A Qui Tam Action Under the False Claims Act
| Publication year | 1993 |
| Pages | 229 |
| Citation | Vol. 22 No. 2 Pg. 229 |
1993, February, Pg. 229. A Qui Tam Action Under the False Claims Act
This article examines an action under the False Claims Act ("Act") by a private citizen against contractors who defraud the federal government.(fn1) The Act was amended in 1986 to encourage more private citizens who have knowledge of fraud by federal government contractors to step forward and prosecute it. The carrot is in the form of larger and more certain portions of the recovered proceeds provided to the successful plaintiff.(fn2) The 1986 amendments have had their desired effect: the first ten months of 1989 produced 100 qui tam actions compared to an average of six per year prior to the amendments. As private attorneys become more creative in delineating just what amounts to fraud against the government, the forecast is that such suits will continue to flourish.(fn3)
The term qui tam comes from the Latin phrase "qui tam pro domino rege quam pro se ipso in hac parte sequitur," which means "he who brings the action for the king as well as for himself." In effect, the Act "creates, by legislative fiat, a de facto assignment of a portion of the government's interest in the action."(fn4)
This article first discusses the background and basic requirements of the Act, the common types of claims for relief and what constitutes a "false claim" under the Act. The article then analyzes who are proper qui tam plaintiffs, constitutional challenges to the Act, pending legislation and the issue of statutory damages. Practitioners should become familiar with the Act since it is likely that more and more such actions will be brought against perpetrators of government fraud.
The Act was passed by Congress in 1863, at the request of President Abraham Lincoln, in response to public outrage over profiteering by Union Army suppliers during the Civil War. The purpose behind providing private persons, or "relators," with the right to bring suit as a private attorney general against such contractors was to root out fraud against the government.
The 1930s saw a dramatic increase in the number of qui tam suits, often by relators who contributed nothing to the exposure of the fraud involved. Indeed, many of these "parasitic suits" were the product of the relators merely plagiarizing federal indictments of government contractors as the substance of their complaints. This practice was eventually challenged in the U.S. Supreme Court, which held in United States ex rel. Marcus v. Hess(fn5) that nothing in the Act prevented such actions.
Congress reacted to Hess by amending the Act so as to preclude qui tam suits "whenever it shall be made to appear that such suit was based upon evidence or information in the possession of the United States, or any agency, officer or employee thereof, at the time such suit was brought."(fn6) Furthermore, the amendment had the effect of prohibiting government employees from bringing a qui tam suit under the Act. Post 1943-amendment judicial interpretations of other requirements of the Act so limited the pool of potential qui tam plaintiffs that the use of qui tam suits to fight fraud against the government dropped dramatically. However, amid public outcry over such things as $100 wrenches and $500 toilet seats charged to the government by defense contractors, the Act was amended in 1986 to encourage more private attorney general suits under the Act.
These comprehensive 1986 amendments did away with the 1943 "information already in the possession of the United States" exclusion and, as a result, the majority of post-amendment decisions have held, with narrow exceptions, that past or present government employees are not per se jurisdictionally barred from bringing qui tam actions.(fn7) Moreover, the 1986 amendments allow for a less exacting "preponderance of the evidence" burden of proof, a successful relator's entitlement to attorney fees and costs, a "knowing" scienter (that includes reckless disregard and deliberate ignorance of the truth) and an increase in potential recoveries.
Before the 1986 amendments, successful relators were entitled to up to 10 percent of an award or settlement, but the actual share was left to the discretion of the court, depending on its determination of the relator's role in bringing the fraud to light. Since 1986, the percentage of recovery has increased substantially, depending
The Act proscribes specific fraudulent schemes which have been used to cause the United States to suffer a financial loss. The schemes on which qui tam actions are most frequently based occur when any person: (1) knowingly presents to an officer or employee of the United States government a false or fraudulent claim for payment or approval; (2) knowingly makes a false record or statement to get a false or fraudulent claim paid or approved by the government; (3) knowingly makes a false record or statement to conceal or decrease an obligation to pay monies to the government; and (4) conspires to do any of the above. Such a person is liable to the government for a civil penalty of not less than $5,000 nor more than $10,000, plus three times the amount of damages which the government sustains because of the fraud.(fn10)
"Knowing" is defined as a person who, with respect to information, has actual knowledge of the information, acts in deliberate ignorance of the truth or falsity of the information or acts in reckless disregard of the truth or falsity of the information.(fn11)
The procedural requirements for a qui tam action are set forth in § 3730(b) and (c). Relators must bring the action in the name of the government. The complaint must be filed in camera and remain under seal for at least sixty days and cannot be served on the defendant until the court so orders.(fn12) The complaint, along with "written disclosure of substantially all material evidence and information the person possesses," must be served on the government, which has at least sixty days to decide whether or not to take over the action.(fn13) If the government chooses to proceed with the action, it has the primary responsibility for prosecuting the claim, although the qui tam plaintiff has the right to continue as a party.(fn14) The government may elect to settle with the defendant despite the objections of the qui tam plaintiff if the court determines that such settlement is fair and adequate. However, the relator can challenge such settlement in a hearing before the court.(fn15)
The government may restrict the plaintiff's participation in the litigation by demonstrating that the relator would cause undo delay, interference, repetition or harassment. In such a case, the court may restrict the plaintiff by (1) limiting the number of witnesses the plaintiff may call, (2) limiting the length of testimony of such witnesses, (3) limiting the plaintiff's cross-examination of the witnesses or (4) otherwise limiting the plaintiff's participation.(fn16) Furthermore, the defendant can limit the plaintiff's participation in the litigation if it can show the court that it would suffer undo burden or unnecessary expense if not so ordered.(fn17)
If the government declines to take over the action, "the person bringing the action shall have the right to conduct the action," and no person other than the government may intervene or bring a related action based on the same underlying facts.(fn18) However, in accordance with the Act and at the government's filed request, the qui tam plaintiff must continue to serve on the government copies of all pleadings and deposition transcripts filed in the action.(fn19)
The complaint must plead with particularity the alleged fraud in accordance with Rule 9(b) of the Federal Rules of Civil Procedure. As a rule, the complaint must set forth, at a minimum, the time, place and specific content of each act of fraud, as well as the identity of the party making the misrepresentation, and what was given up or obtained as a result.(fn20) However, a qui tam complaint meets the specificity requirement if it identifies fraudulent documents submitted to the government, as well as the dates of submission, and describes each defendant's part in the fraud.
Section 3731(b) of the Act states that a civil action under § 3730 may not be brought more than six years after the date on which the violation of § 3729 is committed, or more than three years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the...
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