Filing under seal and the government's election to intervene, the first-to-file and public disclosure bars, the original source exception, relator shares, securities and tax award programs, and retaliation claims.
Under 31 U.S.C. 3730(b) a private relator may sue in the name of the United States. The complaint is filed in camera, remains under seal for at least sixty days, and is not served on the defendant until the court orders it. A copy of the complaint and a written disclosure of substantially all material evidence and information the relator possesses must be served on the government. The United States is the real party in interest throughout.
Rule 21F-17 provides that no person may take any action to impede an individual from communicating directly with Commission staff about a possible securities law violation, including by enforcing or threatening to enforce a confidentiality agreement. The commodities rules contain a parallel prohibition. Section 3730(h) separately entitles an employee, contractor or agent who suffers retaliation to reinstatement, double back pay with interest and special damages.
Section 3730(b)(3) allows the government to move for extensions of the sixty-day seal for good cause, and those motions are made in camera. The seal binds the relator as well as the government: the existence of the action, its contents and the identity of the defendant are not to be disclosed. Breaking the seal does not automatically end the case, and courts weigh the harm to the government, the severity of the violation and evidence of bad faith.
Section 3729(a)(1) makes a violator liable for three times the damages the government sustains because of the act, plus a civil penalty for each false claim within a statutory range that is adjusted for inflation under the Federal Civil Penalties Inflation Adjustment Act. Single damages are usually the difference between what the government paid and the value of what it received. Credits for amounts already recovered are applied after the multiplier rather than before it.
Section 3729(a)(1) imposes liability on a person who knowingly presents a false or fraudulent claim for payment, or uses a false record material to such a claim. Falsity may be factual, where goods or services were not provided as billed, or legal, where the claimant did not comply with a requirement. The Supreme Court held in Escobar that implied certification can support liability where a claim makes specific representations and an omission renders them misleading.
Section 3729(b)(4) defines material as having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property. The Supreme Court in Escobar described the standard as rigorous and demanding and rejected any test that turns on labels alone. Where the government continues to pay claims with actual knowledge of the violation, that is strong evidence the requirement is not material. Minor or insubstantial noncompliance does not satisfy the element.
The securities program under 15 U.S.C. 78u-6 and 17 CFR 240.21F, the commodities program under 7 U.S.C. 26 and 17 CFR Part 165, and the tax program under 26 U.S.C. 7623 all pay a percentage of what the government collects. Each requires original information voluntarily provided, each sets a monetary threshold below which the award is discretionary or unavailable, and each is administered by the agency rather than through a private lawsuit.
Section 3730(e)(4) requires dismissal, unless the government opposes it, where substantially the same allegations or transactions were publicly disclosed through one of three channels: a federal hearing in which the government is a party, a federal report or audit, or the news media. A relator survives as an original source either by voluntarily disclosing the information to the government before that public disclosure, or by holding independent knowledge that materially adds to it.
Section 3730(b)(4) requires the government, before the seal expires, either to proceed with the action or to notify the court that it declines, in which case the relator may conduct it alone. Where the government proceeds it has primary responsibility for prosecuting the case and is not bound by the relator's acts. It may dismiss over the relator's objection after notice and a hearing, and may settle over objection if the court finds the settlement fair, adequate and reasonable.
Section 3730(b)(5) provides that when a person brings a qui tam action, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action. Most circuits apply a material elements test: the later action is barred if it alleges the same essential facts, even where it adds detail, defendants or theories. The Supreme Court held in Carter that a case ceases to be pending once it is dismissed, so the bar is not permanent.
Section 3730(d)(1) gives a relator in an intervened case at least fifteen and not more than twenty-five percent of the proceeds, depending on the contribution to the prosecution. Section 3730(d)(2) gives a relator in a declined case not less than twenty-five and not more than thirty percent. Where the action rested primarily on public information the relator did not supply, the court may award no more than ten percent.
