The False Claims Act Process

Initial Consultation

When we are contacted by a whistleblower, we engage in an initial phone call or in-person meeting (depending on the location of the individual and the matter to be discussed). This initial conversation is confidential and there is no cost or obligation. We use this time to ensure that there is mutual interest in proceeding in an attorney-client relationship.

Our analysis usually involves consideration of the merits of the case, the evidence possessed by the whistleblower and the specific matter at issue. We also endeavor in this initial period to answer questions from our potential client concerning the case and the events that will follow in order to provide them the information they need in order to decide whether to proceed.

Retainer Agreement

Our law firm does not represent individuals without a written and signed retainer agreement. This agreement sets forth the conditions of our representation and the contingency fee which our firm will earn in the event that our legal representation is successful and our client recovers a financial benefit.

Once we have a signed retainer agreement, we will begin to examine the evidence and prepare the pre-filing disclosure, complaint and relator’s statement.

Pre-Filing Disclosure

Prior to filing the complaint with the court, the U.S. Attorney’s office is contacted by whistleblower’s counsel to be informed of the violation of the False Claims Act. This allows the government to begin its investigation.

Congress, through the 1986 amendments, intended the requirement to encourage the potential relator to provide the Government with their information at the earliest possible moment. In practice, the Pre-Filing Disclosure is given to the federal government shortly before the filing of the complaint.

There are few rules for the form of the Pre-Filing Disclosure. In some cases, this may be done over a short phone call. In others, an advance copy of the Complaint or the Relator Statement is provided.

The Pre-Filing Disclosure is an integral part of rebutting a claim by a defendant that there has been a public disclosure. In order to qualify as an original source and proceed in spite of the public disclosure, the FCA requires some individuals to have made a disclosure to the Government prior to the filing of a qui tam complaint.

The Complaint
The Federal Rules of Civil Procedure established a system of notice pleading which requires a short and plain statement setting forth sufficient information to provide the defendant notice of the allegations of the case and the court sufficient information to make the lawsuit seem not implausible.

However, Rule 9(b) governs allegations of fraud and applies to aspects of a False Claims Act complaint.

It is important not to delay the filing of the complaint for too long because of the False Claims Act’s first to file rule. A relator is not permitted to proceed with a qui tam action if there is a pending complaint against an individual or company concerning the matter of the Relator’s complaint. The application of the first to file rule is a complex one when each complaint brings different allegations of fraud.

The Seal

The False Claims Act requires the Relator to not speak of the qui tam lawsuit. The seal was put in place If the Relator or his/her counsel violate the seal, there can be penalties, including potential dismissal of the relator’s qui tam lawsuit.

The Relator’s Statement

The Relator’s Statement is sent to the Department of Justice.   Attached to the document will be the evidence that the Relator possesses.

The document will also include a suggested witness list for the government to contact during its investigation as well as the information which the individual should possess.

Relator Interview

Approximately one or two months after the Complaint is filed under seal with the Court, the Relator, his or her attorneys, one or more members of the U.S. Attorney’s office and other members of the government depending on the case will meet in person to discuss the information provided by the Relator.

The States

In cases involving Medicaid fraud, the complaint is also sent to the thirty or so states which have passed their own version of the False Claims Act. The states may also decide to join the lawsuit and seek recovery of the government money lost due to fraud. In other cases, the states allow the federal government to proceed and play a supporting role as the case goes forward.

Government Investigation

Following the Relator’s Interview, the Government will undertake an investigation of the merits of the case. Depending on the complexity of the case, it may remain in the investigation stage for years. During this time, the lawsuit is on hold.

Seal Extensions

The False Claims Act specifies that the initial seal lasts for 60 days. However, the government investigation typically takes more than a year. While the investigation is ongoing, the government will file seal extensions with the court to delay the onset of the litigation until it has had a chance to fully investigate the case.

Partial Disclosure

At some point in the government investigation, the Justice Department may wish to approach the defendant to provide them a copy of the Complaint and seek settlement. The DOJ will make a motion with the court to partially lift the seal and then pursue settlement negotiations.

Circumstances may also arise which require the Relator to seek the ability to disclose the filing of the False Claims Act complaint. After consultation with the Justice Department, the Relator then moves the court for a partial unsealing which governs the manner and information of disclosure of the existence of the lawsuit.

Criminal Prosecutions

Lawsuits brought under the False Claims Act are handled by the civil division at the Justice Department. However, information which arises during the course of the investigation may lead the government to learn about conduct which violates criminal law in the United States. If criminal charges are warranted, the Justice Department may decide to pursue the criminal conviction prior to pursuit of recovery under the FCA.

Multiple Relators

If several False Claims Act lawsuits have been filed and the Justice Department believes that each individual will add to the government’s efforts to recover against the defendant, they may suggest that the Relators cooperate rather than engage in a long litigation battle regarding who is entitled to a recovery. In this case, Relators and their counsel will negotiate a cooperation agreement which divides the potential recovery.

Government Intervention

If the government discovers fraud and wishes to take control of the litigation, it will inform the court that it has made the decision to intervene. For a Relator, this is usually the best course as it puts the full resources of the United States against the corporation. Most companies will settle before trial rather than risk treble damages and the negative publicity.

Unsealing

Once the government has made its decision on intervention, the court is informed and the complaint is unsealed. If the government has decided to decline intervention and the relator does not wish to proceed, the relator may choose to petition the court to unseal a redacted version of the complaint. There are many factors involved in the determination and it is ultimately a matter of judicial discretion. If the relator wishes to proceed, a copy of the complaint is served on the defendant and litigation commences.
Counterclaims

The Defendant’s answer generally denies the allegations through a variety of language. The more concerning area for relators is the potential for a counterclaim. A defendant facing the expense of defending fraud charges may decide to take the offensive by bringing a counterclaim against the Relator. Some of the possibilities include theft of documents, defamation, or breach of contract.

Motion to Dismiss

The first objection by the Defendant to the litigation is generally in the form of a Rule 12(b)(6) motion to dismiss. If the government has intervened in the lawsuit, it has generally gathered enough evidence during its investigation to make it over this barrier.

For a Relator proceeding without the government, the motion to dismiss can present a greater challenge. Some courts will require that a relator have sufficiently specific information concerning specific false claims made in order to meet the heightened pleading standard imposed on fraud cases by Rule 9(b). This area of the law is still developing and it seems likely that the Supreme Court will consider a case concerning whether a False Claims Act complaint has been pled with sufficient particularity over the next few years due to the current circuit split.

Alternate Remedy

If the government decides to pursue a recovery against the defendant based on the relator’s information without resorting to the False Claims Act litigation, the relator may be entitled to a portion of the recovery as an alternate remedy.

Relator Share

The False Claims Act requires the government to pay the Relator in an intervened case between 15 and 25 percent of the recovery. In a non-intervened case pursued by the Relator, the FCA provides for the relator to earn between 25 and 30 percent of the amount recovered for the government.

The amount of the relator’s share is usually negotiated between the parties. If the Government and the Relator cannot reach agreement, then the dispute is settled in court.

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