Dead Men Telling Tales: a Policy-based Proposal for Survivability of Qui Tam Actions Under Thecivil False Claims Act

• Jurisdiction: United States,Federal
• Citation: Vol. 83
• Publication year: 2021

83 Nebraska L. Rev. 1073. Dead Men Telling Tales: A Policy-Based Proposal for Survivability of Qui Tam Actions Under theCivil False Claims Act

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Vickie J. Williams*

Dead Men Telling Tales: A Policy-Based Proposal for Survivability of Qui Tam Actions Under theCivil False Claims Act

TABLE OF CONTENTS

I. Introduction ..................................................... 1074
II. The Civil False Claims Act and Its Qui Tam
Provisions ...................................................... 1079
A. The Current Version of the Civil False Claims
Act .......................................................... 1079
B. The Evolution of the Act ..................................... 1080
III. Survivability of a Qui Tam Case Under the Act...... 1083
A. The Historical Federal Common-Law Test ...................... 1083
1. The Dual "Remedial" and "Penal" Nature of the
Act ...................................................... 1085
2. The Modern Formulation of the Historical Test
of Survivability ......................................... 1087
a. The Purpose of the Act ................................ 1088
b. The Relationship Between the Relator and
the Government and the Concept of a "Harmed Individual" ................................... 1089
c. Proportionality of Recovery Under the Act ............. 1093
d. The Excessive Fines Clause ............................ 1096
e. Cases Where There Is No Damage ........................ 1098
B. Using "Civil" and "Criminal" Designations as a
Proxy for "Remedial" and "Punitive"
Characterizations ........................................... 1098
IV. Subject Matter Jurisdiction Under the Act ....................... 1103

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A. Public Disclosure and "Original Source" ..................... 1103
B. Discovery Issues ............................................ 1105
V. A Policy-Based Proposal for Survivability ........................ 1108
A. The Importance of Congressional Intent ...................... 1108
B. The Advantages of Using Congressional Intent To
Determine Survivability ..................................... 1111
C. Applying the Test of Congressional Intent to the
Act ......................................................... 1112
VI. Conclusion ...................................................... 1114

"You are well on your way to becoming a pirate already . . . you are obsessed with treasure."

Captain Jack Sparrow (Johnny Depp) to William Turner (Orlando Bloom), in PIRATES OF THE CARIBBEAN--THE CURSE OF THE BLACK PEARL (Walt Disney 2003).

"Yes I am a pirate, two hundred years too late. The cannons don't thunder, there's nothing to plunder, I'm an over-forty victim of fate."

Jimmy Buffett, A Pirate Looks at Forty, on SONGS YOU KNOW BY HEART (MCA Records 1990).

I. INTRODUCTION

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Despite the demise of job security for pirates during the modern age lamented by singer/songwriter Jimmy Buffett in A Pirate Looks at Forty, the box-office success of recent movies about pirates such as Walt Disney Studio's Pirates of the Caribbean--The Curse of the Black Pearl evidences the continued appeal of treasure-hunting and swashbuckling in the modern world. Therefore, it should be no surprise that a statute passed by Congress almost 140 years ago, designed to encourage private citizens to dig deeply into the affairs of entities that contract with the federal government in search of wrongdoing and extract buried treasure, continues to appeal to the watchdogs of the public fisc. More than a century after its birth as a fraud-fighting tool during wartime, the Civil False Claims Act ("the Act")(fn1) continues to pique the imagination and fuel dreams of bounty and glory for both publicly anointed fraud-fighters and private persons who are authorized to sue on behalf of themselves and the Government under the Act's unique "qui tam "(fn2) provisions.(fn3) Consider the following modern

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day uses of the Act, which illustrate its continued appeal to private citizens:

* In order to be reimbursed for their costs in caring for Medicare patients, hospitals prepare a "cost report" and submit it to the federal government. A Chief Financial Officer of a hospital in Whitefish, Montana refused to prepare an "aggressive" cost report for submission to Medicare and an inconsistent "reserve" cost report for submission to the hospital's auditors. The "aggressive" cost report showed greater costs to the hospital for caring for Medicare patients than the "reserve" cost report showed. The CFO was terminated from his position. In the course of pursuing a wrongful termination action against the hospital's management company, which was a national company, the CFO discovered that all of the hospitals managed by the company submitted "aggressive" cost reports to Medicare that he considered fraudulent. The CFO filed a qui tam action under the Act against the management company, resulting in a total settlement payment of $85,773,745.81 by the company and a recovery of $20,585,698.99 by the CFO.(fn4)

* A sales representative for a cardiovascular device manufacturer filed a qui tam suit under the Act against 132 teaching hospitals. He alleged that they had defrauded federal health care programs by submitting claims and receiving payments for services provided to patients participating in clinical trials involving cardiac devices that had not been fully approved for marketing by the Food and Drug Administration, in violation of a provision of a 1986 Medicare Manual that stated that payment would not be made for such procedures. The case, filed in 1994, continues ten years later against forty hospitals. The government and the sales representative have collected millions of dollars from teaching hospitals that have settled the cases against them.(fn5)

* A disgruntled doctoral student brought a qui tam action under the Act against his former faculty advisor, alleging that the faculty advisor collaborated with other researchers to publish scholarly articles based on fabricated research and used the publications to defraud the Veterans Administra

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tion. The complaint was ultimately dismissed, but not before the defendant incurred significant costs by being forced to defend the matter on the student's appeal to the Seventh Circuit Court of Appeals.(fn6)

Recoveries under the Act are potentially enormous, because the Act authorizes the imposition of treble damages and substantial perclaim penalties against its violators.(fn7) The magnitude of potential recovery provides federal prosecutors with a strong incentive to use the Act. But this powerful weapon does not work only for the federal government. The Act's "qui tam " or whistleblower provision allows a private party to sue on its own behalf as well as on behalf of the United States, and to collect a substantial bounty if the suit is successful.(fn8) Actions brought by whistleblowers under the Act recovered a total of $1.5 billion in fiscal year 2003 alone.(fn9)

The similarity between whistleblowing under the Act and the pursuit of bounty on the high seas did not go unnoticed even by the first courts to construe the statute, well over one hundred years ago. Early in the history of the Act, one court described the qui tam provisions of the Act as follows: "Prosecutions conducted by such means [through a private whistleblower] compare with the ordinary methods as the enterprising privateer does to the slow-going public vessel."(fn10) The potential windfall encourages private parties to attempt to use this fraud-fighting weapon for their own financial benefit, even when the United States has determined that it has no interest in pursuing a particular case.(fn11)

Just as the potential rewards to the successful whistleblower are never far from the minds of potential qui tam relators(fn12) under the Act, the specter of financial ruin and adverse publicity that inevitably follows a prosecution under the Act is never far from the minds of enti

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ties that contract with the federal government.(fn13) The magnitude of the damages recoverable under the Act, the collateral consequences of being found liable under the Act,(fn14) and the inevitable tension between the United States, the relator, and the defendant when a treasurehunting relator independently pursues a case that the United States has declined to pursue, gives rise to unique legal issues and challenges. In addition to substantive legal complications, many procedural complications spring from the complex relationship between the relator and the Government, and from the unique procedural requirements for bringing a qui tam action under the Act.(fn15)

Not least among these complications is the length of time that a qui tam case under the Act can be under development, or filed and pending in court, before the defendant even knows of the action's existence. The statute of limitations for bringing a case under the Act can be as long as ten years.(fn16) Even once a case is filed in court, the United States can request to keep it under seal for long periods of time, in renewable increments, at the discretion of the court.(fn17) Additionally, along with a civil prosecution initiated under the Act, the United States often initiates a parallel criminal proceeding based on the same conduct, warranting a stay of the Act's civil proceedings.(fn18) It is also not uncommon for the defendant to declare bankruptcy while proceed

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ings under the Act are pending, triggering an automatic stay of the proceedings in accordance with federal bankruptcy law.(fn19)

Given the uncommonly long time periods that a qui tam relator's cause of action under the Act can remain in limbo, both prior to filing and after it is filed in court, the prospect of a relator's death during the pendency of the action is very real.(fn20) When the relator dies while the case remains pending, and the United States has...