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Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Government Intervention Rights Broadly Interpreted

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A False Claims Act case can be brought by a whistleblower (relator) to recover funds on behalf of the federal government. The government then has the option to “intervene” and proceed with the action. If the government does intervene, it has the primary role in prosecuting the action, although the relator remains entitled to a percentage of any recovery. Even if the government declines to intervene initially, it can later intervene upon a showing of “good cause.”

Government intervention can be the turning point in a False Claims Act case. Specifically, the Department of Justice statistics show that, for cases filed in fiscal year 2012, settlements and judgments in qui tam (or relator-initiated) cases where the government intervened amounted to approximately $670 million dollars. By contrast, for qui tam cases where the government did not intervene, settlements and judgments amounted to only approximately $6 million in the same time period.

Government intervention, therefore, is extremely helpful to the success of a False Claims Act case. In a recent case, United States v. Aseracare, Inc., 2012 WL 5289475 (N.D. Ala. Oct. 24, 2012), the court widely construed the government’s ability to intervene in a case under the act, even where there were problems with the relator’s initial suit and where the government initially declined intervention. In Aseracare, the government initially declined to intervene and then later asked the court to allow it to do so because of new evidence it discovered. Defendants, however, argued that the lawsuit itself failed because it was not the first-filed suit under the act and thus the government could not properly intervene. Defendants also argued that the government did not show “good cause” for its intervention request after its initial declination.

For the “first-to-file” argument, the court noted that while the statute does not explicitly say so, a relator cannot bring a False Claims Act case based on facts underlying an already-existing proceeding under the act. But, the court held that even though a relator’s claims may be barred by the first-to-file rule, the government can still intervene in the case. In other words, the underlying action itself can be defective, but the government can still intervene.

With respect to the “good cause” argument, the court held that good cause exists where the “government realized the magnitude of the alleged fraud was much larger than it had originally anticipated; where the government received additional and new evidence about the case; and where intervention would protect the interests of the relators.” The government in this case argued that it received new information showing that defendants knew of the allegedly wrongful conduct much earlier than it had previously believed, and the court agreed that the new information supplied a sufficient basis to allow intervention.

This decision is good news for the government and for whistleblowers in terms of enhancing their False Claims Act case and possibly recovering significantly more money from defendants.

Reetupama (Reena) Dutta is a senior associate in the Business Litigation Practice at Hodgson Russ LLP. You can reach her at rdutta@hodgsonruss.com.

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Hodgson Russ is one of only a few major law firms that represents both whistleblowers and companies accused by whistleblowers of wrongdoing. This unusual perspective means we are exceptionally well positioned to advise whistleblowers about potential claims.

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