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What are the Laws Related to False Claims/Qui Tam Cases?

California False Claims Act Lawyers Explain False Claims Law

What are the laws related to Qui Tam?

FALSE CLAIMS LAWS

  • I. The Federal False Claims Act (“FCA”) 31 U.S.C. § 3729, et seq.
    • A. In General
    • The Federal False Claims Act (“FCA”) provides for “civil penalties” against any person who:
    • (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
    • (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
    • (C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
    • (D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;
    • (E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
    • (F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or
    • (G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,
    • 31 U.S.C. § 3729(a)(1); see also Cook County v. United States ex rel. Chandler, 538 U.S. 119, 122 (U.S. 2003). A private person may sue under the FCA for a violation of its provisions on behalf of both “the person” and “the United States Government.” 31 U.S.C. § 3730(b)(1). However, “[t]he action shall be brought in the name of the Government.” Id.; see also United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 745- 746 (9th Cir. Wash. 1993). “An action under this provision is termed a “qui tam” suit, and the person who brings such an action is referred to as a “relator” or “informer.” Kelly, 9 F.3d at 746.
    • Although the “partial assignment” of the qui tam action allows the “relator” asserting the government’s injury to satisfy the requirements of Article III standing, it does not transform a qui tam action into the relator’s “own case” for purposes of 28 U.S.C § 1654 . Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116, 1126-1127 (9th Cir. Cal. 2007) (affirming plaintiff as a pro se relator could not bring a qui tam action on behalf of the government). The statutory language of the FCA makes clear that “notwithstanding the relator’s statutory right to the government’s share of the recovery, the underlying claim of fraud always belongs to the government.” Id. (citing 31 U.S.C. § 3730(c)(5), which provides that “[n]otwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty”); see also United States v. Schimmels, 127 F.3d 875, 882 (9th Cir. 1997)
    • Providing, “[i]n all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.” 28 U.S.C. § 1654.
    • (“[T]he United States is the real party in interest in any False Claims Act suit, even when it permits a qui tam relator to pursue the action on its behalf.”) (internal citations omitted).
    • B. Procedural Requirements and Damages under the FCA
    • A relator in a qui tam action brought must “inform the Department of Justice of her intentions and keep the pleadings under seal for 60 days while the Government decides whether to intervene and do its own litigating.” Cook County, 538 U.S. at 122 (citing 31 U.S.C §§ 3730(b)(2) and 3730(c)); see also United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1143 (9th Cir. Cal. 1998) (“To proceed with a qui tam action, the relator must serve a copy of the complaint on the government 60 days before it is served on the defendant; [d]uring the 60-day period, the government can investigate the complaint’s allegations and elect to intervene in the action, in which case the action is conducted by the government.”)
    • If the qui tam claim succeeds, the defendant is liable to the Government for (1) a civil penalty between $ 5,000 and $ 10,000 for each violation; (2) treble damages (reducible to double damages for cooperative defendants), and (3) costs of litigation. Cook County, 538 U.S. at 122 (citing 31 U.S.C. § 3729(a)). These figures are adjusted upward by the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub.L. 101-410, § 5, 104 Stat. 891, note following 28 U.S.C. § 2461). 31 U.S.C. § 3729(a); see also Cook County, 538 U.S. at 134, n.1. The relator’s share of the proceeds of the qui tam action or settlement “may be up to 30 percent, depending on whether the Government intervened and, if so, how much the relator contributed to the prosecution of the claim.” See Cook County, 538 U.S. at 123. In the event the Government does not intervene, the relator is “entitled to 25 to 30 percent of the proceeds.” Id. (citing 31 U.S.C. § 3730(d)(2)). If the Government chooses to intervene, the relator “shall … receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action.” Id. (citing § 3730(d)(1)). If, however, the court determines that the action was “based primarily on disclosures of specific information (other than information provided by the person bringing the action) 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 news media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds … .” Id. (citing 31 U.S.C. § 3730(d)(1)) (footnote omitted).
    • The relator may also obtain from the defendant “reasonable expenses, costs, and attorney’s fees.” Id. (citing § 3730(d)(1)). Section 3730(d)(2) explicitly severs “proceeds” of the qui tam action “from attorneys’ fees and costs by providing that a plaintiff ‘shall also receive an amount for reasonable expenses . . . plus reasonable attorneys’ fees and costs.” United States ex rel. Sharma v. University of So. California, 217 F.3d 1141, 1143 (9th Cir. Cal. 2000). As such, the FCA requires attorneys’ fees and costs to be “awarded against the defendant, rather than taken out of the proceeds” of the FCA recovery. Id. (citing Kelly, 9 F.3d at 747; see also 31 U.S.C. § 3730(f) (providing the government is not liable for a plaintiff’s expenses in bringing a qui tam action). Furthermore, “Ninth Circuit law makes it clear that, ‘in the qui tam arena, . . . attorneys’ fees must go to the attorneys rather than to the plaintiff.’” Id. “If the amount were paid to the plaintiff, it would constitute “a compensatory payment which really belongs to the United States subject to allocation of a portion to the plaintiff.” Id. (citing United States ex rel. Virani v. Jerry M. Lewis Truck Parts & Equip., Inc., 89 F.3d 574, 578 (9th Cir. 1996); United States ex rel. Gibeault v. Texas Instruments Corp., 104 F.3d 276, 277 (9th Cir. 1997)).
    • A. Subject Matter Jurisdiction
    • Section 3730(e) bars certain “civil actions for false claims.” The statute provides that the “court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-
    • (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
    • (ii) in a congressional, Government2 Accountability Office, or other Federal report, hearing, audit, or investigation; or
    • (iii) 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. § 3730(e)(4)(A).
    • A qui tam action is “based upon” a public disclosure if “the allegations or transactions of the complaint have been publicly disclosed and the qui tam action follows, even if the qui tam action allegations were not ‘derived from’ the public disclosure.” United States v. Johnson Controls, Inc., 457 F.3d 1009, 1017 (9th Cir. 2006) (citing U.S. ex rel. Biddle v. Bd. of Trustees of Leland Stanford, Jr. Univ., 161 F.3d 533, 540 (9th Cir. 1998)). Thus, an individual with information about fraud against the government will be barred from bringing a qui tam action if there has been a public disclosure of the allegations or transactions in her complaint, unless she is an “original source.” Id. The result is the same even if the individual “found out about the allegations in her complaint not from the public disclosure but from another source (such as an informant).” Id.
    • The statute defines “original source” as “an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.” 31 U.S.C. § 3730(e)(4)(B); see also United States v. Johnson Controls, Inc., 457 F.3d 1009, 1013 (9th Cir. 2006) (“To qualify as an original source, a relator must show that he or she has direct and independent knowledge of the information on which the allegations are based, voluntarily provided the information to the government before filing his or her qui tam action, and had a hand in the public disclosure of allegations that are a part of… [the] suit.”) (citing United States ex rel. Lujan v. Hughes Aircraft Co., 162 F.3d 1027, 1033 (9th Cir.1998)). The Ninth Circuit has held the FCA does not require that prospective relators provide relevant information to the government prior to the public disclosure at issue. United States v. Johnson Controls, Inc., 457 F.3d 1009, 1014 (9th Cir. 2006) (Cf. United States ex rel. McKenzie v. BellSouth Telecomms., Inc., 123 F.3d 935, 941-43 (6th Cir.1997); United States ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 690-91 (D.C.Cir.1997) (holding there is such a requirement).
    • D. Enforcing Pre-Filing Releases of FCA claims
    • Enforcing a pre-filing release on an FCA qui tam claim, entered into without the United States’ knowledge or consent, would impair a substantial public interest. United States v. Northrop Corp., 59 F.3d 953, 963 (9th Cir. 1995). Such enforcement would threaten to nullify the incentives Congress intended to create in amending the provisions of the False Claims Act in 1986. Id. It is “commonly recognized that the central purpose of the qui tam provisions of the FCA is to ‘set up incentives to supplement government enforcement’ of the Act” (Quinn, 14 F.3d at 649) by “encourag[ing] insiders privy to a fraud on the government to blow the whistle on the crime.” Northrop, 59 F.3d at 963 (citing Wang v. FMC Corp., 975 F.2d 1412, 1419 (9th Cir.1992). The preservation of the incentive effect in the pre-filing period is a public as opposed to a private interest, and qui tam actions exist to vindicate the public interest only, not the private interest. Id.
    • For a free and confidential consultation with experienced San Francisco false claims act lawyers about your possible case, please call 888-372-8381 or send an email under Contact Us.
  • II. The California False Claims Act (“CFCA”), CA Government Code 12650, et seq.
    • A. In General
    • An individual violates the California False Claims Act (“CFCA”) (Cal. Gov Code §§ 12650-12656) if he or she:
    • (1) Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval.
    • (2) Knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim.
    • (3) Conspires to commit a violation of this subdivision.
    • (4) Has possession, custody, or control of public property or money used or to be used by the state or by any political subdivision and knowingly delivers or causes to be delivered less than all of that property.
    • (5) Is authorized to make or deliver a document certifying receipt of property used or to be used by the state or by any political subdivision and knowingly makes or delivers a receipt that falsely represents the property used or to be used.
    • (6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property.
    • (7) Knowingly makes, uses, or causes to be made or used a false record or statement material to an obligation to pay or transmit money or property to the state or to any political subdivision, or knowingly conceals or knowingly and improperly avoids, or decreases an obligation to pay or transmit money or property to the state or to any political subdivision.
    • (8) Is a beneficiary of an inadvertent submission of a false claim, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery of the false claim.
  • Cal. Gov’t Code § 12651(a); see also State ex rel. Harris v. PricewaterhouseCoopers, LLP, 39 Cal. 4th 1220, 1223 (2006). Section 12651(a) is limited by Section 12651(b), which provides “the court may assess not less than two times and not more than three times the amount of damages which the state or the political subdivision sustains because of the act of the person described in that subdivision, and no civil penalty, if the court finds all of the following:
    • (1) The person committing the violation furnished officials of the state or of the political subdivision responsible for investigating false claims violations with all information known to that person about the violation within 30 days after the date on which the person first obtained the information.
    • (2) The person fully cooperated with any investigation by the state or a political subdivision of the violation.
    • (3) At the time the person furnished the state or the political subdivision with information about the violation, no criminal prosecution, civil action, or administrative action had commenced with respect to the violation, and the person did not have actual knowledge of the existence of an investigation into the violation.
  • Cal. Gov. Code § 12652 (b).
  • The California statute also includes a mechanism for filing a “qui tam” claim. Harris, 39 Cal. 4th at 1223. A qui tam claim may be brought under the California statute “in the name of a defrauded government entity, whether state or local, by a person with independent knowledge of the facts who files an action before anyone else eligible to sue has done so.” Id. (internal citations omitted). Section 12652(c)(1) more specifically provides that a “person may bring a civil action for a violation of this article for the person and either for the State of California in the name of the state, if any state funds are involved, or for a political subdivision in the name of the political subdivision, if political subdivision funds are exclusively involved.” Cal . Gov. Code § 12652(c)(1). The qui tam plaintiff may conduct the action in the name of the defrauded entity or entities if the latter decline to intervene; even if such intervention occurs, the qui tam plaintiff may remain a party, eligible to receive a portion of the proceeds recovered. Harris, 39 Cal. 4th at 1223 (citing Cal. Gov. Code subds. § 12652 (c)(4), (7)(B), (e)(1), (f)(1), (g)(2)-(6)). Further, once the action is filed, it may be “dismissed only with the written consent of the court and the Attorney General or prosecuting authority of a political subdivision, or both, as appropriate under the allegations of the civil action, taking into account the best interests of the parties involved and the public purposes behind this act.” Cal Gov. Code § 12652(c)(1).
  • Given the very close similarity of the California Federal Claims Act to the federal false claims scheme, it is appropriate to turn to federal cases for guidance in interpreting the act. 58 Cal. Jur. 3d State of Cal. § 119.
  • For a free and confidential consultation with one of our San Francisco false claims act lawyers about your possible case, please call 888-372-8381 or send an email under Contact Us.
    • B. Procedural Requirements and Damages under the CFCA
    • As noted in Wells, supra, 39 Cal.4th at 1188, a qui tam complaint under the CFCA must be filed under seal, and may remain sealed for up to 60 days, with extensions of time available upon timely application, while the Attorney General (in cases involving state funds) or the local “prosecuting authority” (in cases involving political subdivision funds) decides whether to intervene and assume control of the action. Harris, 39 Cal. 4th at 1239 (citing Cal. Gov. Code, § 12652 (c)(2), (4)-(8)). During this time, the complaint may not be served on the defendant. Id. (citing § 12652 (c)(2).)
    • Damages under the CFCA are similarly structured to damages under the FCA. Cal. Gov. Code § 12652(a). An individual who commits any of the acts enumerated in § 12652(a) “shall also be liable to the state or to the political subdivision for the costs of a civil action brought to recover any of those penalties or damages, and shall be liable to the state or political subdivision for a civil penalty of not less than five thousand dollars ($5,000) and not more than ten thousand dollars ($10,000) for each violation.” Id.
    • For a free and confidential consultation with a California lawyer about your possible case, please call 888-372-8381 or send in email under Contact Us.
  • III. The San Francisco False Claims Act
    • The San Francisco Municipal False Claims Act (“San Francisco Administrative Code §§ 6.80 et. seq.) was held unconstitutional by Judge Wilken, of the Northern District of California District Court, in City & County of San Francisco v. Tutor-Saliba Corp. No. C 02-5286 CW, 2005 WL 645389 (N.D. Cal. Mar. 17, 2005) (unpublished). Judge Wilken dismissed with prejudice Plaintiff’s San Francisco False Claims Act cause of action on the ground that it was “preempted by State law.” (May 4, 2004 Tutor-Saliba Order ). The San Francisco municipal False Claims Act, by duplicating the prohibitions contained in the California False Claims Act, caused an “impermissible conflict of jurisdiction” between the two statutes. (Tutor-Saliba Order at 47.)
    • For a free and confidential consultation with one of our San Francisco qui tam lawyers about your possible case, please call 888-372-8381 or send an email under Contact Us.
  • IV. Resources for Website Users
  • For further information on qui tam/false claims actions, please visit the following comprehensive and user-friendly websites:
    • Taxpayers Against Fraud Education Fund, The False Claims Act Legal Center (TAF).http://www.taf.org/
      • TAF is a nonprofit public interest organization dedicated to combating fraud against the Federal Government through the promotion and use of the federal False Claims Act and its qui tam provisions.
      • California False Claims Act: For TAF’s link to qui tam actions under the California False Claims Act, please visit: www.taf.org/statefca.htm
    • Health Administration Responsibility Project (HARP).http://harp.org
      • HARP is a resource for patients, doctors, and attorneys seeking to establish the liability of HMOs, Managed Health Care Organizations, and Nursing Facilities for the consequences of their decisions.
    • Whistleblower’s Guide to the False Claims Act. http://quitamguide.org/
  • For a discussion of more specific issues relating to qui tam actions under the Federal False Claims Act, please visit the following websites:

For a free and confidential consultation with a San Francisco, California lawyer about your possible false claims act case, please call 888-372-8381 or send an email under the Contact Us portion of this website.

Providing, “[i]n all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.” 28 U.S.C. § 1654.

 

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