What Special and Unique Legal Requirements Apply to False Claims Act Cases?

The False Claims Act is unique in American law.  How do you prove a violation?  What special provisions affect success? Who can sue, be sued, and win? How do False Claims Act plaintiffs (“relators”) satisfy the Act's special  requirements?

Are there special legal issues in False Claims Act qui tam cases that affect success of a case?

Yes. A variety of False Claims Act limitations affect who can sue or be sued successfully.

The False Claims Act law has very peculiar and specialized rules called the "public disclosure" and "original source" bars. The "public disclosure" and "original source" statutes are different provisions from those in other laws. "Public disclosure" and "original source" analysis requires very special knowledge to understand and apply to your situation. If not correctly researched and handled, an otherwise appropriate qui tam lawsuit can fail because of the "public disclosure" and "original source" provisions. Dismissal can occur even though the case accurately alleges millions of dollars of Government contracting fraud.

No qui tam actions can be based on allegations already the subject of a federal civil suit or a federal administrative civil money penalty proceeding in which the federal Government is a party. 31 U.S.C. § 3730(e)(3).  The False Claims Act’s pre-existing case provision creates a “first to file” rush to the courthouse, with each whistleblower hoping to be the first one to file a case reporting a particular fraud scheme. This provision in 31 U.S.C. § 3730(e)(3) eliminates any "parasitical" actions that attempt to benefit from the Government’s own independent efforts to prosecute fraud and recover funds.

The False Claims Act has several limitations on its scope, including a bar on lawsuits against armed forces members and a bar on Internal Revenue Service tax fraud claims. In most situations, Congress, federal judges, and senior administration agency officials cannot be sued. See, 31 U.S.C. §§ 3729(d) and 3730(e).

The False Claims Act law is relatively new and there are important differences among the courts as to who can sue or be sued. Thus, care should be taken as to where a case is filed. A case might be successful in one judicial court district, but dismissed in another.

One more complication is that Congress can re-write or amend its statutes and it has done so multiple times with the False Claims Act “public disclosure” and “original source” provisions. The provisions were first in effect in 1986 and then were amended in 2010. The effect of the changes in  “public disclosure” and “original source” statutes means that cases decided on the basis of the pre-1986 and pre-2010 statutes may no longer be good law.

What time period applies—is there a False Claims Act statute of limitations?

The False Claims Act statute of limitations in 31 U.S.C. § 3731(b)(2) is 6 years.  But, the statute of limitations has a tolling provision that prevents the statute from starting to run until the date on which the Government knew or should have known of the facts. This can extend the time for bringing a suit up to a maximum of 10 years from the date of the violation. This applies to both the Government and a qui tam relator. As a practical matter, however, the Government focuses on cases that involve false claims that are 6 years old or less.

Many Government contracts last for many years. Many Government contracts are not finally “closed out” until months or years after the work was completed. This could extend the time period when a case can be brought for many years.

There is a shorter 3-year statute of limitations for bringing claims asserting violations of the False Claims Act employee and contractor anti-retaliation protections. 

Is proof of actual fraud by a Government contractor required to prove a False Claims Act violation?

No. Most False Claims Act violations do not require proof of “intent to defraud,” but only require proof of a "knowing" violation. The 1986 False Claims Act Amendments specifically eliminated a specific intent to defraud requirement in the False Claims Act. The 1986 provision, 31 U.S.C. § 3729(b), provides that there is no requirement for “proof of specific intent to defraud.” Only a single infrequently used provision, 31 U.S.C. § 3729(a)(1)(E), contains language that requires proof of “intending to defraud the Government.”

The False Claims Act defines “knowing” violations and acting “knowingly” in 31 U.S.C. § 3729(b)(1) as a person, who, with respect to information:

      1.   Has actual knowledge of the information;

     2.   Acts in deliberate ignorance of the truth or falsity of the information; or

     3.   Acts in reckless disregard of the truth or falsity of the information...

Congress has made clear that government contractors cannot, like the ostrich, "hide their head in the sand" to avoid the reach of the False Claims Act.

What is the burden of proof in a False Claims Act case?

The burden of proof is by a preponderance of the evidence. Think of it as just a bit more than 50%, but not even 51% is required. The judge or jury must fine it more likely than not that the defendant violated the law. The False Claims Act burden of proof is the same as in any other civil lawsuit. No higher standard of proof is required, such as might be required in a criminal case, where the proof must be “beyond a reasonable doubt.”

What are the “public disclosure” and "original source" laws that can bar a False Claims Act case?

The “public disclosure” and “original source” provisions in the False Claims Act are a difficult, but very important area of the False Claims Act law. The public disclosure and original source provisions are unique to the False Claims Act statute. The Act provides, in 31 U.S.C. § 3730(e)(4), unless the Government opposes the motion, the court shall dismiss a case where the qui tam suit is based upon "substantially the same allegations or transactions”were publicly disclosed in certain specific ways, unless the False Claims Act case whistleblower is the “original source” of the information.

What does the False Claims Act “Public Disclosure” Dismissal Statute say?

The False Claims Act provides, in 31 U.S.C. § 3730(e)(4), that a court shall dismiss a case where the qui tam suit is based upon "substantially the same allegations or transactions” that were “publicly disclosed.” The term “publicly disclosed” is defined, uniquely and specially, in the False Claims Act and does not mean all information that is in the public domain. The exception to this "public disclosure" rule requiring dismissal is where the Government opposes the motion to dismiss the False Claims Act qui tam case.

What is a “Public Disclosure”under 31 U.S.C. § 3730(e)(4) of the False Claims Act?

The law defines a “public disclosure” in 31 U.S.C. § 3730(e)(4) as certain specific revelations of information upon which a False Claims Act case is based. Not all information disclosed publicly is a "public disclosure" under the law. "Public disclosures," as Congress defined them in the False Claims Act law, can prevent an otherwise good case from going forward successfully.

The False Claims Act defines “public disclosures” to include only:

    1.    Allegations or transactions publicly disclosed “in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party” [31 U.S.C. § 3730(e)(4)(i)];

    2.     Allegations or transactions publicly disclosed “in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation” [31 U.S.C. § 3730(e)(4)(ii)]; or

    3.    Allegations “from the news media” [31 U.S.C. § 3730(e)(4)(iii)].

These "public disclosure" provisions prevent federal courts from dismissing False Claims Act qui tam cases brought by persons who are “original sources.”  In the simplest terms, if the relator is not an “original source” under the False Claims Act, the whistleblower relator could lose the right to pursue the case and obtain a recovery, although the Government may still proceed.

Who is an “Original Source” under the False Claims Act “Public Disclosure” Bar?

An “original source” under 31 U.S.C. § 3730(e)(4)(A) and (B) provisions in the False Claims Act is an individual who either
    (i)    “prior to a public disclosure” under 31 U.S.C. § 3730(e)(4)(A) has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based,” or

    (2)    has “direct and independent knowledge of the information upon which the allegations are based and has voluntarily provided the information to the Government” before filing a qui tam action.

In short, an “original source” is a person who voluntarily made disclosures of False Claims Act claims and allegations to the United States Government and who did so either before a “public  disclosure” or before filing a lawsuit. If the reporting of fraud was done after a “public disclosure” occurred, the relator must have “direct and independent knowledge” in order to be considered an "original source."

What is the most important way to prevent “public disclosure

The answer to this is be very careful and obtain qualified legal advice early in your process of blowing the whistle or deciding whether to file a False Claims Act qui tam case. To protect against this unique False Claims Act provision from harming your case, knowledgeable lawyers must analyze carefully the "public disclosure" and "original source" law applicable in the federal court where a case is to be filed.

After the 1986 Amendments to the False Claims Act enacted, the “public disclosure” and original source” provisions were interpreted by some federal courts to prohibit cases never intended by Congress to be affected. As a result, Congress amended the False Claims Act in 2010 to prevent public disclosure/original source statutory rules from causing  good cases to be thrown out of court. 31 U.S.C. § 3730(e)(4).

What can be done to protect a False Claims Act case from dismissal because of a “public disclosure”?

Once you know what the False Claims Act law provides, the best way to attack the False Claims Act “public disclosure” case bar is to report fraud promptly and file your lawsuit--but only after you qualify as an "original source." You should always try to be an “original source” as defined by the False Claims Act. An advance disclosure of the fraud facts to the Government, before filing your lawsuit, helps you fulfill the “original source” exemption to the False Claims Act’s “public disclosure” bar.

Relators who are an “original source” can pursue their cases without being harmed by the False Claims Act “public disclosure” bar. To become an original source, a qui tam plaintiff should carefully make a disclosure and provide information about the potential defendant’s scheme to the United States Government. Most importantly, your disclosure of wrongdoing should come before filing a qui tam case, as indicated in 31 U.S.C. § 3730(e)(4)(B). By reporting your False Claims Act allegations to federal law enforcement before you file your case, in many situations you will satisfy the “original source” requirements of the False Claims Act.

Ultimately, the False Claims Act “original source” provision protects a relator’s right to file suit after reporting fraud voluntarily to the Government. Another way to avoid the public disclosure bar is to not contact the press about the fraud, but to file your case. Finally, it is important to promptly file a qui tam case before others do so and before others publicly disclose fraud allegations.

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