Conduct of False Claims Act Qui Tam Litigation

Under the False Claims Act, a person who blows the whistle is know as a relator. False Claims Act litigation, also known as Qui Tam litigation, is different from ordinary civil litigation in several ways specifically governed by the Act's unique provisions. Under the False Claims Act, a person who blows the whistle is known as the qui tam "relator."  Qui tam litigation under the False Claims Act also varies from cases in which only the Government prosecutes the fraudulent contractor. Practitioners must be careful to abide by the False Claims Act's special provisions, so as not to inadvertently jeopardize their clients' rights. The full text of the False Claims Act is available here.

Jurisdiction and Venue

The Act's jurisdictional provisions provide the Government, relators, and the courts broad discretion in determining an appropriate forum for the litigation. The False Claims Act allows a case to be brought in any federal court district in which one or more defendants can be found, resides, transacts business or in which any actions giving rise to the false claim occurred. There are often multiple federal judicial districts and divisions where a False Claims Act case can legitimately be filed--more choices than in traditional civil litigation. As a practical matter, as long as the original forum has some logical basis, the cases are seldom transferred thereafter.

The Complaint is Filed "Under Seal" and the Government May Intervene in the Action

A False Claims Act case is filed under seal with service only upon the United States Attorney General and the local U.S. Attorney. A specialized False Claims Act document, known as the "relator's statement" or "disclosure statement" is served upon the Department of Justice, but not filed. The statute mandates this "written disclosure of substantially all material evidence and information the person [the relator] possesses."

Prior to the complaint's unsealing, the Government decides whether to "intervene," which means that it decides whether it will proceed with the action and conduct the case. The Department of Justice can elect to pursue claims through alternate remedies, including administrative proceedings to determine a civil monetary penalty. If it does so, the relator has the same rights in the alternate proceedings that he would have had if a False Claims Act case was pursued. If the Government declines to take over the action or to pursue alternate remedies, the qui tam relator can pursue the case. Even where the Government does not initially intervene in the action, the court may later permit intervention upon a showing of good cause.

After the False Claims Act complaint has been seal for a period of time, normally far more than the 60 days in the statute, the court orders service of the relator's complaint or, if applicable, an amended complaint filed by the Government, upon the defendant. Only then does the defendant learn of the existence of the qui tam case and the whistleblower/relator's actual identity--frequently this is years after the case was filed.

Procurement Fraud (Where the Government buys goods or services from contractors)

Traditional False Claims Act procurement cases include delivering goods of inferior quality or in violation of inspection, testing, or other technical requirements. Procurement violations traditionally involve defense contracts, such as B-1 bombers, computers, tanks, and other traditional subjects of Government contracting. The Government, however, buys a wide array of goods. Supplying reconstituted powdered milk, not the fresh milk that the contract requires, is a False Claims Act violation. When Army mess halls received inferior quality meat, the False Claims Act was violated. Charging the Government higher labor rates than those agreed to in the contract is another scheme that can violate the Act. False billing cases can also involve misrepresenting indirect and overhead labor charges as direct labor. Collusive bidding schemes where bidders conspire to fix prices can also trigger False Claims Act liability.

The most frequently cited procurement case arising under the False Claims Act is United States v. Bornstein, 423 U.S. 303 (1976). In Bornstein, the prime contractor was to provide radio kits to the Government that met certain quality standards. The subcontractor supplying the tubes instead delivered substandard parts, which were mislabeled in an attempt to disguise their poor quality.  Both the prime contractor and the subcontractor were liable.

Medicaid and Medicare Violations

Violations of Medicare laws and the Medicare Fraud and Abuse Statute also constitute violations of the False Claims Act. Hospitals, nursing homes, doctors, home health care agencies, pharmacies, and laboratories that seek and receive reimbursement for Medicare and Medicaid funds are Government contractors subject to the False Claims Act.  Billing for services not rendered or misrepresenting the type of services rendered, can trigger liability under the False Claims Act.  In addition, hospitals and nursing homes that provide substandard care may also be in violation of the False Claims Act.  In fact, the largest False Claims Act qui tam settlement in 2001 involved violations related to prescription drugs.

Healthcare workers and families of nursing home or hospital patients should pay particular attention to the services provided.  Not only can this improve the healthcare for patients and loved ones, but it also helps ensure that public Medicare and Medicaid monies are properly spent in accordance with the law and good medical practice. 

Nursing Home Fraud 

Healthcare workers and families of those in nursing homes should pay particular attention to services provided so as to ensure that family members and patients receive the quality of care to which they are all entitled.  Additionally, bills should not be inflated for services that are inappropriate for a patient or which overstate the services provided. An example of these types of False Claims Act violations would be billing for individual psychotherapy by a physician (at a high billing rate), when in fact the patient, who was hearing-impaired and unable to effectively benefit from the therapy, instead actually attended a group therapy session conducted by a social worker (whose billing rate should be lower than that of the physician therapist).   

Unless healthcare workers or family and friends of the patient speak up, such frauds can continue indefinitely, as the patients cannot themselves investigate or actively pursue the issue.  It will be up to others to expose the wrongdoing and protect both the patients and the public Medicare and Medicaid funds. 

Defense Contractor Fraud 

Defense contracting fraud is perhaps the most traditional type of Government contract fraud addressed by the False Claims Act.  Often, defense contracting fraud involves sophisticated, multi-billion dollar weapons systems and enormous Fortune 500 companies like GE, Boeing, Pratt & Whitney, Grumman, Lockheed Martin, etc.  But, defense fraud can include ordinary items like computers, uniforms, vehicle parts, and office equipment. 

Where the federal contract involves the procurement of a fleet of aircraft, vessels, or other vehicles or thousands of weapons like cruise missiles, the Government enters into a "prime contract" with a manufacturer or supplier. The prime contractor, in turn, enters into subcontracts with hundreds of other companies that manufacture and supply components or provide essential military goods and services. (See Procurement Fraud) . All of these defense contractors are required to comply with the False Claims Act, even though they may not directly contract with the Government.

Typical violations include failure to comply with the contract requirements (See Contract Compliance Violations), such as where the contractor does not abide by the Federal Acquisition Regulations (FAR's) recited or incorporated in the contract. (See Labor, Environmental, Anti-Kickback, and Competitive Bidding Violations)

False Statements of Contract Compliance

Violations of contract terms or of statutes and regulations that are often required by Government contracts and set forth in what might otherwise be termed "boilerplate" sections of contracts, may be sufficient to violate the False Claims Act. Knowing presentation of claim for payment can be deemed equivalent to a false certification of compliance with such laws, rules, and regulations.  If federal funding is conditioned on compliance with these contract provisions, such misconduct gives rise to a viable False Claims Act case. It should be remembered that claims may be false and the law violated, even though goods or services provided fulfill other contract specifications.

False Statements of Compliance with Labor, Environmental, Anti-Kickback, and Competitive Bidding Laws

The False Claims Act is an enforcement device for contract terms requiring compliance with other federal statutory schemes. Government contractors must abide by certain public policies like environmental protection laws, equal employment opportunity, small business procurements, federal wage law and competitive bidding laws. These laws can be enforced through the False Claims Act, despite the absence of a "private right to sue," because Government contracts contain many clauses beyond the technical requirements or descriptions of the products or services being procured. The contractual provisions themselves are derived from language in the Federal Acquisition Regulation (FAR) or from similar Government acquisition regulations. Often, a contract will only cite the applicable FAR provisions and, thereby, incorporate the regulation by reference. As a result of these broad-reaching public policy provisions found in all Government contracts, every federal contractor has potential False Claims Act liability. Among the "public policy" statutes pursued under the False Claims Act are the Buy American Act, Trade Agreements Act, Anti-Kickback Act, Walsh-Healy and Service Contract Acts, and the Davis-Bacon Act.

For example, although emasculated by various "free trade" provisions enacted during the Clinton Administration, the Buy American Act, 41 U.S.C. Sec. 10 et seq., has been the subject of several False Claims Act cases. This law mandates that, for certain types of Government purchases, the cost to the manufacturer of its domestic components must exceed 50% of the value of all components in the end product. Likewise, Government procurements, absent an exemption, must comply with country of origin provisions in the Trade Agreements,19 U.S.C. Sec. 2518.

Other False Claims Act cases have been brought to enforce federal labor and employment policies, which specify wage and benefit rates in the Service Contract Act. False certifications by a contractor stating that it is a small minority business entity also violates the False Claims Act.  In United States ex rel. Stone v. Rockwell International Corp., the relator won a $4.2 million jury verdict because Rockwell falsely stated how it handled environmental waste. Instead of cleaning up nuclear waste by mixing radioactive sludge into cement blocks as promised, the blocks fell apart and further contaminated the site.

Conduct of the Action

The False Claims Act envisions the Government and relator jointly prosecuting a case--unless the Government elects otherwise. There are no special provisions in the False Claims Act regarding trial proceedings and, therefore, a case should proceed as any other complex case involving the Government in federal district court. When the Government has intervened, the court may limit a relator's participation if the Government proves that unrestricted participation would interfere with or delay the prosecution or would be repetitious, irrelevant, or for the purpose of harassment. The Government may seek to limit the relator's discovery by showing that the requested discovery would interfere with the Government's investigation or prosecution of a criminal or civil matter arising out of the same facts. Similarly, the defendant can try to limit the relator's participation, but such efforts have not often been successful.

A trial of a False Claims Act case will proceed as in any other case in which the Government is a party. Where a demand for a jury is made at the outset of the case, a jury will decide liability and damages. Where a trial to the judge only occurs, the judge will render all rulings.

Dismissal or Settlement with Court and Department of Justice Approval

Under the False Claims Act, an action can be dismissed where the District Court Judge and the Attorney General give written consent and their reasons for consenting. The courts have tended to interpret this provision as requiring Attorney General consent only where the Government has intervened, but the Department of Justice normally insists upon being given time to consent to a dismissal. Thus, Government approval should be attempted and, moreover, is worth waiting for to avoid procedural disputes that could be more complex than the underlying claims being settled. Even where the Government intervenes and proceeds with the action, the case cannot be dismissed or settled if the qui tam relator objects. The Judge must then determine, after notice to the relator and a hearing, whether the proposed settlement is "fair, adequate, and reasonable under all the circumstances."

False Claims Act Whistleblower Employee Protections

In 1986, Congress added anti-retaliation protections to the False Claims Act. These provisions, which did not exist previously, are contained in 31 U.S.C. Sec. 3730(h):

Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of his employer or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole.

The protection against retaliation extends to whistleblowers whose allegations could legitimately support a False Claims Act case even if the case is never filed. The statute of limitations for Sec. 3730(h) claims is 6 years in most jurisdictions, but is currently shorter in California and a few other locations.

The whistleblower plaintiff is entitled to reinstatement with seniority, double back pay, interest, special damages sustained as a result of discriminatory treatment, and attorneys fees and costs. There is federal jurisdiction for these whistleblower claims. To establish a Sec. 3730(h) retaliatory discharge claim, the whistleblower must engage in conduct protected by the False Claims Act. Second, the courts require a showing that the defendant have some notice of the protected conduct that the whistleblower was either taking action in furtherance of a qui tam action or assisting in an investigation or actions brought by the Government. Finally, the whistleblower must show that the termination was in retaliation for the protected activities. A False Claims Act qui tam case can include whistleblower claims and other legal claims based upon other state and federal laws.


Federal and State Whistleblower Laws: An Overview

There are dozens of federal laws protecting whistleblowers or otherwise designed to protect workers from retaliation or other illegal treatment.  There are also many similar state and local laws. Most lawyers are not familiar with the employment laws pertaining to whistleblowing and few will know the laws outside the states in which they practice. Before making decisions based upon state laws, you should do some research yourself and consult with an experienced employment/labor attorney, accustomed to representing plaintiffs, to inform yourself about the various federal and state laws which might apply to protect you in your particular circumstances.

Federal Whistleblower Protection Laws

Unlike the False Claims Act, which allows a whistleblower to file a lawsuit in federal court, many of the federal whistleblower laws do not permit a whistleblower to go directly to court, but instead are to be pursued "administratively."  Congress designed many of these laws so that an individual, with or without an attorney, may make a simple complaint or "charge" of retaliatory discrimination to a federal government agency. If not resolved administratively, an administrative law judge may preside over the only evidentiary hearing that will take place.  Some retaliation and whistleblower statutes are relatively "hollow," that is, they prohibit illegal employer retaliation, but do not allow the individual to pursue an administrative charge or file a lawsuit.  In legalese, such laws are described as providing no "private cause of action." 

Whistleblowers are cautioned, however, not to delay investigation of their possible legal remedies, as many of the laws have very short time limits. Some federal whistleblower statutes of limitations are as short as 30 days from the date of the alleged retaliation. A retaliation claim must be brought to the attention of the appropriate federal government official within that time period or cannot be pursued.

Many federal whistleblower laws are administered by the U.S. Department of Labor (DOL). When a complaint is to be filed under these whistleblower laws, they should be filed in writing with the local OSHA (Occupational Safety and Health Administration of the Department of Labor) Office and/or mailed to:

Office of the Assistant Secretary, Occupational Safety & Health Administration
U.S. Department of Labor
200 Constitution Ave., N.W .
Washington, DC 20210

However, the 50-plus federal whistleblower and retaliation laws vary dramatically and the Department of Labor/OSHA is not the intake office for all such claims. Some retaliation statutes provide that the EEOC is the proper intake agency. If neither OSHA nor the EEOC is the proper intake office, however, filing a claim with those agencies will likely not be sufficient to protect legal rights.  Various federal statutes specify still other procedures, including some that have no mandatory administrative or other prerequisites and allow whistleblower or retaliation lawsuits to be filed directly in state or federal court.

Whistleblower or similar anti-retaliation protections providing a private cause of action or administrative remedy are also found in various federal statutes.  Click here to view a list of those statutes.  Our list is still "under construction," but should assist you in researching your own situation. 

In addition, The United States Constitution, pursuant to the First and Fourteenth Amendments, protects state and local government whistleblower employees from retaliation.

While they do not afford any specific whistleblower protections, these other statutes may  assist in the prosecution of those who retaliate against whistleblowers:

18 U.S.C. Sec. 1031 Major Fraud Act of 1989
18 U.S.C. Sec. 1505 Penalties for obstruction of government investigations
45 U.S.C. Sec.    60 Penalties for obstruction of government agency proceedings

Additional references on these topics include:

Job Rights & Survival Strategies: A Handbook for Terminated Employees (National Employee Rights Institute 1997), to order call 1-800-469-NERI. ($19.95, $10 each if bought in groups of 10)

Government Accountability Project, National Office, 1612 K Street, Suite 400, Washington, D.C. 20006, The Whistleblower's Survival Guide (1997) and "Federal Whistleblower Laws and Related Statutes."

The National Whistleblower Center also has a new publication, published in 2001, primarily designed for lawyers handling claims under various federal whistleblower statutes.  It is entitled Concepts and Procedures in Whistleblower Law. 

(Web links to some of the federal agencies, legal research sources for the federal whistleblower laws and statutes, and several of the whistleblower groups mentioned above are listed in the Whistleblowerlaws Links section.) 

State Whistleblower Protection Laws

Most states have some sort of statutory or common law "whistleblower" or anti-retaliation laws.  Like the federal whistleblower laws, not every lawyer will know about these laws, especially laws outside their own state.

These states and the District of Columbia have recognized a public policy exception to the "employment at will doctrine": Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

Some states have explicit statutory protections for whistleblowers. These include: California, Connecticut, Delaware, Florida, Hawaii, Louisiana, Maine, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Rhode Island, Tennessee, and Washington.

There are also state laws that offer special protections just for their own state or local government employees: Alaska, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wisconsin.