Federal Courts Impose Varying Standards on FCA Relators, Impacting Whistleblower Success

What's Happening?

The False Claims Act (FCA) is seeing an increase in lawsuits, with whistleblowers filing 979 qui tam lawsuits last fiscal year, the highest on record. However, the success of these lawsuits often hinges on the ability of relators to meet the 'presentment' requirement, which varies across different federal circuits. The Sixth and Eleventh Circuits have the strictest standards, requiring relators to provide specific examples of false claims or have firsthand knowledge of fraudulent billing practices. In contrast, the Fourth and Seventh Circuits apply a more lenient 'intermediate' standard, allowing for inferences based on patterns of conduct. The remaining circuits follow a slightly more relaxed standard, requiring a strong inference that false claims were submitted. This disparity in standards poses challenges for relators, especially those without direct access to billing records or firsthand knowledge of fraudulent activities.

Why It's Important?

The varying standards for pleading presentment under the FCA have significant implications for whistleblowers and the companies they target. Stricter standards in certain circuits can lead to the dismissal of potentially valid claims, thereby reducing the effectiveness of the FCA as a tool for combating fraud against the government. This inconsistency can also create a strategic advantage for companies operating in circuits with more stringent requirements, potentially leading to forum shopping by plaintiffs. For businesses, understanding the specific requirements of their circuit is crucial in preparing defenses against FCA claims. The increase in FCA lawsuits, coupled with the Department of Justice's initiatives to combat fraud, suggests that companies interacting with the government will face heightened scrutiny and legal challenges.

What's Next?

As the number of FCA lawsuits continues to rise, companies should anticipate increased legal challenges and prepare by understanding the specific pleading standards of their circuit. The DOJ's new initiatives, such as the False Claims Act Working Group and the Civil Rights Fraud Initiative, indicate a more aggressive stance on fraud enforcement. Companies may need to enhance their compliance programs and documentation practices to mitigate the risk of FCA claims. For relators, the challenge remains to gather sufficient evidence to meet the presentment requirement, which may involve collaborating with legal counsel to build a robust case.