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TURNING EMPLOYER WRONGS INTO EMPLOYEE RIGHTS

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Do I have a whistle blower claim under California False Claims Act?

As California’s serious whistle blowing law firm representing employees only, our potential clients are surprised when we advise them that California has its own version of the Federal False Claims, or qui tam (in the name of the King) act. This is the California False Claims Act. (False Claims are routinely described without describing which state or federal law is implied, thus the moniker “FCA” or False Claims Act.) In the most recent expansion of rights under the state version of the federal law, the court in San Francisco Unified School Dist ex rel Conteras vs. ¬†First Student, Inc., held that an invoice submitted to the state implicitly certifies compliance with the underlying terms of its contract. (Cal Court App. 1st Dis. 3/11/14). Here, the defendant allegedly provided the school district with defective brakes, showing worn brake lines, marginal tire treads and a complete abandonment of maintenance and inspections according to the promised schedule. Under federal law, there would be no liability since these invoices did not constitute implied certifications of contract compliance. (Term of payment vs term of participation is a related concept). Put bluntly, the contract did not condition payment on compliance with any regulations and/or standards of safety.

What if the state is aware of a material breach in the contract and pays anyway? The court held that these types of breaches can be material to a decision to pay–even when the state is aware–and accepts them. If this same case had been decided by a federal court in California, it is likely that liability for an “implied” certification for a contract ¬†breach requires the contract to expressly condition payment on the particular term or regulation. In the case of Cafasso vs. General Dynamics,637 F.3d 1047 (9th Cir. 2011). In this case, a vendor was required to comply with federal rules but the payment was not conditioned on such compliance. Thus, no false claim was submitted.

Additionally, and unlike the San Francisco Unified case, under federal law, the knowledge of the government that the contract was breached will defeat a false claim as the paying agency’s knowledge means the breach was not “material”. US ex rel Harrison vs. Westinghouse Savannah River, 176 F.3d 776, 782 (4th Cir 1998). (Government aware that subcontract was awarded on a cost-plus basis. In another matter involving NASA, a false claim was denied since the government was knowledgeable of the form of a defect.

With regard to “materiality”, the critical distinction between federal law and state law is the subjective view of a governmental agency (the one writing the check) in whether the misrepresentation is material. Under state law, the fact that an agency paid a bill with knowledge of the falsity is immaterial to the validity of the claim.

In sum, under the California False Claims Act, the submission of a false invoice is sufficient to cover protection under the act. We have litigated numerous cases under the Federal False Claims Act and now look forward to filing more cases under the California False Claims Act. Affected industries will involve primarily health care providers (dental, PPOs, hospitals, medical group providers billing Medi Cal); aerospace; transportation; finance; service industries of all kinds. Potential clients should be aware of the need to advise the government of the claims in detail, including providing copies of critical billing documents. Due to various privacy laws, consultation with an experienced law firm is critical to understanding the best way to advance your case without incurring personal liability.