FCA claims.. to effectively represent their clients.
[1] Attributed to many.
[2] Qui tam is an abbreviation of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur which translates into “he who brings a case on behalf of our lord the King, as well as for himself.”
