Pitfalls of Filing a Qui Tam Suit

STATUTORY PITFALLS

As discussed below, the False Claims Act and its qui tam provisions have several statutory bars to a qui tam whistleblower bringing suit. These bars are found in Title 31, Section 3730 of the United States Code.

1. First to File Rule

The first to file rule found in Section 3730(b)(5) provides that “when a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” The purpose of Section 3730(b)(5) is to clarify that only the Government may intervene in a qui tam action. The goal of Section 3730(b)(5) is to prevent opportunistic qui tam whistleblowers from filing subsequent suits based on the same underlying facts of a pending action. This is an absolute bar, and no exceptions exist. Therefore, a qui tam whistleblower must be the first whistleblower to file suit or his or her action will be barred.

2. Members of Armed Forces

If the qui tam whistleblower is a former or present member of the armed forces, potential problems may arise. Section 3730(e)(1) bars a former or present member of the armed forces, from being a qui tam whistleblower and suing another member or entity of the armed forces for violations arising out of the whistleblower’s service.

In addition to this bar, a qui tam whistleblower who is a former or present member of the Armed Forces must be ready for a challenge that he cannot bring suit because he is a government employee. While there is no per se exclusion of governmental employees bringing an FCA action, some courts have held that the public disclosure bar precludes governmental employees from bringing suit. Section 3730(e)(1), however, does not prevent a former armed service employee from bringing a qui tam action against a Government contractor.

3. Members of Legislative, Judiciary or Executive Branches

Section 3730(e)(2)(A) bars a qui tam whistleblower from bringing suit against a Member of Congress, a member of the judiciary, or a senior executive branch official if the suit is based on evidence or information known to the Government when the action was brought.

4. Pending Governmental Proceedings: 31 U.S.C. § 3730(e)(3)

Section 3730(e)(3) bars an action based on allegations or transactions which are already the subject of a civil suit or an administrative civil money penalty proceeding to which the government is a party. It appears to be an extension of the first-to-file bar in Section 3730(b)(5). Courts emphasize that Section 3730(e)(3) bars an action only if it is based on allegations or transactions pleaded by the government attempting to recover for fraud committed against it.

5. Public Disclosure Bar and Original Source

Section 3730(e)(3) provides that that the court shall dismiss, unless opposed by the Government, an action which is based upon “the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information . . . .” The public disclosure bar in Section 3730(e)(4)(A) is one of the most difficult and complicated concepts in the qui tam area. This is due to the varied treatment the public disclosure bar receives from the circuit courts. In examining whether an action is barred under Section 3730(e)(4)(A), the courts attempt to answer the following three questions: “(1) Have the allegations made by the plaintiff been ‘publicly disclosed’? (2) If so, is the lawsuit ‘based upon’ that publicly disclosed information? (3) If so, is the plaintiff an ‘original source’ of the information?”

Even if the court determines that a whistleblower’s qui tam suit is based on public disclosure, the action may proceed if the qui tam whistleblower is the original source. The qui tam whistleblower must meet the following requirements to qualify as an original source: 1) prior to a public disclosure, the relator voluntarily disclosed to the Government information on which the allegations or transactions are based, or 2) the relator has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing suit. A minority of courts requires an additional element, either that the qui tam whistleblower provided the Government with the information prior to the public disclosure or that the qui tam whistleblower had a hand in bringing about the public disclosure.

The courts have also determined that phrase “information on which the allegations are based” of Section 3730(e)(4)(B) refers to the information upon which the relator’s allegations are based and not any publicly disclosed allegations. Moreover, the term “allegation” includes not only those included in the original complaint, but also those appearing in any amended complaints. Also, courts are unlikely to find that a relator is an original source when the information he relies upon for his allegations are predictive in nature and lack certainty.

An issue that often arises in this area is whether a Government employee can be an original source. Some courts hold that a Government employee cannot voluntarily provide the information if he was required to provide it as part of his employment with the Government. There is, however, no per se exclusion of Government employees from being original sources. Government employees will only be barred from bringing a qui tam action if one of the four statutory bars discussed above applies.

A qui tam whistleblower should only discuss his or her case with an attorney to avoid public disclosure.

OTHER PITFALLS

Prefiling Release

If the qui tam whistleblower signs a release of claims prior to filing suit, the action may be barred. Although the FCA does not expressly address the issue of pre-filing releases, some courts hold that enforcing pre-filing releases contravenes the public policy of providing incentives to private individuals for blowing the whistle on attempts to defraud the government. However, some narrow exceptions exist to this general rule. When the government has an opportunity to investigate and has full knowledge of the qui tam whistleblower’s claims before the qui tam whistleblower and defendant settle and agree to release future qui tam claims, the court will dismiss a subsequent qui tam action and enforce the pre-filing release.

For more information and case citations, please see Androphy “Federal False Claims Act and Qui Tam Litigation,” published by Law Journal Press (2010).

For more information, email quitam@bafirm.com

Notice

This website is designed to provide general information only. This information is not and should not be construed to be legal advice. The transmission of the information found on this website also does not result in the formation of a lawyer-client relationship.

You should be aware that qui tam claims are subject to a Statute of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam claim and the applicable statute of limitations.