The False Claims Act is a first-in-time,
If more than one qui tam plaintiff files the same case, only the first to file survives. The False Claims Act bars any qui tam case that is based on the "facts underlying" a pre-existing action. The courts have interpreted this wording broadly, so that qui tam relators with knowledge of the same fraud essentially are in a "race to the courthouse", even if the person who is not first to file has more detailed knowledge of the fraud than the first-filed plaintiff and provides the government with more information and assistance.
Similarly, the False Claims Act provides that if a qui tam plaintiff files the same case as a pre-existing civil case filed by government, the qui tam action is barred.
This "first to file" rule is intended to encourage the prompt reporting of fraud.
The degree of risk arising from the rule varies according to the circumstances. If the alleged fraudulent practices are industry-wide, for example, there is a greater likelihood that another whistleblower may already have filed a broad case against all industry players. At the time of filing, it is impossible to know whether a similar case has already been filed, because qui tam cases are filed under seal. Only the government knows what cases have been filed, and the government decides when and in what circumstances to reveal the existence of "competing" qui tam plaintiffs to each other.
It should be noted that the first-to-file rule may not bar all second-in-time cases. Some jurisdictions have recently held that, in rare instances where the first-filed complaint is jurisdictionally defective or legally infirm under Rule 9(b), the second-in-time case will not be barred under the first-in-time provisions. The rationale of these holdings is that opportunistic plaintiffs should not be allowed to displace legitimate whistleblowers by filing overly broad or defective placeholder complaints.
Act qui tam cases cannot be based on publicly disclosed
The qui tam law is designed to encourage individuals with inside knowledge of fraud on the government to come forward and report it. Therefore, the FCA prohibits qui tam cases in which the plaintiff seeks to rely on information that is substantially the same as allegations in the public domain -- so-called "parasitic" claims -- unless the qui tam plaintiff is an "original source" of the information. An "original source" is defined as someone who has information that is independent of and adds materially to the publicly disclosed information.
Success is more likely when the government
joins the case.
Immediately after a qui tam complaint is filed in court, a copy of the complaint is delivered, together with a "disclosure statement" containing all facts material to the action, to the Department of Justice. The government then conducts an investigation, which may take several years. At the end of that period, the government decides whether to "intervene in," (or join) the case. If the government decides not to join, the qui tam plaintiff may pursue the action alone, or the plaintiff may dismiss the case with the government's consent. If the plaintiff elects to go forward, the government has the right to intervene at a later date upon a showing to the court of good cause.
The government's superior evidence-gathering powers, together with its prestige, its resources and its ability to impose sanctions such as excluding defendants from health care and other government-funded programs, mean that a successful result is more likely when the government actively adopts the case.
A professional and effective presentation of the case to the government at the outset -- both written and oral -- is crucial to persuading the government that the case should be at the top of their list of priorities. The complaint should be of the highest quality, the disclosure statement should be detailed, sophisticated and meticulously prepared, and the legal analysis should be thorough and incisive.
The skill and reputation of the attorneys who represent the plaintiff are important factors in the ultimate success of a qui tam case. Attorneys who are experienced, knowledgeable and successful in the qui tam practice area are more likely to be able to give a lucid and powerful oral and written presentation of the case to the government. Furthermore, their involvement in the case by itself will lend credibility at the outset.
You should seek an attorney with well-established credentials and success in the qui tam practice area, and ask about previous qui tam cases they have handled.
All of this is not to say that a case the government does not join should not be pursued. A declination by the government does not always amount to a vote of no-confidence on the merits. Sometimes the government declines because of resource constraints or other considerations wholly unrelated to the viability of the claims. When the government declines and the qui tam plaintiff pursues the case, the government may, and sometimes does, intervene at a later stage. The decision whether to go forward with a case or dismiss it when the government declines must always be made according to the individual circumstances.
False Claims Act qui tam cases typically
are under seal for many years.
Qui tam cases are filed in federal court under seal (i.e., in confidence) and are not initially served on the defendant. The purpose of filing the case in confidence is to give the government an opportunity to investigate the allegations without the defendant's knowledge. While the statutory period of time for the case to be under seal is 60 days, the government is allowed to ask the court to extend this period and almost always does so. Complex qui tam cases, particularly those involving investigation of criminal conduct in addition to the civil violations alleged in the case, frequently are under seal for several years.
Qui tam plaintiffs and their attorneys often work together with the government during the investigation reviewing documents, giving evidence and providing other support. Still, it can be a frustrating time awaiting the outcome of the government's investigation. The best advice one can give a qui tam plaintiff is this: "Don't expect immediate results and don't live your life around the case."
False Claims Act
cases cannot be brought against states but may be brought
against local governments and municipalities.
Prior to a Supreme Court ruling in 2000, the qui tam law had been used to sue state governments and agencies for fraud in federally-funded state administered programs. Since this ruling, states may no longer be sued by qui tam plaintiffs. However, as a result of another Supreme Court ruling in 2003, local governments and municipalities are not so exempt.
Factors governing the qui tam plaintiff's
The False Claims Act provides for a qui tam reward of 15-25% if the government intervenes in, or joins, the case, and 25-30% if the government declines to intervene and the plaintiff pursues the action alone. In special circumstances, lower percentages may apply.
The False Claims Act does not provide much guidance about what determines the size of the qui tam reward, stating only that it depends on the extent to which the qui tam plaintiff "substantially contributed" to the prosecution of the case. The average reward is around 16%, and usually is resolved by negotiation between the qui tam plaintiff's lawyers and the Department of Justice. If the DOJ and the plaintiff cannot agree, the plaintiff can apply to the court for a ruling. Typically, the DOJ seeks to preserve as much of the recovery for the government as possible, and so offers of percentages near the 25% maximum tend to be reserved for cases in which the plaintiff has provided extraordinary assistance.
The DOJ has developed a series of guidelines for government attorneys to follow when deciding what percentage to offer successful qui tam plaintiffs. These guidelines do not have binding authority in court, but they nonetheless provide an authoritative list of the factors that the government regards as relevant. Factors that will tend to increase relator share are the promptness with which the plaintiff reported the fraud, whether the plaintiff tried to stop it, the extent of the plaintiff's knowledge of the fraud and his/her assistance to the government. Decrease factors include the relator's involvement in the fraud, a substantial effort on the part of the government to develop the case, and delay in reporting the fraud.
Qui tam plaintiffs who were involved
in the fraud may have their reward substantially reduced
Under the False Claims Act, the court is authorized to reduce the reward of a qui tam plaintiff who "planned and initiated" the wrongdoing. If a qui tam plaintiff is criminally convicted for conduct arising from his or her role in the fraud alleged in the qui tam case, that person must be dismissed from the case and will not receive any share of the proceeds.
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