The Qui Tam Complaint
Every qui tam lawsuit hinges on its factual basis: the who, what, where, when and how described in your complaint. Alongside credibility, courts value specificity. The ideal complaint includes photocopies of fraudulent invoices that were submitted to the government, or private emails that evince an intent to deceive. Obtaining such evidence is easier said than done, but the complaint’s focus should remain on facts and circumstances that imply fraudulent activity.
Since many qui tam allegations involve violations of agency regulations or federal statute, a technical understanding of the legal nuances at issue is indispensable.
A complaint isn’t enough. Alongside the primary legal document, which will be filed “under seal” in a US District Court, relators are required to submit a separate disclosure statement, providing the Justice Department with “substantially all material information and evidence” that underlies the complaint’s allegations. The disclosure statement is served directly to the US Department of Justice.
Where you file the case is important. In accordance with the False Claims Act, qui tam lawsuits can be filed in any jurisdiction where the defendant “can be found, resides, transacts business, or in which any act proscribed by [the False Claims Act] occurred.” When the defendant is a business with operations in several states, or an individual with multiple residences, attorneys generally have their pick of jurisdiction.
The correct choice depends primarily on the US Attorney’s Offices in that state. Remember that the success of a qui tam lawsuit rises exponentially when the Justice Department decides to intervene; it’s hard to compete with the resources of the federal government.
Thus, the perfect jurisdiction will have a US Attorney’s Office that is both amenable to pursuing qui tam litigation and not over-burdened by pending cases. The perfect fit, of course, is hard to find; Offices that want to work with whistleblowers, after all, probably already have lobbies crowded by whistleblowers.
Sixty Days “Under Seal”
Once the lawsuit is filed with the correct federal court, it will be kept “under seal” for a minimum of sixty days. It is not served on the defendant, listed on online legal dockets or released to the public in any way.
This requirement of confidentiality presents many plaintiffs with a paradox. Once a qui tam lawsuit is filed, no additional actions based on the same facts can be filed. Unfortunately, there’s often no way to know for sure that someone else hasn’t already filed a lawsuit about the same fraud, maybe the prior complaint is just under seal. As a result, there is every reason to begin an action as quickly as possible and beat out potential competitors.
In practice, sixty days is more of a suggestion, than a requirement. The point of putting a qui tam lawsuit under seal, after all, is to provide the federal government with enough time to investigate the complaint’s allegations and decide on whether or not to intervene.
As you could expect, most government investigations take longer than sixty days. To buy more time, the Justice Department can simply ask the presiding judge to extend the deadline, a request that is frequently (though not automatically) granted. In any event, the government will eventually make up its mind about a path forward and either intervene or decline to do so.
The government decides to intervene in between 18% and 25% of all the qui tam lawsuits that are filed every year. In these instances, primary responsibility for the litigation is transferred to the Department of Justice. Relators and their attorneys play a limited, but not inconsequential, role in subsequent proceedings.
As a matter of course, plaintiffs who have their cases picked up by the government will be awarded at least 10% of any total recovery. Making the government’s life easier, though, is always helpful – and may come with rewards.
Your attorney, for their part, can lighten the load, looking for opportunities to review documents so federal investigators don’t have to. Meanwhile, relators should be honest and informative. At some point, nearly every plaintiff is asked to analyze their employer’s corporate documents, sometimes a considerable amount of documents. Relators who assist the authorities in their investigation can be awarded up to 25% of the government’s total recovery.
Going It Alone
If the government declines to intervene, plaintiffs are faced with a difficult decision. Pursue the case on your own or drop it? Pushing on comes with a huge upside: 30% of the government’s recovery. The risks, however, should not be understated.
Qui tam litigation, with or without the Department of Justice behind you, takes time. Money is another factor, but our experienced attorneys make every effort to reduce the burdens of litigation as much as possible. Our lawyers offer their services on a contingency-fee basis; you owe us nothing unless we secure a recovery on the government’s behalf.
Strong Anti-Retaliation Protections
The question of job security is also certain to come up. After the government makes its decision, the seal on the complaint and disclosure statement will be lifted. In short order, these documents will be served on your employer. For this reason, it may be a good idea to file the case anonymously, although many federal courts have stringent procedures for doing so.
It’s important to note that the False Claims Act contains some of the strongest anti-retaliation provisions found in American law. Relators who are fired, demoted or otherwise harassed for their decision to step forward are eligible to file another legal action.
Another reason to consider continuing the case on your own is that the government retains the right to intervene in every qui tam lawsuit at a later date. If your personal investigation turns up evidence of more extensive fraud than was initially suspected, the Department of Justice might jump on the chance to take over.
Elements Of A Qui Tam Case
The elements of a qui tam lawsuit under the False Claims Act appear, at first, rather straightforward. At trial, the whistleblower need only prove that the defendant, usually a medical care provider or defense contractor, knowingly submitted a false claim for approval or funding to the US government. In short, the defendant lied, or presented false records, to the government in the act of seeking federal funds or approval of some sort.
There are, of course, nuances. For the purposes of a lawsuit, for example, it matters little whether the defendant itself submitted “false claims” to a government official or simply “caused” the false claims to be submitted by someone else. Despite these subtleties, the weight of a qui tam lawsuit will boil down to proving two facts:
- the claim was false or fraudulent
- the false or fraudulent claim was made knowingly
The critical questions, then, revolve around how these terms will be interpreted.
Definition Of “Claim” In The False Claims Act
What, in the first instance, is a “claim”? Thankfully, the False Claims Act provides a reasonable, though lengthy, definition of this concept at 31 U.S.C. § 3729(c). A “claim,” in brief, is “any request or demand […] for money or property […] presented to an officer, employee, or agent of the United States.” Some requests or demands made against government contractors also count. Included in the False Claims Act’s definition of “claim” are those requests or demands in which the requested property:
- is “to be spent or used on the Government’s behalf or to advance a Government program or interest,” and
- some of the requested federal money has already been spent, or
- the Government will reimburse some of the requested money or property
For obvious reasons, claims made against the government that involve wages or property paid to a federal employee as compensation for their work, with no governmental restrictions on how they are meant to use that property, are excluded from the Act.
“Any Request Or Demand”
But we can already see that the False Claims Act defines “claim” in a broad manner. A formal contract with the government is not required. Nor does the money or property requested need to be the government’s property by title. And, importantly, false or fraudulent claims to federal property can be made through intermediaries.
The wide scope of this definition is not an accident. In its original drafting, “claim” had a narrow meaning, one that shrunk even smaller under the weight of Supreme Court interpretation. At one time, the Act’s definition of “claim” applied only to requests or demands actually submitted to the federal government. Even though thousands of local and state contractors were also receiving federal funds, claims on their federally-supplied money or property were left out. Not even the government, always the “real party in interest” in a qui tam lawsuit, could sue state contractors for submitting false or fraudulent claims, unless those claims were made specifically to a federal official.
To Congress, this limitation seemed ludicrous. Thus, in 1986, the False Claims Act was amended to cover a much wider range of claims for federal funds, including ones against contractors, grantees or other recipients when even a fraction of the requested money or property originated with the federal government.
Types Of False & Fraudulent Claims
What makes a claim “false” or “fraudulent”? The veracity of a statement made to the government is obviously paramount. The request or demand for federal money must contain falsehoods, more than mere misstatements of fact, and it must contain these falsehoods objectively. A number of federal courts have held that a plaintiff’s evidence must be able to demonstrate the falsity of a claim so that a reasonable jury would be able to make that determination on their own.
The country’s courts have taken a nuanced approach to interpreting the meaning of “false or fraudulent.” Decades of judicial interpretation have hit upon three primary theories to impose liability under the False Claims Act:
- Direct False Claim (or “factually false claim”) – The defendant intentionally misrepresents the facts at issue in the claim and causes the government to pay a higher amount than it would have with an accurate representation
- an inaccurate description of the goods or services provided
- a request to reimburse goods or services that were never provided
- Express False Certification (or “legally false claim”) – The defendant expressly certifies compliance with a contract provision, law or regulation without actual compliance, regardless of whether the defendant’s deceit actually lost the government any money.
- Implied False Certification – Government contracts often come with additional provisions that bind contractors to comply with agency regulations. Thus, even though a defendant does not lie in a claim for federal funds, their mere submission of a claim for payment can imply that the relevant regulations were followed in carrying out the work. As a result, some courts have held that defendants, by the very fact of failing to comply with contract provisions, are liable under the False Claims Act.
We’ve seen that, under certain theories of liability, plaintiffs need not demonstrate any governmental harm for liability to be imposed on a defendant.
The Importance Of Damages
Finding evidence of harm, however, is always a good thing. Damages greatly increase the chances that the Department of Justice will intervene in the case, and thus increase the chances of a successful outcome. Harm comes in two flavors, only one of which is immediately financial. Generally, the more money the government has lost due to fraud, the more willing federal officials will be to take on the case. Non-economic harms can be important, too. Serious health risks, for example, are also likely to pique the government’s interest; major violations of environmental regulations, for example.
On The Question Of Knowledge
In the vast majority of cases, inaccurate representations alone are not enough to impose liability under the False Claims Act. The law was designed to catch out lies, acts that “fleece” the government out of money or property. In the words of a 1998 decision of a Wisconsin federal court, U.S. ex rel Lamers v. City of Green Bay, claims that should be considered false under the False Claims Act “must be more than objectively untrue, they must betray or suggest intentional deceit.”
What does it mean to say that a false or fraudulent claim was knowingly submitted to the government? Demonstrating actual knowledge would likely require confession, an exceedingly rare occurrence in qui tam proceedings. And since few attorneys are mind readers, we look instead for business arrangements and company records that help to demonstrate a level of awareness.
It’s Not (Necessarily) Intention
Relators need not prove that it was the defendant’s intention to defraud the government. With that being said, mere mistakes or simple negligence are usually insufficient to establish liability. In practice, plaintiffs will have to prove that the defendant submitted false claims out of either deliberate ignorance, reckless disregard for the truth or an intention to defraud. Any one of these findings will be enough to establish liability, but at least one is an absolute requirement.
While a demonstrated intention to defraud the government isn’t required, intention is always in the background. Setting actual knowledge aside, two out of the three generally-recognized theories of knowledge (deliberate ignorance and reckless disregard) are intended to suss out a defendant’s potential motives, in the absence of an explicit confession.
Most courts agree that the False Claims Act was written to reach not only defendants with a deliberate desire to defraud the government, but also “ostrich” defendants, those who have “buried their heads in the sand.” In short, people asking for federal money should make some reasonable inquiry into whether or not their claims are factually accurate. Defendants who fail to do so and, through their disregard allow false claims to be submitted, can be held liable.
One real-world example of an “ostrich” should make this point clear. In United States v. Krizek, the United States District Court for the District of Columbia considered the False Claims Act lawsuit filed against a psychiatrist who had delegated billing authorities to his wife. As it turns out, the doctor’s wife began submitting Medicare claims that said her husband had been treating patients for longer than nine hours a day. Nine claims were filed in relation to patients who had been “treated” for longer than 24 hours in a single day. The psychiatrist himself never reviewed the claims, a failure that the Court said amounted to “an aggravated form of gross negligence” and deemed sufficient to satisfy the False Claims Act’s requirement for “reckless disregard.”
The District Court’s logic on this point was later upheld by the US Court of Appeals for the District of Columbia. The doctor’s head was so far in the sand that, in the Court’s eyes, his blatant disregard for the accuracy of his Medicaid claims amounted (at least in a legal context) to knowledge of fraud.
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