Federal Deception Law: 10.6 Remedies
The FCA provides for the recovery of civil penalties and damages.
The FCA provides for the recovery of civil penalties and damages.
The relator is entitled to a percentage of the proceeds of a successful qui tam case. As a general matter, if the government intervenes in the case, the minimum award to the relator is fifteen percent and the maximum is twenty-five percent.
Due to the immense size and scope of government expenditures, the fact patterns giving rise to False Claims Act liability are extremely varied. Traditional areas include fraud by government contractors, fraud by companies marketing and selling drugs, and Medicare and Medicaid fraud by health care providers. Such areas offer tremendous opportunity for a consumer attorney seeking to establish a false claims act practice. However, less traditional or common areas also exist and may provide fertile ground for use of the FCA:
The FCA prohibits discriminatory or retaliatory acts against an employee who takes actions in furtherance of an FCA case.142 The federal FCA and most state false claims acts provide protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as a result of their furtherance of an action under the false claims act.143 Under the federal FCA, retaliating against an
While the FCA claims brought on behalf of the government are likely not subject to a relator’s arbitration agreement,144 the majority of courts now conclude that the federal False Claims Act’s protections against retaliation for whistleblowers are subject to such arbitration agreements.145 Whereas qui tam claims belong to the government, retaliation claims—though part of a statutory scheme that supports false claims acts—run to the benefit of the whistleblower.
In the last several years, Congress has enacted several statutes that broaden the areas within which whistleblowers may receive incentives for reporting fraud. The Motor Vehicle Safety Whistleblower Act (MVSWA), enacted in December 2015, offers monetary incentives to industry insiders who report information about auto safety issues that are likely to cause unreasonable risk of death or serious physical injury.166 It was passed in the wake of several high-profile safety controversies concerning Volkswagen, General Motors and others.
Because of the procedural and substantive requirements of the FCA, it is extremely important that any attorney considering filing an FCA case associate with an attorney specializing in this area or at least consult with an experienced FCA practitioner. However, the following checklist should provide some initial guidance in assessing whether a potential False Claims Act cause of action is possible:
The federal Racketeer Influenced and Corrupt Organization (RICO) Act1 is a complex statute that imposes criminal and civil penalties and permits treble damages when a defendant uses one of two methods to engage with an identified enterprise in any one of four prohibited ways. The two methods are (1) a pattern of racketeering activity and (2) the collection of an unlawful debt.2 The four prohibited ways of engaging with an enterprise are spelled out in 18 U.S.C. § 1962:
The advantages of a RICO claim are straightforward: federal court jurisdiction, treble damages, attorney fees, an extremely broad scope, and the ability to raise claims against third parties that did not deal directly with the consumer. The increased monetary exposure resulting from the threat of treble damages and attorney fees may lead a RICO defendant to be more willing to resolve the case or to resolve it on more favorable terms than it might do in the ordinary civil lawsuit.
Federal statutes may bar RICO claims that are based on conduct such statutes already cover.
RICO claims must allege an enterprise “which is engaged in, or the activities of which affect, interstate or foreign commerce.”33 The requisite connection with commerce need only be “minimal”34 or “insubstantial.”35 Use of the mail to execute a fraudulent scheme satisfies the requirement; in other words, predicate offenses of mail fraud sufficiently meet the interstate commerce requirement in and of themselves.
Many federal courts initially reacted with hostility to civil RICO actions in scenarios remote from organized crime conducted by professional criminals. Courts interpreted RICO—especially civil RICO—restrictively, dismissing many actions at the pleading stage.
RICO refers to the RICO defendant as the “person” and defines “person” as “including any individual or entity capable of holding a legal or beneficial interest in property.”56 Only certain narrow exceptions to this broad definition of person exist.
The first method of engaging with an enterprise that RICO targets is the use of a pattern of racketeering activity.69 RICO defines racketeering activity as an indictable act under one of nine generic categories of state crimes or under one of about fifty enumerated federal crimes.70 These are called “predicate offenses.” A violation of a statute, such as a UDAP statute, cannot be a predicate offense if it is not enumerated in RICO.71 Most con
The elements of mail fraud are a scheme to defraud and a mailing made for the purpose of executing the scheme.72 The mail and wire fraud statutes address a broader scope of fraud than common law fraud does.73 It is not necessary that anyone actually be defrauded.74 Nor is it necessary that the mailings themselves include any misrepresentations or contribute directly to the deception of the plaintiffs, so long as they are part of a scheme to d
Can aiding and abetting mail fraud itself be a predicate act under RICO? Note that this question differs from the question of whether RICO imposes liability for aiding and abetting a RICO violation; most circuit courts have ruled that it does not, at least for claims arising under section 1962(c).103 RICO defines “predicate offense” as “any act which is indictable under . . .
Racketeering activity is not actionable unless there is a “pattern” of racketeering activity.116 A pattern of racketeering activity “requires at least two acts of racketeering activity.”117 However, these acts can both serve the same criminal scheme.118 Courts have great difficulty defining “pattern” of racketeering activity, and this remains one of the haziest aspects of RICO law. The U.S.
The first Supreme Court case to address the “pattern” requirement, Sedima, S.P.R.L. v. Imrex Co.,119 did not define the term but indicated that the commission of two predicate offenses, while necessary, may not suffice to establish a pattern:
The scheme’s duration is the primary factor in closed-ended continuity.
In contrast to closed-ended continuity, which primarily depends on time, open-ended continuity depends primarily on a threat that the defendant will continue its criminal activity.140 To ascertain such a threat, courts will examine the nature of the predicate offenses alleged or the nature of the enterprise on whose behalf the predicate offenses were performed.141
The Supreme Court’s decision in H.J. Inc. v.
Although the “pattern” and “enterprise” elements of a RICO claim are distinct and each must be independently proven, the same evidence may prove both.158 In addition, most courts hold that a plaintiff need not be injured by a practice to plead it as part of the pattern of racketeering activity,159 so long as the plaintiff otherwise meets the requirement of injury to business or property.160