Qui Tam Actions
In 1986, Congress amended the False Claims Act, 31 U.S.C. § 3729 et seq. One of Congress’s objectives in modifying the Act was to encourage the use of qui tam actions in which citizens are authorized to bring, as “private Attorneys General,” lawsuits on behalf of the United States alleging frauds upon the government. The private citizen plaintiff in such a lawsuit is often referred to as the “relator” and the lawsuit the relator brings is known as a “qui tam action.” Individuals who successfully bring a qui tam suit are rewarded with a portion of the recovered proceeds those who sue in the government’s name.
The False Claims Act imposes liability on any person who knowingly (1) presents a false claim; (2) makes or uses a false record or statement material to a false claim; (3) possesses property or money of the United States and delivers less than all of it; (4) delivers a certified receipt with intent to defraud the United States; (5) buys public property from a federal officer or employee, who may not lawfully sell it; (6) uses a false record or statement material to an obligation to pay or transmit money or property to the United States, or conceals or improperly avoids or decreases an obligation to pay or transmit money or property to the U.S.; or (7) conspires to commit any such offense. 31 U.S. Code § 3729 defines “knowing” as when a person “has actual knowledge of the information, acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard for the truth or falsity of the information. No proof of specific intent to defraud is necessary. Offenders may be sued for triple damages, costs, expenses, and attorneys’ fees in a civil action brought either by the United States or by a relator (whistleblower or other private party) in the name of the United States.
If the government initiates the suit, others may not join. If the government has not brought suit, a private individual, known as a relator, may bring a qui tam action under 31 U.S. Code § 3730. The relator must give the government notice and afford it 60 days to decide whether to take over the litigation.
If the False Claims Act action succeeds, relators are entitled to a share in the proceeds of up to 30%. If the government has not participated in the litigation, they are entitled to an award of from 25% to 30%. If the government has participated in the litigation, they are entitled to an award of from 15% to 25%, reduced to no more than 10% when their claim was based primarily on public information. In any case, they are also entitled to attorneys’ fees, expenses, and costs, but may be denied any award if they participated in the underlying fraud. If the defendant prevails in a False Claims Act action in which only a private relator has taken part, the court may award the defendant attorneys’ fees and expenses, should it conclude that the action was clearly frivolous, vexatious, or brought to harass. The test for whether attorneys’ fees and expenses are appropriate is said to be analogous to that used for prevailing defendants under 42 U.S.C. § 1988. Such awards are thought to be appropriate only under “rare and special circumstances,” when the relator’s action is meritless, groundless, or without foundation; when allegations are bereft of factual support or when there is no reasonable chance of success; or when brought or pursued for an improper motive.
A qui tam lawsuit is one of many tools that the Government has to combat fraud in government contracts, and incentivize contractors to be more diligent in policing themselves, as relators often are whistleblowers.