If you have asked these questions, the Eleventh Circuit in U.S. ex rel Hunt v. Cochise Consultancy, Inc., 2018 WL 1736788, *3-5 (11th Cir. 2018) (internal quotations and citations omitted) did such a wonderful job summarizing the high points of the False Claims Act, particularly a qui tam action, that it is worth repeating. I just added the headings for purposes of convenience.
History Behind False Claims Act (FCA)
The FCA [False Claims Act] was enacted in 1863 to stop the massive frauds perpetrated by large contractors during the Civil War. These contractors billed the United States for nonexistent or worthless goods, charges exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war.
Enforcement Mechanisms of the False Claims Act
Section 3730 [31 USC s. 3730] of the FCA sets forth three different enforcement mechanisms for a violation of the Act. Section 3730(a) provides that the Attorney General may sue a violator in a civil lawsuit. Section 3730(b) allows a private plaintiff, known as a relator, to bring a qui tam action in the name of the United States against a violator. Section 3730(h) creates a private right of action for an individual whose employer retaliated against him for assisting an FCA investigation or proceeding.
Qui Tam Action – Section 3730(b)
In qui tam action, the relator pursues the government’s claim against the defendant, and asserts the injury in fact suffered by the government. In bringing a qui tam action, the relator in effect, sue[es] as a partial assignee of the United States.
Special procedures apply when a relator brings an FCA action; these procedures afford the government the opportunity to intervene and assume primary control over the litigation. A relator who initiates an FCA action must file her complaint under seal and serve it only on the Unites States. While the lawsuit remains under seal, the United States has the opportunity to investigate and decide whether to intervene as a party. During this period, the United States may serve a civil investigative demand upon any person believed to be in possession of documents or information relevant to an investigation of false claims, requiring that person to produce documents, answer interrogatories, or give oral testimony. In addition, the United States may meet with the relator and her attorney, giving the government an opportunity to ask questions to assess the strengths and weaknesses of the case and the relator a chance to assist the government’s investigation.
If the United States decides to intervene, the government acquires primary responsibility for prosecuting the action, although the relator remains a party. In contrast, if the United States declines to intervene, the relator may proceed with the action alone on behalf of the government, but the United States is not a party to the action.
Although the United States is not a party to the non-intervened case, it nevertheless retains a significant role in the litigation. The government may request to be served with copies of all pleadings and deposition transcripts, seek to stay discovery if it would interfere with the Government’s investigation or prosecution of a criminal or civil matter arising out of the same facts, and veto a relator’s decision to voluntarily dismiss the action. Additionally, the court may permit the government to intervene later upon a showing of good cause.
Recovery in a Qui Tam Action
Any recovery obtained from a defendant in an FCA qui tam action belongs to the United States, regardless of whether the government has intervened. The relator is entitled to a portion of the recovery, however. Because the relator receives a shares of the government’s proceeds, he is essentially a self-appointed private attorney general, and his recovery is analogous to a lawyer’s contingent fee. By allowing a relator to bring a qui tam action and share in the government’s recovery, the FCA creates an economic incentive to encourage citizens to come forward with knowledge of frauds against the government.
The size of the relator’s share depends upon whether the United States intervenes. In an intervened case, the relator is usually entitled to between 15 and 25 percent of the proceeds, as well as reasonable expenses, attorney’s fees, and costs. In an non-intervened case, the relator’s share is usually greater: between 25 and 30 percent of the proceeds, as well as reasonable expenses, attorney’s fees, and costs.
Even though the relator receives a smaller share in an intervened case, relators generally try to persuade the United States to intervene because the government’s intervention makes it far more likely that there will be a recovery. When the United States elects to intervene, about 90 percent of the time the case generates a recovery, either through settlement or a final judgment. But only about 10 percent of non-intervened cases results in recovery. Indeed, when the government declines to intervene, more than 50 percent of the time the relator decides not to proceed and voluntarily dismisses the action.
If you have questions regarding a False Claims Act / qui tam action, make sure to consult counsel that understands the nuances of such actions including any legal hurdles and challenges. The False Claims Act is contained in 31 USC s. 3729 – s. 3733 and there is a plethora of law setting forth a relator’s requirements. This discussion provides merely a high level summary of a complex legal scheme.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.