I am a False Claims Act lawyer, and I am doing a series of articles addressing
criticism of the Act. A recent article in the Public Contract Law Journal,
published by the American Bar Association, gave grim statistics about
the success rate for relators (whistleblowers) in False Claims Act (“FCA”)
cases where the Government chooses not to intervene in the case. According
to author David Krok, by using data he received as a result of the Freedom
of Information Act he was able to determine that relators have a 95% chance
of winning if the Government chooses to intervene in the case; conversely,
they have only a 9% chance of winning if the Government chooses not to
intervene. Citing statistics such as those Krok cites in his article
Does Private Enforcement Attract Excessive Litigation? Evidence from the
False Claims Act, critics have suggested that these statistics are evidence that relators
should not be allowed to prosecute non-intervened cases.
For more about “intervention”, see my earlier blog post, Why
Whistleblower Cases Seldom Succeed After the Government Declines the Case.
Critics argue that the relators must not be bringing meritorious suits
since the relators generally do not succeed when the Government chooses
not to intervene, but they are missing a critical point: the impact on
the case that occurs simply because the Government refused to intervene.
Three important things happen when the Government does decide to intervene.
First, because the Government chose to intervene in the case, courts tend
to assume that the case must have merit. Second, the courts tend to give
the Government the benefit of the doubt about whether the case is pled
sufficiently. And third, the Government usually has sufficient information
to plead the case appropriately.
When the Government does not intervene, the opposite occurs. The defendant
usually files a motion to dismiss in which the defendant argues that the
case must not be any good, because — after all — the Government
refused to intervene in the case. In my experience, the argument is almost
always false; the intervention decision most often is related to dollars
and cents, and not to facts. Nonetheless, defendants make the argument
precisely because they realize that it likely will resonate with the judge.
Since the Government does not put anything in writing about why it chose
not to intervene, the relator has little to work with in convincing the
court that the Government did not believe the case was unfounded.
Because the court already is skeptical about whether the case is meritorious,
the court then looks with a jaundiced eye on the claims, and is much more
likely to grant a motion to dismiss as a result.
Third, the relator, who is usually an individual, generally has only a
limited amount of information. The defendant typically argues that the
fact that the relator’s information is limited means that the case
should be dismissed because the relator cannot prove every detail of the
claim in advance, without any discovery. For example, even when the relator
has ironclad proof of the fraud that went on, the defendant typically
will claim that the relator is missing some other piece of information,
such as copies of the bills that were submitted to the government agency.
The argument typically is absurd. Does anyone seriously doubt that a hospital
is submitting its claims to Medicare? No hospital could stay in business
if it failed to submit the claims. Nonetheless, even where a hospital
employee can prove that the hospital was billing for procedures that were
never performed, the hospital will argue that the case ought to be dismissed
because the employee does not have copies of the bills that went to Medicare.
Or course, the irony of the argument is that jobs are typically segmented
enough that the relator who knows about the fraud does not know have access
to the billing, and vice versa. Some courts have raised the bar unnecessarily
high in this situation. The upshot is that courts dismiss clearly meritorious
cases, and the Government never recovers the money stolen from it by fraud.