Quick Facts About a Qui Tam Action
The False Claims Act is a First-In-Time, First-In-Right Statute
If more than one whistleblower files the same case, only the first to file can proceed with the qui tam action. The False Claims Act prevents a whistleblower from litigating a qui tam action that is based on the same facts underlying an existing lawsuit, including a lawsuit brought by the government. This means that a person seeking to blow the whistle on fraud is in a “race to the courthouse” with others who have knowledge of the wrongdoing. It does not matter if the person who loses the race has more detailed knowledge of the fraud and can provide the government with more information and assistance than the person who filed first. Only the first to file the qui tam action can proceed with a whistleblower lawsuit.
This first-in-time, first-in-right rule is intended to encourage would-be whistleblowers to promptly report fraud against the government. A person looking to blow the whistle has no way of knowing whether a similar case has already been filed because False Claims Act actions are filed under seal. Only the government knows which cases have been filed. For this reason, it is important to be the first to the courthouse.
False Claims Act Action Cannot be Based on Public Information
The False Claims Act encourages individuals with knowledge of fraud on the government to come forward and blow the whistle. However, a whistleblower’s knowledge cannot be acquired from public sources (the “public disclosure bar”) unless the whistleblower is an “original source” of the information. Under the False Claims Act, a person is an original source of information if he has direct and independent knowledge of the information and has reported it to the government before filing the case.
The purpose of the public disclosure bar is to ensure that a qui tam action is not filed by a person who contributes nothing of substance to the process of blowing the whistle on fraudulent conduct. The False Claims Act defines “public disclosure” to include not only information in the news media but information obtained from a civil or criminal hearing and certain types of government investigation. Whether or not information is obtained through public disclosure is a complex issue for which there is no agreement in the courts. In some circuit courts, for example, information obtained through the Freedom of Information Act is considered to be publicly disclosed.
Success is More Likely When the Government Joins the Case
Immediately after a complaint is filed in court, the whistleblower’s attorney delivers a copy of the complaint together with a “disclosure statement” containing all facts material to the action to the Department of Justice. The government then conducts an investigation into the allegations of fraud. At the conclusion of its investigation, the government must decide whether to join (also known as intervene) in the action. If the government decides not to join, the whistleblower may pursue the action alone, or the whistleblower may dismiss the case with the government’s consent. If the plaintiff decides to continue the action without government participation, the government may intervene at a later date upon a showing to the court of good cause.
Although a whistleblower can be successful without government involvement, success is more likely when the government joins the case. Recoveries from whistleblower actions tell the story: Between 1996 and 2005, the government recovered $9.6 billion in qui tam cases. Of that amount, only $400 million was recovered in cases in which the government did not intervene. To further underscore the point, as of September 31, 2005, 823 of roughly 1,000 cases that had been successfully brought to settlement or judgment were cases in which the government intervened.
A professional and effective written and oral presentation of the case is important to persuade the government to intervene in the action. The complaint and disclosure statement should reflect a thorough legal and factual analysis, and should be detailed and of high quality. The skill and reputation of the attorneys who represent the whistleblower are important factors in the ultimate success of a qui tam action.
The attorneys at Bernstein Liebhard can assist you in persuading the government to intervene in a qui tam action. We have a national reputation for combating fraud and other misconduct. If you choose to blow the whistle on fraud against the government, the attorneys at Bernstein Liebhard will help you comply with the requirements of the False Claims Act, and will zealously protect your rights.
False Claims Act Cases are Filed Under Seal
Qui tam complaints are filed under seal (i.e., they are confidential) and are not served on the defendant. The qui tam complaint is filed under seal to give the government time to investigate the allegations without the defendant’s knowledge. The False Claims Act gives the government 60 days to conduct its investigation (i.e., the time in which the complaint remains under seal), though the government may ask the court to extend the period, which it generally does. As a consequence, qui tam complaints can remain under seal for periods of time that extend well beyond 60 days.
The Whistleblower Can Receive a Reward of 15-30% of any Recovery
The False Claims Act provides a reward of 15-25% of any recovery to a whistleblower if the government intervenes in, or joins, the case, and 25-30% if the government declines to intervene and the plaintiff pursues the action alone. In certain circumstances, a lower percentage may be awarded.
The False Claims Act does not provide much guidance about the size of the reward given to the whistleblower. The statute provides only that it depends on the extent to which the whistleblower “substantially contributed” to the prosecution of the action. The DOJ has developed guidelines for government attorneys to follow when deciding the percentage to offer successful qui tam plaintiffs. These guidelines do not have binding authority in court, but they nevertheless provide a list of the factors that the government regards as relevant. Factors that can increase the whistleblower reward include: the promptness with which the whistleblower reported the fraud, whether the whistleblower tried to stop the wrongdoing, the extent of the whistleblower’s knowledge of the fraud, and his assistance to the government. Factors that can decrease the whistleblower reward include: the whistleblower’s involvement in the fraud, the government’s effort to develop the case, and the delay in reporting the fraud.
Whistleblowers Who Were Involved in the Fraud May have Their Reward Reduced
Under the False Claims Act, the court is authorized to reduce the reward of a whistleblower who “planned and initiated” the fraud. If the whistleblower is criminally convicted for conduct arising from his role in the alleged fraud, then the whistleblower must be dismissed from the case and cannot receive any share of the proceeds if the action is successful.