The False Claims Act: Protecting Your Client When Amending a Sealed Complaint

With her co-authors, attorney Erin M. Campbell published an article entitled The False Claims Act: Protecting Your Client When Amending a Sealed Complaint in the Winter 2014 edition of the ABA Business Torts Journal. Ms. Campbell’s co-authors are Jonathan Kroner, Jennifer McIntosh, and Shankar Ramamurthy.

During the Civil War, unscrupulous contractors supplied the Union Army with empty boxes filled with sawdust instead of muskets, uniforms that disintegrated in the first heavy rain, and blind and diseased mules. The massive scope of this fraud moved Congress to pass and President Abraham Lincoln to sign what is now the False Claims Act, 31 U.S.C. §§ 3729–3733 (FCA). The FCA has become the United States’ primary tool for prosecuting fraud in every part of the government, from Medicare and other federal healthcare programs, to defense contracting, procurement, and grant funding.

The United States does not have the resources to police fraud on its own. The FCA solves this problem by enlisting citizens to serve as qui tam relators. The government remains the real party in interest, and the FCA allows the United States to delegate to relators the prosecution of the case in return for a portion of the proceeds—typically between 15 and 30 percent of the recovery. 31 U.S.C. § 3730(c)(3), (d). The FCA provides for treble damages and civil penalties of $5,500 to $11,000 per false claim. § 3729(a)(1). Successful relators also recover attorney fees and costs. § 3729(d)(1), (d)(2). The highest dollar-value citizen-initiated qui tam FCA suits have returned hundreds of millions of dollars to the treasury in recent years, leading to impressive relator’s share rewards.

Unlike most other federal litigation, the FCA requires the relator to file the complaint under seal and provide a pre-filing disclosure to the United States of all material information within the relator’s possession. 31 U.S.C. § 3730(b)(2). FCA cases then remain under seal, often for years, as the United States investigates the complaint and decides whether to elect to intervene, delegate prosecution of the case to the relator, pursue an alternate remedy, settle the case, or move for dismissal. § 3730(c)(2)(A), (c)(2)(B), (c)(5), (d)(1), (d)(2).

But FCA litigation is fraught with great traps. This article examines one of these traps: the strategic and procedural question of whether and how to amend a sealed FCA complaint. This decision is affected by numerous considerations unique to the FCA: (1) the FCA’s first-to-file rule; (2) its public disclosure bar; (3) statute of limitations concerns; (4) preserving the right to share in an alternative remedy pursued by the government; (5) the government’s interest in the case; (6) and the uncomfortable fit of Federal Rule of Civil Procedure 15 with the FCA’s seal provisions.

The article is available in full with complete citations on the American Bar Association website.