Qui tam

In common law, a writ of qui tam is a writ whereby a private individual who assists a prosecution can receive all or part of any penalty imposed. Its name is an abbreviation of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, meaning "[he] who sues in this matter for the king as well as for himself."

The writ fell into disuse in England and Wales following the Common Informers Act 1951 but remains current in the United States under the False Claims Act, 31 U.S.C. § 3729 et seq., which allows a private individual, or "whistleblower," with knowledge of past or present fraud committed against the federal government to bring suit on its behalf. There are also qui tam provisions in 18 U.S.C. § 962 regarding arming vessels against friendly nations, 25 U.S.C. § 201 regarding violating Indian protection laws, 46a U.S.C. 723 regarding the removal of undersea treasure from the Florida coast to foreign nations, and 35 U.S.C. § 292 regarding false marking. In February 2011, the qui tam provision regarding false marking was held to be unconstitutional by a U.S. District Court,[1] and in September of that year, the enactment of the Leahy-Smith America Invents Act effectively removed qui tam remedies from § 292.[2]

False Claims Act

Main article: False Claims Act

The False Claims Act (31 U.S.C. §§ 37293733, also called the "Lincoln Law") is an American federal law which allows people who are not affiliated with the government to file actions against federal contractors claiming fraud against the government. The act of filing such actions is informally called "whistleblowing." Persons filing under the Act stand to receive a portion (usually about 15-25 percent) of any recovered damages. The Act provides a legal tool to counteract fraudulent billings turned in to the Federal Government. Claims under the law have been filed by persons with insider knowledge of false claims which have typically involved health care, military, or other government spending programs.

The provision allows a private person, known as a "relator," to bring a lawsuit on behalf of the United States, where the private detective or other person has information that the named defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States. The relator need not have been personally harmed by the defendant's conduct; instead, the relator is recognized as receiving legal standing to sue by way of a "partial assignment" to the relator of the injury to the government caused by the alleged fraud.[3] The information must not be public knowledge, unless the relator qualifies as an "original source."[4]

The American Civil War (1861–1865) was marked by fraud on all levels, especially with regard to Union War Department contracts. Some say the False Claims Act came about because of bad mules. During the Civil War, unscrupulous contractors sold the Union Army, among other things, decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions.[5] The False Claims Act, passed by Congress on March 2, 1863, was an effort by the government to respond to entrenched fraud where the official Justice Department was reluctant to prosecute fraud cases. Importantly, a reward was offered in what is called the "qui tam" provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery.

The False Claims Act provides incentive to relators by granting them between 15% and 25% of any award or settlement amount. In addition, the statute provides an award of the relator's attorneys' fees, making qui tam actions a popular topic for the plaintiff's bar. An individual bringing suit pro se—that is, without the representation of a lawyer—may not bring a qui tam action under the False Claims Act. United States ex Rel. Lu v. Ou, 368 F.3d 773 (7th Cir. 2004).

Once a relator brings suit on behalf of the government, the Department of Justice, in conjunction with a U.S. Attorney for the district in which the suit was filed, have the option to intervene in the suit. If the government does intervene, it will notify the company or person being sued that a claim has been filed. Qui tam actions are filed under seal, which has to be partially lifted by the court to allow this type of disclosure. The seal prohibits the defendant from disclosing even the mere existence of the case to anyone, including its shareholders, a fact which may cause conflicts with the defendant's obligation under Securities & Exchange Commission or stock exchange regulations that require it to disclose lawsuits that could materially affect stock prices. The government may subsequently, without disclosing the identity of the plaintiff or any of the facts, begin taking discovery from the defendant.

If the government does not decide to participate in a qui tam action, the relator may proceed alone without the Department of Justice, though such cases historically have a much lower success rate. Relators who do prevail in such cases will get a higher relator's share, about 25% to 30%. It is conventionally thought that the government chooses legal matters it would prosecute because the government would only want to get involved in what it believes are winning cases.

History

In England and Wales

The historical antecedents of qui tam statutes lie in Roman and Anglo-Saxon law.[6] Roman criminal prosecutions were typically initiated by private citizens (delatores) and beginning no later than the Lex Pedia, it became common for Roman criminal statutes to offer a portion of the defendant's forfeited property to the initiator of the prosecution as a reward.[6] Forerunners of qui tam actions also occurred in Anglo-Saxon England; in the year 656, Wihtred of Kent issued a decree that a Sabbath-breaker would "forfeit his healsfang, and the man who informs against him shall have half the fine, and [the profits arising from] the labour."[6]

The first qui tam statutes were enacted by the English Parliament in the fourteenth century, some 250 years after the Norman Conquest.[6] Such qui tam enforcement allowed enforcement of the legislative priorities of the king, especially in areas where and at times when such legislation "undermined local officials' interests."[6]

The 1318 Statute of York, which set uniform prices for certain consumer goods, was an early English qui tam provision. The act prohibited city and borough officers from selling the regulated commodities (specifically, "wine and victuals"), and provided for forfeiture to the king of any prohibited merchandise.[6] To ensure enforcement, the act provided that one-third of the forfeited merchandise "shall be delivered to the Party that sued the Offender, as the King's Gift. And in such Case he that will sue [for a thing so forfeited,] shall be received."[6]

More qui tam provisions were enacted over the next two centuries, rewarding informers.[6] For example, the 1328 Statute of Northampton penalized (by forfeiture and fine) the holding of fairs by lords and merchants for longer than the authorized length, and provided that "every man that will sue for our Lord the King, shall be received, and [also have] the Fourth Part of that which shall be lost at his Suit."[6] Two Statutes of Labourers, enacted in 1349 and 1350, set wage and price controls and provided for informers to seek forfeiture from the violator, or from mayors or bailiffs who failed to enforce the regulations.[6] A large number of other statutes, mostly affecting commercial regulations, also included qui tam provisions.[6]

Some qui tam statutes were targeted at ensuring the integrity of officials. For example:

In 1360, Parliament permitted informers to sue jurors who accepted bribes. Shortly thereafter, another law authorized qui tam suits if a person responsible for procuring and arranging for carriage of provisions for the King's household accepted a bribe. A 1391 statute permitted suits against mayors, sheriffs, and bailiffs who failed to implement a rule concerning measurement of grain. A 1442 statute prohibited customs officials and other public employees from engaging in businesses related to their public duties. The value of qui tam suits as a check on public officials had become so well accepted by 1444 that Parliament adopted no fewer than five such statutes in that single year.[6]

During the reign of Henry VII, qui tam enforcement was reformed to avoid abusive, such as collusive suits between defendants and informers meant to avoid punishment.[6] A 1487 statute, among other reformers, made it a crime (punishable by two years' imprisonment) to collude with a qui tam informer.[6]

The practice fell into disrepute in England in the 19th century by which time it was principally used to enforce laws related to Christian Sunday observance. It was brought to an effective end by the Common Informers Act 1951 but, in 2007, there were proposals to introduce legal provision on the U.S. model back to the United Kingdom.[7]

United States

They existed in the United States in colonial times, and were embraced by the first U.S. Congress as a way to enforce the laws when the new federal government had virtually no law enforcement officers.

The case of Richard Marven and Samuel Shaw led the Continental Congress to pass the first whistleblower law in the new United States in 1778.[8] The Continental Congress was moved to act after an incident in 1777, when the two blew the whistle and suffered severe retaliation by Esek Hopkins, the commander-in-chief of the Continental Navy.[9] The Continental Congress enacted the whistleblower protection law on July 30, 1778 by a unanimous vote.[10] The Continental Congress declared it the duty of "all persons in the service of the United States, as well as all other the inhabitants thereof" to inform the Continental Congress or proper authorities of "misconduct, frauds or misdemeanors committed by any officers in the service of these states, which may come to their knowledge."[11][12] Congress declared that the United States would defend the two whistleblowers against a libel suit filed against them by Hopkins, resolving that "the reasonable expences of defending the said suit be defrayed by the United States" and terminated the employment of Hopkins, who had misconducted himself.[13]

The False Claims Act ("Lincoln Law") was passed in 1863 during the American Civil War, but was substantially weakened in 1943 during World War II while the government rushed to sign large military procurement contracts. It was strengthened again in 1986 after a period of military expansion at a time when there were many stories of defense contractor price gouging. Since then, qui tam provisions have helped recover more than $27 billion in taxpayer money.[14]

Canada

In the provinces of Canada that observed the English common law, the qui tam action has had limited scope, although as recently as 1933 the Exchequer Court Act, R.S.C. 1927, c. 34 had language to the effect that qui tam was permitted in "suits for penalties or forfeiture as where the suit is on behalf of the Crown alone." (Bank of Montreal v. Royal Bank of Canada, [1933] SCR 311; see sec 75(a) of RSC 1886 v2 c.135 "Supreme and Exchequer Courts"). Lawyers have used the qui tam action to prevent unwarranted intrusion into their domain by unqualified practitioners (1871: Allen Qui Tam v. Jarvis, 32 UCR 56). In cases like these, it would appear that the Crown is owed a bond from qualified practitioners, and the respondents—since they have not provided such a bond—are penalised by the courts. Allen in this case would seem to gain a fraction of the penalty exacted from Jarvis, the balance to the Crown.

Defense Criminal Investigative Service

Whistleblowers

'Whistleblower' can mean any person who reveals misconduct by his or her employer or another business or entity. The misconduct may be in the form of breaking the law, committing fraud, or corruption. That type of fraud can be a violation of the False Claims Act, or similar state and local laws. And a whistleblower who exposes fraud on the government can bring a qui tam lawsuit on behalf of the government, and can receive a share of the recovery as his or her reward.

In order for a whistleblower (also known as a "relator" in the context of the FCA) to bring a qui tam action that is based upon publicly disclosed information, that person must legally qualify as an "original source." See Rockwell International Corp. v. United States.

Examples

False patent marking

It is an offense under 35 U.S.C. § 292 (the "False Marking Statute") to falsely mark goods as "Patented." Before the enactment of the America Invents Act, any person could sue for breach, and the penalty of up to $500 was shared between the government and the person suing. Frequently, patentees fail to remove patent markings from their products following the expiration date of their patents and continue to mark goods sold after that date as patented. This behavior was largely overlooked until a court held that a separate penalty was due for each such article sold.[40] This inspired a host of similar lawsuits.[41]

In 2011, the United States District Court for the Northern District of Ohio held that the False Marking Statute was unconstitutional. Judge Dan Aaron Polster determined that it violated the Take Care Clause of Article II of the Constitution, because it represented "a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice".[1]

The America Invents Act made significant changes to false marking laws, which affected all pending and future false marking actions:[2]

See also

References

  1. 1 2 Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc. (N.D. Ohio), February 23, 2011.
  2. 1 2 Quinn, Gene (September 26, 2011). "America Invents: A Simple Guide to Patent Reform, Part 1". IPWatchdog.com. Retrieved September 28, 2011.
  3. See Nathan D. Sturycz, 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 Pub. L. Rev. 459 (2009), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1537749
  4. See, e.g. Rockwell International Corp. v. United States, No. 05-1272, 549 U.S. 457 (2007) Text of Rockwell International Corp. v. United State is available from:  Official U.S. Supreme Court slip opinion 
  5. Larry D. Lahman, "Bad Mules: A Primer on the Federal False Claims Act", 76 Okla. B. J. 901, 901 (2005) http://www.okbar.org/obj/articles_05/040905lahman.htm
  6. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam Legislation, 78 North Carolina Law Review 539 (March 2000).
  7. Walker, P (2007-05-24). "Fraud whistleblowers could get cash rewards". The Guardian (London). Retrieved 2008-03-12.
  8. {author="Kohn, Stephen Martin"|title="The Whistleblower's Handbook"|year=2011|publisher="Globe Pequot"|page=199}
  9. "Honoring America’s Truth-Tellers". Office of United States Senator Charles Grassley. Retrieved 8 July 2015. |first1= missing |last1= in Authors list (help)
  10. Journals of the Continental Congress: 1774–1789. Washington: Government Printing Office. 1908. pp. 732–33.
  11. Journals of the Continental Congress: 1774–1789, op. cit. p. 732.
  12. "Asia Times Online :: Welcome to the Post-Constitution". Retrieved 15 June 2015.
  13. "Journals of the Continental Congress--THURSDAY, JULY 30, 1778". Retrieved 15 June 2015.
  14. "Qui Tam A History". Whistleblower Info. Retrieved 2012-01-23.
  15. 1 2 http://www.dodig.mil/sar/index.html
  16. Egelko, Bob, "$31.9 Million Settlement In Shipping Suit", San Francisco Chronicle, 4 January 2012, P. D1.
  17. "Maersk Line to Pay Us $31.9 Million to Resolve False Claims Allegations for Inflated Shipping Costs to Military in Afghanistan and Iraq – OPA – Department of Justice". Retrieved 15 June 2015.
  18. 1 2 3 4 ["This civil settlement netted the government and all whistleblowers about $750 million. The government received an additional $600 million in criminal fines. http://www.bafirm.com/results.html
  19. "GlaxoSmithKline to plead guilty and pay $3 billion to resolve fraud allegations and failure to report safety data," Department of Justice Press Release, July 2, 2012.
  20. "Glaxo whistleblower case accounts for $1.5 billion out of Glaxo's record $3 billion settlement," Phillips & Cohen LLP Press Release, July 2, 2012.
  21. "Whistleblowers played major role in Glaxo case," July 2, 2012.
  22. "Glaxo agrees to pay $3 billion in fraud settlement," The New York Times, July 2, 2012.
  23. "ATK settles Phillips & Cohen whistleblower case for $37 million", Phillips & Cohen LLP Press Release. April 23, 2012.
  24. "James Hoyer » ATK Launch Systems Inc. Settles False Claims For Allegedly Delivering Unsafe Illuminating Para-flares". Retrieved 15 June 2015.
  25. http://www.rttnews.com/1860244/ammed-direct-to-pay-18-mln-to-us-tennessee-to-resolve-false-claims-allegations.aspx
  26. http://www.justice.gov/usao/waw/press/2012/Mar/lifewatch.html
  27. Huffstutter, P.J.; Blankstein, Andrew (November 20, 2010). "Texas businessman settles military food mislabeling case for $15 million". Los Angeles Times.
  28. "Boeing Company to Pay U.S. $25 Million to Resolve Allegations Related to Defective Work on KC-10 Aerial Refueling Aircraft". Retrieved 15 June 2015.
  29. http://www.usdoj.gov/usao/ma/Press%20Office%20-%20Press%20Release%20Files/Sept2009/PharmaciaPlea.html
  30. http://www.fbi.gov/pressrel/pressrel09/justice_090209.htm
  31. Berkrot, B (2009). "Pfizer whistleblower's ordeal reaps big rewards". Reuters. Retrieved 2009-08-03.
  32. "Qui tam whistleblower False Claims Act tax fraud news". Phillips & Cohen LLP. Retrieved 15 June 2015.
  33. "Whistleblower Healthcare Fraud Law Firm – Nolan, Auerbach & White" (PDF). Nolan, Auerbach & White. Retrieved 15 June 2015.
  34. New York Times article, Associated Press. April 15, 2009.
  35. "Businessman exposed problems with Quest subsidiary's blood test kits; led to $302 million settlement", Phillips & Cohen LLP Press Release. April 15, 2009.
  36. P&C. "Scientist blew whistle on faulty military satellite parts; Northrop Grumman pays $325 million to settle case". Retrieved 29 March 2013.
  37. Drew, Christopher (3 April 2009). "Military Contractor Agrees to Pay $325 Million to Settle Whistle-Blower Lawsuit". The New York Times. p. 4.
  38. Melody Petersen, Our Daily Meds: How the Pharmaceutical Companies Transformed Themselves into Slick Marketing Machines and Hooked the Nation on Prescription Drugs
  39. "Bloomberg". Bloomberg.com. Retrieved 15 June 2015.
  40. (The Forest Group, Inc. v. Bon Tool Co, 2009)
  41. "Qui Tam Plaintiffs Have Standing to Sue for False Marking under 35 U.S.C. § 292 – Publications – Mayer Brown". Retrieved 15 June 2015.

Bibliography

External links

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