Qui Tam

A look at the standing of qui tam relators under the Virginia Fraud Against Taxpayers Act

By Zachary A. Kitts

    In the course of blogging, from time to time people call or email me about various aspects of the Virginia Fraud Against Taxpayers Act as well as the Federal False Claims Act.  When I do receive such questions, along with the permission of the person asking the question, I sometimes use such topics for a post. 

    I recently spoke to someone about the standing of relators and the government in qui tam litigation.  More specifically, the question was: "Who are the parties to a non-intervened qui tam case, and who exactly does the qui tam relator and his or her attorney represent?" 

    As with most things in this area of law, there is no easy answer.  Certainly it is safe to say that the Commonwealth occupies a unique place in qui tam litigation under the VFATA.  

    For example, in a non-intervened case, the Commonwealth will receive a minimum of 70% of the money recovered by the private relator.  The Commonwealth can dismiss the relator's qui tam complaint at any time over the objection of the relator, or settle the case with the defendants over the objection of the relator.  The Commonwealth can intervene at any time and limit the relator's presentation of the case.  

    Moreover, the relator cannot settle the case without the participation of the Commonwealth, and without the Commonwealth's signature on the settlement agreement and release.  Because the government will rarely agree to a broad release of claims, a high level of involvement in the drafting and negotiation of the settlement and release agreement is the norm for the United States Department of Justice, and the same thing should be true for the Commonwealth when it one day has to form an opinion on these matters.      

    Additionally, of course, the Commonwealth also has the power to receive copies of all pleadings, discovery, and deposition transcripts.  These are just a sample of the Commonwealth's powers, and they certainly make the Commonwealth seem like a party to the case, if you ask me. 

    In the context of the Federal False Claims Act, an interesting but rarely discussed District Court opinion from Judge Ellis in the Eastern District of Virginia holds that a qui tam case prosecuted by a private relator is a suit "brought by a governmental unit."  The case is U.S. ex rel Doe v. X, Inc., 246 B.R. 817 (E.D.Va. 2000).  

    The issue becomes important because the rights of the government in a non-intervened case are constantly on the table.  For example, defendants occasionally seek to limit the government's use of the discovery produced by defendant.  Such actions seem to be rare, and I think that is because it is generally a stupid thing for a defendant to do.  

    In a non-intervened case, the defendant already has the biggest worry off of his or her plate--namely, that the government will prosecute the case with its limitless resources.  Thus, the last thing I would want if I represented a defendant in a non-intervened case would be to appear as if my client was trying to hide something or protect itself from some branch of the government.    

    I think largely for that reason, there is very little law available on the point of whether the government can be limited in its use of discovery material.  One important non-published decision is United States ex rel Stewart v. The Louisiana Clinic, et al., 2002 WL 31819130 (E.D.La. 2002).   

    There will be more to follow, as we have just touched upon some of the major issues in this particular area of law.  As always, comments are welcome. 


    Zachary Kitts 
    Cook & Kitts, PLLC  
    
    

Full post as published by Virginia Qui Tam Law on June 14, 2008 (boomark / email).