Introducing the Kansas False Claims Act: a Primer
| Jurisdiction | Kansas,United States |
| Citation | Vol. 79 No. 9 Pg. 24 |
| Pages | 24 |
| Publication year | 2010 |
By Daniel E. Lawrence and Stephen E. Robison
Fraud upon the government has a long – if not venerable – history. An oft-quoted Senate investigatory committee convened in the wake of the Civil War famously observed:
Through haste, carelessness, or criminal collusion, the [Government] accepted almost every offer and paid almost any price ... regardless of character, quality, or quantity.... For sugar, it often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors ....[1]
The government is the quintessential deep pocket, one that many apparently feel ambivalent about dipping into. Perhaps it's because so many of us pay taxes – perhaps we feel as though we're only getting back some of what we gave. Perhaps it's because, when the government spends $900,000 to purchase a single patrol boat,[2] $92 billion annually on "corporate welfare",[3] and more than $2.5 million on charitable boondoggles such as teaching Chinese prostitutes to use alcohol responsibly,[4] it seems – perhaps justifiably – that there is cash to spare.
The law that has emerged in response to this impulse is, thankfully, more easily fathomed than fraudsters' varied justifications and rationales. For more than 130 years, the federal False Claims Act (FCA/Act) has been the chief weapon in the federal government's arsenal to combat contractor and vendor fraud.[5] The FCA is a dual deterrent and recovery tool. Under the Act, anyone who submits a "false claim" for payment or property to the United States is subject to civil penalties and multiplied actual damages. These remedies are typically brought to bear within the contractual relationship between the federal government and one of the many private contractors who provide it with goods and services. Since the passage of the 2005 Deficit Reduction Act (DRA),[6] a growing number of states have created analogous state-level legislation. Twenty-four have adopted their own versions of the FCA, and Kansas joined them in April 2009 with the Kansas False Claims Act (KFCA).[7]
Kansas legislators were initially attracted to the false claims act altar by the DRA's incentives.[8] But the DRA imposes relatively stringent, non-negotiable qualification requirements on the content of state false claims act legislation.[9] To qualify, state legislation must be "at least as effective in rewarding and facilitating qui tam actions for false and fraudulent claims" as the FCA.[10] Given the explicit reference to the FCA and a lack of other guidance clarifying what makes a state's act "at least as effective" as the FCA, many states opted to parrot the Act closely. Kansas is among them. This is fortunate for Kansas attorneys and courts, as it provides us with a ready-made and comprehensive body of authority to draw upon in construing the newly-minted KFCA.[11]
The KFCA is not, however, a carbon copy of the FCA. It differs in significant ways that bear comment and which this article will explore. Additionally, the KFCA provides the Kansas Attorney General's (AG) office with new powers, and many attorneys who might not otherwise suspect may find their clients within the reach of its provisions.
I. Construction of the Kansas False Claims Act
It seems appropriate to begin an examination of the KFCA with a note about how the Act should be construed. Courts construing the FCA have reached differing conclusions regarding the appropriate standard of construction, declining, in some instances, to apply a broad construction, but resisting, too, invitations to apply a strict construction across the board.[12] The KFCA demonstrates an awareness of this division and attempts to provide some guidance: The KFCA, it instructs, is to be "broadly construed to promote the public interest."[13]
Superficially, the KFCA's construction clause may seem rather platitudinal. Would Kansas courts tend to construe the KFCA against the public interest? But the KFCA attempts to at least address inevitable questions concerning construction, and this broad appeal to public policy opens the door for Kansas lawyers and judges to refer to the state's existing jurisprudence evaluating when the public interest is and is not served in other contexts.[14] To the extent any of it illuminates and identifies the "public interest," it is potential guidance and rhetorical fodder.
II. Qui Tam Relators and the Kansas False Claims Act
A significant difference between the KFCA and the FCA is in the area of qui tam.[15] While a private party, or "relator," may sue on behalf of the federal government under the FCA, and that Act encourages such suits by allowing relators to share in the recovery from any suit they initiate, only the AG can sue under the KFCA.[16]
Although it is often the substrate for meritorious suits,[17] qui tam litigation under the FCA may do more harm than good: relators' suits are often meritless and are always an expensive burden upon defendants.[18] It is thus unsurprising that Kansas opted not to copy the qui tam provisions of the FCA. Members of the Kansas Judicial Council's False Claims Act advisory committee were divided on this issue, with the AG's office favoring the inclusion of a qui tam provision.[19] Other members noted, however, that the majority of relators' suits under the FCA are rejected and only a small percentage actually recover anything, while the cost of defense to Kansas companies would be huge in any event.[20]
Ultimately, the KFCA was adopted without qui tam. It is therefore clear the KFCA does not comply with the DRA's requirement that it be "at least as effective as [the FCA] in rewarding and facilitating qui tam actions," and so Kansas will not receive the DRA's incentives. But the AG's office will still enjoy the power of a KFCA-based fraud deterrent and recovery strategy, and is relieved of the more demanding requirements (in terms of intent and burden of proof) of the criminal statutes that were previously its chief remedy.
III. Investigation, Prosecution, and Anti-Retaliation
There are no relators under the KFCA – the Act expressly provides that it does not give rise to a private cause of action.[21] Whistleblowers, consequently, do not share in any recovery under the KFCA, and the Act does not otherwise provide any reward to them. Only the AG's office can sue, and neither whistleblowers nor anyone else can do aught but report a violation of the KFCA and wait for the AG to investigate and prosecute.[22] This is perhaps the most significant difference between the KFCA and the FCA. The absence of qui tam removes the chief incentive for whistleblowing and places the onus of enforcement upon the state – an arrangement which, in light of Kansas' current budgetary problems, seems less than optimal.
Although the KFCA does not encourage whistle-blowers, it does endeavor to protect them from liability for coming forward, by providing a private cause of action for any employee who is retaliated against in any manner for actions that he or she, in good faith, undertakes to support an action under the KFCA.[23] The remedy for such a suit includes all relief required to make the employee whole,[24] which would presumably include attorney fees.
These anti-retaliation provisions were not included in the precursor to the enrolled KFCA, House Bill 2943, but were recommended by the Judicial Council Advisory Commit-tee.[25] Committee members were concerned that the KFCA, because it lacked a qui tam provision, not only failed to encourage whistleblowing, but also left whistleblowers vulnerable to retaliation.[26] This concern, however, was tempered by the awareness that Kansas law already recognizes a claim for retaliatory discharge.[27] Thus, this provision of the KFCA was derived from the corresponding provision of the FCA, 31 U.S.C. § 3729(h), but the Legislature refrained from prescribing specific remedies.[28] The KFCA apparently incorporates the common law tort of wrongful discharge, and makes firing for reporting a KFCA violation an instance of "state public policy clearly declared by the Legislature" upon which a claim of wrongful discharge may be based.[29]
The anti-retaliation provisions of the KFCA do contain a puzzling limitation: the legislative history of the Act suggests that the drafters intended for an employee to be able to maintain an action for retaliatory discharge if fired for blowing the whistle on his or her employer,[30] yet the KFCA expressly limits such a remedy to those instances where the whistle blowing actions were undertaken "in good faith."[31] The good faith limitation is consistent with common law in Kansas, as our courts have held that the tort of retaliatory discharge is available only to those employees who acted in "good faith based on a concern regarding the wrongful activity reported rather than for a corrupt motive like malice, spite, jealousy, or personal gain."[32]
The question this provokes is simply, why? Suppose a violator's disgruntled employee, motivated by a desire to harm his or her employer, reports a violation-in-fact of the KFCA to the AG's office. If the report is accurate, the public fisc may be protected and the greater good served no matter the whistleblower's subjective motivation. Indeed, it would hardly be a surprise to learn that many whistleblowers are motivated, at some level, by a desire to harm the entity against whom they are informing. However, although "good faith" is an amorphous concept, it is at least commonly understood to be a state of mind mutually exclusive of an intent to injure.[33] Notwithstanding that the underlying goals of the KFCA would be served by granting the whistleblower protection, the good...
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