GUARDING THE GUARDIANS: ACCOUNTABILITY IN QUI TAM LITIGATION UNDER THE CIVIL FALSE CLAIMS ACT

Sean Elameto*

I. Introduction..........................................................................................................................1II. The Eruption of Qui Tam Suits............................................................................................5

A. Public Disclosure Bar and Original Source Exception................................................11B. Weakening of FRCP 9(b) “Particularity” Requirement..............................................14C. Looking Ahead: An All-Purpose Anti-Fraud Statute.................................................18

III. The Festering Qui Tam Controversy.................................................................................20IV. Government Attorney Accountability...............................................................................25

A. The Government’s Role in Qui Tam Litigation...........................................................26B. Measuring Before Managing.......................................................................................29C. Forcing the Government’s Hand.................................................................................38D. Guiding Prosecutorial Discretion................................................................................45

V. Qui Tam Plaintiff Attorney Accountability.......................................................................51A. The Rise of the Qui Tam Bar.......................................................................................53B. Private Securities Litigation Parallel...........................................................................57C. FRCP 23(g) and Beyond: A Model for Qualifying Plaintiff Attorneys.....................60D. Amending § 3730(d)(4) to Include Plaintiff Attorneys...............................................63

VI. Prohibiting Pro Se Litigation When the DOJ Declines Intervention................................68VII. Conclusion.........................................................................................................................72

____________________________________________________

Major Sean Elameto currently serves in the U.S. Air Force Judge Advocate General’s Corps as a Commercial Law and Litigation Attorney. The author thanks Dean Jessica Tillipman and Professor Karen Thornton for providing invaluable insight and expert direction during the writing of this article. The author also thanks his wife Gretchen Elameto and his mother Rosario Elameto for their boundless inspiration and never-ending love and support. This paper was submitted in partial satisfaction of the requirements for the degree of Master of Laws in Government Contracts and Procurement Law at The George Washington University Law School. The views expressed in this article are solely those of the author and do not reflect the official policy or position of the United States Air Force, Department of Defense or U.S. Government.

____________________________________________________

I. Introduction

The Civil False Claims Act (“FCA”)1 can levy devastating impacts on any company

found to have violated its provisions.2 For example, in December 2000, HCA-The Healthcare

Company settled its FCA case with the federal government and forfeited $745 million,3and only

three years later, it paid another $631 million as a result of another FCA action.4 Under similar

circumstances, in July 2006, Tenet Healthcare forked over a whopping $900 million to settle its

FCA suit.5 In January 2008, the federal government received $650 million from Merck6and a

record $1 billion from Pfizer in September 2009.7 One need only glance at this sampling of the

1 See generally Robert F. Hall & Robert J. Berlin, When You Have a Hammer Everything Looks Like a Nail: Misapplication of the False Claims Act to Off-Label Promotion, 61 FOOD & DRUG L.J. 653, 653 (2006) (“Together with related enforcement tools, the risks and ramifications of FCA litigation have forced multinational, multibillion dollar companies to settle such claims at almost any cost.”).

2 See Press Release, U.S. Dep’t of Justice, Largest Health Care Fraud Case in U.S. History Settled: HCA Investigation Nets Record Total of $1.7 Billion (June 26, 2003), (on file with author), available at http://www.usdoj.gov/opa/pr/2003/June/03_civ_386.htm.

3 See D. Jeffrey Campbell, Frank Fazio, & Steven S. Vahidi, Conning the IADC Newsletters, 73 DEF. COUNS. J. 91, 92 (2006); Matthew S. Brockmeier, Article, Pulling the Plug on Health Care Fraud: The False Claims Act After Rockwell and Allison Engine, 12 DEPAUL J. HEALTH CARE L. 277, 280 (2009).

4 See Michael J. Vanselow & Ann M. Bildtsen, Healthcare Law Enforcement “Perfect Storm”, 22 HEALTH LAW. 18, 18 (2010); Press Release, U.S. Dep’t of Justice, Justice Department Announces Largest Health Care Fraud Settlement in Its History (Sept. 2, 2009), (on file with author), available at http://www.hhs.gov/news/press/2009pres/09/20090902a.html. All these settlements and a lot more can be seen by doing a simple internet search for the False Claims Act. See, e.g., Top 20 Cases, TAXPAYER AGAINST FRAUD EDUC. FUND, http://www.taf.org/top20.htm (last visited May 20, 2011).

5 See 31 U.S.C. § 3729 (2010); Justin P. Tschoepe, A Fraud Against One is Apparently a Fraud Against All: The Fraud Enforcement and Recovery Act’s Unprecedented Expansion of Liability Under the False Claims Act, 47 HOUS. L. REV. 741, 743 (2010).

6 31 U.S.C. § 3729(a)(1).

7 See United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 15-16 (1st Cir. 2009). Under the FCA, a qui tam action allows a private citizen to sue on behalf of the government and receive a portion of any recoveries, even though the citizen sustained no direct

1

gargantuan recoveries possible under the FCA to appreciate why it serves as the federal

government’s “weapon of choice” for combating fraud.8 With little doubt, government

contractors must be well aware of the FCA’s existence and its extensive reach.

The FCA prohibits the knowing submission, or the causing of another person or entity to

submit, false claims for payment of government funds.9 It further prohibits a person from

knowingly making, using, or causing to be made or used, false records or statements for payment

or approval.10 The FCA also empowers whistleblowers, known as relators, to file qui tam

lawsuits on behalf of the government against those who defraud the government.11 This

controversial qui tam mechanism allows successful relators to receive between fifteen to thirty

percent of the government’s total financial recovery,12 a “bounty” that could easily amount to

tens of millions of dollars.13 The FCA authorizes the Department of Justice (“DOJ”) to intervene

harm from the alleged fraud. See 31 U.S.C. § 3730(b), (d); Tipton F. McCubbins & Tara I. Fitzgerald, As False Claim Penalties Mount, Defendants Scramble for Answers Qui Tam Liability, 31 U.S.C. § 3729 Et Seq., 62 PUB. LAW. 103, 104 (2006). The private person initiating the qui tam action is known as a relator.

8 See 31 U.S.C. § 3730(d).

9 See, e.g., United States ex rel. Franklin v. Pfizer Inc., No. 96-11651-PBS (D. Mass. 2004) (relator award of $24,640,000 per settlement agreement); United States ex rel. Alcorn v. Schering-Plough Corp., No. 98-5688 (E.D. Penn. 2004) (relator award of $31,662,173). For a listing of the top twenty FCA recoveries, see Top 20 Cases, supra note 7.

10 See 31 U.S.C. § 3730(c). The government is also not bound by any action by the relator. Id. § 3730(c)(1).

11 See id. § 3730(b)(4)(B).

12 See id. § 3730(c)(2)(A). The government may also settle the suit over the relator’s objection. See id. § 3730(c)(2)(B).

13 See generally Joel M. Androphy & Mark A. Correro, Whistleblower and Federal Qui Tam Litigation – Suing the Corporation for Fraud, 45 S. TEX. L. REV. 23, 28 (2003) (stating that these amendments resulted in a sharp increase in the number of qui tam actions filed and recovery amounts).

2

in a qui tam action, whereupon it assumes primary prosecutorial responsibility,14 but the relator

may proceed with an action whenever the DOJ elects not to intervene15 or move for dismissal.16

Though the law has existed for nearly a hundred and fifty years, it did not become a high-

paying public-private enforcement mechanism until after relatively recent amendments.17 The

recent amendments also stimulated a rapid growth of a private qui tam bar,18 and, coupled with

minimal judicial and regulatory policing, the amendments threw the floodgates wide open for qui

tam lawsuits.19 This article proposes modest measures for handling the perceived systemic

problem of wasteful or abusive non-intervened qui tam litigation.20 First, it suggests increasing

transparency over key segments of the qui tam process as well as the DOJ’s intervention

14 See generally Erik Cummins, There’s Gold in False Claims, CALIFORNIA LAWYER (June 2010), http://www.callawyer.com/story.cfm?eid=909871&evid=1 (stating that attendance for attorneys at the annual Taxpayers Against Fraud convention has increased by more than five times over the past ten years).

15 See generally United States ex rel. Stevens v. Vermont Agency of Natural Res., 162 F.3d 195, 222 (2d Cir. 1998) (stating that single suits have been reported to reap tens of millions in rewards and the potential for enormous recoveries has “spawned the growth of a ‘qui tam bar’ and a shift in emphasis from defense-contract cases to healthcare related ones”), rev’d on other grounds, 529 U.S. 765 (2000); see also John T. Boese & Beth C. McClain, Why Thompson is Wrong: Misuse of the False Claims Act to Enforce the Anti-Kickback Act, 51 ALA. L. REV. 1, 49 (1999) (“The FCA requires the government to affirmatively move for the dismissal of meritless suits, a process that requires a modest commitment of prosecutorial resources. To decline intervention, however, the DOJ may simply file a notice of declination under § 3730(3)(4)(B).”).

16 See infra Sections IV-VI; see generally John C. Coffee, Jr., Rescuing the Private Attorney General: Why the Model of the Lawyer as Bounty Hunter is Not Working, 42 MD. L. REV. 215, 263 (1983) (“‘Who will guard the guardian’ is an ancient problem, which applies with special force to the guardian who is motivated by profit. If we are to rely seriously on private enforcement of law, some means must be found to hold the private attorney general accountable.”).

17 See infra Section IV.

18 See infra Section V.C.

19 See infra Section V.D.

20 See infra Section VI.

3

decisions to show the extent to which the DOJ’s choices correlate, if at all, with wasteful

litigation.21 Second, it advocates changes aimed at ensuring qui tam plaintiff attorney

competence in pursuing qui tam actions beginning with a scheme similar to Federal Rule of Civil

Procedure 23(g).22 Third, it recommends exposing plaintiff attorneys to the penalties of 31

U.S.C. § 3730(d)(4) as they are in the best position to determine whether a case is or has become

baseless.23 Finally, the article suggests the elimination of pro se litigation when the government

declines intervention to further reduce the possibility of wasteful litigation.24

Laying the foundation for a discussion of the FCA’s evolution, Section II

provides a brief historical overview of the law and the initial rarity of its usage. It

discusses the FCA’s progression up until its recent 2010 amendments, focusing on the

major congressional amendments since 1986 and a few judicial interpretations that gave

the FCA additional life, all of which helped invigorate the growing surge of FCA

litigation. Section III lays out the chronic issue of how non-intervened qui tam cases,

eighty-six percent of which ended in dismissals, have consistently made minor recoveries

and yet continue to outnumber intervened cases four-to-one. Section IV presents the

need for improved transparency over qui tam litigation, particularly the government’s

intervention-related decision-making, to better diagnose and treat any systemic

21 See United States ex rel. Newsham v. Lockheed Missiles & Space Co., 722 F. Supp. 607, 609 (N.D. Cal. 1989), quoting Robert Tomes, Fortunes of War, 29 Harper’s Monthly Mag. 228 (1864).

22 3 WILLIAM BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND *160.

23 See Rockwell Int’l Corp. v. United States, 549 U.S. 457, 463 n.2 (2003) (translating Latin expression). Such an action is called a qui tam action “because the plaintiff states that he sues as well for the state as for himself”. BLACK’S LAW DICTIONARY 1251 (6th ed. 1990).

24 See Nathan D. Sturycz, Comment, The King and I?: An Examination of the Interest Qui Tam Relators Represent and the Implications for Future False Claims Act Litigation, 28 ST. LOUIS U. PUB. L. REV. 459, 460 (2009).

4

incongruities existing in the FCA’s current design. Sections V discusses proposed

measures for ensuring the accountability of qui tam plaintiff attorneys, while Section VI

argues for the prohibition of pro se litigation in cases where the government declines

intervention.

II. The Eruption of Qui Tam Suits

For sugar [the government] often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental failures of sanguine inventors, or the refuse of shops and foreign armories.25

The phrase “qui tam” derives from the Latin phrase “qui tam pro domino rege quam pro

se ipso in hac parte sequitur,”26 a mouthful which translates to “who sues on behalf of the King

as well as for himself.”27 A qui tam action is one filed on behalf of the government by a private

citizen, known officially as a “relator” under the FCA.28 At the urging of President Lincoln, and

in response to the extensive fraud against the government by unscrupulous army contractors who

25 See Daniel C. Lumm, Comment, The 2009 “Clarifications” to the False Claims Act of 1863: The All-Purpose Antifraud Statute with the Fun Qui Tam Twist, 45 WAKE FOREST L. REV. 527, 528-29 (2010); Newsham, 722 F. Supp. at 609, quoting Robert Tomes, Fortunes of War, 29 Harper’s Monthly Mag. 228 (1864). From 1860 to 1863, the Civil War increased government spending dramatically and unscrupulous businessmen, viewing the growing federal budget as a font to be plundered, sold to the government decrepit horses and mules, weapons that would not fire, rancid rations, and phantom supplies. See American Civil Liberties Union v. Holder, No. 09-2086, 2011 WL 1108252, at*1 (4th Cir. 2011). In response, Congress enacted the FCA. Id.

26 See Rainwater v. United States, 356 U.S. 590, 592 n.8 (1958); Johnson v. Univ. of Rochester Med. Ctr., 686 F. Supp. 2d 259, 264 (W.D.N.Y. 2010).

27 See Patricia Meador & Elizabeth S. Warren, Article, The False Claims Act: A Civil War Relic Evolves into a Modern Weapon, 65 TENN. L. REV. 455, 459 (1998).

28 See Act of December 23, 1943, ch. 377, 57 Stat. 608, codified as amended at 31 U.S.C. §§ 232-235 (1946). The most notorious of these “parasitic” lawsuits that essentially incited the 1943 amendments was United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943). In Marcus, the relator who pled nolo contendere to criminal collusive bidding on government contracts subsequently filed a qui tam action by using the information from the government’s indictment in his prior criminal case. Marcus, 317 U.S. at 537. The relator received a significant share of the $315,000 verdict and judgment. Id. at 540.

5

sold the Union Army faulty war supplies during the Civil War, including broken rifles, rancid

food, useless ammunition, and lame horses and mules, Congress enacted the False Claims Act in

1863, exploiting the effectiveness of relators to suppress such fraud.29 The FCA provided both

criminal and civil penalties and contained a qui tam provision that sought to enlist the resources

of private citizens, often referred to as “private attorneys general,” to augment the government’s

anti-fraud enforcement efforts.30 As an incentive for exposing and prosecuting fraud

perpetrated on the government, the FCA permitted whistleblowers to collect fifty percent of the

damages.31 Over time, however, Congress modified the FCA to respond to the perceived abuses

of opportunistic or parasitic lawsuits.32

In an attempt to curb these suits, Congress blunted the FCA’s edge in 194333 by

making a number of dramatic changes to the FCA.34 After the 1943 amendments, qui tam

29 See United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649-50 (D.C. Cir. 1994).

30 See Act of December 23, 1943, ch. 377, 57 Stat. 608, codified as amended at 31 U.S.C. §§ 232-235 (1946); United States v. Pittman, 151 F.2d 851, 853-54 (5th Cir. 1945) (discussing history of 1943 amendments).

31 See Todd J. Canni, Who’s Making False Claims, the Qui Tam Plaintiff or the Government Contractor? A Proposal to Amend the False Claims Act to Require that All Qui Tam Plaintiffs Possess Direct Knowledge, 37 PUB. CONT. L.J. 1, 7 (2007) (stating that 1943 amendments “effectively shut the door” on qui tam suits).

32 See United States ex rel. State of Wisconsin (Dept. of Health and Soc. Serv.) v. Dean, 729 F.2d 1100 (7th Cir. 1984).

33 See generally Gary W. Thompson, A Critical Analysis of Restrictive Interpretations Under the False Claims Act Public Disclosure Bar: Reopening the Qui Tam Door, 27 PUB. CONT. L.J. 669, 687 (1998) (discussing the legislative history behind the 1986 amendments and the Senate’s concern that whistleblowers lacked incentive to file suit because they feared retaliation by their employers).

34 See Act of December 23, 1943, at §§ 232-235. In fact, the right of action against whistleblower retaliation was not implemented until the FCA was amended again in 1986. See 31 U.S.C. § 3730(h) (2010).

6

actions under the FCA were rarely viable.35 In addition, courts had interpreted the 1943

jurisdictional bar to preclude all qui tam actions involving information already known to

the government, even when the qui tam relator was the source of that information.36

Another setback was that the risk of whistleblowing became even riskier as individuals

faced losing their employment and had no guarantee that they would be rewarded if they

prevailed.37 The 1943 version of the FCA included no right of action to protect against

whistleblower retaliation.38 Furthermore, if the government intervened in the case,

relators lost all stake in the outcome of litigation that the government took over.39 As a

result, the number of cases from 1943 to 1986 brought under the FCA averaged about six

a year.40

Government studies in the early to mid-1980s revealed the existence of widespread

waste, if not fraud, including blatant and extreme cases involving $600 toilet seats, $748 pliers,

and $7,000 coffeepots, a reality that contributed to Congress once again making sweeping

35 See Robert L. Vogel, The Public Disclosure Bar Against Qui Tam Suits, 24 PUB. CONT. L.J. 477, 481 (1995).

36 See Elleta Sangrey Callahan & Terry Morehead Dworkin, Do Good and Get Rich: Financial Incentives for Whistleblowing and the False Claims Act, 37 VILL. L. REV. 273, 318 (1992); Steve France, The Private War on Pentagon Fraud, 76 A.B.A. J. 46, 48 (1990).

37 See Barry M. Landy, Deterring Fraud to Increase Public Confidence: Why Congress Should Allow Public Employees to File Qui Tam Lawsuits, 94 MINN. L. REV. 1239, 1239 (2010).

38 See U.S. GOV’T ACCOUNTABILITY OFFICE, AFMD-81-73, FRAUD IN GOVERNMENT PROGRAMS: --HOW EXTENSIVE IS IT? --HOW CAN IT BE CONTROLLED? iv (1981).

39 See infra Section II.

40 See Pamela H. Bucy, Private Justice, 76 S. CAL. L. REV. 1, 61-62 (2002) (describing the difficulties of being a whistleblower, including job loss, ostracism from friends, co-workers, and family, stress-related physical and psychological issues, and the pain of severely disrupting one’s own life and the lives of colleagues).

7

amendments to the FCA.41 Because most fraud was believed to have gone undetected,42

Congress attempted to increase incentives,43 while simultaneously eliminating disincentives, for

potential whistleblowers to bring fraudulent activities to light.44 Beginning in 1986, Congress

made substantial amendments to the FCA with an eye towards encouraging more whistleblowers

and relators to expose and prosecute those who defraud the government.45 Congress eliminated

the uncertainty of rewards given purely at the discretion of the courts, while adjusting the

rewards to reflect relators’ contributions.46 The amendments also created an important protection 41 See Laura Perry & Stephanie Salek, False Statements and False Claims, 45 Am. Crim. L. Rev. 465, 482, 495 (2008).

42 See 31 U.S.C. § 3730(d) (2010); see also J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam Legislation, 78 N.C. L. REV. 539, 560-62 (2000) (comparing the 1943 changes to the FCA where the informer had no assurance of a fixed minimum recovery with the relator rewards as determined by the 1986 amendments to the Act).

43 See 31 U.S.C. § 3730(h).

44 See 31 U.S.C. § 3729(a)(1).

45 See, e.g., S. REP. NO. 111-10, at 3-4 (2009), reprinted in 2009 U.S.C.C.A.N. 430, 432, (“The effectiveness of the False Claims Act has recently been undermined by court decisions which limit the scope of the law and, in some cases, allow subcontractors paid with Government money to escape responsibility for proven frauds.”); see generally Jeffrey L. Handwerken, Matthew H. Solomson, Mahnu V. Davar & Kathleen H. Harne, Congress Declares Checkmate: How the Fraud Enforcement and Recovery Act of 2009 Strengthens the Civil False Claims Act and Counters the Courts, 5 J. BUS. & TECH. L. 295, 297 (2010) (“FERA reflects the Senate’s deep disappointment with several prominent, relatively recent court decisions that limited the scope of the FCA.”).

46 See, e.g., Richard Doan, The False Claims Act and the Eroding Scienter in Healthcare Fraud Litigation, 20 ANNALS HEALTH L. 49, 59 (2011) (stating that Congress passed the Deficit Reduction Act (DRA) to create “a monetary incentive for states to enact their own false claims legislation to battle Medicaid fraud”); Matthew Titolo, Retroactivity and the Fraud Enforcement and Recovery Act of 2009, 86 IND. L.J. 257, 260 (2011) (discussing the purpose and effects of Congress enacting FERA); Robert T. Rhoad & Matthew T. Fornataro, Whistling While They Work, Limiting Exposure in the Face of the PPACA’s Invitation to Employee Whistleblower Lawsuits, 22 HEALTH LAW. 19, 19 (2010) (explaining that the passage of Patient Protection and Affordable Care Act (“PPACA”) expanded fraud and abuse exposure for healthcare organizations). The DOJ’s statistics indicate that Congress’ mission has largely succeeded. See DOJ Fraud Statistics – Overview, TAXPAYERS AGAINST FRAUD EDUC. FUND, 1, http://www.taf.org/FCA-stats-2010.pdf (last visited June 9, 2011) [hereinafter DOJ Fraud

8

for whistleblowers – a new cause of action they could employ if their employer retaliated against

them for lawful acts in furtherance of FCA proceedings.47 The amendments also increased the

FCA’s damages provision from double to treble, thus requiring those found to have defrauded

the government to pay three times the actual government-incurred damages.48 In addition,

Congress fashioned several of these amendments specifically to overturn narrow judicial

interpretations.49 Thus, the 25-year span since 1986 has reflected significant congressional

efforts to expand the qui tam mechanism as a means of combating fraud against the

government.50

Statistics]. In 1987, at the outset of these congressional amendments, only 30 qui tam actions, none of which made any recoveries, were filed as compared to 343 non-qui tam actions. See id. In other words, government-initiated actions outnumbered relator-initiated cases eleven-to-one. See id. By early 2000, however, the overall number of qui tam actions had caught up with non-qui tam cases, rendering a one-to-one ratio between the two. See id. This overall ratio is now approaching a two-to-one ratio in favor of qui tam suits. See id. at 2 (listing the overall qui tam and non-qui tam actions between fiscal years 1987 and 2010 as 7,202 and 4,157 respectively). In 2010 alone, relators initiated over 570 qui tam actions, whereas the government commenced only 136 non-qui tam suits – a four-to-one difference. See id.

47 See Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 669, 673 (2008); Fraud Enforcement and Recovery Act, Pub. L. No. 111-21, 123 Stat. 1621 (2009) (codified at 31 U.S.C. § 3129, et seq.).

48 See generally Handwerken et al., supra note 49, at 297, 299 (asserting that FERA enhanced the ability to establish liability for false or fraudulent claims).

49 See United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C. Cir. 1994).

50 See Bucy, supra note 44, at 70-71 (explaining that the government’s power to move for a dismissal, though it is not used often, is one way the FCA attempts to control frivolous suits from flooding the system). In the 1986 amendments, Congress attempted to curtail parasitic and frivolous actions by barring suits based on allegations or transactions arising from a government proceeding or investigation, or from the news media, unless that person bringing the suit was an original source of the information. See 31 U.S.C. § 3730(e)(4)(A) (2010). In addition, to address concerns about politically motivated suits, Congress retained the prior broader ban on information in the possession of the government for suits against top government officials. See id. § 3730(e)(1)-(2); Robert E. Johnston, 1001 Attorneys General: Executive-Employee Qui Tam Suits and the Constitution, 62 GEO. WASH. L. REV. 609, 617 (1994). Congress also authorized the award of attorney’s fees to a defendant prevailing in a suit deemed by the court to be clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment. See 31 U.S.C. §

9

 Congress made further significant amendments to the FCA through the Fraud

Enforcement and Recovery Act (“FERA”) of 2009 endeavoring to overturn the Supreme Court’s

decision in Allison Engine holding that a payment by the government requires more than a mere

payment using government funds because to read otherwise “would expand the FCA well

beyond its intended role” of dealing with fraud against the government and potentially turn the

FCA into an “all-purpose anti-fraud statute” by making it applicable to any claim for government

funds.51 This modification, along with other provisions of the FERA amendments, expands the

scope of the FCA and creates potential FCA liability for defendants who make false statements

in relation to claims for payment submitted to recipients of federal funds, even if the false

statements never made their way to or were relied upon by the federal government.52 

A. Public Disclosure Bar and Original Source Exception

Though the FCA provides powerful financial incentives for private citizens to file

suits exposing fraud against the government,53 the statute does, however, endeavor to

discourage purely parasitic or opportunistic suits.54 For instance, the FCA to contains a

3730(d)(4). See United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371, 376 (5th Cir. 2009); see also Sanderson v. HCA – The Healthcare Co., 447 F.3d 873, 876 (6th Cir. 2006) (describing Congress’ balancing act between legalizing whistleblowing and opportunistic behavior).

51 See John T. Boese, Fundamentals of the Civil False Claims Act, AN ABA-CLE PUBLICATION ON THE CIVIL FALSE CLAIMS ACT AND QUI TAM ENFORCEMENT, at A-1, A-13; See 31 U.S.C. § 3730(e)(4)(A) (2006), amended by 31 U.S.C. § 3730(e)(4) (2010).

52 See Rockwell Int’l Corp. v. United States, 549 U.S. 457, 467 (2003), quoting 31 U.S.C. § 3730(e)(4)(A) (2006), amended by 31 U.S.C. § 3730(e)(4)(A) (2010).

53 See id., quoting 31 U.S.C. § 3730(e)(4)(B) (2006), amended by 31 U.S.C. § 3730(e)(4)(B) (2010).

54 See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S. Ct. 1396, 1402, 1411 (2010).

10

“public disclosure” jurisdictional bar,55 which prohibits any person from bringing a qui

tam action “based upon” public disclosures of allegations or transactions “in a criminal,

civil, or administrative hearing, in a congressional, administrative, or Government

[Accountability] Office report, hearing, audit, or investigation, or from the news media,

unless the action is brought by the Attorney General or the person bringing the action is

an original source of the information.”56 The statute defined the “original source”

exception to the public disclosure bar as a person who has “direct and independent

knowledge” of the information comprising the substance of the allegations and has

voluntarily provided this information to the government prior to filing an action based on

such information.57

In Graham County Soil and Water Conservation District v. United States ex rel. Wilson,

the Supreme Court broadened the scope of the “public disclosure” bar and provided defendants

with a viable defense against qui tam lawsuits.58 The Court held that the public disclosure bar

applied both to disclosures made in state and local proceedings and those released in federal

hearings, reports, audits, and investigations.59 Only days before the Court issued its opinion, 55 See id.

56 Graham County, 130 S. Ct. at 1402, 1411, was argued before the Supreme Court on November 30, 2009, and the opinion was entered on March 30, 2010, seven days after Congress enacted the PPACA. See Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).

57 See Rhoad & Fornataro, supra note 50, at 19. In addition to expanding whistleblowers’ ability to bring forth qui tam suits, buried in the over nine-hundred pages of the PPACA were far-reaching changes to the FCA that extend beyond the healthcare field, impacting all direct and indirect federal fund recipients. See id. at 22; 2010 Mid-Year False Claims Act Update, GIBSON DUNN (July 9, 2010) (on file with author), available at http://www.gibsondunn.com/publications/pages/2010Mid-YearFalseClaimsActUpdate.aspx.

58 See 31 U.S.C. 3730(e)(4)(B) (2010).

59 See Rhoad & Fornataro, supra note 50, at 23.

11

however, Congress enacted amendments to the statute through the 2010 Patient Protection and

Affordable Care Act (“PPACA”).60 These amendments expanded the ability of whistleblowers

to bring qui tam suits by making clear that only disclosures in certain federal domains or in the

news media meet the definition of “public disclosure” under the FCA.61 Furthermore, the

amendments modified the FCA so that it no longer required an “original source” to have “direct

and independent knowledge,” requiring only a showing of “knowledge that is independent of and

materially adds to the publicly disclosed allegations or transactions.”62 Under this new original

source definition, relators may now bring FCA claims even with secondhand information as long

as they obtained the information through sources independent of any public disclosure.63

F. Weakening of FRCP 9(b) “Particularity” Requirement

After the 1986 amendments, one of the biggest weapons contractors found useful in

combating meritless suits centered on arguing that complaints lacked sufficient detail.64 At the

outset of the case, contractors often file motions to dismiss pursuant to Federal Rule of Civil 60 See generally Mark R. Troy, The Early Round Knockout Punch to a Qui Tam Action: Recent Decisions Upholding Rule 9(b) Challenges to Relators’ Speculative Allegations, 41 PROCUREMENT LAW. 1, 23 (2006) (“Defendants served with qui tam complaints that are overly general and/or speculative in nature have found increasing success with the knockout punch afforded by Federal Rule of Civil Procedure 9(b).”)

61 See FED. R. CIV. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”). For the majority of federal civil claims not alleging common law fraud, the general standard requires only notice pleading. See Hickman v. Taylor, 329 U.S. 495, 501 (1947) (stating that the Federal Rules of Civil Procedure “restrict the pleadings to the task of general notice-giving”). Compared to FRCP 9(b) which requires pleading with particularity, notice pleading entails a much lower threshold, requiring only that plaintiffs provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” See FED. R. CIV. P. 8(a).

62 See, e.g., United States ex rel. Russell v. Epic Healthcare Mgmt. Grp., 193 F.3d 304, 309 (5th Cir. 1999) (affirming dismissal as complaint failed to allege with particularity an FCA violation).

63 See, e.g., United States ex rel. Branhan v. Mercy Health Sys. of Sw. Ohio, No. 98-3127, at *2-3 (6th Cir. Aug. 5, 1999) (upholding dismissal because relator’s complaint was based on generalized accusations of wrongdoing without any specificity).

12

Procedure (“FRCP”) 9(b), which mandates that complaints alleging common law fraud “state

with particularity” the circumstances constituting fraud.65 In many cases, relators are unable to

prove the submission of a single fraudulent claim to the government.66 In these cases, relators

tend to identify shortcomings with business management, such as poor administration of billing,

deficient internal control systems, problematic manufacturing processes, and a myriad of system-

wide business practices, to support their position that the contractor most likely submitted false

claims to the government as a result of such inadequacies.67

The majority of federal appeals courts apply a strict reading of the rule requiring FCA

plaintiffs to point directly to an allegedly fraudulent claim in their complaint.68 A number of

appeals courts, however, have recently adopted a relaxed reading of the rule, accepting

64 See, e.g., Russell, 193 F.3d at 308; Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir. 1995); United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 522-23 (6th Cir. 2007).

65 See, e.g., United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1173 (10th Cir. 2010) (holding that the relator’s complaint need only “provide enough information to describe a fraudulent scheme to support a plausible inference that false claims were submitted” under FRCP 9(b)); United States ex rel. Schumann v. AstraZeneca, No. 03-5423, 2010 WL 4025904, *9 (E.D. Penn. Oct. 13, 2010) (following the Lemmon court’s rationale regarding “fraudulent scheme”). For examples of other circuits following this trend, see infra note 70 and accompanying text.

66 See generally United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 41 (1st Cir. 2009) (holding that a relator satisfies FRCP 9(b) by providing “factual or statistical evidence to strengthen the inference of fraud beyond possibility” without necessarily providing details on each false claim); Hopper v. Solvay Pharms., Inc., 588 F.3d 1318, 1329 (11th Cir. 2009) (“So, in the appropriate case, we may consider whether the particularity requirements of FRCP 9(b), as to the details of the alleged false claims at issue, are more relaxed for claims under 31 U.S.C. § 3729(a)(2) than for claims under § 3729(a)(1).”); United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 191 (5th Cir. 2009) (stating that FRCP 9(b) is not “context specific and flexible” and a relator’s complaint can survive FRCP 9(b) scrutiny if it alleges particular details of a scheme along with “reliable indicia” inferring the claims were actually submitted).

67 See False Claims Act Correction Act of 2007, H.R. 4854, 110th Cong. § 4(c) (2007); see also False Claims Act Correction Act of 2009, H.R. 1788, 111th Cong. § 4(c) (2009).

68 See id.

13

complaints that sufficiently allege fraudulent schemes, even if they do not allege any specific

false claims.69 These courts require only a link between the “fraudulent scheme” to the

likelihood that the contractor submitted false claims.70

While this relaxed FRCP 9(b) pleading standard has made inroads for relators’ counsel in

some courts, movement in Congress has been made toward amending the FCA to mandate such a

standard.71 Both House Bill 4854 and House Bill1788, neither of which became law, proposed

language that explicitly made FRCP 9(b) inapplicable to qui tam filings, stating that:

“a person shall not be required to identify specific claims that result from an alleged course of misconduct if the facts alleged in the complaint, if ultimately proven true, would provide a reasonable indication that one or more violations of section 3729 are likely to have occurred, and if the allegations in the pleading provide adequate notice of the specific nature of the alleged misconduct to permit the Government effectively to investigate and defendants fairly to defend the allegations made.”72

69 See id.

70 See Kevin M. Comeau, False Certification Claims in Light of Allison Engine and False Claims Act Amendments Introduced in the 111th Congress, 18 FED. CIR. B.J. 491, 509 (2009).

71 See generally id. at 513 (categorizing the 2009 FCA Amendments as “overbroad” and will result in “enormous increases in unproductive, nonintervened qui tam litigation”).

72 See David M. Nadler, Feature Comment, Ortho-Biotechs Prods., LP v. U.S. ex rel. Duxbury – The Supreme Court Should Grant Cert and Reverse the First Circuit, 52 GOV’T CONTRACTOR 103 (2010). Another interesting and unintended consequence of a relaxed rule may be that it adds an additional incentive for companies that do business with the government to establish and maintain robust internal compliance controls and practices. See generally Contractor Business Ethics Compliance Program and Disclosure Requirements, 48 C.F.R. pts. 2, 3, 9, 42, 52 (2008) (expanding elements regarding contractor codes of ethics and internal control systems and requiring contractor disclosure to the government of evidence of criminal violations, FCA violations, or significant overpayments). This latent effect may only be wishful thinking as 89.7% of the employees who filed FCA qui tam cases between 2007 and 2010 initially reported issues internally with either their supervisors or compliance departments, indicating that companies in violation tend to ignore patently obvious concerns. See NAT’L WHISTLEBLOWERS CTR., IMPACT OF QUI TAM LAWS ON INTERNAL COMPLIANCE: A REPORT TO THE SECURITIES EXCHANGE COMMISSION 4-5 (Dec. 17, 2010) (“The existence of a qui tam whistleblower reward program has no impact on the willingness of employees to internally report potential violations of law, or to work with their employer to resolve compliance issues.”); see also Aaron S. Kesselheim, David M. Studdert & Michelle M. Mello, Special Report, Whistle-Blowers’

14

The bills, however, provide no guidance for the courts in answering the question of whether a

relator’s factual allegations raise “a reasonable indication that one or more violations of section

3729 are likely to have occurred.”73 Nevertheless, the proposals clearly signal a desire for courts

to follow the relaxed pleading standard used by the First and Fifth Circuits.74

While relaxing FRCP 9(b) further encourages the exposure of fraud against the

government, an ensuing side effect permits relators with little knowledge of fraud to plead

speculative allegations.75 As such, it has been argued that the relaxed rule would open the door

to more speculative and frivolous suits.76  Another concern regarding the prospect of more cases

bypassing FRCP 9(b) is that contractors must commit more resources to discovery-related

litigation.77 Proponents behind the relaxing of FRCP 9(b) want relators to be permitted to file a

Experiences in Fraud Litigation Against Pharmaceutical Companies, 362 NEW ENG. J. MED. 1832, 1834 (2010) (“[I]nsiders first tried to fix matters internally by talking to their superiors, filing an internal complaint, or both.”).

73 See generally United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 309 (5th Cir. 1999) (finding no authority to ignore 9(b) requirements because “[a] special relaxing of Rule 9(b) is a qui tam plaintiff’s ticket to the discovery process that the statute itself does not contemplate.”).

74 See generally United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 559 (8th Cir. 2006) (rejecting contention that court allow relator to conduct discovery to satisfy FRCP 9(b) requirements).

75 See id.

76 See generally United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 231 (1st Cir. 2004) (holding that qui tam relator cannot present general allegations instead of actual claims hoping that the discovery process will unearth more details); see also Clausen, 290 F.3d at 1313 n.24, quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3rd Cir. 1984) (finding that relator’s “failure to plead all the elements of his claim with specificity violates an equally strong purpose of Rule 9(b) – protecting defendants from frivolous suits or ‘spurious charges of immoral and fraudulent behavior.’”).

77 See United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (2009); see also Christina Orsini Broderick, Qui Tam Provision and the Public Interest: An Empirical Analysis, 107 COLUM. L. REV. 949, 955 (2007) (predicting qui tam lawsuits will rise with passage of the Deficit Reduction Act of 2005, requiring entities that receive or make annual Medicaid payments

15

general complaint and then “fill in the blanks” after discovery.78 But the opposing contention is

that using discovery to satisfy FRCP 9(b) will contribute to increased filings of qui tam suits

where no injury was suffered and where relators merely hoped to uncover yet unknown wrongs.79

Subsequently, in addition to risking defendant’s “goodwill and reputation,” these allegations

could potentially be used to extract settlements in hopes of avoiding even more expensive

defense fees.80 Finally, opponents of the relaxed standard fear that it would eliminate the

important gatekeeping function of FRCP 9(b) of blocking meritless and speculative fraud

claims.81

in excess of $500 million to include detailed information on FCA and whistleblower rights in employee handbooks); Troy, supra note 64, at 24 (stating one purpose of FRCP 9(b) is “to protect defendants against general allegations of fraud that are made merely as a pretext for attempting to discover unknown wrongs).

78 See infra Section II.C. for a discussion of expansive FCA theories of liability. See also Lumm, supra note 29, at 541-45 (detailing the increased liability under FCA with the passage of the 2009 Amendments contained in FERA); see also 1 PAUL H. TOBIAS, LITIGATING WRONGFUL DISCHARGE CLAIMS § 2:84 (2011) (“Because many Government contracts involve complex, specialized purchases and services, the False Claims Act imposes liability on both an ‘innocent’ prime contractor and upon wrongdoing subcontractors. Otherwise, a Government contractor could ‘hide his head in the sand’ and avoid liability.”).

79 See Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 642 (2008); see also United States ex rel. Steury v. Cardinal Health Inc., 625 F.3d 262, 268 (5th Cir. 2010) (stating that the FCA is not generally an “enforcement device”). See, e.g., Mikes v. Straus, 274 F.3d 687, 699 (2d Cir. 2001) (allowing implied certification theory); Michael Holt & Gregory Klass, Implied Certification Under the False Claims Act, 41 PUB. CONT. L.J. 1 (2011) (presenting a theoretical and systematic framework for understanding and applying the implied certification rule under the FCA).

80 See United States v. Neifert-White Co., 390 U.S. 288, 233 (1968); see also Handwerken et al., supra note 49, at 297 (stating that FERA enhances both the government’s and the relator’s ability to establish liability for fraudulent claims submitted by contractors).

81 See Michael Rich, Prosecutorial Indiscretion: Encouraging the Department of Justice to Rein In Out-of-Control Qui Tam Litigation Under the False Claims Act, 76 U. CINN. L. REV. 1233, 1247 (2008).

16

G. Looking Ahead: An All-Purpose Anti-Fraud Statute

The outlook appears that qui tam actions will continue to rise.82 Since the FCA only

requires a “knowing” state of mind, as opposed to a specific intent to defraud, government

contractors have been forced to bite the bullet for violating seemingly innocuous contract terms

as well as non-existent ones.83 In addition, despite the Supreme Court’s caution that the FCA

was not intended as an “all-purpose antifraud statute,” new theories of liability continue to arise,

pushed by both the government as well as relators.84 Neither Congress nor the courts have posed

a significant impediment to this continued expansion.85 With the added filing of qui tam claims

through these new avenues, it stands to reason that the government’s capability to intervene in

qui tam actions decreases on account of its limited and finite resources.86

82 See DOJ Fraud Statistics, supra note 50, at 9. This rate increased by twelve percent in only three years from seventy-three to eighty-five percent. See Todd J. Canni, Commentary, Arming Contractors with a Statutory Defense Against Speculative Qui Tam Actions, 21 ANDREWS GOV'T CONT. LITIG. REP. 11, 11 (2008).

83 See Rich, supra note 86, at 1247-48 (stating that the government’s statutory responsibilities to investigate diligently any alleged violations by qui tam relators causes it to expend significant resources on these investigations and that, assuming the government has finite resources, the more qui tam relators file actions, the less the government is able to investigate new qui tam allegations and to continue to initiate its own investigations, thereby forcing it to prioritize the allocation of its investigative and prosecutorial resources for future qui tam cases).

84 See DOJ Fraud Statistics, supra note 50, at 1-2 (listing a total of 7,202 qui tam actions and 4,157 non-qui tam actions filed from fiscal years 1987 to 2010). In 1987, non-qui tam actions outnumbered qui tam cases eleven to one. See id.

85 See id. at 2.

86 See id. at 9.

17

III. The Festering Qui Tam Controversy

Non-intervened qui tam cases are dismissed at a staggering rate of eighty-six percent.87

The continuous influx of qui tam actions, assisted by a seemingly interminable expansion of

FCA liability, impacts the DOJ’s ability to intervene in each case.88 The surge of qui tam actions

can be ascertained by reviewing the statistics collected by the DOJ which reveal that the

cumulative number of qui tam actions between federal fiscal years 1987 and 2010 has far

exceeded non-qui tam, i.e. government-initiated, FCA cases.89 These qui tam actions brought

about the collection of over $18 billion, over double the amount recovered in non-qui tam suits.90

During this period, the DOJ intervened in only about twenty-one percent of the total number of

qui tam actions, or approximately one in every five cases.91 Yet, in those cases alone, the DOJ 87 See id. at 2; Christopher W. Myers, The False Claims Act Clarification Act: An End to the FCA’s Bar on Parasitic Qui Tam Actions, 44 PROCUREMENT LAW. 7, 10 (2009) (stating that non-intervened qui tam cases produced only two percent of all FCA recoveries through 2009). The $17.59 billion consists mostly of healthcare-related fraud at $13.26 billion, while defense contract-related fraud accounts for $2.24 billion. See DOJ Fraud Statistics, supra note 50, at 4, 6.

88 See DOJ Fraud Statistics, supra note 50, at 2; Myers, supra note 92, at 10. The breakdown of $571 million by government agency is as follows: $284 million for Health and Human Services (“HHS”), $151 million for the Department of Defense (“DOD”), and $135 million for non-HHS and non-DOD. See DOJ Fraud Statistics, supra note 50, at 4, 6, 8.

89 See DOJ Fraud Statistics, supra note 50, at 9.

90 See Broderick, supra note 82, at 975 (deducing that 72% of qui tam actions are frivolous). See generally Myers, supra note 92, at 10 (stating that when the government declines intervention, ninety-three percent of nonintervened cases are dismissed); see DOJ Fraud Statistics, supra note 50, at 1-2. See also Canni, supra note 35, at 9 (asserting that a statistical analysis of qui tam filings evidences that the “majority of qui tam actions lack merit”); see generally Rich, supra note 86, at 1264, quoting Robert D. McCallum, Jr., Assistant Attorney General, Remarks to the American Health Lawyers Association Meeting (Sept. 30, 2002) (contending that the costs of litigating these non-intervened meritless claims far outweighs the benefits and referring to a statement made by a senior DOJ official who commented at a health care conference that the merits of these non-intervened cases are “questionable at best”); Broderick, supra note 82, at 975 (deducing that seventy-two percent of qui tam actions are frivolous). See infra Section III.

91 See generally G. Wayne Merchant, II, Student Commentary: At What Point Does an Attorney Have a Duty to Dismiss a Lawsuit That May Be a Meritless Claim?, 27 J. LEGAL PROF. 233, 236

18

recovered about ninety-seven percent, or $17.59 billion, of the total qui tam recoveries.92 In stark

contrast, in the remaining seventy-nine percent of the total qui tam actions, relators recovered,

without DOJ intervention, only three percent, or $571 million, of the total qui tam recoveries.93

Of the 4,628 qui tam cases in which the DOJ declined intervention, 3,962 cases, or roughly

eighty-six percent were eventually dismissed, whereas only sixty cases, or about five percent, of

the cases in which the DOJ intervened have been dismissed.94

The immense size of the disparity between recoveries in intervened and non-intervened

qui tam actions understandably produces a perception that most non-intervened qui tam cases

(2002) (stating that meritless suits impose a burden on the limited financial resources and time of the overloaded judiciary and create unnecessary expense for the opposing party). Some critics have contended that the recent amendments have merely generated numerous frivolous lawsuits. See Frank LaSalle, The Civil False Claims Act: The Need for a Heightened Burden of Proof as a Prerequisite for Forfeiture, 28 AKRON L. REV. 497, 501 n.29 (1995). See generally Canni, supra note 35, at 2 (labeling government contractors as casualties of dismissed meritless claims who are left with their tarnished reputations having spent hundreds of thousands of dollars on defense to speculative allegations); see also Rich, supra note 86, at 1255 (“[I]f a case is dismissed prior to unsealing, the government is able almost to wipe the slate clean and spare the defendant the bulk of its potential defense costs and the embarrassment of public fraud allegations.”); Bucy, supra note 44, at 62-64 (detailing the high costs to businesses in defending fraud investigations). See generally Lumm, supra note 29, at 536-37 (suggesting that contractors will reallocate costs by passing them on to consumers and proposing that the government may actually lose money by permitting non-intervened FCA cases to proceed since contractors will raise prices to account for increased exposure to liability).

92 See generally William E. Kovacic, The Civil False Claims Act as a Deterrent to Participation in Government Procurement Markets, 6 SUP. CT. ECON. REV. 201, 225-26 (1998) (stating that the FCA contributes to high transaction costs for contractors working with the government and increases these businesses’ exposure to significant threats of litigation even for minor infringements that cause little to no harm).

93 See generally Lumm, supra note 29, at 536 (stating that contractors most likely pass costs of FCA compliance and potential risk of litigation on to customers or the government).

94 See Lumm, supra note 29, at 536-37 (contending that contractors will pass on increased costs of FCA regulations and potential litigation by passing them on to customers and the government).

19

assert meritless or frivolous claims.95 If this perception actually reflects reality, the vast majority

of non-intervened cases simply produce unwanted social costs, namely, the wasting of taxpayer

dollars through the consumption of the scarce resources of the courts, the delaying of meritorious

claims, the burdening of legitimate businesses with defense litigation costs as well as serious

economic and reputational damage.96 As a result of these social costs, private firms may not

wish to do business with the government, thereby reducing competition and eroding the

government’s goal of obtaining maximum competition in contracting.97 Overall, these social

costs negatively impact the economy as a whole.98 Regardless of who bears the immediate

impacts of these social costs – whether they are borne by businesses, the courts, or by taxpayers

– substandard cases in no way serve the public interest.99 Accordingly, if non-intervened cases

are in fact mostly non-meritorious or frivolous, the DOJ indeed would have a compelling

economic interest in taking more of an active role in preventing such waste.100

The present-day statistical reality of qui tam litigation calls into question whether

Congress’ enduring mission to spur whistleblowers into the open has caused the pendulum to 95 See generally R. Harrison Smith, A Key Time for Qui Tam: The False Claims Act and Alabama, 58 ALA. L. REV. 1199, 1212 (2007) (“The primary criticism of … the FCA and its state equivalents…is that the possibility of a generous recovery increases the number of frivolous suits and leads to the creation of hostile business environment.”)

96 See Rich, supra note 86, at 1258.

97 See supra note 95 and accompanying text.

98 See generally William Y. Culbertson, Whistleblowers and Prosecutors, 17 BUS. L. TODAY 30, 32-33 (2008) (stating that non-intervened qui tam cases cause “demonstrable waste of taxpayer money”). The government does absorb some direct costs. See, e.g., the Federal Acquisition Regulation (commonly referred to as the “FAR”) which allows government contractors who successfully defend against FCA suits to recover from the government eighty percent of their litigation costs. See FAR 31.205-47 (2010).

99 See generally Culbertson, supra note 103, at 32-33 (claiming that among other things non-intervened qui tam cases cause “demonstrable waste of taxpayer money”).

100 See DOJ Fraud Statistics, supra note 50, at 1-2.

20

swing too far.101 It is not difficult for one to reach the conclusion that, because the exceedingly

high volume of non-intervened cases generates a paltry recovery rate, the social cost of wasteful

or abusive litigation may be unreasonably large.102 Though the FCA does not require the

government to pay relators to conduct non-intervened cases (other than its share of successful

recoveries), the government nevertheless absorbs, albeit indirectly, the social costs generated by

what appears to be a large number of meritless claims.103 Thus, the data suggests that the

government is paying significant amounts via these social costs to outsource private FCA

prosecutions.104 This conclusion, however, may be a bit premature in that it is based solely on

broad statistical data focused essentially on the highly disparate rates of return between

intervened and non-intervened cases.105 These statistics lack the empirical data necessary to

make transparent the real picture on the social cost impact of non-intervened cases.106 As such,

transparency in this area needs to be augmented to some degree to present more persuasive

support for changes in the law.107

101 See generally Broderick, supra note 82, at 963 (asserting that examining the empirical effect of qui tam provisions is essential to resolving whether the qui tam mechanism is effective).

102 See generally id. at 1000 (proposing that states enacting qui tam provisions conduct factfinding investigations and data collection to reduce the number of frivolous actions).

103 See id. at 965 (stating that the FCA fails to indicate which factors the DOJ must consider when deciding whether or not to intervene).

104 Letter from James Madison to W.T. Barry (Aug. 4, 1822), in 9 WRITINGS OF JAMES MADISON, at 103 (G. Hunt ed., 1910).

105 LOUIS BRANDEIS, OTHER PEOPLE’S MONEY AND HOW THE BANKERS USE IT 92 (Augustus M. Kelley ed., Sentry Press 1971) (1914).

106 See generally Broderick, supra note 82, at 975 (deducing that most suits in which the relator does not prevail to be meritless).

107 See generally Tara L. Ward, Note, Amending the Qui Tam Intervention Provisions Setting Debar Higher?, 38 PUB. CONT. L.J. 297, 313 (2008) (asserting that FCA needs to provide transparency in how the DOJ uses its statutory authority).

21

IV. Government Attorney Accountability

Establishing measures to ensure the accountability of government attorneys handling qui

tam matters constitutes a major step toward reducing unnecessary non-intervened FCA litigation.

The key lies in improving transparency over the DOJ’s intervention-related decision-making.108

As James Madison once observed, “A popular Government without popular information, or the

means of acquiring it, is but a Prologue to a Farce or a Tragedy; or perhaps both. Knowledge

will forever govern ignorance: And a people who mean to be their own governors, must arm

themselves with the power which knowledge gives.”109 Along the same vein, Justice Louis

Brandeis wrote, “sunlight is said to be the best of disinfectants.”110 With the drastic difference in

recovery rates between intervened and non-intervened cases, it is no surprise that the popular

conclusion is that most non-intervened cases amount to frivolous or abusive litigation.111 It is

also no surprise that sentiment is building to hold the government accountable for this quarter-of-

a-century-long statistical trend.112 Nonetheless, in order to convince Congress to make any

changes to the FCA, more empirical data is needed to shed “sunlight” over this issue and attach

accountability where accountability is due.113 A modest dose of added transparency would

provide insight into the degree of accountability on the part of the DOJ for any unnecessary

108 See Broderick, supra note 82, at 963.

109 See infra Section IV.B-D.

110 See generally Gretchen L. Forney, Qui Tam Suits: Defining the Rights and Roles of the Government and the Relator Under the False Claims Act, 82 MINN. L. REV. 1357, 1377 (1998) (analyzing the rights and roles of the government and the qui tam plaintiffs is critical to proper FCA interpretation).

111 See 31 U.S.C. § 3730(a) (2010).

112 See 31 U.S.C. § 3730(a).

113 See 31 U.S.C. § 3730(a).

22

social costs incurred from wasteful litigation.114 The analysis first begins with a basic

understanding of the government’s role in qui tam actions.115

A. The Government’s Role in Qui Tam Litigation

The Attorney General holds the primary responsibility for investigating and prosecuting

FCA violations.116 The FCA mandates that the Attorney General “diligently shall investigate a

violation under section 3729.”117 If the Attorney General finds that a person violated or is

violating § 3729, the government “may” instigate a civil action against the person under §

3730.118 When the government initiates an action under § 3730, no other person may initiate a

case based upon the same facts.119 Barring this restriction, among others,120 a relator may file a

qui tam action under § 3730, which initiates a timeline for pivotal events.121

The qui tam complaint must be filed under seal and the Clerk of court maintains all

records relating to the case on a secret docket.122 Copies of the complaint are provided only to

114 See 31 U.S.C. § 3730(e)(3).

115 See supra Section II.

116 See 31 U.S.C. § 3730(e)(3).

117 See False Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) Suits, U.S. DEP’T OF JUSTICE, 1,1, http://www.justice.gov/usao/pae/Documents/fcaprocess2.pdf (last visited June 9, 2011) [hereinafter FCA Intervention Process]; Am. Civil Liberties Union v. Holder, No. 09-2086, 2011 WL 1108252, at*1 (4th Cir. 2011).

118 See FCA Intervention Process, supra note 122, at 1.

119 See 31 U.S.C. § 3730(b)(2); FCA Intervention Process, supra note 122, at 1.

120 See 31 U.S.C. § 3730(b)(2); Bucy, supra note 44, at 69; FCA Intervention Process, supra note 122, at 1.

121 See FCA Intervention Process, supra note 122, at 1.

122 See 31 U.S.C. § 3730(b)(3); FCA Intervention Process, supra note 122, at 1; see also Ridenour v. Kaiser-Hill Co., 397 F.3d 925, 930 (10th Cir. 2005) (stating that court granted extensions amounting to two years).

23

the DOJ, including the local U.S. Attorney, and to the assigned judge of the U.S. District Court,

though the Court may, usually upon motion by the U.S. Attorney, make the complaint available

to other individuals.123 The complaint and any other filings remain under seal for a period of at

least sixty days.124 In addition to filing the complaint, the relator must serve upon the DOJ a

“written disclosure” of substantially all the evidence and information in the possession of the

relator.125 The relator neither files this disclosure statement in any court nor provides it to the

named defendant.126 At the conclusion of the sixty days, the DOJ may, for good cause, request

an extension of time during which the complaint will remain under seal.127 Typically, these

motions request six-month extensions of the seal.128

While the case remains under seal, the DOJ must investigate each allegation.129 The

investigation may involve one or more law enforcement agencies, including the Office of

Inspector General or the FBI.130 These investigative agencies employ investigative techniques,

123 See FCA Intervention Process, supra note 122, at 1.

124 See FCA Intervention Process, supra note 122, at 1; 31 U.S.C. § 3730(a).

125 See FCA Intervention Process, supra note 122, at 1.

126 See id. at 2.

127 See id.

128 See 31 U.S.C. §§ 3730(b)(4)(A), 3730(c), 3731(c); FCA Intervention Process, supra note 122, at 2. The decision to intervene in a qui tam is a significant one, which “usually requires approval by [the DOJ] in Washington.” See FCA Intervention Process, supra note 122, at 2. The DOJ also solicits and considers the views of the investigative agency involved and prepares a detailed memorandum discussing the relevant facts and law. See id. The DOJ usually includes in this memorandum a discussion of efforts undertaken “to advise the named defendant of the nature of the potential claims against it, any response provided by the defendant, and settlement efforts undertaken prior to intervention.” Id.

129 See 31 U.S.C. § 3730(b)(4)(B); FCA Intervention Process, supra note 122, at 2.

130 See FCA Intervention Process, supra note 122, at 2; see also 31 U.S.C. § 3730(c)(2)(A) (granting DOJ authority to move for dismissal).

24

including subpoenas for documents or electronic records, interviews of witnesses, and expert

consultations.131 They may also utilize search warrants and other criminal investigation tools to

obtain evidence if a parallel criminal investigation is involved.132

At the conclusion of the investigation, or earlier if the court so directs, the DOJ must

choose one of three options provided by the FCA: (1) intervene in one or more counts of the

pending qui tam action,133 (2) decline intervention in one or all counts of the pending action,134 or

(3) move to dismiss the complaint because “there is no case,” or the action “conflicts with

significant statutory or policy interests of the United States.”135 If the United States declines to

intervene, the relator and his or her attorney may prosecute the action on behalf of the United

States.136 After the relator’s complaint is unsealed, the relator must serve its complaint upon each

defendant within 120 days pursuant to the FRCP.137 Each named defendant has the duty to file

an answer to the complaint or a motion within twenty days after service of the complaint.138

Discovery per the FRCP begins thereafter.139

131 See 31 U.S.C. § 3730(b)(4)(B); FCA Intervention Process, supra note 122, at 2.

132 See FCA Intervention Process, supra note 122, at 3; FED. R. CIV. P. 4(m).

133 See FCA Intervention Process, supra note 122, at 3.

134 See id.

135 See generally DOJ Fraud Statistics, supra at note 50, at 1-9 (making no mention of cases dismissed while under seal).

136 See infra note 160 and accompanying text.

137 See generally FCA Intervention Process, supra note 122, at 3 (providing direction on procedures after case removed from seal).

138 See infra text and accompanying notes 145-150.

139 See Kovacic, supra note 97, at 225.

25

B. Measuring Before Managing

Though the DOJ does an impressive job of gathering and reporting statistics, the

information it provides lacks empirical data that sheds light on the reasons for the disparate

recovery rates of intervened and non-intervened qui tam cases.140 At a minimum, the DOJ should

report on the number of cases dismissed while still under seal.141 The unsealing of a case

represents a major point in the litigation process during which significant costs begin to inure to

the detriment of the public as well as the defendant in non-meritorious cases.142 Once a court

removes a case from under seal, the complaint is served on the defendant, whereupon significant

and costly events come into play, including the litigation of motions, discovery, and, eventually,

full-blown trial.143

When a contractor receives notice that a qui tam relator has filed suit against it, it initiates

expensive measures for defending against the relator’s allegations.144 The estimated out-of-

pocket cost of defending against qui tam suits that involve relatively simple theories of liability

can range anywhere from $250,000 to $500,000.145 Expenditures for outside counsel increase

dramatically when cases involve complex theories of liability or that result in protracted

litigation.146 Professional fees also climb significantly depending on the proceedings used to

140 See Kovacic, supra note 97, at 225.

141 See id.

142 See id.

143 See id. at 226.

144 See id.; Bucy, supra note 44, at 62-63.

145 See Kovacic, supra note 97, at 226; Bucy, supra note 44, at 62-63.

146 See John T. Boese, When Angry Patients Become Angry Prosecutors: Medical Necessity Determinations, Quality of Care and the Qui Tam Law, 43 ST. LOUIS U. L.J. 53, 79 (1999) (stating that “when the product is health care paid for by the government, the costs are born by taxpayers”). Fifty-five percent of all qui tam cases fall under the “Health and Human Services”

26

resolve the matter.147 In all, defending these types of cases can cost anywhere from $1 million to

over $10 million.148

Note that these estimated costs do not include the costs incurred by contractors internally,

which can “match or surpass the costs associated with retaining external professional advisors

such as law firms.”149 These internal costs typically involve a substantial commitment of time

from the most senior executives in responding to inquiries of investigators, interrogatories,

depositions, and in some cases, testifying at hearings or depositions.150 They also include the

considerable consumption of basic company employees manpower hours for the gathering and

compilation of records subpoenaed or requested in discovery.151 Since the costs for defending

these cases are allowable business expenses, they are eventually passed through to consumers,152

and as demonstrated above, the costs of defending these suits can be quite steep.153 Broader

arena. See DOJ Fraud Statistics, supra note 50, at 3-4.

147 See Boese, supra note 152, at 79 (“Ultimately the costs to American taxpayers imposed by qui tam enforcement of health care regulations may be quite steep.”); see generally Bucy, supra note 44, at 63 (explaining that responding to FCA investigations is expensive for business).

148 See Rich, supra note 86, at 1237 (“The unchecked expansion of FCA liability, the avalanche of qui tam suits, and inconsistent court rulings alienate regulated industries, which threatens public confidence in the legitimacy of government action and future industry cooperation in government enforcement initiatives.”).

149 Bucy, supra note 44, at 63.

150 Id. at 63; see also John T. Bentivoglio, Jennifer L. Bragg, Michael K. Loucks, & Gregory M. Luce, False Claims Act Investigations: Time for a New Approach?, SKADDEN, 1, 4 (May 12, 2011), http://skadden.com/Index.cfm?contentID=51&itemID=2421 (“[C]ompanies have made the judgment that deferral of public disclosure has been in their best interests. Sometimes, after investigation, the government has determined not to intervene, and the whistleblower has dropped the matter; that the matter remained under seal eliminated potentially harmful publicity around a meritless claim.”).

151 See FCA Intervention Process, supra note 122, at 2.

152 See id.

27

economic impacts may occur as well.154 According to Professor Pamela H. Bucy, once a fraud

investigation becomes public, “business expansions, corporate borrowing, and mergers may be

put on hold or lost as opportunities.”155 She further states that “[s]tock prices may fall and lay-

offs may result.”156

In a non-intervened case, the DOJ has the option to advise the relator that it intends to

decline intervention.157 According to the DOJ, “[t]his usually, but not always, results in

dismissal of the qui tam action.”158 Thus, the relator may opt to dismiss the case with the consent

153 When the government declines intervention, the relator has the right to proceed with the case. See 31 U.S.C. §§ 3730(b)(4)(B), 3730(c)(3) (2010).

154 See Bucy, supra note 44, at 63 (explaining that responding to FCA investigations, including record gathering process, answering interrogatories, responding to inquiries, and testifying while under investigation, are expensive endeavors for businesses); see also Culbertson, supra note 103, at 33 (“Although there are no statistics available because defense costs are undisclosed and some cases are settled on other grounds, there is little doubt among leading defense attorneys that the aggregate costs of defending or settling declined qui tam cases exceed the amounts recovered.”).

155 See generally Rich, supra note 86, at 1259 (“The problem instead is that the government is not fulfilling its responsibility to counterbalance relators’ financial motivations with appropriate consideration of the public interest.”).

156 See id.

157 For example, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued a final rule establishing new “Contractor Business Ethics Compliance Program and Disclosure Requirements.” See Contractor Business Ethics Compliance Program and Disclosure Requirements, 73 Fed. Reg. 67,064 (Nov. 12, 2008) (codified at pts. 2, 3, 9, 42, 52).

158 See 31 U.S.C. § 3729(a)(2) (reducing treble damages to double, leaving the combined total of damages and penalties still at potentially staggering levels); 31 U.S.C. § 3729(a)(1) (listing liability for FCA violations to include civil penalties from $5,000 to $10,000 per claim and three times the amount of damages the government sustained, though this range was increased by ten percent by the Debt Collection Improvement Act of 1996). Unfortunately, it seems that any deterrence measure with all sticks and no carrots must fail as even the death penalty itself, the highest form of deterrence, failed to deter pickpockets from picking pockets at the public hangings of their own colleagues during the late eighteenth and early nineteenth centuries in England. See David A. Anderson, The Deterrence Hypothesis and Picking Pockets at the Pickpocket’s Hanging, 4 AM. L. & ECON. REV. 295, 295 (2002).

28

of the court and the government before the case is unsealed and before serving the complaint on

the defendant.159 An accounting of how many cases are dismissed before the unsealing of the

case would provide a modest measure for gauging the true magnitude of social costs on the

American taxpayer resulting from non-meritorious qui tam cases. The more non-intervened

cases that are dismissed while under seal, the less social costs, which burden the general public

and further drain the public fisc, are experienced.160

Measuring the impact of the social costs arising out of meritless non-intervened cases

requires a comparison of the social costs to the recoveries of non-intervened, i.e. privately-

outsourced, qui tam prosecutions.161 This cost-benefit analysis should illustrate whether the

government is truly achieving best value in outsourcing FCA matters.162 The government places

heavy requirements on contractors to establish robust internal compliance controls and disclosure

systems163 with meager incentives to do so and severe penalties for noncompliance.164 Yet, 159 Shadowing these efforts is the constantly looming threat of FCA prosecution. See generally Danielle M. Conway, Emerging Trends in International, Federal, and State and Local Government Procurement in an Era of Global Economic Stimulus Funding, 32 HAWAII L. REV. 29, 51-52 (2009) (“The unprecedented levels of oversight and enforcement in the legislative and regulatory agendas in an era of economic stimulus funding are intended to ensure that recipients of federal funds are held accountable to the government. The enhanced whistleblower protections alone will guarantee that qui tam relators and their attorneys will make use of the False Claims Act to police federal and state project fraud on behalf of the government and taxpayers.”).

160 See DOJ Fraud Statistics, supra note 50, at 9; Broderick, supra note 82, at 967.

161 See, e.g., Bucy, supra note 44, at 67-68 (discussing the costs that FCA imposes on the judicial system, including delaying dockets, increased disrespect for the judiciary, and consuming scarce public resources).

162 See DOJ Fraud Statistics, supra note 50, at 2.

163 See id.

164 See Bucy, supra note 44, at 71 (“[T]here are other interests at stake, such as ensuring that qui tam actions further the public interest and protecting the long-term viability of the private justice model. The macro intangible interests would appear to outweigh the government’s economic interest in remaining passive in a single case and counsel for aggressive use by the government

29

interestingly enough, for all its efforts in shocking contractors into contrite behavior to force the

implementation of internal compliance controls and disclosure measures,165 the government

seems shielded from any obligation to its own benefactors, i.e. Congress and taxpayers, to

account for the impact of its own actions or inactions with respect to what appears to be a

considerable number of non-meritorious qui tam lawsuits.166 Though the government cannot

entirely be blamed for this deficiency given the incentive structure of the FCA, it remains to be

seen if the government is aware, or is even concerned about, the extent to which the social costs

of privately prosecuted qui tam actions may have surpassed the marginal value realized from

such cases.167

Since the 1986 amendments, privately-outsourced qui tam prosecutions have recovered

over $571 million, approximately $110 million of which constituted the aggregate amount of

relator shares.168 The benefit to the public fisc, therefore, amounts to roughly $461 million.169 A

determination of the extent to which the social cost impacts of meritless non-intervened cases

of its authority to move for dismissal of ill-conceived qui tam actions.”).

165 See generally Rich, supra note 86, at 1264, quoting Robert D. McCallum, Jr., Assistant Attorney General, Remarks to the American Health Lawyers Association Meeting (Sept. 30, 2002) (discussing DOJ official’s comment categorizing the merits of non-intervened cases as “questionable at best”).

166 See generally Broderick, supra note 82, at 985 (stating that currently DOJ fails to break down the number of interventions by its office and the disposition of these cases).

167 See generally id. at 1001 (“Data collection is needed on elements such as the cost to investigate qui tam actions.”).

168 See generally Bucy, supra note 44, at 63 (stating that investigations can be very time-consuming and costly). In fact, the DOJ has a backlog of 1,246 qui tam actions which are still currently under investigation. See DOJ Fraud Statistics, supra note 50, at 9. As of January 2011, the backlog was reported at 1,341. See Bentivoglio et al., supra note 156, at 2.

169 See generally Bucy, supra note 44, at 74 (stating that the DOJ must monitor private justice actions by carefully reviewing, examining, and investigating allegations presented in complaints and that it also monitors the progress of cases in which it has declined to intervene, but which relators have elected to pursue, both of which require considerable time and expertise).

30

have exceeded this benefit should be assessed.170 Critics have argued, at least at a theoretical

level, that the costs far outweigh the benefits of litigating meritless non-intervened cases.171

Unfortunately, empirical data needed to provide persuasive support for these arguments is

lacking.172

In addition to collecting the number of cases dismissed while under seal, data should be

gathered on the total expenditures of the DOJ on qui tam investigative and monitoring efforts.

Measuring the impact of social costs resulting from non-meritorious actions requires an

examination of the rate of consumption of the DOJ’s time and finite resources.173 Specifically,

these costs include the investigative costs for qui tam cases leading up to the DOJ’s intervention

decision,174 as well as the monitoring costs DOJ expends scrutinizing the progress of non-

intervened cases for potential post-intervention actions.175 As of January 21, 2011, the DOJ

possessed a backlog of 1,341 qui tam actions under seal that were awaiting completion of its

investigation.176 For qui tam cases filed since October 1, 2006, the average length of time that a

case remained under seal was thirteen months, six times more than the sixty days envisioned by

170 Letter from Jim Esquea, Assistant Sec’y, U.S. Dep’t of Health and Human Serv. & Ronald Welch Assistant Attorney Gen., U.S. Dep’t of Justice, to Senator Charles E. Grassley, U.S. Senate (Jan. 24, 2011) (on file with author).

171 Id.

172 Bentivoglio et al., supra note 156, at 2 n.1.

173 See 31 U.S.C. § 3730(a) (2010).

174 See generally Broderick, supra note 82, at 963 (stating that studying the empirical effect of qui tam provisions is needed for determining the effectiveness of the qui tam mechanism).

175 See Ward, supra note 112, at 316 (“The increase in transparency would reduce costs to all parties, thereby restoring the statutes deterrent power while maintaining an appropriate level of prosecutorial discretion over the intervention process.”).

176 See infra Section IV.C.

31

Congress.177 However, it is likely that this average is substantially larger when evaluating the

wait times for all pending qui tam actions.178 The lengthy delay and the associated costs of such

delay clearly suggests that the sixty-day investigative timeline has proven inadequate for the

government in its duty to investigate each case.179 Undoubtedly, the effort to begin recording

such empirical data should be undertaken in order to prompt necessary legislative changes aimed

at ameliorating any deficiencies in the FCA’s design and incentive structure.180

From a broad perspective, improving transparency in the area of non-intervened qui tam

actions is needed to determine whether or not the government is in fact failing to uphold the

public’s trust in its use and management of taxpayer dollars for the execution of its fraud

enforcement mission.181 The more focused reason for such transparency is to legitimize or

177 See generally Bucy, supra note 44, at 72 (theorizing that better exercise of the government’s authority to monitor, intervene, and move for dismissal in FCA cases would reduce damages of potential non-meritorious claims). See infra note 186 and accompanying text.

178 See Ward, supra note 112, at 299 (contractors are “unsure which characteristics of qui tam are likely to inspire government pursuit, dismissal, or alternatively disengagement.”).

179 See id. (stating that the FCA only provides that the government may elect to intervene, but offers no comparable factors for consideration). The government may opt out for any number of reasons and its decisions not to intervene may not necessarily be “an admission by the United States that it has suffered no injury in fact, but rather [the result of] a cost-benefit analysis.” See United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 455 (5th Cir. 2005), quoting United States ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453, 1458 (4th Cir. 1997). The court in Bell Helicopter held that the district court should not have dismissed a case with prejudice for FRCP 9(b) pleading deficiencies which would thereby preclude the DOJ from bringing suit on the same set of facts in the future. See id. The court stated that “the government may have determined that the costs associated with proceeding based on a poorly drafted complaint outweighed any anticipated benefits.” Id.

180 See, e.g., Rich, supra note 86, at 1260 (“[T]he FCA does not require the government to express any opinion about the legal, factual, or policy merits of a non-intervened action, so the government suffers very little politically when it does not dismiss even a frivolous qui tam suit. In fact, the DOJ often isolates itself further from criticism – and tries to do as little harm as possible to the relator’s case – by disclaiming any opinion on the merits of a non-intervened case when it weighs in on other legal issues.”).

181 See Bucy, supra note 44, at 70-71.

32

positively influence the DOJ’s intervention-related decisions, including its decisions not to

dismiss cases after declining intervention.182

C. Forcing the Government’s Hand

Experts and commentators tend to regard the government as not being proactive enough

in weeding out unworthy cases.183 This objective to attach accountability to the government,

however, requires the illumination of another important data void – the government’s reasons for

declining intervention. With little doubt, the reasons behind the government’s decision against

intervening in a qui tam action would provide valuable insight into why it likewise chose not to

dismiss it.184 Alas, the FCA does not require the government to provide such reasons.185 Without

such a requirement, the government might as well not have a good reason at all, let alone a poor

one, for allowing a losing case to proceed.186

Compounding the problem is the fact that the FCA incentivizes the government to move

for dismissal only for compelling reasons.187 The FCA requires the government to affirmatively

182 See Boese & McClain, supra note 19, at 49.

183 See 31 U.S.C. § 3730(c)(2)(A) (2010).

184 See id. § 3730(b)(4)(B).

185 See generally id. § 3730(b)(4)(B) (requiring only that the DOJ “notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action.”).

186 See Bentivoglio et al., supra note 156, at 3 (“The government’s typical strategy in False Claims Act cases has been to investigate the matter fully prior to making an intervention decision. This strategy has allowed the government to triage its scarce resources and to pursue investigations largely on a timetable of its choice.”).

187 See Bucy, supra note 44, at 71 (stating that it can be “economically advantageous for DOJ to remain a passive observer in non-intervened FCA cases.”). In other words, why should the DOJ buy a cow when it can get milk for free? In an internal document issued by the DOJ to explain the FCA process, it mentions only that it would “move to dismiss the relator’s complaint, either because there is no case, or the case conflicts with significant statutory or policy interests of the United States.” See FCA Intervention Process, supra note 122, at 2 (emphasis added).

33

move to dismiss qui tam suits, a process that involves the expenditure of modest prosecutorial

resources.188 Getting a court to grant the government’s motion to dismiss is far from automatic

as the FCA affords the relator a right to a hearing on the matter and requires court consent for

dismissal.189 On the other hand, the government’s option to decline intervention entails the mere

filing by the DOJ of a notice of its election not to intervene.190 A declination neither requires

court consent nor affords the relator a right to a hearing on the matter.191 Thus, the FCA’s

structure makes allowances for the DOJ to opt out of low priority cases192 and exploit the time

and resources of private attorneys general, hoping for a successful recovery in the end.193 And

the proof is in the pudding. Even though non-intervened cases recovered only about $571

million of the overall qui tam recoveries, the government, with little to no additional effort on the

merits of the case, nonetheless took the lion’s share of those recoveries of approximately $461

million.194 Thus, despite the noticeable disparity between recoveries of intervened versus non-

188 See DOJ Fraud Statistics, supra note 50, at 1-2.

189 See Bucy, supra note 44, at 70-71 (stating that DOJ uses its dismissal authority sparingly).

190 See, e.g., Bucy, supra note 44, at 72 (characterizing the DOJ’s power to intervene, monitor, and move for dismissal as a “powerful quality-control mechanism” and proposing that the DOJ use this authority to “minimalize damage of frivolous suits); William E. Kovacic, Whistleblower Bounty Lawsuits as Monitoring Devices in Government Contracting, 29 LOY. L.A. L. REV. 1799, 1803-04, 1825 (1996) (finding the DOJ’s unwillingness to dismiss weak qui tam suits permits relator opportunism).

191 See generally Rich, supra note 86, at 1238 (“that the FCA encourages the government too often to stand by and allow relators to exercise nearly complete prosecutorial discretion in their qui tam actions.”).

192 See id.; Bucy, supra note 44, at 71 (stating that DOJ rarely dismisses qui tam actions because there is “always the chance, however small, that the relator will prevail and collect a judgment, of which at least seventy percent will go to the government”).

193 See Bucy, supra note 44, at 72.

194 See Dayna Bowen Matthew, Tainted Prosecution of Tainted Claims: The Law, Economics, and Ethics of Fighting Medical Fraud Under the Civil False Claims Act?, 76 IND. L.J. 525, 588 (2001) (arguing that qui tam actions alleging violations of anti-kickback and self-referral laws

34

intervened cases, the DOJ rarely moves to dismiss, doing so primarily to challenge a private

action as not being in the public interest.195

The general consensus among commentators is that measures must be implemented to

compel the DOJ to take more of an active role in dismissing weak or frivolous suits.196 This

belief is not entirely unfounded given the FCA’s incentive structure.197 While the DOJ

experiences no palpable negative consequences by letting a weak case continue unabated, it must

spend some time and resources in preparing, filing, and litigating a motion to dismiss.198 The

various propositions offered by commentators, therefore, focus on modifying the FCA’s

incentive structure to motivate, or in some cases force, the DOJ to dismiss more cases.199

Some commentators have suggested that the FCA be modified so that qui tam actions are

automatically dismissed when the government opts against intervention.200 Texas’s state version

of the FCA includes such a provision.201 Though the solution may eliminate the concern about

the impact of unnecessary social costs resulting from non-meritorious and frivolous cases, under

such a scheme, the government would be completely deprived of the ability to outsource

meritorious cases that it does not have the resources to prosecute, resulting in fraud potentially

should be dismissed automatically if the government declines to intervene).

195 See James F. Barger, Jr., Pamela H. Bucy, Melinda M. Eubanks, & Marc S. Raspanti, States, Statutes, and Fraud: An Empirical Study of Emerging State False Claims Acts, 80 TUL. L. REV. 465, 487 (2005) (noting that the Texas FCA contains a provision requiring dismissal of a qui tam complaint if the government elects against intervention).

196 See Rich, supra note 86, at 1274.

197 See FCA SENATE REPORT, supra note 8, at 8.

198 See id.

199 See Rich, supra note 86, at 1275; Landy, supra note 41, at 1253.

200 See FCA SENATE REPORT, supra note 8, at 8; Rich, supra note 86, at 1275.

201 See Rich, supra note 86, at 1275.

35

going unpunished.202 As reflected in the legislative history for the 1986 amendments, Congress

recognized that government attorneys make “screening” decisions based on assessing the best

use of their limited resources, noting that “allegations that perhaps could develop into very

significant cases are often left unaddressed at the outset due to a judgment that devoting scarce

resources to a questionable case may not be efficient.”203 In this context, Congress supported the

1986 amendments which allowed and encouraged private citizens to bolster the government’s

fraud enforcement efforts.204 Thus, automatic dismissals would place the government in a bind

to select two equally detrimental choices: it would either have to (1) intervene in every case,

including questionable ones in the event they become viable later,205 or (2) accept that

meritorious cases will go unprosecuted.206 With the pendulum’s strong momentum swinging in

the direction of increased fraud enforcement, Congress will likely decline to permit such a

result.207

Professor Dayna Matthew advocates a proposal less restrictive than automatic dismissals,

calling for the government to certify in non-intervened cases that it has evaluated the relator’s

claims and believes the case worthy to continue.208 Under her proposal, qui tam actions become

subject to dismissal when the government declines intervention, placing the burden on the relator

202 See Dayna Bowen Matthew, The Moral Hazard Problem with Privatization of Public Enforcement: The Case of Pharmaceutical Fraud, 40 U. MICH. J.L. REFORM 281, 336 (2007).

203 See id.

204 Rich, supra note 86, at 1277.

205 See infra text and accompanying notes 212-214.

206 See Rich, supra note 86, at 1277.

207 See id.

208 See id.

36

to show good cause as to why it should be allowed to continue.209 Commenting on this proposal,

Professor Michael Rich warns that it may “raise some of the same concerns as requiring

dismissal of all non-intervened suits, in that it would limit severely the ability of relators to act as

a check on the DOJ’s lack of resources and will to prosecute some meritorious fraud claims.”210

He suggests a similar amendment, but one that requires less regulatory oversight.211 His idea

involves the authorizing of courts to require government certification of novel legal theories.212

The proposal calls for empowering the courts, in non-intervened cases where the relator’s theory

of liability presents a matter of first impression, to require the government to provide a non-

binding certification of whether the theory has legal merit and serves the public interest.213

The benefit of such an initiative includes (1) providing helpful guidance to the court and

encouraging consistency in the DOJ’s FCA enforcement actions, (2) raising political pressure on

the DOJ to weigh and provide a reasoned assessment of the financial, social, and regulatory costs

and benefits of the claim, (3) enabling regulated entities to better plan future activities based on 209 See id.

210 See generally Broderick, supra note 82, at 963 (arguing for a study of the empirical effect of qui tam provisions in determining the effectiveness of the qui tam mechanism).

211 See Bucy, supra note 44, at 72 (arguing that the DOJ’s power to intervene, monitor, and move for dismissal makes up a “powerful quality-control mechanism” that should be used to “minimalize damage of frivolous suits”).

212 Criticism levied on the DOJ include: (1) that the DOJ’s control of agency litigation can reduce the scope and effectiveness of an agency’s enforcement of its substantive regulations; (2) that public prosecutors have at least an indirect financial interest in funds recovered because those moneys are used to pay for future enforcement efforts; (3) that prosecutors may use their success to serve their own personal agendas, such as striving for “sensational prosecutions” to encourage support for a political career; (4) that the “danger of overzealous prosecution is particularly acute in FCA litigation, where prosecutors may lack the perspective to see how an individual case might impact future development of the law and thus pursue cases that lead to unwarranted expansion of FCA liability.” See Rich, supra note 86, at 1256-57.

213 See Ward, supra note 112, at 313 (“The problem is not that the FCA offers the Government the discretion to decide whether to intervene; the problem is that the FCA does not complement this broad grant of authority with transparency as to how it uses its authority.”).

37

the government’s position, affording them some measure of protection from FCA liability, and

(4) improving the relationship between the government and heavily regulated industries by

providing a public governmental stance on disputed regulatory subjects.214

Transparency and consistency operate as common denominators among the above

sought-after benefits articulated by Professor Rich.215 Rather than forcing the government to

pick and choose its battles, a more moderate approach of improving transparency over the DOJ’s

intervention decision-making may suffice to bring these benefits to fruition.216 When applied

correctly, transparency can influence the government to aspire to maintain consistency in its

decision-making, as well as place on the government some sense of accountability for wasteful

and abusive litigation.

D. Guiding Prosecutorial Discretion

The government’s accountability for wasteful qui tam litigation cannot be convincingly

established solely on theoretical analysis. The FCA affords the government considerable

prosecutorial discretion regarding intervention and dismissal.217 This broad discretion should be

reasonably tempered in a manner that will not necessarily narrow the government’s prosecutorial

discretion, but rather alleviate any concerns of dereliction of duty in the government’s exercise

214 See Rich, supra note 86, at 1277.

215 See generally Ward, supra note 112, at 308 (quoting a DOJ official who described the decision to intervene as an “ad hoc process”).

216 See Broderick, supra note 82, at 975 (deducing that seventy-two percent of qui tam actions are “frivolous”). Professor Rich warns against the use of the term “frivolous,” however, as it has a specific legal definition that makes the use of the term problematic in this context. See Rich, supra note 86, at 1250.

217 This predicament is one of the reasons it is allowed to intervene at a later time. See 31 U.S.C. § 3730(c)(3) (2010).

38

of such discretion in the public interest.218 Transparency places on the government the kind of

accountability that would influence it to intervene and/or dismiss non-meritorious qui tam cases.

One measure that could help achieve this goal involves establishing published guidelines upon

which the DOJ must consider when making its intervention decisions.219 These guidelines would

help promote the four sought-after goals articulated above.220

Presently, the DOJ’s decision-making process for intervention remains broad at best and

mysterious at worst – a process that consists mostly of cards that the DOJ holds close to its

chest.221 At least one commentator believes that non-intervened qui tam actions are found to be

frivolous at a rate of seventy-two percent.222 Yet, there is little data indicating why the

government fails to dismiss the vast majority of meritless qui tam suits. Certainly, even in cases

of questionable merit, the DOJ cannot be expected to know in every case whether or not

evidence it believed lacking after a thorough investigation might be uncovered later in discovery 218 See Rich, supra note 86, at 1275 (stating dismissing all cases in which the government declines intervention would force the government to either “intervene in all meritorious cases, thus placing a strain on already limited government resources, or accept that some meritorious FCA cases would not be prosecuted.”).

219 See id. at 1247-48.

220 See generally id. at 1260 (“In fact, the DOJ often isolates itself further from criticism – and tries to do as little harm as possible to the relator’s case – by disclaiming any opinion on the merits of a non-intervened case when it weighs in on other legal issues.”).

221 See Ward, supra note 112, at 313 (proposing that the FCA be amended “to delineate factors considered by DOJ officials when deciding whether to intervene in qui tam actions.”); see generally Broderick, supra note 82, at 965-66 (“The statute does not indicate what factors the Attorney General should consider when deciding whether to intervene, nor has the Supreme Court spoken on this issue. Moreover, the DOJ has never formalized the method by which it makes this decision.”).

222 See generally Gregory A. Zafiris, Comment, Limiting Prosecutorial Discretion Under the Oregon Environmental Crimes Act: A New Solution to an Old Problem, 24 ENVTL. L. 1674, 1674 (1994) (asserting that American jurisprudence affords prosecutors with broad decision-making power and that such power is susceptible to both abuse and error under normal circumstances, and that environmental law by its nature further increases the likelihood of misuse).

39

or at trial.223 This reason alone may provide sufficient justification for not requiring the DOJ to

move to dismiss every case it believes deficient in some way.224 Furthermore, with its finite

resources, it must choose the best cases it has on its plate to litigate in order to maximize

returns.225 Nevertheless, some illumination of their decision-making process is necessary to

ensure consistency in their practice and guard against poor choices, i.e. choices not to intervene

in and/or dismiss cases which were clearly wasteful.226

To this end, Congress should require the DOJ to consider certain minimum guidelines

when deciding whether or not to intervene and to certify compliance with them when declining

intervention.227 Furthermore, it should require the DOJ to include in its certification a

justification for any significant deviations from the guidelines. Publishing guidelines for the

government’s intervention decisions would alleviate some of the concerns of taxpayers as well as

regulated industries and would place a modest measure of accountability on the government,

while encouraging it to dismiss more wasteful cases and to maintain consistency in its decision-

223 See supra note 186 and accompanying text.

224 See Broderick, supra note 82, at 967 (“The exact reasoning behind the Attorney General’s choice to intervene cannot be studied systematically as the Attorney General is not required to report his reasoning.”).

225 See id. at 967.

226 See generally Broderick, supra note 82, at 966 (“Certainly, if a suit is without merit the Attorney General will not intervene.”). Scrutinizing the merits of the case involves determining if the case carries with it an important principle or large dollar amount and whether it raises novel issues of first impression. See id. at 991.

227 Courts have suggested that the dollar recovery in a case should not by itself provide sufficient justification for the expenditure of resources necessary to monitor a case and comply with discovery requests because, in their view, this approach would divert scarce resources from other valid objectives. See Swift v. United States, 318 F.3d 250, 254 (D.C. Cir. 2003) (dismissing complaint brought by former DOJ employee, alleging that colleagues had submitted false time sheets and leave slips in the amount of about $6,000); Ridenour v. Kaiser-Hill Co., L.L.C., 397 F.3d 925 (10th Cir. 2005) (involving the protection of classified information and urgent need to timely close contaminated facility).

40

making.228 In addition, requiring it to provide justification for significant deviations from the

guidelines will afford some insight into whether the government is adequately fulfilling its part

to separate the wheat from the chaff and avoid needless social costs.229

An attempt to systematically determine the DOJ’s internal intervention factors, short of

compelling the DOJ to reveal its secrets, would probably be futile.230 Some courts, however,

have surmised various reasons upon which the government may rely for declining intervention or

for opting against dismissal.231 Nevertheless, rather than having the courts or commentators

pontificate on the proper parameters for the exercise of prosecutorial discretion, a better solution

would require the government itself to be involved in promulgating prosecutorial guidelines as it

is in the best position to determine workable solutions within the confines of its budgetary and

manpower constraints. Congress should mandate that the Attorney General promulgate such

guidelines, while requiring that those guidelines include, at a minimum, factors Congress may

deem fundamental, such as: (1) the merits of the case;232 (2) cost-benefit analyses;233 (3) the

availability of DOJ attorneys;234 (4) the government’s ability to participate without intervening;235

228 See United States ex rel. Downy v. Corning, Inc., 118 F. Supp. 2d 1160, 1170 (D.N.M. 2000).

229 For a listing of ways in which the DOJ may participate without intervening, see Broderick, supra note 82, at 967 n.123.

230 See Downy, 118 F. Supp. 2d at 1170.

231 See United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1146 (9th Cir. 1998).

232 See 31 U.S.C. § 3730(b)(4)(B) (2010).

233 See Oregon Environmental Crimes Act, 1993 Or. Laws 956 (codified at OR. REV. STAT. § 468.961 (1993)).

234 See Zafiris, supra note 228, at 1674.

235 See Ward, supra note 112, at 312 (“[T]he lack of transparency has weakened the statute’s effectiveness. Deterrence cannot be served when contractors are unsure when, if ever, the Government will shield them from superfluous claims. Moreover, the integrity of the FCA must

41

(5) the experience and skill of the relator’s attorneys;236 and (6) the maintenance of stability in an

industry.237 More important, Congress should require the DOJ to certify to the court that it

complied with these guidelines, or to provide justification for significant deviations therefrom,

whenever it submits its notice of non-intervention pursuant to § 3730(b)(4)(B).238

This small measure of tempering prosecutorial discretion without diminishing it provides

a politically viable solution. A similar example can be seen in the Oregon Environmental Crimes

Act (“OECA”), which requires that the Attorney General, in conjunction with local district

attorneys, develop legally prescribed guidelines for prosecuting felony environmental crimes.239

The OECA, which requires prosecutorial certification of compliance in each case, was

promulgated as a political compromise amidst growing concerns from the general public as well

as from regulated communities that the broad discretionary powers of prosecutors in the area of

felony environmental crimes contributed to prosecutorial errors and abuses.240 Congress should

similarly compel the creation of clear prosecutorial guidance with respect to intervention and

dismissals. Without such guidance, DOJ attorneys are left to make choices which, inevitably,

be questioned when the statute allows the Government to intervene without questioning whether actual damages were even experienced.”).

236 See generally id. at 313 (proposing amendments to the FCA by providing factors that the DOJ should consider in deciding whether to intervene similar to the mitigating factors considered in debarment decisions).

237 See id. at 315-16 (suggesting that by providing factors that the DOJ should consider in determining whether to intervene will result in “decreased costs to the industry”, reduced litigation costs, and lower general contractor proposal prices).

238 See Rich, supra note 86, at 1277.

239 See generally Ward, supra note 112, at 316 (asserting that “knowledge as to the type of behavior truly policed by this statute would better serve deterrence and efficient government contracting.”).

240 See Bucy, supra note 44, at 58-59.

42

impute their own values, leaving the DOJ’s qui tam intervention and dismissal decisions

particularly susceptible to politicized and, in some cases, arbitrary enforcement.241

Ultimately, improving transparency over non-intervened cases and the government’s

decision-making process will deliver the spark needed to trigger necessary changes to the FCA’s

design.242 It would help promote public and political awareness of the actual social cost impact

of non-intervened cases as well as the potential interplay between the DOJ’s decisions and the

proliferation of these social costs.243 Transparency will also reveal whether the social costs have

exceeded politically acceptable levels and, in turn, cause the DOJ to be held at a higher standard

of accountability for examining the financial, social, and regulatory costs and benefits of each

qui tam claim.244 As an added bonus, transparency will promote (or ensure) consistency in the

DOJ’s qui tam intervention decisions.245

241 See, e.g., Frequently Asked Questions, TAXPAYER AGAINST FRAUD EDUC. FUND, http://www.taf.org/faq.html#q25 (last visited May 20, 2011) (“Unfortunately, not many lawyers have experience in qui tam litigation. At a minimum, you should seek an attorney with experience in federal civil litigation.”).

242 “The one great principle of English law is to make business for itself.” CHARLES DICKENS, BLEAK HOUSE 482 (George Ford & Sylvère Monod eds., Modern Library 1985) (1853).

243 See Bucy, supra note 44, at 58.

244 See generally Martin H. Redish, Private Contingent Fee Lawyers and Public Power: Constitutional and Political Implications, 18 SUP. CT. ECON. REV. 77, 79 (2010) (explaining that attorneys bet everything on attainment of victory in contingency fee arrangements); Rich, supra note 86, at 1251 n.128 (explaining that relators’ attorneys usually work on contingency fee basis and thus are motivated by the prospect of a financial reward); cf. John S. Dzienkowski & Robert J. Peroni, The Decline in Lawyer Independence: Lawyer Equity Investments in Clients, 81 TEX. L. REV. 405, 441 (2000) (discussing critics’ concerns that contingency fees may encourage attorneys to pursue frivolous cases for nuisance value, thereby imposing additional costs on the legal system).

245 See Herbert M. Kritzer, The Wages of Risk: The Return of Contingency Fee Legal Practice, 47 DEPAUL L. REV. 267, 271 (1998).

43

V. Qui Tam Plaintiff Attorney Accountability

The inherent complex nature of FCA claims often entails daunting legal and logistical challenges and creates huge expenses for both parties. One qui tam case had so many attorneys, with 125 lawyers representing the defendants, fifteen relator attorneys, and numerous DOJ lawyers, that the federal courthouse could not accommodate all of the parties for docket call. Plaintiffs needed a 5,000 square foot warehouse to store the 7,000 banker boxes of records produced by the defense. The parties eventually settled with $400 million for the federal government and a relators’ share of $64 million.246

It is important that attorneys representing relators in FCA cases meet certain

minimum qualifications to ensure that worthy cases are filed and that attorneys are not

acting solely on the basis of private gain.247 Private practitioners are, generally speaking,

in the business to make money,248 and because they typically conduct qui tam cases on a

contingency basis,249 they are careful in their selection of cases, taking on those that they 246 See generally Lester Brickman, ABA Regulation of Contingency Fees: Money Talks Ethics Walks, 65 FORDHAM L. REV. 247, 269-70 (1996) (asserting that contingency fee attorneys carefully select cases trying to limit exposure to undercompensation and maximizing their overcompensation).

247 For a detailed discussion of the varied nature of contingency fee attorneys portfolio strategies, see Kritzer, supra note 251, at 304. Professor Kritzer explains that some firms have reputations that allow them to be extremely selective in choosing cases, seeking only those with high potential payoffs that are “sure things,” while other attorneys may have a combination of high risk/large returns along with more “routine” cases that keep the bills paid. Id. Other strategies include a “substantial flow” hoping to get the occasional “hit” or winner-case. Id. Then there is the attorney who keeps a large number of high risk cases that when successful turn into substantial payoffs. Id. A possible contributing factor to this phenomenon may be the inability of lawyers to accurately assess the potential outcome of their cases. See generally Jane Goodman-Delahunty, Maria Hartwing & Pär Anders Granhag, Insightful or Wishful: Lawyers’ Ability to Predict Case Outcomes, 16 PSYCHOL. PUB. POL’Y & L. 133, 149 (2010) (describing a recent study released by the American Psychological Association indicating that lawyers frequently make substantial judgmental errors and show a proclivity to over optimism).

248 See Canni, supra note 35, at 9 (contending that Congress met its objective to increase private enforcement suits).

249 See generally Cummins, supra note 18 (stating that the attendance at the annual conference for Taxpayers Against Fraud, an organization dedicated to assisting whistleblowers and their attorneys, more than quintupled within the past ten years). Eric Havian, a federal prosecutor-turned qui tam attorney, predicts that qui tam litigation will increase even further in the next five years. Id. See also France, supra note 40, at 46 (“[M]ore attorneys are being attracted by the

44

feel will bring adequate, if not great, returns on their investment.250 By accepting a case

for representation, attorneys signal their willingness to invest their personal resources in

litigating a case.251 Theoretically, this business sense should ferret out baseless FCA

lawsuits from reaching the court system.252 What one attorney deems an unworthy case,

however, could be seen as a goldmine to another, especially considering the fact that the

legal profession, particularly the private bar, possesses an undeniable profit motive.253

A. The Rise of the Qui Tam Bar

A quarter of a century has passed since the 1986 amendments and during that time qui

tam actions have flourished.254 Over the course of this period, the number of qui tam actions

rapidly increased, while at the same time the qui tam bar continues to grow.255 The prospect of

huge sums of money potentially recoverable and the idea of serving the taxpayers at the same time….‘It’s public interest for profit.’”).

250 See generally Donald H. Caldwall, Jr., Qui Tam Actions: Best Practice for Relator’s Counsel, 38 J. HEALTH L. 367 (2005) (contending that some critics have blamed the “bounty” of the FCA provisions for providing incentives to pursue meritless claims). “‘How would you like to become a multimillionaire, spend the rest of your life playing golf or going fishing? Swindle the government? No, help the government catch some people who did.’” Paul W. Morenberg, Comment, Environmental Fraud by Government Contractors: A New Application of the False Claims Act, 22 B.C. ENVTL. AFF. L. REV. 623, 629 n.61 (quoting 60 Minutes: Getting Rich (CBS television broadcast, Jan. 16, 1994)).

251 See Peter Loftus, Whistleblower’s Long Journey, WALL ST. J. (Oct. 28, 2010) (on file with author), available at http://online.wsj.com/article/SB10001424052702303443904575578713255698500.html.

252 See id.

253 See id.

254 See id.

255 See 31 U.S.C. § 3729(a)(1)(G) (2010); 28 C.F.R. § 85.3(9) (2011). To illustrate how the FCA’s penalty and multiple damages provisions can manifest in practice, in United States v. Lorenzo, 768 F. Supp. 1127, 1133 (E.D. Penn. 1991), a claimant submitted 3,683 Medicare reimbursement claims and received $130,719. The court determined that the defendants “acted in reckless disregard of the truth or falsity of the information they submitted on the form” and therefore awarded three times the amount of damages ($130,719), or $392,157, and a civil

45

netting enormous recoveries under the FCA while simultaneously serving the public interest

fueled the growth of the qui tam bar.256 The median relator recovery averages out at $3 million,

ranging from $100,000 to $42 million a person.257 Attorneys’ fees usually consume thirty to fifty

percent of these shares.258 In 2010, Cheryl Eckard, a lone whistleblower, collected a lottery-sized

relator share of $96 million.259 The publicity of large settlements like Ms. Eckard’s serves to

encourage additional would-be whistleblowers looking to get rich quick.260

The damages and penalties provisions of the FCA can lead to staggering results,

subjecting violators to three times the amount of actual damages plus civil penalties of up to

$11,000.00 per false claim.261 The FCA, however, provides no framework for calculating actual

damages or for calculating the number of false claims.262  Some courts have accepted aggressive

theories of liability and damages, requiring defendants to pay up to triple the amount of all

money paid out by the government, regardless of the value of goods or services received in

penalty of $5,000 per claim (3,683 x $5,000), totaling $18,415,000. See id. at 1132-33.

256 See 31 U.S.C. §§ 3729-33.

257 See 2010 Year-End False Claims Act Update, GIBSON DUNN, 1, 1-2 (Jan. 6, 2011) (on file with author), available at http://www.gibsondunn.com/publications/Documents/2010YearEndFalseClaimsActUpdate.pdf.

258 See, e.g., Boese, supra note 152, at 77 (“[B]ecause billing in the health care industry typically involves the submission of numerous small claims, damages and penalties could easily reach astronomical figures.”).

259 See France, supra note 40, at 48.

260 See GAO-06-320R, supra note 8, at 2.

261 See DOJ Fraud Statistics, supra note 50, at 2.

262 See The Eighth Annual National Institute on the Civil False Claims Act and Qui Tam Enforcement, AMERICAN BAR ASSOCIATION 2, available at http://www2.americanbar.org/calendar/civil-false-claims-act-and-qui-tam-enforcement-2010/Documents/cen0cfc_Website_Brochure_5-7-10.pdf (“The Civil False Claims Act (FCA) is the fastest growing area of federal litigation, particularly because of its unique qui tam enforcement mechanism.”).

46

exchange.263  The determination of claims have also run the whole gamut of interpretation,

ranging from calculating “claims” at the lowest level such as the number of contracts to a much

higher calculation based on the number of line items on all claims and invoices.264

A general search for “qui tam attorneys” online produces numerous website

advertisements emphasizing potential money settlements as opposed to the public interest of

combating fraud. The DOJ’s statistics also evidence the substantial growth of the qui tam bar.

Between 1943 and 1986, only about six FCA cases were filed per year.265 Subsequently,

between fiscal years 1986 and 2005, the Civil Division for the DOJ received 8,869 FCA cases,

an average of over 440 cases per year.266 Qui tam relators collectively raked in over $2.8 billion

in relator share awards between 1986 and 2010.267 These astronomical profits as well as the

ever-expanding theories of liability have made the FCA now the fastest growing area of federal

litigation.268

263 See Stephen N. Subrin, The Limitations on Transsubstantive Procedure: An Essay on Adjusting the “One Size Fits All” Assumption, 87 DENV. U. L. REV. 377, 397 (2010).

264 Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737 (1995) (codified at 15 U.S.C. § 78u-4(b)(2) (2010)).

265 See Eugene Zelenski, New Bully on the Class Action Block – Analysis of Restrictions on Securities Class Actions Imposed by the Private Securities Litigation Reform Act of 1995, 73 NOTRE DAME L. REV. 1135, 1135-37 (1998).

266 See id. at 1142; see also S. REP. NO. 104-98, at 6 (1995), reprinted in 1995 U.S.C.C.A.N. 679, 685 (acknowledging that many securities class actions “are brought on the basis of their settlement value”).

267 See Elliot J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L.J. 2053, 2085-86 (1995).

268 See generally Kathryn B. McKenna, Pleading Securities Fraud Using Confidential Sources Under the Private Securities Litigation Reform Act of 1995: It’s All in the Details, 55 RUTGERS L. REV. 205, 205-06 (2002) (explaining that legislators focused on reducing abuses of frivolous securities fraud suits while still encouraging the filing of meritorious claims).

47

B. Private Securities Litigation Parallel

The private securities litigation realm, another important fraud enforcement tool in

American Jurisprudence, provides the public with another prominent mechanism involving the

use of private attorneys general.269 In response to the perceived increase in abusive and meritless

securities fraud lawsuits, Congress enacted the Private Securities Litigation Reform Act of 1995

(“PSLRA”),270 which imposed inter alia unique requirements and limitations on private class

actions charging securities fraud in federal courts.271 Congress particularly sought to thwart

securities class action suits filed simply to extort settlements from defendant corporations.272

These non-meritorious securities fraud claims, often referred to as “strike suits,” are lawsuits

where the plaintiff’s attorney either initiates the action without reasonable grounds or decides to

continue maintaining the action even after discovery confirms that the action lacks merit.273

Like the FCA qui tam mechanism which was employed to augment the DOJ’s anti-fraud

enforcement efforts, the PSLRA private right of action for securities fraud claims was deemed 269 See Bucy, supra note 44, at 56 (discussing how PSLRA appears to do a good job in recruiting knowledgeable attorneys by requiring the appropriate lead plaintiff to be the one with the “largest financial stake” and responsible for selecting class counsel). See also Joseph A. Grundfest & Michael A. Perino, The Pentium Papers: A Case Study of Collective Institutional Investor Activism in Litigation, 38 ARIZ. L. REV. 559, 559-62 (1996) (describing the Private Securities Litigation Reform Act of 1995).

270 See generally Alpine Pharm., Inc. v. Chas. Pfizer & Co., 481 F.2d 1045, 1050 (2d Cir. 1973) (“One accepting employment as counsel in a class action does not become a class representative through simple operation of the private enterprise system. Rather, both the class determination and designation of counsel as class representative come through judicial determinations, and the attorney so benefited serves in something of a position of public trust. Consequently, he shares with the court the burden of protecting the class action device against public apprehensions that it encourages strike suits and excessive attorneys’ fees.”)

271 See 31 U.S.C. § 3729 et al. (2010).

272 Compare Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737 (1995) (codified at 15 U.S.C. § 78u-4(b)(2) (2010)) with 31 U.S.C. § 3729 et al. (2010).

273 See generally 31 U.S.C. § 3729 et al. (2010) (failing to provide standards for plaintiff attorneys in FCA cases).

48

necessary to supplement the efforts of the Securities and Exchange Commission in deterring

securities fraud and to provide an effective mechanism for compensating investors injured by

securities fraud.274 In contrast to the FCA, however, the reforms under the PSLRA included an

emphasis on aligning the interests of private attorneys with that of the individual investors

representing the class.275 In addition, as it is a class action affair, FRCP 23(g) applies, requiring

the court to determine whether a proposed attorney can adequately serve as class representative –

a determination primarily made to ensure the protection of the interests of the representative

class, but just as importantly, to protect the public interest.276 The FCA qui tam mechanism, on

the other hand, does not have a similar requirement.277

The duty imposed on the courts to ensure the adequacy of plaintiff attorneys under the

PSLRA delineates an important area where the FCA and PSLRA private enforcement

mechanisms differ significantly.278 Modifying the FCA to eliminate this difference presents a

274 See Culbertson, supra note 103, at 32-33 (stating that “most lawmakers, judges, and commentators tend to view whistleblowers and their lawyers inseparably as ‘private attorneys general.’”).

275 In fact, qui tam relators and their attorneys specifically operate under Congress’ grant of authority under the FCA, exercising an assignment of the government’s right to prosecute private individuals and entities under the FCA. See Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 773-74 (2000) (regarding the FCA as effecting a partial assignment of the government’s damages claim, thereby conferring standing on the relator).

276 The requirement for adequate counsel is particularly important because the outcome of a qui tam action may have claim or issue-preclusive effect on the United States. See U.S. ex rel. Fisher v. Network Software Assoc., 377 F. Supp. 2d 195, 197 (D.D.C. 2005); see generally Kovacic, supra note 196, at 1803-04, 1825 (discussing how the growth of the qui tam bar, large public bounties, and overall benefit of deterring fraud can have unintended negative consequences, such as excessive litigation and the filing of nuisance suits).

277 See infra Section V.C.

278 See United States ex rel. Kreindler & Kreindler v. United Tech. Corp., 985 F.2d 1148, 1154 (2d Cir. 1993), quoting Minotti v. Lensink, 895 F.2d 100, 104 (2d Cir.1990).

49

modest step toward improving qui tam plaintiff attorney accountability.279 Plaintiff attorneys act

as private attorneys general280 alongside their clients to pursue, at least in theory, the public

interest in combating fraud.281 Because of the substantial growth in the qui tam bar, the prospect

of tremendous monetary recoveries, coupled with the ever-present profit motive of the private

bar, prudence dictates that a stronger measure for ensuring plaintiff attorney accountability be

established under the FCA.282 The court-monitoring approach under the PSLRA via FRCP 23(g)

presents a potential starting point.283

C. FRCP 23(g) and Beyond: A Model for Qualifying Plaintiff Attorneys

Like class action counsel, courts should determine whether prospective FCA plaintiff

attorneys in non-intervened cases are qualified to adequately represent the interests of qui tam

relators and, more importantly, that of “the real party in interest” – the U.S. government.284 As

mentioned above, the PSLRA class action mechanism enables and requires the court to

determine the adequacy of plaintiff attorneys.285 The court’s authority to perform this

gatekeeping function derives from FRCP 23(g).286 This provision stemmed from the reality that

279 See FED. R. CIV. P. 23(g).

280 In 2003, the Supreme Court adopted important amendments to the FRCP, including the subdivision (g) to FRCP 23. See generally Eran B. Taussig, Broadening the Scope of Judicial Gatekeeping: Adopting the Good Faith Doctrine in Class Action Proceedings, 83 ST. JOHN’S L. REV. 1275, 1345 (2009) (enacting the 2003 amendments to the FRCP signal a greater role for the courts in appointment of class counsel).

281 See FED. R. CIV. P. 23(g), advisory committee’s notes.

282 See infra note 298 and accompanying text.

283 See FED. R. CIV. P. 23(g).

284 See FED. R. CIV. P. 23(g)(1)(A).

285 See FED. R. CIV. P. 23(g)(1)(B).

286 See FED. R. CIV. P. 23(g)(1)(E).

50

the selection and activity of class counsel correlate directly to the successful handling of a class

action, and build on the experience of the courts under FRCP 23(a)(4) in scrutinizing proposed

class counsel and representatives for adequacy. 287 The FCA qui tam private enforcement

mechanism should likewise contain a similar requirement since its very nature involves a

specialized area of practice and a similar range of complexity.288

FRCP 23(g) describes what the court must assess before deeming a class action counsel

adequate for representation.289 To determine whether an appointment should be made, the rule

lists four factors that the court must consider: (1) the work counsel has done in identifying or

investigating potential claims in the action, (2) counsel’s experience in handling class actions,

other complex litigation, and the type of claims asserted in the action, (3) counsel’s knowledge

of the applicable law, and (4) the resources counsel will commit to representing the class.290 The

rule authorizes the court to take into account “any other matter pertinent” in determining whether

the attorney can fairly and adequately represent the interests of the class,291 and it includes a

catchall provision stating that the court “may make further orders in connection with the

appointment.”292 The rule also authorizes the court to direct the potential class counsel to 287 See FED. R. CIV. P. 23(g)(1)(C).

288 FED. R. CIV. P. 23(g)(1)(C), advisory committee’s notes.

289 See generally FED. R. CIV. P. 23(g)(1), (4) (describing the appointment requirements and duty for class counsel).

290 See Benjamin Hoorn Barton, Why Do We Regulate Lawyers? An Economic Analysis of the Justifications for Entry and Conduct Regulation, 33 ARIZ. ST. L.J. 429, 431, 450 (2001) (contending that courts are greatly affected by attorney actions, from administration of matters to filing unnecessary lawsuits or motions to discovery disputes and these interactions have costs associated with them for the courts).

291 See generally United States ex rel. Rockefeller v. Westinghouse Elec. Co., 274 F. Supp. 2d 10, 16 (2003) (stating that the relator represents the interests of the United States).

292 Compare Bucy, supra note 44, at 58 (stating that the qui tam model has proven highly effective in recruiting top legal talent who have the skill and resources to handle complex,

51

provide information on any subject pertinent to the appointment.293 If the court deems class

counsel unsatisfactory, “it may deny class certification, reject all applications, recommend that

an application be modified, invite new applications, or make any other appropriate order

regarding selection and appointment of class counsel.”294

A gatekeeping mechanism akin to FRCP 23(g) would be a useful first step in deterring

frivolous and unmeritorious FCA qui tam actions.295 Though the main purpose of FRCP 23(g) is

to ensure that an appointed attorney adequately represents the interests of the class, a corollary

consequence is that the “adequate” attorney, at least in theory, is less likely than the general

practitioner to assert baseless claims.296 While there is no empirical data showing a widespread

problem with incompetence or rampant abuse of process on the part of plaintiff attorneys, such a

certification requirement would protect the court and its limited time and resources from any

potential abusive or wasteful litigation. However, to avoid placing undue burden on the courts

and the government with an elaborate procedural requirement, the FCA’s gatekeeping process

should be simple. All that should be required is for the lead counsel for any qui tam relator to

expensive cases because of the incentive for large fees and judgments and, conversely, that the structural design of the qui tam provisions discourage inexperienced or unskilled counsel) with Frequently Asked Questions, supra note 247 (“Unfortunately, not many lawyers have experience in qui tam litigation.”). For practical purposes, the disqualification should result in a dismissal without prejudice, allowing the relator to seek adequate counsel. See, e.g., United States ex rel. Schwartz v. TRW Inc., 118 F. Supp. 2d 991, 996-997 (C.D. Cal. 2000) (dismissing case without prejudice and giving pro se relator sufficient time to find counsel).

293 See Rich, supra note 86, at 1256 (contending that in non-intervened cases, relators’ interests are motivated by self-interest, which may be contrary to the public’s interest); Bucy, supra note 44, at 54 (“Perhaps not by design, but in fact, the FCA elevates the value of protecting the larger community over the value of loyalty to those close at hand.”).

294 31 U.S.C. § 3070(d)(4) (2010).

295 See Pfingston v. Ronan Eng’g Co., 284 F.3d 999, 1006 (9th Cir. 2002) (“In the absence of any indication that Congress intended a different result, we hold that the award of attorneys’ fees against an attorney is not authorized by the False Claims Act.”).

296 See supra Section V.C.

52

certify in their complaint that they are qualified under the FRCP 23(g)-like requirements. The

only time an additional hearing should be involved is when the government desires to challenge

the qualification of the relator’s counsel, especially since the government sits as the real party in

interest and is essentially outsourcing the case to outside counsel.297 Inclusion of this attorney

qualification requirement would motivate prospective plaintiff attorneys to ensure they possess

or acquire the requisite expertise before embarking on a qui tam action, particularly because of

the threat of an early sanction in the form of a disqualification from representation.298

D. Amending § 3730(d)(4) to Include Plaintiff Attorneys

The FCA effectively draws upon private economic interests to serve the greater public

interest of combatting fraud.299 Thus, if money primarily motivates qui tam plaintiff attorneys,

then money can serve as the logical impetus for influencing the quality of their work as well.

297 See generally United States ex rel. Mikes v. Straus, 98 F. Supp. 2d 517 (S.D.N.Y. 2000), aff’d. 274 F.3d 687 (2d Cir. 2001) (requiring an extremely high standard for award of fees under § 3070(d)(4)). This high standard is difficult to topple despite the fact that Congress encourages courts to apply the provision strictly. See FCA SENATE REPORT, supra note 8, at 8.

298 See generally Brickman, supra note 252, at 284-85 (stating that contingency fee places the qui tam attorney in the role of principal as a result of his financial stake in the litigation).

299 Notwithstanding its flaws, the FCA presents the most robust public-private enforcement mechanism for combatting fraud. See Bucy, supra note 44, at 54 (comparing the number of suits filed and monetary judgments with other private justice-type actions, such as securities and citizen suit private actions, demonstrates the FCA’s success). Moreover, qui tam plaintiff attorneys stand to gain tremendous returns on their investments because they are allowed to double dip in the sense that they collect not only on their contingency fees, but may also recover attorney fees. See id. at 58 (stating that relators receive large fees combined from court-awarded attorney fees and a percentage of recovery based on the contingency fee as agreed-upon by client). In stark contrast, the private enforcement mechanism for environmental statutes mandates that recoveries be returned to the United States Treasury. See, e.g., The Clean Water Act of 1977, 33 U.S.C. §§ 1251-1387 (1994). This approach “significantly reduces the influence that private financial gain might have on private enforcement of these statutes.” See Matthew, supra note 208, at 331. The drawback of this approach is that it does not encourage revealing insider information about environmental violations as there is no financial incentive. See Bucy, supra note 44, at 60. On the other hand, the current FCA scheme for the allocation of reward funds has encouraged more filings, so much so that the government has been able to intervene in only approximately one in five cases filed. See DOJ Fraud Statistics, supra note 50, at 9.

53

While providing a FRCP 23(g)-like incentive for plaintiff attorneys to ensure they have the

requisite expertise to conduct qui tam cases is worthwhile by itself, a disincentive for bringing

frivolous or non-meritorious cases should also be implemented. In tandem with the gatekeeping

requirement for qualified plaintiff attorneys, Congress should also amend the FCA to expose

these qualified plaintiff attorneys to the penalties of § 3730(d)(4) which reads:

If the Government does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys’ fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.300

Congress chose not to expose plaintiff attorneys to this provision, opting to apply it only to

relators.301 Arguably, while relators may have as large an appetite for big dollar success as their

attorneys do, it is their attorneys who are in a better position to assess the legal viability of their

cases. Therefore, counsel for relators should be made to appreciate and avoid the potential

consequences of violating the mandate of § 3730(d)(4), particularly if they have already certified

their qualifications.302 Under this regime, the court should hesitate less to impose § 3070(d)(4),

which is currently applied sparingly, because attorneys are specifically trained to practice law, as

opposed to their typically non-lawyer clients.303

300 See generally Dzienkowski & Peroni, supra note 250, at 440 (discussing some of the disadvantages of contingency fee cases including attorneys filing frivolous cases for nuisance value, and diverging from clients’ interests).

301 This measure causes no chilling effect on relators as § 3730(d)(4) already applies to them. Rather, the measure instead balances the risks between attorney and client to prevent a divergence of interests that may lead to wasteful litigation.

302 Compare FED. R. CIV. P. 11 (civil procedure rule allowing sanctions for filing frivolous actions or suit for an improper purpose) with 31 U.S.C. § 3730(d)(4) (2010) (provision of the FCA that awards reasonable attorneys’ fees and expenses to the defendant if the claim is found to be clearly frivolous).

303 See generally Ted Lapidus v. Vann, 112 F.3d 91, 96 (2d Cir. 1997) (making a similar comparison on the differences between Rule 11 and 28 U.S.C. § 1927).

54

Under the current version of § 3730(d)(4), the plaintiff attorney enjoys an advantage over

the relator in terms of the unbalanced risks associated with the provision’s penalties.304 Thus,

though plaintiff attorneys, armed with legal training and experience, are technically in a better

position to determine and advise their clients on whether their cases are non-meritorious or

frivolous, they may nevertheless fail to avert their clients from pushing forward for a number of

reasons including the ever-present profit motive.305 The result is that the plaintiff attorney may

be more willing to take calculated risks that deviate from the relator’s desire to avoid liability

under this provision, increasing the likelihood of frivolous or unmeritorious claims making it to

court.306 Applying § 3730(d)(4) to plaintiff attorneys balances the risk between the relator and

his attorney and helps to discourage plaintiff attorneys from pursuing frivolous and non-

meritorious matters.307

FRCP 11 (“Rule 11”) does not obviate the need to make such a harmonizing modification

to § 3730(d)(4).308 Rule 11 and § 3730(d)(4), though similar, are quite distinct.309 Some of the

significant differences include: (1) a Rule 11 violation must be based on signed pleadings, while

§ 3730(d)(4) does not have a paper requirement; (2) Rule 11 misconduct is measured as of the 304 See id.

305 See FED. R. CIV. P. 11(c)(2).

306 See Lapidus, 112 F.3d at 96.

307 See FED. R. CIV. P. 11(c)(1).

308 See Brickman, supra note 252, at 284-85 (“The contingency fee lawyer has a substantial financial interest in the claim; unlike an attorney working for a flat rate, the contingency fee lawyer only recovers if the outcome favors his client. Thus, the issue of control assumes that greater significance in a contingency fee situation. To be sure, the traditional notion of the lawyer-client relationship assumes the lawyer acts as the agent of the client-principal. But in reality, and in particular when the attorney has a substantial financial stake in the claim, this traditional perspective is anachronistic because the attorney assumes the role of the principal.”).

309 See id. at 285 (asserting that lawyers gain control over a case by “employing manipulative tactics during negotiation of the lawyer-client relationship).

55

time the pleading was signed, while § 3730(d)(4) relates to a course of conduct and imposes an

ongoing obligation on attorneys; and (3) unlike Rule 11, § 3730(d)(4) applies only if the

defendant ultimately prevails in the action.310 An additional difference is that Rule 11 allows a

party to withdraw an offensive pleading in lieu of being faced with a motion for sanctions.311

Thus, applying § 3730(d)(4) to plaintiff attorneys would not be a duplicative measure, but rather

an augmentation of the court’s monitoring authority.312 It would also mirror Rule 11’s equal

applicability to both attorneys and their clients.313

Since qui tam plaintiff attorneys typically take on these cases on a contingency fee basis,

a fee arrangement where the attorney foots the bill up front, the resulting relationship between

attorney and client is that the plaintiff attorney wields the immense power of setting primary

objectives.314 Under these conditions, the relator’s dependence on the attorney’s resources

diminishes the relator’s influence in determining the direction of the case and, consequently,

presents opportunities for the relator’s attorney to engage in unethical behavior or to push

forward unmeritorious claims.315 Qui tam plaintiff attorneys have also largely been unregulated 310 See generally MODEL RULES OF PROF’L CONDUCT Preamble 10 (2007) (“The legal profession is largely self-governing.”); see Brickman, supra note 252, at 250 (stating that professional codes are the main self-regulating tool for attorneys).

311 See generally Barton, supra note 296, at 431 (stating that explicit rules narrowly describing the minimum standard of permitted attorney conduct govern attorney conduct).

312 The U.S. Supreme Court stated the obvious when it called qui tam relators a “class of plaintiffs” who were “motivated primarily by prospects of monetary reward rather than the public good.” See Hughes Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 949 (1997). See generally Kovacic, supra note 196, at 1803-04, 1825 (discussion how the growth of the qui tam bar, large public bounties, and overall benefit of deterring fraud can have unintended negative consequences, such as excessive litigation and the filing of nuisance suits).

313 See United States ex rel. Tomeo v. Allied Signal Co., 97-CV-442, 1997 WL 727563 (N.D.N.Y. Oct. 24, 1997).

314 See id.

315 See id.

56

other than by their rules of ethics and professional conduct.316 Though these rules would bar an

attorney from allowing his own interests, financial or otherwise, to influence how he serves his

client’s interests, they serve as inadequate deterrents.317 Reducing wasteful litigation requires a

stronger measure of deterrence such as the application of § 3730(d)(4) to plaintiff attorneys.318

VI. Prohibiting Pro Se Litigation When the DOJ Declines Intervention

In United States ex rel. Tomeo v. Allied Signal Company., pro se plaintiff-relators filed a

signed Amended Complaint with over four hundred pages of attachments under seal, containing

ten causes of action against twenty-one defendants, including President Clinton, Vice-President

Gore, the Catholic Church, the U.S. Post Office, and various members of Congress.319 The court

regarded the “rambling twelve pages” as unique, stating that it presented “a confusing series of

allegations and observations.”320 The bulk of the Amended Complaint was devoted to a narrative

written by one of the relators who discussed his personal conflicts, love interests, travels,

psychological issues, and employment problems without reference to any claims or defendants.321

Though “provocative,” the court stated that the four-hundred plus pages of attachments shed

little light on the nature of the relators’ specific claims.322 Not surprisingly, the court dismissed

316 See id.

317 See id.

318 Currently, courts are split as to whether qui tam relators should be allowed to do so. Compare United States ex rel. Lu v. Ou, 368 F.3d 773, 775 (7th Cir. 2004) (holding that pro se relator cannot prosecute qui tam suits because he is acting as an attorney and the court’s policy is that nonlawyers cannot represent litigants), with Tomeo, 1997 WL 727563, at *1 (allowing pro se relator to proceed with case), complaint dismissed on other grounds.

319 See 31 U.S.C. § 3730(b) (2010).

320 See 31 U.S.C. §§ 3729-33.

321 See United States ex rel. Doe v. John Doe Corp., 960 F.2d 318, 319 (2d Cir. 1992).

322 See United States ex rel. Rockefeller v. Westinghouse Elec. Co., 274 F. Supp. 2d 10, 16 (D.D.C. 2003), quoting United States ex rel. Zissler v. Regents of Univ. of Minn., 154 F.3d 870,

57

the Amended Complaint, but it nevertheless granted the relators thirty days to file and serve a

Second Amended Complaint.323

While the Tomeo case is an extreme example of wasteful pro se filings, it illustrates how

the qui tam mechanism can tax the court system unnecessarily. Thus, Congress or the courts

should reevaluate whether relators should be allowed to pursue qui tam actions pro se.324

Though the FCA allows a relator to either pursue a case or move to dismiss it whenever the

government declines intervention,325 the statute fails to address whether or not the relator may

proceed without counsel.326 While relators are private individuals who sue on behalf of the

United States and are entitled to a proportional share of any recoveries,327 the “real party in

872 (8th Cir. 1998)); United States ex rel. Kreindler & Kreindler v. United Tech. Corp., 985 F.2d 1148, 1154 (2d Cir. 1993), quoting Minotti v. Lensink, 895 F.2d 100, 104 (2d Cir. 1990) (“As we have previously stated, ‘although qui tam actions allow individual citizens to initiate enforcement against wrongdoers who cause injury to the public at large, the Government remains the real party in interest in any such action.’”).

323 See Rockefeller, 274 F. Supp. 2d at 16.

324 See id. at 18 (“The idea that a relator can independently pursue what would amount to his or her personal part of a FCA lawsuit without affecting the United States’ rights in the action is wholly inconsistent with the purpose behind the FCA.”).

325 See United States ex rel. v. Fisher Network Software Assocs., 377 F. Supp. 2d 195, 197 (D.D.C. 2005); see also Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749, 763 (5th Cir. 2001) (“[A] relator may make sweeping allegations that, while true, he is unable effectively to litigate, but which nonetheless bind the government, via res judicata, and prevent it from suing over those concerns at a later date when more information is available.”).

326 See Fisher, 377 F. Supp. 2d at 197, quoting Rockefeller, 274 F. Supp. 2d at 16. In the analogous PSLRA private enforcement mechanism, courts have required named plaintiffs suing on behalf of others to retain counsel. See Phillips v. Tobin, 548 F.2d 408, 411 (2d Cir. 1976) (holding that shareholder derivative suits cannot be brought pro se).

327 See United States v. Onan, 190 F.2d 1, 6 (8th Cir. 1951) (“[W]e do not think that Congress could have intended to authorize a layman to carry on such suit as attorney for the United States but must have had in mind that such a suit would be carried on in accordance with the established procedure which requires that only one licensed to practice law may conduct proceedings in court for anyone other than himself.”).

58

interest” remains the United States.328 This fact continues to be the case regardless of whether or

not the government elects to intervene in the case.329 Moreover, since the government represents

the “real party” in a qui tam suit, the mere fact that it declines to intervene does not entitle the

relator to bifurcate the case and pursue solely his own share of potential recoveries.330

Perhaps the most critical factor justifying a rule prohibiting pro se qui tam litigation lies

in the fact that the outcome of a qui tam action could impose a claim or issue-preclusive effect on

the United States.331 This factor raises a compelling need for “adequate legal representation on

behalf of the United States.”332 The Eighth Circuit in United States v. Onan, 190 F.2d 1, 6 (8th

Cir. 1951), addressed this issue and held that only licensed attorneys, who hold both public

duties to the court and private obligations to their clients, may conduct proceedings in court for

anyone other than themselves.333 Agreeing and adding to this view, the Seventh Circuit in

328 See United States ex rel. Lu v. Ou, 368 F.3d 773, 775 (7th Cir. 2004).

329 See 31 U.S.C. §§ 3801-3812 (2010); Michael Davidson, Combating Small-Dollar Fraud Through a Reinvigorated Program Fraud Civil Remedies Act, 37 PUB. CONT. L.J. 213, 214 (2008).

330 See 31 U.S.C. §§ 3801-3812.

331 See, e.g., Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008) (finding pro se representation in FCA cases is not authorized as there is a potential that the government’s interests will not receive adequate legal representation).

332 The NFL Commissioner, Roger Goodell, echoed sentiment that in the 2011 NFL Lockout only the lawyers benefited. See Jess Root, NFL Lockout: Commissioner Roger Goodell Speaks on Behalf of League, SB NATION (March 15, 2011) (on file with author), available at http://www.revengeofthebirds.com/2011/3/15/2053044/nfl-lockout-commissioner-roger-goodell-speaks-on-behalf-of-league.

333 See generally Marc Galanter, Predators and Parasites: Lawyer-Bashing and Civil Justice, 28 GA. L. REV. 633, 634 (1994) (organizing anti-lawyer themes into the following four clusters: (1) corrupters of discourse; (2) fomenters of strife; (3) betrayers of trust; or (4) economic predators). One of the most controversial reports addressing lawyers as a whole led by Stephen P. Magee, a Professor of Finance at the University of Texas, estimated that the average lawyer drains the U.S. economy by $1 million a year. See id. at 634 n.48 citing STEPHEN P. MAGEE ET AL., BLACK HOLE TARIFFS AND ENDOGENOUS POLICY THEORY 111-21 (1989).

59

United States ex rel. Lu v. Ou, 368 F.3d 773 (7th Cir. 2004), concluded that a rule limiting legal

representation, except for self-representation, to attorneys “operates to filter out frivolous

litigation that can redound to the harm of the represented party.”334

The need for adequate legal representation and the requirement limiting legal

representation to licensed attorneys, sufficiently justify prohibiting pro se litigation. Note,

however, that in the event a relator brings a valid claim that involves a small potential recovery,

thereby failing to gain the interest of both the DOJ and private attorneys, such a claim may be

brought under Program Fraud Civil Remedies Act (“PFCRA”), the administrative or “mini”

version of the FCA.335  The PFCRA allows government agencies to pursue false claims of up to

$150,000 through an administrative process, rather than the courts – a viable avenue for smaller

claims.336 For all the foregoing reasons, Congress or the U.S. Supreme Court should step in to

resolve this issue in favor of disallowing pro se litigation.337

334 See Press Release, U.S. Dep’t of Justice, Largest Health Care Fraud Case in U.S. History Settled: HCA Investigation Nets Record Total of $1.7 Billion (June 26, 2003), (on file with author), available at http://www.usdoj.gov/opa/pr/2003/June/03_civ_386.htm.

335 See D. Jeffrey Campbell, Frank Fazio, & Steven S. Vahidi, Conning the IADC Newsletters, 73 DEF. COUNS. J. 91, 92 (2006); Matthew S. Brockmeier, Article, Pulling the Plug on Health Care Fraud: The False Claims Act After Rockwell and Allison Engine, 12 DEPAUL J. HEALTH CARE L. 277, 280 (2009).

336 See Michael J. Vanselow & Ann M. Bildtsen, Healthcare Law Enforcement “Perfect Storm”, 22 HEALTH LAW. 18, 18 (2010); Press Release, U.S. Dep’t of Justice, Justice Department Announces Largest Health Care Fraud Settlement in Its History (Sept. 2, 2009), (on file with author), available at http://www.hhs.gov/news/press/2009pres/09/20090902a.html. All these settlements and a lot more can be seen by doing a simple internet search for the False Claims Act. See, e.g., Top 20 Cases, TAXPAYER AGAINST FRAUD EDUC. FUND, http://www.taf.org/top20.htm (last visited May 20, 2011).

337 See 31 U.S.C. § 3729 (2010); Justin P. Tschoepe, A Fraud Against One is Apparently a Fraud Against All: The Fraud Enforcement and Recovery Act’s Unprecedented Expansion of Liability Under the False Claims Act, 47 HOUS. L. REV. 741, 743 (2010).

60

VII. Conclusion

“I’m proud to say I’m not a lawyer.”338

It should come as no surprise that the public at large distrusts lawyers, a sentiment that

applies not only to private practitioners, but also to government attorneys. 339 This article makes

modest proposals aimed at assuaging some of the lawyer-related concerns about wasteful qui tam

litigation. Specifically, it proposes measures to increase transparency over the government’s

intervention decision-making process, which would in turn reveal the extent to which its

decisions to decline intervention or to rule against dismissal correlate with wasteful litigation

while. The proposed transparency sought here is limited, but it is sufficient to provide the public

assurance that appropriate, if not better, intervention- and dismissal-related prosecutorial

decisions are made. The article also suggests changes in the FCA for ensuring qui tam plaintiff

attorney competence in pursuing qui tam actions beginning with a scheme similar to FRCP

23(g). In addition, the article proposes amending § 3730(d) to expose plaintiff attorneys to its

provisions because they are in the best position to determine whether a case is or has become

meritless. Finally, to help reduce the filing of frivolous or non-meritorious cases, the article

suggests the elimination of pro se qui tam litigation when the government declines intervention.

338 31 U.S.C. § 3729(a)(1).

339 See United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 15-16 (1st Cir. 2009). Under the FCA, a qui tam action allows a private citizen to sue on behalf of the government and receive a portion of any recoveries, even though the citizen sustained no direct harm from the alleged fraud. See 31 U.S.C. § 3730(b), (d); Tipton F. McCubbins & Tara I. Fitzgerald, As False Claim Penalties Mount, Defendants Scramble for Answers Qui Tam Liability, 31 U.S.C. § 3729 Et Seq., 62 PUB. LAW. 103, 104 (2006). The private person initiating the qui tam action is known as a relator.

61