INFOTECH AND THE LAW

Court Upholds Relators' Standing to Bring Claims

Jonathan Cain

By Jonathan Cain

On May 22, the Supreme Court dashed the hopes of government contractors and health care providers who had urged an end to False Claims Act (FCA) cases brought by private individuals.

The case has been closely watched since last fall because the Supreme Court, on its own initiative, asked for last-minute briefs on the issue of whether relators had constitutional standing to bring FCA cases.

A decision against relators on standing would have brought an end to qui tam cases and would have left the government alone to pursue false claims in its own name. The court decided the case against the relator, but upheld the standing of private persons to bring qui tam actions.

Qui tam cases pit a private person ? the "relator" ? against the government contractor or claimant in a civil legal action for the benefit of the relator and for the government, in the name of the United States. Under the FCA, the government has the right to intervene in the relator's case. But if the government declines, the relator can still pursue the case. If the relator wins money from the defendant, he is entitled to keep a portion of the recovery, plus his attorneys' fees and other costs.

There are only four qui tam statutes on the books. Two relate to the protection of Indian tribes, one to the false marking of patented articles, and the FCA. The only qui tam statute of practical significance today is the FCA.

In the case decided recently, a former employee of the Vermont Agency of Natural Resources alleged that the state had padded claims to the Environmental Protection Agency under various grant programs. The government elected not to intervene, and the relator continued on his own. The state then moved to have the case dismissed on the grounds that a state cannot be held liable for damages under the FCA.

When the case came to the Supreme Court last year, the only issue before the court was whether the FCA could be applied to the actions of a state government.

Then, 10 days before the court was to hear oral arguments on the case, it requested the parties to file briefs on the issue of a relator's constitutional standing to bring an FCA case in the name of the government.

Several coalitions of defense contractors, manufacturers, hospital associations, and other business interests also filed briefs. They argued that relators lack standing to bring such claims and that qui tam cases (or at least those in which the government had declined to intervene) should be declared unconstitutional. Qui tam cases all over the country were stayed pending the court's ruling in this case.

The outcome was a victory for those in state government seeking immunity for defrauding the United States, but a defeat for the private interests who sought an end to qui tam litigation altogether.

The antecedents of the FCA and its qui tam provisions were a product of the Civil War, when profiteering was rampant. The concept of qui tam actions in this country predates the Constitution.

Early colonial "informer statutes" provided for sharing with an informer the fines levied against government officials who failed to carry out their duties.

Qui tam statutes in England date to the 1300s. The court considered this long history and concluded that qui tam cases were among the "cases and controversies" traditionally resolved by courts at the time the Constitution was written.

Several arguments in support of qui tam standing were rejected by the Supreme Court. It held that the relator's recovery is not just a bounty on the government's recovery, but a claim against the defendant in the relator's own right.

This means that the government
cannot settle a qui tam case over the
relator's objection without a court
first finding that the settlement is fair, reasonable and adequate to the relator. Nor is the qui tam case a claim for an injury to the relator ? as a taxpayer, for example.

Rather, the court held that in enacting the FCA, the government assigned part of its claim against the defendant to those private citizens who uncover the defendant's wrongdoing. This means that the relator has the authority, within the limits of the statute, to pursue and compromise the claim without regard to the interests of the government.

As a practical matter, this decision means that dozens of qui tam cases in federal courts throughout the United States that were stayed last fall will now be moving toward trial. It may also mean that a flurry of new qui tam cases, which had remained unfiled while the Supreme Court deliberated, will begin to appear on the doorsteps of government contractors and their counsel.

Jonathan Cain is an attorney specializing in intellectual property and litigation for information technology companies at Mintz Levin Cohn Ferris Glovsky & Popeo PC in Reston, Va. His e-mail address is jcain@mintz.com.

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