Know Your Rights Under The False Claims Act
What is the False Claims Act?
The False Claims Act (“FCA”) is a federal statute, 31 U.S.C. § 3729, et. seq., that empowers private citizens to pursue claims, on behalf of the federal government, against individuals and entities who have either made a knowingly false claim for payment to the government, who have possession of property or money belonging to the government and have knowingly delivered less than all of said property or money to the government, or who have used a false record or statement to knowingly avoid or decrease an obligation to pay property or money to the government. (Click here to view the FCA).
Many states have enacted similar false claims statutes to empower citizens to redress fraud against a given state.
The wrongdoer’s actions has to have been done “knowingly.” The FCA defines “knowingly” as either: (1) actual knowledge of the falsity of the information; (2) deliberate ignorance of the truth or falsity of the information; or (3) acting in reckless disregard of the truth or falsity of the information. No specific proof of intent to defraud is required. 31 U.S.C. § 3729(b)(1).
What Type of Fraud Is Actionable Under the False Claims Act?
The most common type of FCA claim involves health care fraud stemming from knowingly false claims for payment sent to either Medicare, Tricare or Medicaid. However, the FCA is regularly employed to address a host of other false claims or statements presented to the government that cost the government money. FCA claims have been successfully pursued for customs fraud, defense contract fraud, procurement fraud, and underpayment of federal oil and gas royalties. When trying to determine whether the fact pattern of which you are aware amounts to an FCA case, the penultimate question is whether the wrongdoer’s actions have cost the government money.
Not every situation, though, qualifies as a FCA case. For example, the FCA excludes claims, records or statements made under the Internal Revenue Code. 31 U.S.C. § 3729(d). An FCA case may not be brought against a member of Congress, a member of the judiciary or a senior executive branch official if the action is based on evidence or information known to the government when the action is brought. 31 U.S.C. § 3730(e)(2). And, no FCA case may be brought that is based on allegations or transactions that are the subject of a civil suit or an administrative civil money penalty proceeding in which the government is already a party. 31 U.S.C. § 3730(e)(3).
The Materiality Element
In order to be actionable under the FCA, a given false claim must be “material.” In layman’s terms, this means that the falsity cannot be trivial. In general, the falsity must be something that is important to the government’s decision to make payment, or to the government’s decision to pursue someone for failure to pay (i.e., oil and gas royalties).
The significance of this materiality element has grown in recent years, culminating in the 2016 United States Supreme Court decision of Universal Health Services v. United States ex rel. Escobar, 136 S.Ct. 1989, (2016). Since Escobar, numerous FCA cases have been dismissed on determinations that the claim at issue did not satisfy the materiality element.
Significant factors in evaluating whether your particular fact pattern can satisfy the materiality element include: (1) whether the federal agency that makes payment had actual knowledge of the falsity and then continued to pay the claim; (2) how the agency typically responds to similar transgressions; (3) whether contract or regulatory language states that payment may be withheld for the violation at issue; (4) whether the violation goes to the essence of the bargain between the party and the government; and (5) whether the violated requirement is a condition of payment.
Who May Pursue An FCA Claim?
Any “person” may pursue an FCA claim, with the exception of a former or present member of the armed forces who seeks to bring a claim against a member of the armed forces arising out of such person’s service in the armed forces. 31 U.S.C. 3730(e)(1).
I have personally devoted considerable effort to ensure that federal employees, who work in a corrupt agency, may utilize the FCA to pursue claims their agency would prefer to ignore. See, United States ex rel. Maxwell v, Kerr-McGee Oil & Gas Company, 540 F.3d 1180, 1184 (10th Cir. 2008) (Click here to view); and United States ex rel. Little v. Shell Exploration & Production Company, 690 F.3d 282, 286 (5th Cir. 2012) (Click here to view). In both decisions, the Tenth Circuit and the Fifth Circuit agreed that federal employees were “persons” who could pursue FCA claims arising from information they learned in the course and scope of their employment.
What Is The Statute Of Limitation For An FCA Suit?
31 U.S.C. § 3731(b)(1) provides that an FCA suit must be brought within six years after the date on which the violation is committed. If the violation is a serial or recurring violation that stretches back more than six years, a suit can still be brought but will be limited in time to those violations occurring within six years of when the suit was brought.
How Much Can You Personally Recover?
The FCA provides that a successful plaintiff or relator may recover between 15% and 30% of the proceeds of the action or settlement of the claim. The amount depends on whether the government has intervened in the suit and the extent to which the relator substantially contributed to the prosecution of the action. In the situation where the government has intervened in the suit, the amount of the relator’s share is between 15% and 25%. 31 U.S.C. § 3730(d)(1). When the government does not intervene or proceed with the action, the range of the relator’s recovery is between 25% and 30%. § 3730(d)(2).
I have a reputation for fighting for my client’s share of the recovery. In the Maxwell case, I was successful in obtaining a 30% share for Mr. Maxwell. Click here to view the Maxwell settlement agreement). In the Fowler case, the government was only willing to agree to an 18% relator share. We fought that decision and convinced the Court to increase the relator share to 20%, which was worth an additional $360,000.00. (Click here to view the Fowler decision).
The Procedurally Complexity Of FCA Cases
A large number of filed FCA cases are dismissed by the Courts each year because it has been determined that the case does not state a proper FCA claim, because the complaint has failed to plead fraud with sufficient specificity or because the case violates one of the FCA’s many jurisdictional provisions and the Court has determined that it has no jurisdiction over the case.
FCA cases are procedurally complex. The attorney you chose to hire should not only be an experienced litigator, but should have substantial experience pursuing FCA cases. For example, the Courts have established that an FCA claim must be pled with specificity to satisfy the pleading requirements of Fed.R.Civ.P. 9(b). Generally, what this requires is identification in the complaint of specific facts and events that take the allegations of the complaint from something that sounds like mere suspicion to something that gives the Court a reasonable basis to conclude a knowingly false claim has been made. In a health care fraud case, it is best to be able to reference specific patient examples, leaving out the patient’s name and other identifying information to protect the patient’s identity. (Click here to view the Fowler Amended Complaint, see ¶ ¶ 175-198).
Unfortunately, a great number of attorneys who advertise themselves as False Claims Act experts are not litigators, have never tried a case and are not competent to write a complaint that can withstand a motion to dismiss. Make sure the attorney you hire has substantial litigation and trial experience.
What Makes A Good FCA Case?
The best FCA cases are brought by an individual who has substantial, direct and independent knowledge of the defendant’s wrongful actions. It is important that you not only understand what the defendant has done, or is doing, but that you also have concrete evidence to back up your allegations. A proper complaint can only be pled with concrete facts and evidence. The initial stage of the case involves working with the government and convincing it that your case is worth investigating. You need strong evidence to convince the government to pursue your case.
In addition, the case must present with strong liability, substantial damages and the defendant must have the capacity to pay. Several years ago, I passed on pursuing a case that involved allegations of upcoding by an orthopedic department of a major hospital chain. Upcoding means that rather than use the appropriate CPT billing code for a given procedure, the defendant upcodes or chooses a higher billing code in order to inappropriately bill for a higher dollar amount. The government investigated the claim and reported back that although there was some upcoding, the pattern did not seem to be that egregious and on its best day the total damages were only $150,000. I recommended to the client that the case should be dropped, and we dismissed the case without ever serving the defendant. That does not mean every time the government chooses not to intervene that a given case should be dropped. I have aggressively pursued several cases the government chose not to pursue and recovered millions of dollars.