Arizona Attorney - March 2014

Today, the landscape is particularly ripe for FCA lawsuits, especially in states like Arizona. From a legal perspective, the statutory incentives for FCA claims are at an all-time high. Companies found responsible for FCA violations may be subject to treble damages and significant statutory penalties. And qui tam plaintiffs, a growing type of whistleblower, who pursue such claims may recover as much as 30 percent of those amounts. From a factual perspective, the target field is rich. Arizona companies are doing billions of dollars of business with the federal government in a wide spectrum of industries ranging from financial to health care to construction to aerospace to national defense to education, and beyond. And one need only follow the daily news to see the growing ranks of whistleblowers, who now can access data, publicize claims and achieve levels of noto-riety for their efforts unlike any other point in history.

Together, these laws and facts create a minefield of risks and potential liabilities for businesses when FCA allegations arise. Indeed, according to the Department of Justice (“the DOJ”), 2012 saw nearly $5 billion recovered by the federal government through FCA claims, over $3.3 billion of which was under the qui tam enforcement provision of the act. 2 Given that whistleblowers can obtain significant portions of those staggering amounts, it should come as no surprise then that the DOJ also reported that 2012 saw more than 650 whistleblower-filed actions, also an all-time high. 3

The Anatomy of a Qui Tam Action

As noted, a qui tam action is initiated by a
private person, legally known as a “rela-
tor,” acting as a whistleblower on behalf of
the government. 4 To initiate a qui tam suit,
a complaint alleging FCA violations—
which typically involves allegations of
fraudulent claims made by a business to the
government for goods and services—is
filed under seal, without notice to a defen-
dant. Copies of the complaint are then
provided to the DOJ with a written disclo-
sure of the evidence that the whistleblower
claims to have in support of his or her alle-
gations. 5 It is important to note that not
just any claim qualifies a whistleblower for
relator status. The relator must have inde-
pendent knowledge of the false claims or
knowledge that “materially adds to … pub-
lically disclosed allegations or transac-
tions.” 6 Claims asserted on the basis of cer-
tain statutorily defined public disclosures
do not suffice, unless the relator is an orig-
inal source of that information.

Once the lawsuit is filed and delivered to the government, the government has 60 days to investigate the action and decide how to proceed. At the end of that period, which can be extended with court permission, the government has four options:

• Option One: The government can elect to intervene in the case. If it does, it will assume primary control of litigating the claim or claims. This step, however, does not take the whistleblower out of the picture entirely. He or she can still participate in the case, object to any settlement and potentially recover between 15 percent and 25 percent of any damages collected, as well as attorneys’ fees and costs, just for blowing the whistle and filing suit.

• Option Two: The government can
dismiss the case. The FCA, however,
does not make this option particularly

BARB DAWSON, a co-chair of Snell & Wilmer’s Commercial Litigation Practice Group, has more than 20 years of experience assisting companies and their boards of directors with complex litigation, internal investigations and compliance issues. She often assists clients with issues involving non-U.S. parties and venues, and formerly chaired the global affiliation of 160 law firms, Lex Mundi. She is recognized by Chambers,

Southwest Super Lawyers and Best Lawyers in America in categories including “Bet-the-Company.”

DAN HUITINK is a commercial litigation associate at Snell & Wilmer and a member of the firm’s appellate, financial services litigation, internal investigations and regulatory compliance, professional liability litigation, and white-collar defense and investigations groups. Prior to joining Snell & Wilmer, he was an Assistant United States Attorney and a law clerk to Hon. Michael J. Melloy, United States Court of Appeals for the Eighth Circuit. Dan graduated from the University of Iowa College of Law in 2008.

The authors thank and credit Zachary Fort, Sandra Day O’Connor College of Law at Arizona State University, Class of 2014, for his substantial contributions to this piece. They look forward to Zach joining Snell & Wilmer in 2014.