Government Contracts Monitor
Federal Employees are “People” Too Under the False Claims Act – Your Investigator May Also be Your Relator
August 27, 2012
A federal appeals court recently asked: “Is a federal employee, even one whose job it is to investigate fraud, a ‘person’ under the False Claims Act such that he may maintain a qui tam action?” The case, See Little v. Shell Exploration & Production Company, No. 11-20320 (5th Cir. 2012), answered the question with a “yes,” holding that two government auditors whose job it was to detect fraud could be qui tam relators in connection with the fraud they investigated.
The District Court for the Southern District of Texas dismissed the case brought by the federal employees because “as agents of the government, [the Plaintiffs] are not private persons eligible to sue under the statute on topics within their responsibilities.” See Little v. Shell Exploration & Production Company, No. 4:07-CV-00871 (S.D. Tx. 2011). However, the Fifth Circuit reversed the dismissal, holding that the False Claims Act permits “actions by private persons,” and because the federal employees are human beings, and thus “persons,” they may file suit. The Court also rejected the argument that “private persons” narrows the universe of relators to non-governmental persons, and that government employees cannot bring claims “for the United States,” because those employees are, for practical purposes, the United States.
The Court also remanded the case for further proceedings to determine whether there were sufficient public disclosures to bar the lawsuit, holding that the lower Court’s determination regarding the issue was “overly broad.” If a sufficient public disclosure had occurred, however, the Court held that the lawsuit could not proceed because the federal employees could not be the “original source” of the information under the False Claims Act. The Court held that because the original source section of the False Claims Act requires a “voluntary” disclosure to the government, and the fact that the employees were employed to specifically disclose the fraud to the government, their disclosures are involuntary. However, there still exists a possibility in this case and others that if no public disclosure bar applies, a federal employee who is directly responsible for investigating the fraud could become a qui tam relator.
The Fifth Circuit’s decision adds to a current split in the federal Circuits, with the 10th, 11th, and 6th Circuits favoring granting a federal employee standing under the False Claims Act, and the 1st and 9th Circuits denying such standing. Since federal District Courts across the country are also split, the resolution of this issue currently depends on where the case is filed.
The split in the federal Circuits and Districts and the significant policy considerations surrounding conflicts of interests and the role of the federal employee should compel Congress to consider amending the False Claims Act. Congress has attempted several times in the last few years, including most recently the False Claims Act Clarification Act of 2009, to modify the False Claims Act to set strict guidelines and fee caps for cases involving government relators, especially those who investigate fraud. However, the various bills have either failed or still remain in Committee. If a federal employee is to be a relator, there must be better laws to ensure that federal employees do not receive significant qui tam bounties for simply doing their job.
Brian Stolarz is the attorney responsible for the content of this article.