While the elements of a False Claims Act whistleblower claim may appear straightforward, there is nothing straightforward about this area of practice. The road for qui tam attorneys to successful recovery is littered with minefields that can cause even the best of cases to blow up. What follows is a qui tam attorney’s guide to some of the “do’s and don’ts” one should keep in mind in evaluating, filing and litigating False Claims Act whistleblower lawsuits.
1. Is it a Good Qui Tam Whistleblower Case?
The key to being a successful qui tam attorney is to identify cases that the government is likely to pursue.2 Fraud against the government is rampant; the government only intervenes in a fraction of filed qui tam whistleblower cases. While there are instances in which whistleblowers have successfully litigated cases after government declinations, pursuing a qui tam whistleblower lawsuit on behalf of the government without the government as a co-plaintiff is an expensive and arduous task with a low probability of success. Unfortunately, judges often assume that the government’s failure to intervene in your client’s qui tam case means that the case lacks merit. Obtaining information from the government in a non-intervened qui tam whistleblower case, including the communications involving government officials that may be a defense, or “claim” information necessary to prove damages, can be harder than capturing the witch’s broomstick for the wizard of Oz.
Thus, it is critical to keep in mind the criteria the government uses in evaluating your client’s qui tam whistleblower lawsuit and what steps you, as a qui tam lawyer, can take to satisfy that criteria. Assuming that you have a viable legal theory and the evidence to establish a prima facie case, the two key questions the Department of Justice is likely to focus on when analyzing your client’s qui tam lawsuit are: 1) What is the harm to the government; and 2) What evidence does your client have in her possession to corroborate her whistleblower claims?
Obviously, the amount of money the government is likely to recover is key. In many jurisdictions, absent other compelling factors, the government is unlikely to intervene in aqui tam lawsuit unless it appears that the recoverable actual damages (not including a multiplier or penalties) are in the millions. The assessment of damages by clients is often overly optimistic and unreliable. It is up to the qui tam attorney to establish a credible damage model, based on appropriate legal standards, that he or she can back up. Never exaggerate damages claims. The Department of Justice also is interested in those qui tam cases where the defendant’s conduct has or may cause serious non-monetary harm. Make sure you can support claims of harm with credible evidence.
The Department of Justice also will scrutinize the quality and quantity of the documentary evidence that your whistleblower client possesses in support of her allegations. The best documents are those that corroborate your client’s claims that a fraud was committed, that the fraud was intentional, and that it was widespread rather than a single instance of aberrant behavior.
The Department of Justice will consider whether there are witnesses that support your client’s whistleblower allegations. You should provide the government with the names and addresses of any such witnesses, particularly other former employees who are likely to cooperate in a government investigation. However, you should resist the temptation to interview witnesses and gather witness statements. If you contact witnesses, you run the risk that your actions may trigger others to consider filing a qui tam False Claims Act lawsuit. As explained below, if someone else files first, your client’s whistleblower lawsuit may be barred by the “first to file” provisions of the False Claims Act.
2. The First to File Conundrum
The False Claims Act provides that once a person has filed a qui tam lawsuit, no other person may file “a related action based on the facts underlying the pending action.” 31 U.S.C. §3730(b)(5). Unfortunately, a qui tam attorney evaluating a whistleblower case has no way of ascertaining if a “related action” is pending under seal. Nor do qui tam attorneys usually know if there is someone else who is preparing to file a similar case and may beat you to the courthouse. There are some basic precautions all qui tam attorneys should take to guard against the latter possibility. First, find out from your client as soon as possible whether she is aware of any other former employee or other individual who may be considering legal action. If this appears to be a risk, you should investigate and, if appropriate, file your qui tam case as expeditiously as possible. Second, you should caution your client not to say or do anything that may alert others to the fact that she is contemplating legal action. Third, as mentioned above, in investigating your client’s allegations, be careful not to tip off others who may have knowledge of the fraud. You also should be on high alert for any investigative activity by the government, such as the issuance of a subpoena or the initiation of an audit, although such activities may indicate that another qui tam case already has been filed.
3. Where to File
Your Qui Tam Complaint
A qui tam attorney’s decision on where to file her client’s whistleblower lawsuit often has a profound impact on the ultimate outcome of the qui tam case. Under the broad venue provisions of the False Claims Act, a qui tam action “may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred.” §3732(a). Cases in which the government intervenes often settle without litigation. In such cases, the qui tam attorney’s choice of forum usually is not challenged.
Most experienced qui tam attorneys base their venue choice primarily on their assessment of whether the U. S. Attorney’s Office in a particular district has the experience and resources to pursue their clients’ whistleblower cases and whether the district is receptive to working with qui tam attorneys and their whistleblower clients. The attitude of prosecutors toward qui tam cases vary from district to district. Some prosecutors are open to working with qui tam attorneys and their whistleblower clients in a collegial and cooperative fashion, especially in those cases where it is clear that working as a team will advance the interests of the government in pursuing the case. Other prosecutors view whistleblowers and their qui tam lawyers with hostility and there is little one can do to change that perception. Unfortunately, some of the U. S. Attorney’s Offices that are most receptive to and experienced in working with qui tam lawyers and their whistleblower clients may be overburdened with too many cases; as a result, your case may languish. In cases where a qui tam whistleblower complaint includes state as well as federal False Claims Act claims (e.g., Medicaid fraud cases), qui tam lawyers also should consider filing in a district where state prosecutors and agents may be eager to pursue the case.
4. Drafting the Qui Tam Complaint and Preparing a Disclosure Statement
In drafting the complaint, qui tam attorneys should keep three goals in mind. First, the qui tam complaint must meet the requirement under Federal Rules of Civil Procedure 9(b) that fraud must be pled with particularity. Many courts have been very demanding in evaluating whether a qui tam whistleblower has specified the “who, what, where, when and how” of the alleged fraud.3 In some jurisdictions, courts have held that the complaint must include evidence of the specific invoices that are alleged to constitute the false claims.4 If, as often is the case, your client does not possess evidence of particular billings, you should make every effort to set forth all the facts and circumstances from which one may conclude that claims were submitted to the government in connection with the fraud alleged in the complaint.
The second factor to bear in mind in drafting the qui tam whistleblower complaint is the possibility that other related complaints have been filed already or may be filed in the future. You may be better off in a “first to file” battle if your client’s complaint includes facts, defendants, and locations in which the fraud was committed, and particular types of fraudulent schemes and/or causes of actions under state False Claims Acts that are not included in the competing complaints. On the other hand, a qui tam lawyer will hurt his or her case by filing an overly broad “kitchen sink” complaint.
Finally, the Department of Justice will judge your qui tam case in large part on the basis of your client’s complaint. The whistleblower complaint must demonstrate that your client’s allegations are credible and that you have full mastery of the rules and regulations that are pertinent to the fraud claims in your client’s qui tam case. The latter is not an easy task. The governing regulations and guidance, particularly in the areas of health care and defense procurement fraud, can be complex and highly technical.
When a qui tam attorney commences the action, he or she must file the complaint under seal in federal district court. The qui tam lawyer must neither reveal the existence of the complaint (no press conference!) nor serve the complaint on the defendant; instead, counsel must serve it on the Attorney General and the U.S. Attorney’s Office in the district in which he or she has filed the case.
Along with service of the complaint, a qui tam attorney is required to provide the Department of Justice with substantially all material information and evidence that support the client’s allegations.5 This is not some bureaucratic requirement to be cursorily put together. Drafting a complete and effective disclosure statement may be the single most important thing a qui tam attorney can do to further his or her client’s whistleblower case. The disclosure statement should be the qui tam lawyer’s trial brief based on everything counsel and her whistleblower client have learned about the particular facts, and about the law. A qui tam attorney should organize any documentary evidence in the client’s possession in a manner that makes it easily accessible and understandable to the government and provide a written explanation of the nature of the documents and what they show.6
When preparing the disclosure statement, a qui tam attorney should bear in mind that although the attorney will argue that it is covered by the work product and common interest privileges (since qui tam counsel is sharing it only with the government, which is on the same side of the litigation), many courts have found that the statement is discoverable. For that reason, a qui tam lawyer may decide to include information that he or she is willing to risk having to disclose to the defendant, and to convey other, more sensitive information to the government at a later time. That being said, an effective disclosure may include some or all of the following:
A. The nature of the defendant’s scheme, including:
i. Examples of the varieties of schemes with an annotated summary of the documents you are producing.
ii. A detailed timeline.
iii. A detailed list of potential witnesses with background information, descriptions of their likely testimony,
and assessments of whether or not they are likely to cooperate with government agents.
iv. A description of who in the defendant’s operation knew the claim was false, and how the Relator
(whistleblower) knows this.
v. A review of the government program which has been defrauded, and the legal authority which shows that
the defendant’s claims are false, with the applicable regulations, contracts (if you have them), and program guidance
from the government, as well as any significant court interpretations of the provisions.
vi. A description of who the Relator (whistleblower) is, what she has done to expose the fraud, and how she can help
vii. A clear (and hopefully simple) explanation of how the false claim cost the government money. Claims which
do not result in a loss to the government may be actionable, but it would be unusual for the Justice Department
to take a particular interest in them.
viii. The estimated size of the false claims, and facts or clearly explained assumptions demonstrating how the estimate
ix. The qui tam lawyer’s suggestions about documents to subpoena, witnesses to interview, and what they
are likely to reveal.
5. How Qui Tam Attorneys and Their Clients Should Conduct Themselves During the Litigation
It is important to remember that until you have demonstrated to the government lawyers that you are a reliable and trustworthy partner, you need to establish your credibility and value, regardless of how experienced you are in other aspects of the law. Here are some things you, as a qui tam attorney, can do that will help:
A. Focus on making the government’s job easier – not just on making demands. Offer to review documents or brief issues, and look for opportunities, however small, to help the government team.
B. You do not know what else the prosecutors or the agents have on their plates, or what resource limitations they face, so do not be quick to insist that your case is urgent or “must” have more attention – unless you know the defendant’s conduct is endangering lives.
C. Your credibility and your client’s credibility are your biggest entrees. Make sure your client is comfortable stating that she doesn’t know things unless she really knows them. Make sure any claims about damages or the defendant’s conduct are backed up with careful evidence and analysis.
D. Be prepared to sign an information-sharing “joint prosecution” agreement. The Department of Justice makes signing such an agreement a precondition for allowing qui tam attorneys and their clients to review documents the government obtains. The agreement (which will be one-sided and probably not subject to negotiation) will require your client to agree not to use government-obtained documents to file a new case or expand her present one.
E. Prepare your client for some of the things that are likely to occur during the qui tam lawsuit.
i. Duration. Qui tam cases often take many years. Even uncomplicated whistleblower cases can easily take four or more years to resolve. Cases involving multiple issues and/or multiple jurisdictions often take longer. The whistleblower client who has been prepared for this at the outset of the case is more likely to tolerate the delay.
ii. Willingness to Commit Time. Whistleblowers and their qui tam lawyers may need to devote substantial time to reviewing documents which they are far better able to understand than you or the agents (at least initially) are. The whistleblower who thinks that she has done her part by sounding the alarm and that it is now the “government’s job” is likely to be disappointed.
iii. Willingness to Further the Investigation. If your client is still employed with the defendant, she may be asked to wear a wire. Discuss this with her beforehand.
6. What to Do if the Qui Tam Case is Declined
The hard fact is that three out of four qui tam cases are declined. Qui tam attorneys need to plan in advance what they will do if their clients’ case is among them. Consider that the government may be right in declining to intervene, either because the conduct was actually excused by the government, the case is worth a lot less than you had thought, or proving the fraud will take too much time and effort, given the sums at stake. Many judges wrongly conclude that any government declination is a comment on the merits of the case. It is not necessarily so. The government may simply be overworked.7
It is smart to make plans that will give you (and your client) a maximum degree of flexibility. First, draft your qui tam engagement letter so it is clear that you have the freedom not to continue with the case in the face of a government declination. No matter how strongly you believe in the qui tam case when you take it on, the possibility that new facts may come to light, or that the law may change over the course of a multi-year investigation, make it important for you to preserve the option to withdraw from the lawsuit.
Second, plan to protect your whistleblower client. Department of Justice policy does not support efforts to keep cases sealed even if you dismiss them in the face of a government declination. If warranted you should consider filing the qui tam complaint with your client as “Jane Doe.” Some Circuits have explicit standards for proceeding anonymously.8 As a practical matter courts may not care that a case has been filed anonymously – unless the case turns into active litigation. (The identity of your client will of course have to be disclosed to the government as part of your disclosure statement.)
Third, think through any special problems you may have if you represent multiple Relators (whistleblowers). One whistleblower Relator may want to dismiss the case while the other remains eager to proceed. This raises conflict issues, particularly if the dismissing client will no longer voluntarily testify.
Fourth, if you are going to proceed, use the time after you learn of government declination, but before serving the qui tam complaint, to amend the complaint in ways that might buttress it against a 9(b) attack.
Fifth, develop a realistic litigation budget. Assume that you will face pretrial motions to dismiss no matter how detailed your qui tam complaint is. Assume nothing will be conceded and that you will face a defendant which assumes you do not have the resources to go the distance. Qui tam litigation is very much a team sport, so do not hesitate to form co-counsel arrangements with other qui tam attorneys to share the risk as well as the reward.
7. Settlement Considerations for Qui Tam Attorneys and Their Clients
Whenever the government does not join in a qui tam action, any suit that includes a whistleblower retaliation claim raises the question of how to allocate the settlement between the false claims and the whistleblower retaliation components of the case. Both prudence and a sense of propriety argue against allocating settlement proceeds in a way which cannot be justified to the government. This is a very real danger where the whistleblower retains 100% of the retaliation recovery but only 25-30% of the false claims recovery. Moreover, it is unseemly when a whistleblower – someone who is supposed to be protecting the public fisc – appears to be joining in an effort to loot it.9 The Sixth Circuit has held that the government, even after declining to join a qui tam suit, retains an absolute veto power over a proposed settlement in the action.10 In short, qui tam lawyers who try to creatively structure a settlement to deprive the United States of its fair share do so at their peril.11
1 The federal False Claims Act, 31 U.S.C. §§ 3729-33, which provides the statutory basis for“qui tam” cases, can be found in Appendix A to this article. The qui tam provisions are contained in §3730(b).
2 Section §3730(b)(4) provides that after conducting its investigation, the government may elect to either intervene in and proceed with the qui tam action or decline to take over the case.
3 United States ex rel Karvelas v. Melrose-Wakefield Hospital 360 F.3d 220, 232 (1st. Cir. 2004).
4 United States ex rel Clausen v. Laboratory Corporation of America 290 F.3d. 1301 (11th Cir. 2002)
5 31 U.S. §3730(b)(2)
6 In selecting the documents to be provided to the government, be careful not to include any documents that may be covered by the defendant’s attorney-client privilege. Otherwise, the Department of Justice attorneys who have reviewed such privileged material are likely to remove themselves from the case. (For similar reasons, you should tell your client not to give you any documents that may be covered by the defendant’s attorney-client privilege.)
7 “There is no reason to presume that a decision by the Justice Department not to assume control of the suit is a commentary on its merits. The Justice Department may have myriad reasons for permitting the private suit to go forward including limited prosecutorial resources and confidence in the Relator’s attorney.” United States ex rel Chandler v. Cook County, Ill., 277 F.3d 969, 974 n.5 (7th Cir. 2002).
8 Does I – XXIII v. Advanced Textile Corp., 214 F.3d 1058 (9th Cir. 2000)
9 In United States ex rel Killingsworth v. Northrop 25. F.3d 715 (9th Cir. 1994) the whistleblower brought a retaliation charge along with his false claims action. In settling the case for $4.2 million, he sought to allocate $2.7 million to his employment claim, and only $1.5 million to the actual false claim. The Ninth Circuit afforded the government the right to a hearing on whether the settlement, including the allocation, was fair and reasonable.
10 United States v. Health Possibilities P.S.C. 207 F.3d 335, 339 – 341 (6th Cir. 2000.)
11See United States ex rel Gibeault v. Texas Instruments 104 F.3d 276 (9th Cir. 1996) (ordering Relator’s counsel to repay to the government money that should have been the government’s share of a recovery).