Qui Tam Lawsuits Under the Federal False Claims Act – An Overview

by Sabarish Neelakanta

The qui tam provisions of the federal False Claims Act (FCA)1 exist to encourage whistleblowers who are aware of fraud against the government to bring such information forward. See 31 U.S.C. §§ 3729-3733. Private contractors guilty of defrauding the federal government are liable for a civil penalty of $5,500 to $11,000 per claim, plus three times the government’s damages. Id. at § 3729(b).

A civil suit filed by an individual on behalf of the government is known as a qui tam action, and the person bringing the action is referred to as a “relator.” The relator may be awarded 15-30% of the proceeds of any recovery or settlement, plus expenses and reasonable attorneys’ fees and costs. Id. at § 3730(d)(1)-(2). Recoveries in FCA cases often result in millions of dollars in settlements or damage awards, providing a significant incentive for individuals with inside knowledge of fraudulent conduct to report such activity.

Within the criminal justice context, qui tam lawsuits can be used to expose mistreatment and fraud at privately- or publicly-operated correctional facilities. Prisons are required to provide adequate food, medical care (including mental health and dental care) and sanitation, among other things. To the extent that private contractors fail to adhere to these requirements, such as billing federal agencies for services not provided, they may be violating contractual obligations or engaging in fraud against the U.S. government, thereby subjecting them to an FCA suit.

This article is intended to provide readers with a general overview of the qui tam provisions of the FCA and similar statutes in individual states, as well as the procedural requirements for and statutory bars to filing a qui tam action.

What is the False Claims Act?

The FCA, in pertinent part, makes it illegal for any person to: “1) knowingly present, or cause to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; 2) knowingly make, use, or cause to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; 3) conspire to defraud the Government by getting a false or fraudulent claim paid or approved by the Government; ... or 7) knowingly make, use, or cause to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” Id. at § 3729(a)(1)(3).

In sum, the FCA imposes liability on any person who submits a claim2 to the federal government that he or she knows (or should know) is false or fraudulent. State false claims acts prohibit the same type of conduct with respect to claims filed with state agencies.3

How do you file a False Claims Act suit?

Unlike a civil rights case or other civil suits, a qui tam relator may not pursue a case pro se; because the relator is representing the government, he or she is required to have counsel. There are also special filing requirements when initiating a qui tam lawsuit under the FCA. First, the complaint must be filed with the court under seal and must not be served on the defendant. Rather, the complaint and a written statement of all material evidence substantiating the claim have to be submitted to the U.S. Attorney General (for the federal FCA) or state Attorney General (for state FCA claims). Id. at § 3730(b)(2). The case will remain under seal for 60 days in order for the government to determine whether it will intervene; the complaint cannot be served until the government decides if it will intervene and the court orders service. Id.

After the 60-day period expires, the government can: 1) request more time to investigate the claim; 2) intervene and prosecute the claim; 3) allow the relator to prosecute the claim; 4) move to dismiss the suit; or 5) try to settle the suit. See Id. at § 3730(b)(3); § 3730(b)(4)(A)(B); and § 3730(c)(2)(A)(B).

Even if the government does not intervene while the case is under seal, it may do so later upon a showing of good cause, after which it will be responsible for prosecuting the case. Id. at § 3730(c)(1). The government can also settle the case over the objection of the relator so long as there is a hearing to allow the relator to express any concerns and the court finds the settlement is fair. Id. § 3730(c)(2)(B). The relator is entitled to 15-30% of the amount recovered if the government intervenes, and 25-30% if the relator prosecutes the claim without government intervention. Id. at § 3730(d)(1). Lastly, the FCA includes its own statute of limitations – six years for claims brought by private qui tam relators, and for actions brought by the government, three years from when the violation was or should have been discovered, but in no event more than ten years. Id. at § 3731(b).

What bars are there to filing a qui tam action?

There are several circumstances under which a qui tam action can be statutorily barred. For example: 1) The relator was convicted of criminal conduct arising from his or her role in the FCA violation. Id. at § 3730(d)(3); 2) Another qui tam action concerning the same conduct already has been filed. Id. at § 3730(b)(5); 3) The government is already a party to a civil suit or administrative civil money penalty proceeding concerning the same conduct. Id. at § 3730(e)(3); and 4) The qui tam action is based upon information that has been disclosed to the public through any of several means, including criminal, civil or administrative hearings in which the government is a party, or government hearings, audits, reports or investigations, or through the news media – unless the relator was the original source of the information. Id. at § 3730(e)(4)(A). An original source is a relator who has “inside” information or personal knowledge of fraud against the government.

There are few reported cases involving qui tam actions within the prison context. In one 1999 ruling by the D.C. Circuit Court of Appeals, a prisoner brought a False Claims Act suit against Federal Prison Industries (FPI, also known as UNICOR), claiming that FPI “had falsely certified that the communication cables and weapons parts that it produced for the Department of Defense had been adequately tested and met the requisite quality standards.” The appellate court held FPI was entitled to sovereign immunity because it is a wholly-owned government corporation – not a private entity – and had not waived its immunity. See: Galvan v. Federal Prison Indus., 199 F.3d 461 (D.C. Cir. 1999).

Sab Neelakanta is a staff attorney for the Human Rights Defense Center (HRDC), the parent organization of Prison Legal News. HRDC is interested in representing relators who have direct knowledge and evidence of fraud involving the federal government.

Endnotes

1 Several laws, both state and federal, provide private causes of action, or legal protection and remedies for whistleblowers. This article focuses solely on the qui tam provisions of the federal False Claims Act.

2   “[A] claim includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” 31 U.S.C. § 3729(c).

3   The following states have their own false claims acts which parallel the federal FCA: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Washington and Wisconsin – plus the District of Columbia.

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