Filing the Complaint and Disclosure Statement
The process begins when a qui tam complaint is filed in federal district court. The False Claims Act requires that the complaint be served on the Attorney General of the United States and the U.S. Attorney in the district where the complaint was filed. A written disclosure statement is also served on the Attorney General and U.S. Attorney, but it is not filed with the court nor is it available to the defendant. The disclosure statement contains a detailed case narrative, a list of potential witnesses, and a description of all the relevant evidence in the whistleblower’s possession that supports the allegations in the qui tam complaint.
A qui tam complaint in a False Claims Act lawsuit is filed “under seal.” Unlike complaints in most civil lawsuits, a complaint filed under seal doesn’t appear on a public docket and therefore doesn’t become a matter of public record. Only the whistleblower, the whistleblower’s attorneys, and attorneys at the Justice Department have knowledge of the complaint’s existence. The confidential nature of this process allows the government to investigate the whistleblower’s allegations without the defendant being aware that it is the target of an investigation.
Potential Bars to Recovery
The False Claims Act includes statutory bars that disallow a relator from bringing a qui tam action under the following circumstances.
Public Disclosure Bar – the court will dismiss a qui tam complaint if it contains substantially the same allegations or transactions that were publicly disclosed in:
- a federal criminal, civil or administrative hearing in which the government or its agent is a party;
- a congressional, Government Accountability Office or other federal report, hearing, audit or investigation; or
- the news media.
A relator can, however, overcome the public disclosure bar by demonstrating that they are the “original source” of the information. In order to do so, a relator must be able to prove that they:
- provided the information to the government prior to the public disclosure;
- had independent knowledge that materially added to the publicly disclosed allegations; or
- were the original source of the information reported in the news media.
First-to-File Bar – a second relator cannot bring an action that is based on the same facts underlying a pending qui tam action filed by an earlier relator. Since a False Claims Act complaint is filed under seal, it is often impossible to know whether another case has been filed based on the same allegations or transactions. Despite these obstacles, there are tactics that can be employed to overcome the first-to-file bar, particularly where relators are willing to cooperate for their mutual benefit. For example, the Tenth Circuit Court of Appeals held that multiple relators could be added to an existing lawsuit in order to pursue a False Claim Act qui tam action.
Criminal Conduct – if a relator has been convicted of a crime for their role in the conduct that is the subject of the action, they are barred from bringing suit under the False Claims Act.
Government is Already a Party – a relator cannot pursue a qui tam action where the government is a party to a civil or administrative monetary proceeding that is based on the same conduct.
Expiration of the Seal and the Government’s Intervention Decision
The False Claims Act requires that a qui tam complaint remain under seal for 60 days. However, the government rarely completes its investigation within the first 60 days. Fortunately, the False Claims Act contains a provision that allows the government to seek an extension “for good cause shown.” Experience has shown that the average length of a government investigation is about two years, with some investigations taking significantly longer.
Once the government completes its investigation, it must notify the court whether it will intervene in one or more counts of the pending qui tam action. If the government intervenes, it assumes responsibility for prosecuting the case. Alternatively, a decision to decline intervention means that the whistleblower must assume responsibility to proceed with the case on behalf of the United States.
In conjunction with declining to intervene in the action, the government can also move to dismiss the whistleblower’s complaint. The government might pursue this course when it believes there is no viable cause of action, or if the case conflicts with significant statutory or policy interests of the United States. Regardless of whether the government intervenes, the United States remains the real party in interest meaning that it possesses the substantive rights in the action and has the legal right to enforce all claims.
Once the complaint is unsealed, the identity of the whistleblower is revealed in most cases. While there have been circumstances where a whistleblower was permitted to maintain their anonymity after the complaint was unsealed, courts are generally unwilling to grant such a request absent extraordinary and compelling circumstances.
Resolution of the Case and Determination of the Relator’s Reward
There is no way to accurately predict how long a False Claims Act case will take from start to final resolution. There have been cases that lasted little more than a year and others that have taken well over a decade. The defendant is often the primary determinant of the length of a case, particularly regarding their choice whether to litigate or pursue settlement.
In either case, the False Claims Act provides that a relator is entitled to a share of any monetary recovery from either a judgment or settlement. If the government intervenes in the case, the relator’s share can range from 15% to 25% of the proceeds of the action or settlement. If the government declines to intervene, the relator’s share increases to a range of 25% and 30%.
The Justice Department considers a number of factors when determining the relator’s share. Some factors considered for an increase in the relator’s share include how quickly the relator reported the fraud; whether the relator took action to stop or report the fraud; the level of assistance provided by the relator and their attorney; and whether the government had any prior knowledge of the fraud.
The government also considers the relator’s conduct for purposes of decreasing the relator’s share. Reasons for a decrease in the relator’s share include the extent to which the relator participated in the fraud; significant delays in reporting the fraud or filing the complaint; and a quick settlement without the need for discovery.
If the qui tam complaint was based primarily on public information, the False Claims Act limits the relator’s share to a maximum of 10% of the proceeds. The court can also reduce the percentage below the 15% minimum if the relator planned and initiated the fraud. If the relator is convicted for their role in the misconduct related to the underlying False Claims Act violation, the court is required to dismiss the qui tam complaint and the relator is barred from receiving any award.