Qui tam and the False Claims Act –
Frequently Asked Questions

There is no requirement in the False Claims Act to report first to the corporate Compliance Department before filing a case. However, an internal report serves to demonstrate the whistleblower’s sincere desire to correct wrongdoing and enhances the whistleblower’s credibility. Of course, there may be circumstances in which the whistleblower reasonably fears retaliation, or where management is part of the problem to the extent that an internal report would be futile, but most qui tam plaintiffs who were ultimately successful in their cases reported internally first. A 2010 study in the New England Journal of Medicine examined the behaviors of qui tam whistleblowers who won large False Claims Act judgments against pharmaceutical companies. All of the 18 individuals who were employees of the defendant corporation had first reported to their employers. For these individuals, the compliance function didn’t work. It didn’t succeed in stopping the misconduct.

Under the False Claims Act, the statute of limitations — the time limit for filing a case — is the longer of six years from when the fraud is committed, or three years after the government knew, or should have known, about the violation, but no more than 10 years after the violation. However, the qui tam law is designed to encourage the prompt reporting of fraud, and unreasonable delay in filing can result in a case being dismissed if a similar case has already been filed.

If more than one qui tam plaintiff files the same case, according to a strict interpretation of the law, only the first to file survives. The False Claims Act bars any qui tam case that is “based on the facts underlying” an existing action. The courts have interpreted “based on” as meaning “similar to”, so that a later filed qui tam case that states the same essential facts or the same elements of the fraud as an existing case will be barred. The same goes for a civil case that has already been filed by the government — a similar, later filed qui tam action is barred. This “first to file” rule is intended to encourage the prompt reporting of fraud.

For the most part, this rule applies even if the person who is not first to file has more detailed knowledge of the fraud and provides the government with more information and assistance. However, if the first-filed case is defective in one or more technical ways (for example, if it is overly broad or purely speculative), subsequently filed cases may not be barred. The rationale is that opportunistic plaintiffs with little useful information should not be allowed to displace legitimate whistleblowers by filing “placeholder” cases.

At the time of filing, it is impossible to know whether a similar case has already been filed, because qui tam cases are filed under seal and not available for public inspection. Only the government knows what cases have been filed, and the government decides when and in what circumstances to reveal the existence of “competing” qui tam plaintiffs to each other. When this occurs, whistleblower lawyers often reach sharing agreements on behalf of their clients to avoid disputes. The facts underlying qui tam cases are complex and two or more cases are rarely identical. Often, there are factual variations so that cases are complementary rather than competing.

The “first-to-file” rule means that you should not delay reporting, but neither should you rush to judgment or make a decision without carefully weighing the impact on you, your career and family. Many qui tam plaintiffs think long and hard about whether a qui tam case is the right thing to do and it is often a last resort after attempts to correct the problem internally have failed.

The qui tam law is designed to encourage individuals with inside knowledge of fraud on the government to come forward and report it. Therefore, the FCA prohibits qui tam cases that rely solely or primarily on information that is substantially the same as information in the public domain, unless the qui tam plaintiff is an “original source” of the information. An “original source” is defined as someone who gave the information to the government before the public disclosure, or who has information that is “independent of and materially adds” to the publicly disclosed information, and who gave the information to the government before filing the qui tam case.

This does not mean that public information has no place in a qui tam action. For example, information in Medicare’s Open Payments database can be useful to confirm a whistleblower’s inside information about misconduct by physicians and other health care providers. New York has a more restrictive definition of what constitutes a public disclosure. For example, in New York, information obtained from public sources under freedom of information laws (federal or state) is not considered to be a public disclosure. Public information is often used to supplement a whistleblower’s non-public information and a case-by-case evaluation should be made.

After a qui tam complaint is filed in court, a copy of the complaint is delivered, together with a “disclosure statement” containing all facts material to the action, to the Department of Justice. The government then conducts an investigation, which may take several years. At the end of that period, the government decides whether to “intervene in,” (or join) the case. This is often followed by a settlement with the defendant, but it may also result in a litigation of the case conducted by the government alongside the whistleblower and their counsel.

If the government decides not to join, the qui tam plaintiff may pursue the action alone, or the plaintiff may dismiss the case with the government’s consent. A declination by the government does not equate to a vote of no-confidence on the merits. Sometimes the government declines because of resource constraints or other considerations wholly unrelated to the viability of the claims. If the plaintiff elects to go forward, the government has the right to intervene at a later date upon a showing to the court of good cause.

Statistically, a successful result is more likely when the government joins the case. Since 1986, $45.6 billion has been recovered in qui tam cases that the government joined. $4.7 billion has been recovered in cases that were pursued by the qui tam plaintiff after the government declined to join. That said, these figures can be misleading given that, at times, the government intervenes in a declined case just before the case is resolved.

A professional and effective presentation of the case to the government at the outset — both written and oral — is crucial to persuading the government that the case should be at the top of their list of priorities. The complaint should be of the highest quality, the disclosure statement should be detailed, sophisticated and meticulously prepared, and the legal analysis should be thorough and incisive. The skill and reputation of the attorneys who represent the qui tam plaintiff are important factors in the ultimate success of a qui tam case.

You should seek a qui tam attorney with well-established credentials and success in the qui tam practice area, and ask about previous qui tam cases they have handled.

Qui tam cases are filed in court under seal and are not initially served on the defendant. The purpose of filing the case under seal is to give the government an opportunity to investigate the allegations without the defendant’s knowledge. While the statutory period of time for the case to be under seal is 60 days, the government is allowed to ask the court to extend this period and almost always does so. Complex qui tam cases, particularly those involving investigation of criminal conduct in addition to the civil violations alleged in the case, frequently are under seal for several years. Qui tam plaintiffs and their attorneys often work together with the government during the investigation reviewing documents, giving evidence and providing other support.

Still, it can be a frustrating and anxious time awaiting the outcome of the government’s investigation. The best advice one can give a qui tam plaintiff is: “Don’t expect immediate results and don’t live your life around the case.”

The False Claims Act provides for a qui tam reward of 15-25% if the government intervenes in, or joins, the case, and 25-30% if the government declines to intervene and the plaintiff pursues the action alone. In special circumstances, lower percentages may apply. There is no monetary cap on the amount a qui tam whistleblower can receive.

The False Claims Act does not provide much guidance about what determines the size of the qui tam reward, stating only that it depends on the extent to which the qui tam plaintiff “substantially contributed” to the prosecution of the case. The average reward in an intervened case is around 16%, and usually is resolved by negotiation between the qui tam plaintiff’s lawyers and the Department of Justice. If the DOJ and the plaintiff cannot agree, the plaintiff can apply to the court for a ruling. Typically, the DOJ seeks to preserve as much of the recovery for the government as possible, and so offers of percentages at or near the 25% maximum are rare.

The DOJ has developed a series of Guidelines for government attorneys to follow when deciding what percentage to offer successful qui tam plaintiffs. These guidelines do not have binding authority in court, but they provide a list of the factors that the government regards as relevant and that are often considered by courts. Factors that will tend to increase the whistleblower’s share include the promptness with which the plaintiff reported the fraud, whether the plaintiff tried to stop it, the extent of the plaintiff’s knowledge of the fraud and the assistance provided to the government by the plaintiff and their counsel. Decreasing factors include the relator’s involvement in the fraud, a substantial effort on the part of the government to develop the case, and delay in reporting the fraud.

Since 1986, qui tam awards have exceeded $8 billion.

Under the False Claims Act, the court is authorized to reduce the reward of a qui tam plaintiff who “planned and initiated” the wrongdoing. If a qui tam plaintiff is criminally convicted for conduct arising from his or her role in the fraud alleged in the qui tam case, that person must be dismissed from the case and will not receive any share of the proceeds.