Be Wary, But not Fearful, of False Claims Act Allegations

One of my favorite things to do is help clients extricate themselves from a False Claims Act investigation. I like it because it’s intellectually challenging, and few things are more rewarding than keeping an organization from having to pay large sums of money.

Longtime readers know that False Claims Act investigations are filed under seal. The government then investigates to determine whether it wishes to intervene in the case.

During the investigative period, which is statutorily supposed to be completed within 60 days, but in reality, takes years, the case remains under seal. The public won’t, and really can’t, learn about it.

Whenever the government makes its intervention decision – whether that decision is to intervene, decline intervention, intervene to dismiss, or kick the can down the road – the case is unsealed and becomes public.

I have been involved in over 50 False Claims Act cases. For the first two decades, I would have said you could be quite confident that the government would notify you of its intervention decision before the unsealing, so you wouldn’t be surprised. But something has changed, and I don’t think that is still true.

This has important implications. The minute the government makes its intervention decision, the court file is publicly available. It’s quite common for reporters, law firms, and others to watch court dockets. If you haven’t received a heads-up from the government about their decision, you can find yourself in a situation where you’re getting a cold call from a reporter about the case. While that’s not exactly what happened to me last week, it could have, because I have a case for which we got the good news of the government’s decision to decline, but we discovered it without hearing from the government.

Now, I realize this may sound like a practice tip for lawyers, and you may be thinking “I am not a lawyer. Why is David wasting my time with this?” But this brings me to a second important point. There’s nothing magical about being a lawyer. Non-lawyers can and do teach smart lawyers a lot. Good lawyers listen carefully to their clients. You can help your lawyer, and yourself, if you remind your counsel that they should set up a docket watch whenever you have a False Claims Act case. And if your lawyer bristles whenever you offer suggestions, or acts like you are invading their turf, think about getting a new lawyer. 

False Claims Act cases can be scary. The amount of dollars involved is potentially enormous. But my third and final point is that in about three-quarters of the False Claims Act cases where I’ve been involved, the case resolves without any money changing hands. There is discussion this week from Knicole Emanuel and Mary Inman about some significant false claims settlements, but that shouldn’t cause you to assume that the moment you get a civil investigative demand or a visit from government agents, it means your organization will be writing a big check.

If your counsel is thoughtful and creative, and you’re willing to be patient, with the regulatory environment as unclear as it often is, the case may one day simply go away. And I will note that in recent times, resolution has often been just as silent as the unsealing decision was last week.

You can’t assume that you will ever hear that the case has been closed. There’s a very real possibility that it will just go quietly into the night.