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

Sean Elameto*

____________________________________________________

* 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 1

II. The Eruption of Qui Tam Suits 7

A. Public Disclosure Bar and Original Source Exception

14

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

18

C. Looking Ahead: An All-Purpose Anti-Fraud Statute 24

III. The Festering Qui Tam Controversy 25

IV. Government Attorney Accountability 32

A. The Government’s Role in Qui Tam Litigation 34

B. Measuring Before Managing 38

C. Forcing the Government’s Hand 48

D. Guiding Prosecutorial Discretion 56

V. Qui Tam Plaintiff Attorney Accountability 64

A. The Rise of the Qui Tam Bar 67

B. Private Securities Litigation Parallel 70

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

Plaintiff Attorneys 74

D. Amending § 3730(d)(4) to Include Plaintiff Attorneys

79

VI. Prohibiting Pro Se Litigation When the DOJ Declines

Intervention 85

VII. Conclusion 90

i

ii

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,3 and 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,

1 The federal False Claims Act is codified under a civil title of the United States Code, rather than a criminal title, at 31 U.S.C. §§ 3729-33 (2010). See United States ex rel. Sanders v. Allison Engine Co., 667 F. Supp. 2d 747, 753 (S.D. Ohio 2009); see also United States ex rel. Drake v. NSI, Inc., 736 F. Supp. 2d 489, 499 (D. Conn. 2010) (analyzing whether the FCA and its penalties are civil or criminal in nature). 2 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.”).3 See Dylan Trache, Wide-Ranging Fraud Allegations Changed the Culture at Columbia/HCA, 22 FALSE CLAIMS ACT AND QUI TAM Q. REV. 13, 13 (2001).4 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.

5 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).

1

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 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

6 See Brockmeier, supra note Error: Reference source not found, at 280.7 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).8 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-06-320R, INFORMATION ON FALSE CLAIMS ACT LITIGATION (2006); see generally Lisa Michelle Phelps, Note, Calling Off the Bounty Hunters: Discrediting the Use of Alleged Anti-Kickback Violations to Support Civil False Claims Actions, 51 VAND. L. REV. 1003, 1004 (1998) (stating that both government prosecutors and private parties use the FCA as their “weapon of choice” in combating health care fraud and abuse); S. REP. NO. 99-345, at 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266-67 [hereinafter FCA SENATE REPORT] (referring to the FCA as the government’s “primary litigative tool” for combatting fraud).9 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).

2

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 in a

qui tam action, whereupon it assumes primary prosecutorial

responsibility,14 but the relator may proceed with an action

10 31 U.S.C. § 3729(a)(1).11 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. 12 See 31 U.S.C. § 3730(d).13 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 Error: Reference source not found7.14 See 31 U.S.C. § 3730(c). The government is also not bound by any action by the relator. Id. § 3730(c)(1).

3

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

15 See id. § 3730(b)(4)(B).16 See id. § 3730(c)(2)(A). The government may also settle the suit over the relator’s objection. See id. § 3730(c)(2)(B).17 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).18 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). 19 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).”).

4

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 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 20 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.”).21 See infra Section IV.22 See infra Section V.C.23 See infra Section V.D.24 See infra Section VI.

5

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 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

25 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). 26 3 WILLIAM BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND *160.

6

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 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

27 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).28 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).29 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.

7

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 actions under the

FCA were rarely viable.35 In addition, courts had interpreted

30 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). 31 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).32 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 540.33 See United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649-50 (D.C. Cir. 1994). 34 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). 35 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).

8

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

36 See United States ex rel. State of Wisconsin (Dept. of Health and Soc. Serv.) v. Dean, 729 F.2d 1100 (7th Cir. 1984).37 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). 38 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).39 See Robert L. Vogel, The Public Disclosure Bar Against Qui Tam Suits, 24 PUB. CONT. L.J. 477, 481 (1995).40 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).

9

and extreme cases involving $600 toilet seats, $748 pliers, and

$7,000 coffeepots, a reality that contributed to Congress once

again making sweeping 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 for whistleblowers – a new cause of action they could 41 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).42 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).43 See infra Section II.44 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).45 See Laura Perry & Stephanie Salek, False Statements and False Claims, 45 Am. Crim. L. Rev. 465, 482, 495 (2008).46 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).

10

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 47 See 31 U.S.C. § 3730(h).48 See 31 U.S.C. § 3729(a)(1).49 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.”). 50 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

11

 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

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 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. 51 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.).

12

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 “public disclosure” jurisdictional bar,55 which 52 See generally Handwerken et al., supra note Error: Reference source not found, at 297, 299 (asserting that FERA enhanced the ability to establish liability for false or fraudulent claims).53 See United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C. Cir. 1994).54 See Bucy, supra note Error: Reference source not found, 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. § 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).55 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),

13

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

amended by 31 U.S.C. § 3730(e)(4) (2010).56 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).57 See id., quoting 31 U.S.C. § 3730(e)(4)(B) (2006), amended by 31 U.S.C. § 3730(e)(4)(B) (2010).58 See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S. Ct. 1396, 1402, 1411 (2010).59 See id.

14

before the Court issued its opinion, 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

60 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). 61 See Rhoad & Fornataro, supra note Error: Reference source not found, 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. 62 See 31 U.S.C. 3730(e)(4)(B) (2010).63 See Rhoad & Fornataro, supra note Error: Reference source not found, at 23.

15

B. 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 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

64 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).”)65 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).66 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).

16

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 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 67 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). 68 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). 69 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, at *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. 70 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”

17

While this relaxed FRCP 9(b) pleading standard has made

inroads for relators’ counsel in some courts, movement in

Congress has been made in Congress toward amending the FCA to

mandate such a standard.71 Both House Bill 4854 and House Bill

1788, 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

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

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, 1901 (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). 71 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).72 See H.R. 4854 at § 4(c); see H.R. 1788 at § 4(c).id.

18

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  73 See H.R. 4854 at § 4(c); see H.R. 1788 at § 4(c).id.74 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).75 See generally id. at 513 (categorizing the 2009 FCA Amendments as “overbroad,” and stating they will result in “enormous increases in unproductive, nonintervened qui tam litigation”).76 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, March, 24 (2010 at 1.). 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 at 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’ Experiences in Fraud Litigation

19

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 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 from defendants who

are hoping to in hopes of avoiding even more expensive defense

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

would eliminate FRCP 9(b)’s the important gatekeeping function

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.”).77 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.”). 78 See generally United States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 559 (8th Cir. 2006) (rejecting contention that the court allow relator to conduct discovery to satisfy FRCP 9(b) requirements). 79 See id. 80 See id., quoting United States ex rel. Clausen v. Lab Corp. of Am., Inc., 290 F.3d 1301, 1313-14 n.24 (11th Cir. 2002).

20

of FRCP 9(b) of blocking meritless and speculative fraud

claims.81

F. 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 81 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 1313-14 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.’”).82 See United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 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, which requiresing entities that receive or make annual Medicaid payments in excess of $500 million to include detailed information on FCA and whistleblower rights in employee handbooks); Troy, supra note Error: Reference source not found, 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).83 See infra Section II.C. for a discussion of expansive FCA theories of liability. See also Lumm, supra note Error: Reference source not found, 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

21

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

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

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.”).84 See Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 64269 (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, 700699 (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).85 See United States v. Neifert-White Co., 390 U.S. 2828, 233 (1968); see also Handwerken et al., supra note Error: Reference source not found, at 297 (stating that FERA enhances both the government’s and the relator’s ability to establish liability for fraudulent claims submitted by contractors).86 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). 87 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 9. This rate increased by twelve percent in only three years from seventy-three to eighty-five percent. See Todd

22

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 recovered about ninety-seven percent, or $17.59

billion, of the total qui tam recoveries.92 In stark contrast,

J. Canni, Commentary, Arming Contractors with a Statutory Defense Against Speculative Qui Tam Actions, 23 Legal Backgrounder 1, 1 (2008).21 ANDREWS GOV'T CONT. LITIG. REP. 11, 11 (2008).88 See Rich, supra note Error: Reference source not found, 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).89 See DOJ Fraud Statistics, supra note Error: Reference source not found, 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. 90 See id. at 2. 91 See id. at 9. 92 See id. at 2; Christopher W. Myers, The False Claims Act Clarification Act: An End to the FCA’s Bar on Parasitic Qui Tam

23

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

assert meritless or frivolous claims.95 If this perception

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, 6.93 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 2; Myers, supra note Error: Reference source not found, 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 Error: Reference source not found, at 4, 6, 8.94 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 9.95 See Broderick, supra note Error: Reference source not found, at 975 (deducing that 72% of qui tam actions are frivolous). See generally Myers, supra note Error: Reference source not found, at 10 (stating that when the government declines intervention, ninety-three percent of nonintervened cases are dismissed); see DOJ Fraud Statistics, supra note Error: Reference source not found, at 1-2. See also Canni, supra note Error: Reference source not found, 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 Error: Reference source not found, at 1264, quoting Robert D. McCallum, Jr.,

24

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

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 Error: Reference source not found, at 975 (deducing that seventy-two percent of qui tam actions are frivolous). See infra Section III.96 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 (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 Error: Reference source not found, 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 Error: Reference source not found, 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 Error: Reference source not found, at 62-64 (detailing the high costs to businesses in defending fraud investigations). See generally Lumm, supra note Error: Reference source not found, 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

25

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 swing too

liability).97 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). 98 See generally Lumm, supra note Error: Reference source not found29, at 536 (stating that contractors most likely pass costs of FCA compliance and potential risk of litigation on to customers or the government).99 See Lumm, supra note Error: Reference source not found29, 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). 100 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

26

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

of frivolous suits and leads to the creation of hostile business environment.”)101 See Rich, supra note Error: Reference source not found86, at 1258.102 See supra note Error: Reference source not found95 and accompanying text.103 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).104 See generally Culbertson, supra note Error: Reference source not found103, at 32-33 (claiming that among other things non-intervened qui tam cases cause “demonstrable waste of taxpayer money”).105 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 1-2.

27

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

III. 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

106 See generally Broderick, supra note Error: Reference source not found, at 963 (asserting that examining the empirical effect of qui tam provisions is essential to resolving whether the qui tam mechanism is effective).107 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).108 See id. at 965 (stating that the FCA fails to indicate which factors the DOJ must consider when deciding whether or not to intervene).109 Letter from James Madison to W.T. Barry (Aug. 4, 1822), in 9 WRITINGS OF JAMES MADISON 103 , at 103 (G. Hunt ed., 1910).

28

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 to 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 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

110 LOUIS BRANDEIS, OTHER PEOPLE’S MONEY AND HOW THE BANKERS USE IT 92 (Augustus M. Kelley ed., Sentry Press 1971) (1914).111 See generally Broderick, supra note Error: Reference source not found82, at 975 (deducing that most suits in which the relator does not prevail to beare meritless).112 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).113 See Broderick, supra note Error: Reference source not found82, at 963.114 See infra Section IV.B-D.115 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).

29

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 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 116 See 31 U.S.C. § 3730(a) (2010).117 See 31 U.S.C. § 3730(a).118 See 31 U.S.C. § 3730(a).119 See 31 U.S.C. § 3730(e)(3).120 See supra Section II.121 See 31 U.S.C. § 3730(e)(3).122 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).

30

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

123 See FCA Intervention Process, supra note Error: Reference source not found, at 1.124 See 31 U.S.C. § 3730(b)(2); FCA Intervention Process, supra note Error: Reference source not found, at 1.125 See 31 U.S.C. § 3730(b)(2); Bucy, supra note Error: Reference source not found, at 69; FCA Intervention Process, supra note Error: Reference source not found, at 1.126 See FCA Intervention Process, supra note Error: Reference source not found, at 1.127 See 31 U.S.C. § 3730(b)(3); FCA Intervention Process, supra note Error: Reference source not found, 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).128 See FCA Intervention Process, supra note Error: Reference source not found, at 1.129 See FCA Intervention Process, supra note Error: Reference source not found, at 1; 31 U.S.C. § 3730(a). 130 See FCA Intervention Process, supra note Error: Reference source not found, at 1.

31

techniques, 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 131 See id. at 2.132 See id.133 See 31 U.S.C. §§ 3730(b)(4)(A), 3730(c), 3731(c); FCA Intervention Process, supra note Error: Reference source not found, 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 Error: Reference source not found, 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.134 See 31 U.S.C. § 3730(b)(4)(B); FCA Intervention Process, supra note Error: Reference source not found, at 2.135 See FCA Intervention Process, supra note Error: Reference source not found, at 2; see also 31 U.S.C. § 3730(c)(2)(A) (granting DOJ authority to move for dismissal).

32

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

E. 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

136 See 31 U.S.C. § 3730(b)(4)(B); FCA Intervention Process, supra note Error: Reference source not found, at 2.137 See FCA Intervention Process, supra note Error: Reference source not found, at 3; FED. R. CIV. P. 4(m).138 See FCA Intervention Process, supra note Error: Reference source not found, at 3.139 See id.140 Compare the U.S. Department of Justice, Bureau of Statistics’ website, http://bjs.ojp.usdoj.gov, which amasses an extensive collection of statistical information and data on crime and the criminal justice system, with DOJ Fraud Statistics, supra note Error: Reference source not found50, which features a snapshot of the number and type of FCA cases and their recoveries. 141 See generally DOJ Fraud Statistics, supra at note Error: Reference source not found, at 1-9 (making no mention of cases dismissed while under seal).

33

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 resolve the matter.147 In all, defending

these types of cases can cost anywhere from $1 million to over

$10 million.148

142 See infra note 160 and accompanying text. 143 See generally FCA Intervention Process, supra note Error: Reference source not found, at 3 (providing direction on procedures after case removed from seal).144 See infra text and accompanying notes 145-150.145 See Kovacic, supra note Error: Reference source not found, at 225.146 See Kovacic, supra note Error: Reference source not found, at 225.147 See id.148 See id.

34

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 economic impacts may 149 See id. at 226.150 See id.; Bucy, supra note Error: Reference source not found, at 62-63.151 See Kovacic, supra note Error: Reference source not found, at 2256; Bucy, supra note Error: Reference source not found, at 62-63.152 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” arena. See DOJ Fraud Statistics, supra note Error: Reference source not found, at 3-4. 153 See Boese, supra note Error: Reference source not found, 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 Error: Reference source not found, at 63 (explaining that responding to FCA investigations is expensive for business).

35

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 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

154 See Rich, supra note Error: Reference source not found, 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.”).155 Bucy, supra note Error: Reference source not found, at 63.156 Id. at Error: Reference source not found; 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, 34 (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.”).157 See FCA Intervention Process, supra note Error: Reference source not found, at 2.158 See id.159 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).

36

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 160 See Bucy, supra note Error: Reference source not found, 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 Error: Reference source not found, 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.”).161 See generally Rich, supra note Error: Reference source not found, 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.”).162 See id.163 For example, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued a final rule establishing new “Contractor Business Ethics Compliance Program

37

incentives to do so and severe penalties for noncompliance.164

Yet, 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

and Disclosure Requirements.” See Contractor Business Ethics Compliance Program and Disclosure Requirements, 73 Fed. Reg. 677,064 (Nov. 12, 2008) (codified at pts. 2, 3, 9, 42, 52). 164 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).165 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 U. HAW.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.”).

38

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 have

exceeded this benefit should be assessed.170 Critics have argued,

at least at a theoretical level, that the costs far outweigh the

166 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 9; Broderick, supra note Error: Reference source not found, at 967.167 See, e.g., Bucy, supra note Error: Reference source not found, 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).168 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 2.169 See id.170 See Bucy, supra note Error: Reference source not found, 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 of its authority to move for dismissal of ill-conceived qui tam actions.”).

39

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

171 See generally Rich, supra note Error: Reference source not found, 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”).172 See generally Broderick, supra note Error: Reference source not found, at 985 (stating that currently DOJ fails to break down the number of interventions by its office and the disposition of these cases).173 See generally id. at 1001 (“Data collection is needed on elements such as the cost to investigate qui tam actions. . .”).174 See generally Bucy, supra note Error: Reference source not found, 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 Error: Reference source not found, at 9. As of January 2011, the backlog was reported at 1,341. See Bentivoglio et al., supra note Error: Reference source not found, at 2.

40

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 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 recordingrecord 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.180 175 See generally Bucy, supra note Error: Reference source not found, 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).176 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 13(Jan. 24, 2011) (on file with author).177 Id. at 14..178 Bentivoglio et al., supra note Error: Reference source not found, at 42 n.1. 179 See 31 U.S.C. § 3730(a) (2010).180 See generally Broderick, supra note Error: Reference source not found, at 963 (stating that studying the empirical effect of qui tam provisions is needed for determining the effectiveness of

41

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 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

the qui tam mechanism).181 See Ward, supra note Error: Reference source not found, 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.”).182 See infra Section IV.C.183 See generally Bucy, supra note Error: Reference source not found, 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. 184 See Ward, supra note Error: Reference source not found, at 299 (contractors are “unsure which characteristics of qui tam are

42

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 move to dismiss qui tam suits, a process that

likely to inspire government pursuit, dismissal, or alternatively disengagement.”).185 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.186 See, e.g., Rich, supra note Error: Reference source not found, 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.”).187 See Bucy, supra note Error: Reference source not found, at 70-71.

43

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 188 See Boese & McClain, supra note Error: Reference source not found, at 49. 189 See 31 U.S.C. § 3730(c)(2)(A) (2010).190 See id. § 3730(b)(4)(B).191 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.”).192 See Bentivoglio et al., supra note Error: Reference source notfound, at 23 (“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.”).193 See Bucy, supra note Error: Reference source not found, at 71 (stating that it can be “economically advantageous for DOJ the government 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 Error: Reference source not found, at 2 (emphasis

44

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-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

added). 194 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 1-2.195 See Bucy, supra note Error: Reference source not found, at 70-71 (stating that DOJ uses its dismissal authority sparingly).196 See, e.g., Bucy, supra note Error: Reference source not found, 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, 1803-054, 1825 (1996) (finding the DOJ’s unwillingness to dismiss weak qui tam suits permits relator opportunism). 197 See generally Rich, supra note Error: Reference source not found, 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.”).

45

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 going

unpunished.202 As reflected in the legislative history for the 198 See id.; Bucy, supra note Error: Reference source not found, 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”).199 See Bucy, supra note Error: Reference source not found, at 72. 200 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 should be dismissed automatically if the government declines to intervene).201 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).202 See Rich, supra note Error: Reference source not found, at 1274.

46

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

203 See FCA SENATE REPORT, supra note Error: Reference source not found, at 8. 204 See id.205 See Rich, supra note Error: Reference source not found, at 1275; Landy, supra note Error: Reference source not found, at 1253.206 See FCA SENATE REPORT, supra note Error: Reference source not found, at 8; Rich, supra note Error: Reference source not found, at 1275.207 See Rich, supra note Error: Reference source not found, at 1275.

47

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 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

208 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).209 See id. 210 Rich, supra note Error: Reference source not found, at 1277.211 See infra text and accompanying notes 212-214.212 See Rich, supra note Error: Reference source not found, at 1277.213 See id, at 1276.

48

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 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. 214 See id, at 1277.215 See id.216 See generally Broderick, supra note Error: Reference source not found, at 963 (arguing for a study of the empirical effect of qui tam provisions in determining the effectiveness of the qui tam mechanism).

49

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 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 217 See Bucy, supra note Error: Reference source not found, 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”).218 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 Error: Reference source not found, at 1256-57.

50

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 or at trial.223 This reason alone

may provide sufficient justification for not requiring the DOJ to

219 See Ward, supra note Error: Reference source not found, 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.”).220 See Rich, supra note Error: Reference source not found, at 1277.221 See generally Ward, supra note Error: Reference source not found, at 308 (quoting a DOJ official who described the decision to intervene as an “ad hoc process”).222 See Broderick, supra note Error: Reference source not found, 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 Error: Reference source not found, at 1250.223 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).

51

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

224 See Rich, supra note Error: Reference source not found, 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.”).225 See id. at 1247-48.226 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.”).227 See Ward, supra note Error: Reference source not found112, 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 Error: Reference source not found82, 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.”).

52

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-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

228 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. 16743, 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).229 See supra note Error: Reference source not found186 and accompanying text.230 See Broderick, supra note Error: Reference source not found82, 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.”). 231 See id. at 966-67.

53

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, 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

(5) the experience and skill of the relator’s attorneys;236 and

232 See generally Broderick, supra note Error: Reference source not found82, 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. 233 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, 9265 (10th Cir. 2005) (involving the protection of classified information and urgent need to timely close contaminated facility).234 See United States ex rel. Downy v. Corning, Inc., 118 F. Supp. 2d 1160, 1170 (D.N.M. 2000).235 For a listing of ways in which the DOJ may participate without intervening, see Broderick, supra note Error: Reference source not found, at 967 n.123.236 See Downy, 118 F. Supp. 2d at 1170.

54

(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

237 See United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1146 (9th Cir. 1998).238 See 31 U.S.C. § 3730(b)(4)(B) (2010).239 See Oregon Environmental Crimes Act, 1993 Or. Laws 956 (codified at OR. REV. STAT. ANN. § 468.961 (1993)).240 See Zafiris, supra note Error: Reference source not found228, at 1674.

55

such guidance, DOJ attorneys are left to make choices which,

inevitably, 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

241 See Ward, supra note Error: Reference source not found112, 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 be questioned when the statute allows the Government to intervene without questioning whether actual damages were even experienced.”).242 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).243 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).

56

claim.244 As an added bonus, transparency will promote (or

ensure) consistency in the DOJ’s qui tam intervention

decisions.245

IV. 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

244 See Rich, supra note Error: Reference source not found86, at 1277. 245 See generally Ward, supra note Error: Reference source not found112, at 316 (asserting that “knowledge as to the type of behavior truly policed by this statute would better serve deterrence and efficient government contracting.”).246 See Bucy, supra note Error: Reference source not found44, at 58-59. 247 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.”).248 “The one great principle of the English law is, to make business for itself.” Dickens, Charles, Bleak House, 482, George Ford & Sylvère Monod eds., W. W. Norton & Co., Inc. 1977CHARLES DICKENS, BLEAK HOUSE 482 (George Ford & Sylvère Monod eds., Modern

57

typically conduct qui tam cases on a contingency basis,249 they

are careful in their selection of cases, taking on those that

they 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

Library 1985) (1853).249 See Bucy, supra note Error: Reference source not found44, at 58. 250 See generally Martin H. Redish, Private Contingent Fee Lawyers and Public Power: Constitutional and Political Implications, 18 SUP. CT. ECON. REV. 77, 79-80 (2010) (explaining that attorneys bet everything on attainment of victory in contingency fee arrangements); Rich, supra note Error: Reference source not found86, 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, 440-41 (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).251 See Herbert M. Kritzer, The Wages of Risk: The Return of Contingency Fee Legal Practice, 47 DEPAUL L. REV. 267, 271 (1998). 252 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).253 For a detailed discussion of the varied nature of contingency fee attorneys portfolio strategies, see Kritzer, supra note Error: Reference source not found, at 304. Professor Kritzer

58

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 netting enormous recoveries under the

FCA while simultaneously serving the public interest fueled the

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). 254 See Canni, supra note Error: Reference source not found, at 9 (contending that Congress met its objective to increase private enforcement suits).255 See generally Cummins, supra note Error: Reference source not found (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 Error: Reference source not found, at 46 (“[M]ore attorneys are being attracted by the huge sums of money potentially recoverable and the idea of serving the taxpayers at the same time….‘It’s public interest for profit.’”).

59

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 256 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)). 257 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.258 See id.259 See id.260 See id.261 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

60

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 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

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 penalty of $5,000 per claim (3,683 x $5,000), totaling $18,415,000. See id. at 1132-33.262 See 31 U.S.C. §§ 3729-33.263 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.264 See, e.g., Boese, supra note Error: Reference source not found, 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.”).265 See France, supra note Error: Reference source not found, at 48.

61

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

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

266 See GAO-06-320R, supra note Error: Reference source not found, at 2.267 See DOJ Fraud Statistics, supra note Error: Reference source not found, at 2.268 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_http://www.friedfrank.com/index.cfm?pageID=23&itemID=3128.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.”).269 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). 270 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)).

62

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 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 271 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).272 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”).273 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).274 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

63

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

while still encouraging the filing of meritorious claims).275 See Bucy, supra note Error: Reference source not found, 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).276 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.”) 277 See 31 U.S.C. § 3729 et al. (2010).

64

significantly.278 Modifying the FCA to eliminate this difference

presents a 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

278 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).279 See generally 31 U.S.C. § 3729 et al. (2010) (failing to provide standards for plaintiff attorneys in FCA cases).280 See Culbertson, supra note Error: Reference source not found, at 32-33 (stating that “most lawmakers, judges, and commentators tend to view whistleblowers and their lawyers inseparably as ‘private attorneys general.’”).281 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). 282 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 United .States. ex rel. Fisher v. Network Software Assoc., 377 F. Supp. 2d 195, 197 (D.D.C. 2005); see generally Kovacic, supra note Error: Referencesource not found, at 1803-054, 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).

65

under the PSLRA via FRCP 23(g) presents a potential starting

point.283

E. 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 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

283 See infra Section V.C.284 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)).285 See FED. R. CIV. P. 23(g).286 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). 287 See FED. R. CIV. P. 23(g), advisory committee’s notes.

66

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 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, 288 See infra note 298 and accompanying text.289 See FED. R. CIV. P. 23(g).290 See FED. R. CIV. P. 23(g)(1)(A). 291 See FED. R. CIV. P. 23(g)(1)(B). 292 See FED. R. CIV. P. 23(g)(1)(E). 293 See FED. R. CIV. P. 23(g)(1)(C).

67

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

certify in their complaint that they are qualified under the FRCP 294 See FED. R. CIV. P. 23(g)(1)(C), advisory committee’s notes.295 See generally FED. R. CIV. P. 23(g)(1), (4) (describing the appointment requirements and duty for class counsel).296 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).

68

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

F. 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, 297 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).298 Compare Bucy, supra note Error: Reference source not found, 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, 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 Error: Reference source not found (“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).299 See Rich, supra note Error: Reference source not found, 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 Error: Reference

69

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. 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.

source not found, 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.”). 300 31 U.S.C. § 3070(d)(4) (2010).301 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.”).

70

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

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 302 See supra Section V.C.303 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 Error: Reference source not found8, at 8.304 See generally Brickman, supra note Error: Reference source notfound252, 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).305 Notwithstanding its flaws, the FCA presents the most robust public-private enforcement mechanism for combatting fraud. See Bucy, supra note Error: Reference source not found44, at 54 (comparing the number of suits filed and monetary judgments with

71

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

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 Error: Reference source not found, 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 Error: Reference source not found, 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 Error: Reference source not found, at 9. 306 See generally Dzienkowski & Peroni, supra note Error: Reference source not found, at 440-41 (discussing some of the disadvantages of contingency fee cases including attorneys filing frivolous cases for nuisance value, and diverging from clients’ interests). 307 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.

72

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

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 308 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).309 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). 310 See id.311 See FED. R. CIV. P. 11(c)(2).312 See Lapidus, 112 F.3d at 96.313 See FED. R. CIV. P. 11(c)(1).

73

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 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 314 See Brickman, supra note Error: Reference source not found, 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.”).315 See id. at 285 (asserting that lawyers gain control over a case by “employing manipulative tactics during negotiation of the lawyer-client relationship).316 See generally MODEL RULES OF PROF’L CONDUCT Preamble 310 (201007) (“The legal profession is largely self-governing.”); see Brickman, supra note Error: Reference source not found, at 250 (stating that professional codes are the main self-regulating tool for attorneys).317 See generally Barton, supra note Error: Reference source not found296, at 431 (stating that explicit rules narrowly describing

74

stronger measure of deterrence such as the application of §

3730(d)(4) to plaintiff attorneys.318

V. 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 discusse[d] his personal

conflicts, love interests, travels, psychological issues, and

employment problems without reference to [any] claims or . . .

the minimum standard of permitted attorney conduct govern attorney conduct).318 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 Error: Reference source not found196, at 1803-054, 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). 319 See United States ex rel. Tomeo v. Allied Signal Co., No. 97-CV-442, 1997 WL 727563, *1 (N.D.N.Y. Oct. 24, 1997).320 See iId.

75

defendants.”321 Though “provocative,” the court stated that the

four-hundred plus pages of attachments “shed little [ ] light on

the nature of [the] [r]elators’ specific claims.”322 Not

surprisingly, the court dismissed 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

321 See iId.322 See iId.323 See iId. at *2.324 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 *21 (allowing pro se relator to proceed with case), compl.aint dismissed on other grounds.325 See 31 U.S.C. § 3730(b) (2010).326 See 31 U.S.C. §§ 3729-33. 327 See United States ex rel. Doe v. John Doe Corp., 960 F.2d 318, 319 (2d Cir. 1992).

76

the “real party in 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 328 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, 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.’”). (“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.’” (quoting Minotti v. Lensink, 895 F.2d 100, 104 (2d Cir.1990)).329 See Rockefeller, 274 F. Supp. 2d at 16.330 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.”).331 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

77

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 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,

those concerns at a later date when more information is available.”).332 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).333 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.

Id.”). 334 See United States ex rel. Lu v. Ou, 368 F.3d 773, 775 (7th Cir. 2004).

78

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

VI. 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

335 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).336 See 31 U.S.C. §§ 3803(c)(1)1-3812.337 See, for examplee.g., Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008), which found that (finding pro se representation in FCA cases is not authorized as because there is a potential that the government’s interests will not receive adequate legal representation).338 The NFL Commissioner, Roger Goodell, echoed that sentiment that in the 2011 NFL Lockout implying that only the lawyers benefited. See Jess Root, NFL Lockout: Commissioner Roger Goodell Speaks on Behalf of League, SB NATION REVENGE OF THE BIRDS (March 15, 2011, 6:44 PM) (on file with author), available at http://www.revengeofthebirds.com/2011/3/15/2053044/nfl-lockout-commissioner-roger-goodell-speaks-on-behalf-of-league.

79

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

339 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 of complaints: (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).

80

article suggests the elimination of pro se qui tam litigation

when the government declines intervention.

81