It’s Time for the Supreme Court To Stop Fueling False Claims Whistle-Blower SuitsMay 2, 2019
The federal False Claims Act continues to lure prospective “qui tam relators” (i.e., whistle blowers ), and their attorneys, with a gleaming pot of gold. To reach the end of the rainbow, a qui tam relator must file, on behalf of the United States, a suit alleging that a government contractor, Medicare/Medicaid provider, or other federal funds recipient has submitted false or fraudulent claims for federal payments or reimbursements. If the relator, with or without the benefit of Department of Justice intervention, succeeds in pressuring the defendant to settle, or goes to trial and wins a judgment, he or she will take home between 15% and 30% of the proceeds.
My article, Reining In the Qui Tam Bar, published by the Professional Services Council in the Spring 2019 edition of its Service Contractor magazine, highlights the latest Justice Department qui tam statistics. (Click button above to download pdf copy.) For example, during FY 2018, qui tam relator awards in False Claims Act suits against Department of Defense contractors added up to more than $14 million. During the past 31 years, qui tam relator awards in such suits have been almost $600 million out of a total $3.3 billion paid by DoD contractors.
As my article explains, the Supreme Court recently has been taking a broad view of the False Claims Act qui tam provisions. That in turn has emboldened the qui tam plaintiffs’ bar to continue to push the false claims envelope, especially since qui tam suits are often settled rather than litigated. For example, the Supreme Court held in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), that False Claims Act liability can be imposed where a defendant has submitted a payment claim that, merely by implication, fails to disclose noncompliance with any of myriad statutory, regulatory, or contractual requirements that are “material” to the government’s payment decision. The Supreme Court left it to lower courts to figure out the meaning of “materiality.”
Prior to the end of June the Court will be deciding another qui tam case, Cochise Consultancy, Inc. and The Parsons Corporation v. United States ex rel. Hunt, No. 18-315. The question presented is whether whistle blowers can bypass the statutory 6-year statute of limitations (which begins to run when the alleged fraud is committed) , and instead, delay filing suit for up to 10 years under an extended limitations period enacted for the benefit of the government — even where the government ultimately assess a relator’s allegations and then decides not to intervene. Hopefully, the Supreme Court will strictly enforce the 6-year statute of limitations rather than enabling prospective whistle blowers to game the qui tam system by postponing when they inform the government of alleged fraud.