Friday, July 11, 2008

Qui Tam - States Enacting Whistleblower Statutes

The U.S. Department of Justice has a backlog of more than 1000 whistleblower cases awaiting review. As a result, qui tam plaintiffs attorneys are increasingly turning to state courts to file whistleblower suits. Specifically, in the health care context, 23 states and the District of Columbia are pooling their resources to investigate and prosecute Medicaid fraud.

The growth of the state qui tam litigation comes from a 2005 law. The Deficit Reduction Act of 2005 increased the share of recoveries for states that have whistleblower laws the same as the federal False Claims Act. These states receive a 60% share while states without such statutes receive 50%. Moreover, qui tam statutes call for treble damages and significant fines.

With a federal backlog, qui tam plaintiffs are turning to state authorities and state courts. The cases receive faster review from the state authorities than from the Justice Department and proceed to court dockets. Once a whistleblower case is brought, there is a very high probability of settlement. Since the cost of losing in terms of damages and fines is potentially so onerous, most companies attempt to negotiate the best terms and settle the litigation.

For an in depth discussion of the growing use of state qui tam statutes, please see the following interesting article, The National Law Journal, "States Getting in on Qui Tam Suits", p.1, June 30, 2008.

No comments: