"Qui Tam" is the beginning of a Latin phrase which means "he who acts for the
king as well as for himself." In a "False Claims Act" (FCA) or "qui tam" action,
the plaintiff brings the action on behalf of the federal or state government
("acting for the king") and against some person or entity who has allegedly
submitted false claims to, or otherwise defrauded, the government. The plaintiff
also seeks a bounty ("acting for himself") in the form of a percentage of the
amount recovered. In a Qui Tam action the plaintiff's name is styled, or called, "ex rel." the
government: for example, "John Doe ex rel. the United States of America v. ABC
Corporation." "Ex rel." means "on the relation of" or "on behalf of." As a
result of this convention, the Qui Tam plaintiff is commonly referred to as the
"Relator."
The basic theory of the FCA action is that it encourages private individuals
to ferret out fraud against the government, and to act as private attorney
generals by bringing an action seeking reimbursement for the government.
Frequently the FCA Relator will be a person who actually participated in the
alleged misconduct. He or she is then often called a "whistle blower",
alerting the government to the fraud of their employer.
The Relator's participation in the alleged misconduct is not
a good defense to the action - the legislative history of the Federal FCA
explicitly notes that the FCA was designed to "set a rouge to catch a rogue."
The information here is provided for educational purposes only and is not intended to be legal advice. See full disclaimer at the bottom of the page.
RALPH C. LOSEY, J.D., Attorney
at Law
To learn more about Qui Tam actions see:
Incentives for Relators to bring Qui Tam Actions
Unusual Procedures Involved in Qui Tam Actions
Unique Difficulties of Defending Qui Tam Actions
Incentives for Relators to bring Qui Tam Actions
Depending on various factors, including primarily whether the government intervenes in the action and takes over the case, the Relator may be awarded between 10 to 30 percent of the total amount recovered on behalf of the government. The potential recovery is huge: the court can award treble damages for the amount overpaid by the government, plus a penalty of between $5,000-$10,000 for each violation.
Because of this penalty, Relators have tremendous incentives to file False Claims Act actions, even where the total amount allegedly overpaid by the government is small. For example, suppose that a medical laboratory's billing software miscoded a test such that the laboratory was overpaid $1.00 per test. After 1000 such billings, a laboratory employee realized the error. Rather than correct the miscoding and report the error to his superiors, the laboratory employee hires a lawyer and files a False Claims Act action. The total amount of damages to the government would be only $1,000. However, the total potential False Claims Act penalty that the laboratory employee can hold over the head of his employer would be $10,000,000, plus treble damages of $3,000. Thirty percent of that total potential penalty would be $3,000,900. Of course, the employee would have to prove that this erroneous billing was not just an accident, that it was a knowing overcharge. There are, of course, all kinds of additional defenses and nuances, but the monetary risks and rewards here are obvious.
Unusual Procedures Involved in Qui Tam Actions
The procedures for False Claims Act matters are, to say the least, unusual. The Relator must file his complaint "in camera," or secretly. At the same time, the Relator must serve the Complaint, plus a written disclosure of substantially all material evidence and information in the Relator's possession, upon the Government. However, the Relator does not serve the Complaint upon the defendant. Rather, the Complaint remains under seal for at least 60 days, and may not be served upon the defendant until the Court so orders.The sealing of the complaint is designed to allow the Government to determine whether it wants to intervene in the action and take over the prosecution of the case.
Many Relators, especially those with counsel that cannot finance or staff a large complex matter over a long period of time, actively push the Government to take over the case. While this reduces the Relator's top potential percentage recovery, it also prevents the Relator and/or the Relator's counsel from having to finance the prosecution of the action. Typically the Government does not review the matter within the first 60 days. The statute allows the Government to request extensions of the time in which the complaint is under seal, and the Government generally makes use of this provision. Eventually, however, the Court's patience with further delay will end, and the Court will unseal the complaint and require the Government to decide whether or not it is intervening.If the Government intervenes, it then takes over and handles the prosecution of the action. If the Government does not intervene, the Relator and his counsel must then handle the prosecution of the action alone.
Unique Difficulties of Defending Qui Tam Actions
Because of the unusual procedures, and the unusual posture of a private individual bringing an action on behalf of the government, False Claims Act cases pose a unique set of difficulties to any defendant.This law is highly complicated, and not known by all attorneys or judges. Moreover, these cases are usually very fact intensive and complex. This makes this type of case very difficult to prosecute and defend. The unusual nature of False Claims Act cases also vastly complicates possible settlement of a False Claims Act action. Settling such an action requires effective negotiation not just with the Relator and his counsel, but also with the appropriate state and federal officials. Furthermore, the settlement must be approved by the Court. The enormous False Claims Act potential penalties put False Claims Act defendants at risk for extremely large judgments. These sums are frequently disproportionate to the amount of alleged overpayment, especially where the alleged overpayments are small but numerous. Because of these and other difficulties, False Claims Act actions require an aggressive, well-calculated, and creative defense.
Legal Representation
The defense of these cases requires a unique combination of skills: (a) extensive knowledge and experience with complex litigation, especially fraud, involving up to tens or hundreds of millions of dollars of alleged damages, and hundreds of thousands of separate transactions; (b) the ability to negotiate effectively with the appropriate government agencies for cases involving alleged fraud against government agencies, both state and federal. While most False Claims Act cases are based on the federal False Claims Act, 31 U.S.C. 3729 et seq., Florida also has its own False Claims Act allowing Florida state court actions alleging false claims against a state governmental agency. Fla. Stat. 68.081 et seq. The Florida Act is patterned on the Federal Act. The considerations involved in the defense of a federal and Florida False Claims Act action are similar, with the exception that in a Florida action there is no involvement of federal officials or agencies. Other states have similar laws.
Ralph Losey has experience representing defendants and plaintiffs in this area of law. He can be reached at ralph.losey@gmail.com.
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