A relator is a private person or entity who files a False Claims Act (FCA) lawsuit on behalf of the United States in exchange for receiving a portion any recovery from the defendant. The FCA was enacted in 1863 in response to defense contractors defrauding the Union Army during the Civil War. But, it wasn’t until 1986, when Congress supercharged the FCA by incentivizing more private whistleblowers to file lawsuits on behalf of the government, that the FCA became the Department of Justice’s (DOJ) primary enforcement tool for combatting fraud against the government.
FCA lawsuits filed by relators, called “qui tam” suits (qui tam comes from a Latin phrase for someone who sues “for the King as well as for himself”), are the engine behind the FCA’s strength as an enforcement tool. Under the 1986 amendments, relators are entitled to receive between 15% and 30% of the government’s recovery for any successful qui tam suit.
Given the severity of damages and penalties imposed by the FCA—treble damages plus civil penalties up to $23,607 per false claim, often resulting in potential recoveries in the millions of dollars—this bounty has proved a keen motivator. In FY2021 alone, relators filed 598 qui tam suits, and DOJ obtained more than $1.6 billion in settlements and judgments resulting from qui tam suits. For their part, relators received more than $237 million in 2021. Indeed, since the 1986 amendments, the DOJ has obtained more than $70 billion in settlements and judgments under the FCA.
Who Can Be a Relator?
As the Acting Assistant Attorney General for the DOJ’s Civil Division explained, the qui tam provisions of the FCA are meant to encourage industry insiders with “inside information” to uncover and report “new and evolving fraud schemes that might otherwise remain undetected.” Relators are often past or present employees, contractors, vendors, auditors, consultants, or associates of a defendant organization. But, because the FCA allows anyone claiming to have inside knowledge of false claims or statements being submitted to the government to file a qui tam suit, relators also can be competitors or others in the marketplace. In fact, given the lucrative bounties available to successful qui tam relators, there has been a rise in investor-backed, “professional” relator entities established specifically to bring an FCA case.
Mechanics of Qui Tam Suits
To bring a qui tam suit on behalf of the government, a relator must file the qui tam complaint under seal so that neither the defendant nor the public are aware of the lawsuit or its allegations. The relator must also serve the government with a copy of the complaint and a written disclosure of substantially all material evidence he or she possesses. The FCA mandates that once the government receives a copy of the sealed complaint, it must investigate the relator’s allegations and decide whether to intervene in the lawsuit and pursue litigation against the defendants. While the government investigates, the qui tam lawsuit remains under seal, so FCA defendants may or may not know that they are under investigation or that a lawsuit has been filed against them. Although the FCA provides an initial 60-day period for sealed investigation, the government routinely requests and upon a showing of good cause may receive extensions of the sealed investigatory period—in many cases resulting in these lawsuits remaining under seal for years before they become public.
If the government decides to intervene, the relator will take a back seat for purposes of the litigation but remains entitled to receive a share of any settlement or judgment. If the government chooses not to intervene, the relator may take the case forward on behalf of the government for a potentially larger share of any recovery. If successful, the relator will also recover attorney’s costs and fees from the defendant. This intervention decision is a key point for qui tam cases, as historically, recoveries have been much higher in intervened cases. Since the 1986 amendments, government has recovered more than $34 billion in intervened healthcare fraud cases, compared to $2.6 billion in non-intervened healthcare fraud cases.
When a relator opts to take the litigation forward on behalf of the United States, the government remains involved. The government is served with copies of all pleadings and orders filed in the case. The government must also consent to any dismissal or settlement sought by the relator. The government also has the authority to move to dismiss the case over the relator’s objections and may seek to intervene later in the case—although it must show “good cause” to do so after the case has been unsealed.
Restrictions on Relators
In light of its steep financial penalties and lucrative bounties, the FCA provides several procedural and substantive safeguards to limit who can serve as a relator. These issues are often vigorously litigated because they can be case-dispositive for defendants.
For example, under the first-to-file bar, a relator cannot maintain an action based on the same facts as another action already brought by another relator. Likewise, the public disclosure bar prevents a relator from maintaining an action based on information previously disclosed to the public unless the relator can show that he or she has independent knowledge of the alleged fraud that materially adds to the publicly disclosed information.
A relator’s case might also be dismissed if the relator violates the seal by disclosing the existence or substance of the lawsuit before the government has made its intervention decision and the case has become public. And, as noted above, the government may seek dismissal of the case if it believes the lawsuit contravenes a government interest or wastes government resources.
But, perhaps the biggest defense against would-be relators seeking to collect a bounty without credible allegations of fraud is Rule 9(b) of the Federal Rules of Civil Procedure. Because a relator who sues under the FCA has accused the defendant(s) of committing fraud against the government, the relator’s allegations must satisfy the heightened pleading requirements imposed by Rule 9(b)—which mandate that the relator’s allegations include specific details identifying the essential elements of a defendant’s fraud scheme and provides some link between the alleged fraud scheme and an actual false claim or statement submitted to the government.
Protections for Relators
The FCA provides protection for relators bringing FCA actions. Because the FCA encourages insiders to come forward with non-public information, relators are often employees of the defendant organization. Section 3730(h) of the FCA provides anti-retaliation protections for these relators, which prevent defendants from taking adverse employment actions against relators or would-be relators based on their whistleblowing activities. Critically, this protection extends to relators who bring allegations that are ultimately dismissed or proven untrue, so long as the relator is engaged in “protected activity” and has a reasonable belief that the allegations are true. Relators who feel they have been retaliated against can assert a separate cause of action against the defendant for violation of the FCA’s anti-retaliation provision, seeking back pay and other damages.
Another issue that can arise is whether the relator can be held responsible for his or her involvement in the alleged fraudulent behavior. While § 3730(d)(3) allows a court to reduce the relator’s share of any recovery if the relator planned or initiated the alleged fraud, the FCA does not prevent a relator from suing based on behavior in which the relator took part. The FCA’s original author, Senator Jacob Howard, said the qui tam provisions are based on “the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’” meaning that when Congress enacted the law, it foresaw that many whistleblowers who bring their allegations in pursuit of a bounty might have played some role in the fraud. For that reason, FCA defendants are generally prohibited from filing counterclaims against a relator for the relator’s behavior or from seeking to avoid or offset liability by pointing to the relator’s conduct or other actors who may not have been named in the lawsuit.
For more information about the False Claims Act, please subscribe to this blog or contact a member of the Bass, Berry & Sims Healthcare Fraud & Abuse Task Force.