Qui Tam

Latin abbreviation for "Who sues on behalf of the King as well as for himself." An action under a statute that establishes penalties for certain acts or omissions that can be brought by an informer or and in which a portion of the penalties, fines, awards can be awarded the whistleblower.

Who as well. When a statute imposes a penalty, for the doing or not doing an act, and gives that penalty in part to whosoever will sue for the same, and the other part to the commonwealth, or some charitable, literary, or other institution, and makes it recoverable by action, such actions are called qui tam actions, the plaintiff describing himself as suing as well for the commonwealth, for example, as for himself.

Qui tam provisions of the False Claims Act: As expressed by a court discussing the original version of the Act, qui tam actions are based on the theory "that one of the least expensive and most effective means of preventing frauds on the Treasury is to make the perpetrators of them liable to actions by private persons acting, if you please, under the strong stimulus of personal ill will or the hope of gain." United States v. Griswold, 24 F. 361, 366 (D. Or. 1885) (quoted, inter alia, in Quinn, 14 F.3d at 649 (emphasis added)). It can be argued that monies paid in settlement to a relator outside of the framework of an action brought under the Act should have an equivalent deterrent effect to monies paid in settlement subsequent to the filing of the suit. We believe, however, that the Act's deterrent objectives would be diluted substantially by the enforcement of prefiling releases.

To see this, one need only assume that, but for the filing of a qui tam claim, the government would be significantly less likely to learn of the allegations of fraud. Because Congress itself has made this very assumption, see Senate Report, supra, at 4-7, reprinted in U.S.C.C.A.N. at 5269-72, we find it a reasonable starting point. When the qui tam relator files suit, the relator stands to receive only a percentage of the eventual proceeds from the action; at most, this will amount to 30 percent of the recovery. See 31 U.S.C.A. S 3730(d) (West Supp. 1994). Accordingly, in settlement negotiations, both the government and the relator will have incentives to maximize the expected gross recovery.

It is commonly recognized that the central purpose of the qui tam provisions of the FCA is to "set up incentives to supplement government enforcement" of the Act, Quinn, 14 F.3d at 649, by "encourag[ing] insiders privy to a fraud on the government to blow the whistle on the crime," Wang v. FMC Corp., 975 F.2d 1412, 1419 (9th Cir. 1992). The history and structure of the FCA and its qui tam provisions is described in United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649-55 (D.C. Cir. 1994); United States ex rel. Kelly v. Boeing Co., 9 F.3d 743, 745-47 (9th Cir. 1993), cert. denied, 114 S. Ct. 1125 (1994); United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1152-1154 (3d Cir. 1991); John T. Boese, Civil False Claims and Qui Tam Actions (1993).

The vital importance of this incentive effect is demonstrated by the reasons set forth by Congress in 1986 in undertaking the first extensive revision of the Act since its enactment in 1863. Congress expressed its judgment that "sophisticated and widespread fraud" that threatens significantly both the federal treasury and our nation's national security only could successfully be combatted by "a coordinated effort of both the Government and the citizenry." S. Rep. No. 345, 99th Cong., 2d Sess. 2-3 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5267-68 [hereinafter Senate Report]. Emphasizing both difficulties in detecting fraud that stem largely from the unwillingness of insiders with relevant knowledge of fraud to come forward, see id. at 4, reprinted in 1986 U.S.C.C.A.N. at 5269, and "the lack of resources on the part of Federal enforcement agencies" that often leaves unaddressed "[a]llegations that perhaps could develop into very significant cases," id. at 7, reprinted in 1986 U.S.C.C.A.N. at 5272, Congress sought to "increase incentives, financial and otherwise, for private individuals to bring suits on behalf of the Government," id. at 2, reprinted in 1986 U.S.C.C.A.N. at 5267. Congress's overall intent, therefore, was "to encourage more private enforcement suits. " Id. at 23, quoted in 1986 U.S.C.C.A.N. at 5288-89; see also Killingsworth, 25 F.3d at 721 ("The amended Act `increased incentives, financial and otherwise, for private individuals to bring suits on behalf of the Government.'" (quoting Senate Report, supra, at 2, reprinted in 1986 U.S.C.C.A.N. at 5267)).

The importance of the Act's incentive effect is evidenced clearly in the revised Act's structure. A relator who properly brings a claim will generally receive a share of the recovery as well as eligibility for attorneys' fees and costs. See 31 U.S.C.A. S 3730(d) (West Supp. 1994). This is true even if the government decides to intervene and conducts the action itself, see id. S 3730(d)(1), or elects to pursue its claim in an administrative proceeding, see id. S 3730(c)(5). The right to recovery clearly exists primarily to give relators incentives to bring claims.*fn8 Moreover, the extent of the recovery is tied to the importance of the relator's participation in the action and the relevance of the information brought forward.*fn9 This demonstrates not only the importance of the incentive effect, but that Congress wished to create the greatest incentives for those relators best able to pursue claims that the government could not, and bring forward information that the government could not obtain.

The Act's jurisdictional provisions also demonstrate Congress's concern with maintaining adequate incentives for those who materially would advance the goals of revealing fraud and supplementing government enforcement efforts. Under the Act, if an action is "based upon the public disclosure of allegations or transactions in" certain specified proceedings, reports, or mediums, a qui tam action cannot be brought unless the relator "is an original source of the information" on which the allegations are based. 31 U.S.C.A. S 3730(e)(4)(A) (West Supp. 1994). We held in Wang that "section 3730(e)(4)(A) requires a qui tam plaintiff to have played some part in his allegation's original public disclosure." Wang, 975 F.2d at 1418. Reviewing the history of the Act's jurisdictional provisions and the concerns that led Congress to amend the Act in 1986, we concluded that "Congress wanted in 1986 what it apparently thought it had in 1943: a law requiring that the relator be the original source of the government's information." Id. at 1419 (emphasis in original). We therefore held that engrafting a requirement that "a qui tam plaintiff . . . have played some part in his allegation's original public disclosure," id. at 1418, was in accord with Congress's purpose "of encouraging private individuals who are aware of fraud being perpetuated against the Government to bring such information forward," id. at 1419 (internal quotations omitted)), because it "`discourages persons with relevant information from remaining silent and encourages them to report such information at the earliest possible time,'" id. (quoting United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2d Cir. 1990)).

Creating incentives for those with knowledge of fraud to come forward was not Congress's sole objective. In carefully crafting provisions that specify the relator's recovery and in amending the jurisdictional provisions, it is clear that Congress attempted "to walk a fine line between encouraging whistle-blowing and discouraging opportunistic behavior." Quinn, 14 F.3d at 651. Moreover, once a claim is filed, it is clear that an important concern is ensuring that the United States' rights are not prejudiced by the relator's conducting of the action. That is why the government can object to a settlement between a relator and defendant when the settlement might be structured artificially to defeat the United States' right to recovery. See Killingworth, 25 F.3d at 723-25. That is also why the government retains the right to intervene for good cause and to reduce substantially the relator's role. See 31 U.S.C.A. S 3730(c).

The private right of recovery created by the qui tam provisions of the FCA exists not to compensate the qui tam relator, but the United States. The relator's right to recovery exists solely as a mechanism for deterring fraud and returning funds to the federal treasury. See Kelly, 9 F.3d at 760. Therefore, qui tam actions exist only to vindicate the public interest.