California False Claims Act FAQ

A “whistleblower” is somebody who has the courage to inform the government that their employer or any other business or person has violated the law in some way or has ripped off either the federal government or the State of California, or one of the state’s political subdivisions, such as a California county, city, or the University of California.

A company can even blow the whistle on another company that has ripped off the government. Both California law and federal law make it illegal for an employer to retaliate against an employee who blows the whistle on the employer for ripping off the government. If you know that a company has ripped off the State of California or one of its political subdivisions you may be able to blow the whistle on the fraud and get financially rewarded with a percentage of the money recovered. To do that you must become a “qui tam plaintiff” by filing a lawsuit under the California False Claims Act seeking to recover the money or property that was ripped off. Attorneys who represent qui tam plaintiffs normally will handle such cases on a contingency. You should promptly consult with an attorney who has experience handling qui tam cases and try to get the case filed in court as quickly as possible since only the first person to file a qui tam action will be entitled to a percentage of the recovery on that fraud.

A “qui tam plaintiff” is a whistleblower who brings a lawsuit under the California False Claims Act to recover money or property ripped off from the State of California or from one of the state’s political subdivisions, such as a county, a city or the University of California.

In a successful case a qui tam plaintiff is entitled to an award of a percentage of the proceeds recovered plus reasonable expenses necessarily incurred, court costs and attorney’s fees. Attorneys who represent qui tam plaintiffs normally will handle such cases on a contingency. The California False Claims Act contains protective mechanisms to prevent an employer from retaliating against an employee who blows the whistle on the employer for ripping off the State of California or one of its political subdivisions.

Normally a qui tam plaintiff must bring suit under the California False Claims Act within 10 years after the money or property was ripped off from the government by a contractor unless the Attorney General or the prosecuting authority for a political subdivision knows of the false claim, or of facts that would cause a reasonable person to suspect the fraud: in that instance, such a case must be filed within three years after the Attorney General or the prosecuting authority for a political subdivision knows or reasonably should have known of the fraud.

In a successful case brought by a qui tam plaintiff, if the Attorney General’s office* elected to take the case over and proceed with it, the qui tam plaintiff will receive a minimum guaranteed compensation of at least 15% and could receive up to 33% of the double or treble damages and civil penalties recovered against the wrongdoer depending upon the court’s determination of the extent of the qui tam plaintiff’s contribution to the case. The qui tam plaintiff will also receive an award against the defendant/wrongdoer of the qui tam plaintiff’s reasonable expenses, the qui tam plaintiff’s court costs and the qui tam plaintiff’s reasonable attorney’s fees.

If the Attorney General’s office* declined to take over the case and the qui tam plaintiff proceeded with it, the qui tam plaintiff will receive a minimum guaranteed compensation of at least 25% and could receive up to 50% of the double or treble damages and civil penalties recovered against the wrongdoer depending upon the court’s determination of what is reasonable for the qui tam plaintiff’s efforts. The qui tam plaintiff will also receive an award against the defendant/wrongdoer of the qui tam plaintiff’s reasonable expenses, the qui tam plaintiff’s court costs and the qui tam plaintiff’s reasonable attorney’s fees.

However, if the qui tam plaintiff is a present or former employee of the state or the political subdivision, there is no minimum guaranteed compensation and the amount of the qui tam plaintiff’s compensation, if any, is in the discretion of the court and is based on such factors as whether the present or former government employee made reasonable efforts to go through official channels to recover the funds before bringing the lawsuit, the extent of the present or former government employee’s contributions to the success of the case and, if the employee was a participant in the fraud, the extent and circumstances of the qui tam plaintiff’s involvement in it.

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What is the statute of limitations for bringing a qui tam action under the California False Claims Act?::

Normally a qui tam plaintiff must bring suit under the California False Claims Act within 10 years after the money or property was ripped off from the government by a contractor unless the Attorney General or the prosecuting authority for a political subdivision knows of the false claim, or of facts that would cause a reasonable person to suspect the fraud: in that instance, such a case must be filed within three years after the Attorney General or the prosecuting authority for a political subdivision knows or reasonably should have known of the fraud.

Yes, it does proceed differently from other types of court cases in several important respects. The lawsuit is filed in superior court “in camera”, which means it is not made public when it is filed. It remains under seal for up to 60 days or even more while the California Attorney General’s office reviews the lawsuit and the evidence and information furnished by the qui tam plaintiff supporting it to determine whether the AG’s office wants to proceed with the prosecution of the case.

If the AG’s office elects to take over the case the AG’s office* will have primary responsibility for prosecuting the case although the qui tam plaintiff continues as a full party to it. If the AG’s office declines to take over the case the qui tam plaintiff may proceed with it. Once the AG’s office announces its decision on whether it will proceed with the case the seal on the court case is lifted. The defendant/wrongdoer is then served with a summons and must file a response to the lawsuit within 30 days. From that point the lawsuit proceeds forward similarly to other types of cases, although there are some other procedural differences.

For example, a qui tam case can only be dismissed or settled with the consent of the court and the Attorney General’s office*, and a violation of the California False Claims Act cannot be waived or released by any private person unless such waiver or release is part of a court approved settlement of a false claims case.
What amounts can be recovered from the wrongdoer in a qui tam case under the California False Claims Act?::
The wrongdoer is liable for three times the amount of the damages sustained by the State of California or any of its political subdivisions as a result of the fraud in violation of the False Claims Act and for a civil penalty of between $5,000 and $10,000 for each violation of the FCA, for the reasonable expenses necessarily incurred by the qui tam plaintiff, for the court costs and for the qui tam plaintiff’s reasonable attorney’s fees.

The wrongdoer is liable for three times the amount of the damages sustained by the State of California or any of its political subdivisions as a result of the fraud in violation of the False Claims Act and for a civil penalty of between $5,000 and $10,000 for each violation of the FCA, for the reasonable expenses necessarily incurred by the qui tam plaintiff, for the court costs and for the qui tam plaintiff’s reasonable attorney’s fees.

Yes, a wrongdoer will not be required to pay a civil penalty and the wrongdoer may be required to pay a lower multiple of damages (between two times and three times the amount of damages sustained by the State of California or any of its political subdivisions as a result of a violation of the False Claims Act) if all of the following mitigating circumstances are found to be present:

• The wrongdoer furnished the state or the political subdivision with all information known to the wrongdoer about the fraud within 30 days after the wrongdoer first obtained the information;
• The wrongdoer fully cooperated with any investigation by the state or the political subdivision into the fraud; and,
• At the time the wrongdoer furnished the information about the fraud there was no criminal, civil or administrative action pending with respect to the fraud, and the wrongdoer did not know of the existence of any investigation into the fraud.

No. The California False Claims Act bars subsequently filed qui tam lawsuits based on the same facts as a pending case.

Yes. The California False Claims Act prohibits retaliation by an employer against an employee for any lawful acts done by the employee in bringing or supporting a false claim action. Protected activity would include disclosing information about the fraud to the government, filing a qui tam lawsuit, or giving information, testimony or assistance in support of a false claim action brought by the employee or anybody else. Any kind of discrimination against an employee in the terms and conditions of her employment is prohibited, including discharge, suspension, denial of promotion, harassment or any other kind of retaliation against such an employee.

If an employer does retaliate against an employee for bringing or supporting a qui tam lawsuit the California False Claims Act allows an employee to bring a discrimination lawsuit to recover whatever relief is necessary to make the employee “whole,” e.g. restoration of the employee’s job and seniority, etc. The employee can recover two times lost back pay plus interest on the back pay, and any special damages resulting from the discrimination such as compensation for emotional distress, plus punitive damages, litigation costs and an award of reasonable attorneys’ fees.

There are two conditions that must be satisfied in order for an employee who participated in the fraud to be eligible for the anti-retaliation remedies mentioned above: (a) the employee must have voluntarily given information to the government about the fraud or have given assistance in support of the false claim action; and, (b) the employee’s involvement in the fraud must have resulted from coercion by her employer.

The most frequent types of false or fraudulent acts by a person that can be the basis for a qui tam lawsuit against the wrongdoer under the California False Claims Act include:

• Knowingly submitting to the government or to a government contractor a false or fraudulent invoice or other false or fraudulent request for the payment of money, property or services;
• Knowingly making or using a false record or statement in support of a false or fraudulent claim submitted to the government or to a government contractor;
• Conspiring with another person to get a false claim paid by the government or by a government contractor; and,
• Knowingly and improperly concealing or avoiding or decreasing an obligation to pay money to the government.

Some other types of false or fraudulent acts by a person that can also be the basis for a qui tam lawsuit under the California False Claims Act include:

• Knowing failure to return all of the government’s money or property that a person has in his possession, custody or control;
• Making a receipt for property used or to be used by the government that is false;
• Knowingly buying government property or receiving it as a pledge from anyone who is not authorized to sell or pledge the property.
• Discovering that one is the beneficiary of an inadvertent false claim submitted to the government and then failing to disclose the false claim to the government within a reasonable time after the discovery.

In most instances a qui tam case under the California False Claims Act seeks recovery of money or property fraudulently ripped off by a wrongdoer FROM the State of California or from one of its political subdivisions. A “reverse false claim” seeks recovery of money or property from a wrongdoer who has fraudulently avoided or covered up an obligation to pay money or return property TO the government.

For example, suppose a company fraudulently understates the amount of water it has drawn from a river to irrigate crops, resulting in an understatement of the company’s obligation to pay the government for the water used. Such an understatement of what the company owes to the government for water usage could be the basis of a “reverse false claim” qui tam action under the California False Claims Act.

Yes. The following types of frauds and rip-offs of the government cannot be the basis of a qui tam action under the California False Claims Act:

• Qui tam actions based upon fraudulent claims that have already been publicly disclosed by the news media or that were disclosed in a criminal, civil or administrative hearing, or in an investigation, report, hearing or audit conducted by the Senate, Assembly, auditor, or governing body of a political subdivision ARE BARRED, UNLESS the person bringing the qui tam action is an “original source” of the information (for this purpose, “original source” means the qui tam plaintiff: (a) had direct and independent knowledge of the information on which the qui tam action is based; (b) voluntarily provided the information to the state or political subdivision before filing the qui tam action; and, (c) the qui tam plaintiff’s information was the catalyst for the proceeding, audit or report that led to the public disclosure.)
• Qui tam actions based upon information discovered by an employee, or former employee, of the government during the course of their public employment ARE BARRED, UNLESS (a) the person first, in good faith, exhausted their public employer’s internal procedures for reporting and seeking to recover the falsely claimed sums; and (b) their public employer failed to act on the information within a reasonable period of time.
• Neither the State of California nor any state or local government agencies can be sued as a wrongdoer under the California False Claims Act;
• Qui tam actions based upon fraudulent claims made by a wrongdoer under the state tax laws are barred;
• Qui tam actions based upon fraudulent claims submitted by the same person that collectively total less than $500 in value are barred;
• Qui tam actions based upon fraudulent claims made under the workers’ compensation laws or upon fraudulent claims and statements submitted to the government under the California Tort Claims Act are barred;
• Qui tam actions based upon fraudulent claims made against the assets of a person doing insurance business that have been transferred to the Insurance Commissioner under Ins. Code §1011 are barred;
• Qui tam actions based upon fraudulent claims alleged to have been made by key elected officials (members of the state senate or assembly, the state judiciary, executive branch elected officials and members of governing bodies of political subdivision) are barred if based on evidence or information known to the state or political subdivision when the action was brought;
• Qui tam actions based upon fraudulent claims that are already the subject of a civil suit or an administrative civil money penalty proceeding in which the state or political subdivision is already a party are barred.

The qui tam plaintiff’s reward must be paid out of the “proceeds” of the action or settlement (the civil penalties and damages recovered in the case from the wrongdoer). The qui tam plaintiff’s reasonable expenses, reasonable costs and attorney’s fees are awarded against the wrongdoer. Neither the state nor a political subdivision is responsible for payment of the qui tam plaintiff’s expenses, costs and fees.

Yes, but only where (1) the qui tam plaintiff prosecutes the case; (2) the defense prevails in the case; and, (3) the court finds the qui tam claim was clearly frivolous, clearly vexatious, or brought primarily for harassment.