Fullerton False Claims and Whistleblower Attorneys

Fullerton, California – False Claims Act and Whistleblower Attorneys

Stephen Danz and Associates represents whistleblowers throughout the United States, with a focus on California.  We have represented many individuals and are familiar with local courts.   Our practice includes the highly specialized and complex Qui Tam lawsuits where private individuals called relators trust our attorneys to bring forth their cases in courts representative of Fullerton, California relators. 

Over the last thirty years since the 1986 amendments to the False Claims Act (“FCA”), the FCA has become the main weapon in the government’s arsenal to battle fraud, waste and abuse on federal and state governments.  The FCA was first enforced in the Civil War to handle procurement fraud by suppliers to the Union Army.  It was rarely used by the government until it was amended in 1986.  The 1986 amendments, combined with the 2009 and 2010 amendments, bolstered several key sections of the FCA statutes.  These included the whistleblower and damages sections where they made it easier for the government and whistleblowers to file lawsuits.  (31 U.S.C. §§ 3729-3733.)

Excessive Fines

The amount of penalties under the FCA may be limited by the Eighth Amendment to the US Constitution, which prohibits imposing excessive fines (U.S. Const. amend. VIII). Challenges under the Excessive Fines Clause have been brought against FCA judgments in cases where there are a large number of false claims, but each individual claim involves a small or negligible amount of actual damages. Additionally, in federal reimbursement cases, where each invoice can trigger a separate mandatory penalty of at least $10,781, these cumulative penalties can substantially outweigh the actual damages.

The Fourth Circuit, however, recently held that a $24 million FCA penalty is not an excessive fine even when the relator failed to prove economic harm (U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., 741 F.3d 390, 409 (4th Cir. 2013)).

The action was commenced in the district court, when the relator alleged that the defendant moving companies had engaged in a price-fixing agreement in connection with their bid for a contract to move military members’ household goods. At trial, the relator declined to pursue a damages judgment and focused solely on the statutory violations, which are easier to prove. Based on 9,136 invoices the defendant had submitted, the district court calculated that the minimum civil penalty under the FCA was $50,248,000 ($5,500 for each invoice, the mandatory minimum per claim penalty which has since increased to $10,781) but deemed it unconstitutionally excessive and declined to impose a penalty. The plaintiff proposed to lessen the penalty to $24 million, but the district court still found it grossly disproportionate to any harm caused by the defendants and in violation of the Eighth Amendment. (U.S. ex rel. Bunk v. Birkart Globistics GmbH & Co., Nos. 02-1168, 07-1198, 2012 WL 488256, at *14 (E.D. Va. Feb. 14, 2012).)

On appeal, the Fourth Circuit reinstated the $24 million dollar penalty as being within constitutional limits, noting that the amount appropriately reflected the gravity of the defendants’ offenses and served as an appropriate deterrent (Bunk, 741 F.3d at 409). The case represents a boon to qui tam counsel in cases where damages are difficult to prove but the submission of a large number of false claims is not.

 Minimizing FCA Exposure

Companies that do business with the government can minimize their exposure to FCA liability by:

•             Implementing strong compliance programs (see Compliance Programs).

•             Self-disclosing promptly any conduct that may be subject to the FCA (see Self-Disclosure).

In particular, the industries that have been the primary targets of FCA enforcement to date are:

•             Pharmaceutical.

•             Medical device.

•             Healthcare.

•             Financial services.

•             Housing and mortgage.

•             Insurance.

•             Construction.

•             Defense contracting.

Other industries that have been increasingly exposed to FCA liability are:

•             Stimulus projects and alternative energy.

•             Educational lending.

•             Technology.