False Claims Act Procedures Go to Court

The False Claims Act's qui tam provision is a powerful tool for both whistleblowers and the government. It allows private individuals--known as relators in FCA cases--to come to the government with allegations of false claims and information supporting those allegations (read more about the updated False Claims Act in "Perfect Storm"). Once the relator files a complaint, it is kept under seal in federal court, and the government has 60 days to investigate the allegations and decide whether to "intervene" in the case. In reality, however, the government typically takes longer--sometimes eight or nine months, according to Robert Rhoad, a partner at Crowell & Moring who has served as lead defense counsel in numerous FCA cases.

If the government decides to intervene, it basically takes over the case, making the relator's duties minimal. "That's the hope of every qui tam relator and counsel," Rhoad says. If the government declines to intervene, the relator is still free to initiate a private action against the company--although according to Rhoad, the success rate is much lower in these cases.

"My view has always been that [declining to intervene] means the government thinks there are some significant problems with the case," he says.


Intervention Denied

The situation in which the Justice Department declines to intervene is at play in U.S. ex rel. Eisenstein v. City of New York, which the U.S. Supreme Court decided June 8. In that case, a relator filed an action, alleging that New York City and some of its officials had defrauded the government. The U.S. declined to intervene. The relator moved forward with a private action, but district court dismissed the relator's claims. Fifty-four days later the relator filed an appeal.

Under the Federal Rules of Appellate Procedure and the U.S. Code, appeals must be filed within 30 days, but they extend the period to 60 days when "the United States or an officer or agency thereof is a party." The question before the court was whether this 60-day limit should apply in a False Claims action, with the relator arguing that the government is a party in every False Claims Act case.

The Supreme Court affirmed an appeals court ruling that the 30-day limit should apply, rendering the relator's appeal untimely. Justice Clarence Thomas wrote for the unanimous court, "Although the United States is aware of and minimally involved in every FCA action, we hold that it is not a 'party' to an FCA action for purposes of the appellate filing deadline unless it has exercised its right to intervene in the case."


Opening Secrets

In another case relating to the False Claims Act, the American Civil Liberties Union is calling for more openness in the government's investigation of companies that are the subject of FCA allegations.

The DOJ keeps confidential the companies under investigation and the investigations themselves are sealed, so while companies are being investigated, often they have no idea someone has made allegations against them.

The "secrecy provisions" that allow this are part of the 1986 amendments--and currently they are the subject of an ACLU lawsuit. The organization's complaint goes after this "entire secret docket of cases that is inaccessible to the public and the press." The government, it states, puts the number of sealed cases at approximately 1,000. The ACLU says the secrecy provisions violate First Amendment rights by denying information to the public about claims of fraud on the government, and denying qui tam relators the right to speak out. It also says the secrecy violates the separation of powers doctrine since judges are not able to determine, on an individualized basis, which cases should be sealed.

"[If the ACLU suit is successful] it would show to the public which companies are facing the most False Claims Act exposure," says Andrew Tulumello, a partner at Gibson Dunn. "Beyond that, there would be no immediate effect. But I suspect it would generate more litigation, because people could look at theories being used against companies in different industries and use the same theory against another [yet-to-be-sued] company in that industry."

Associate Editor

Melissa Maleske

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