False Claims Act cases are unusual in their procedures because the real party of interest is the government, but the plaintiff is suing an individual. In addition to granting the right to sue on behalf of someone else, one of the most unusual aspects of False Claims Act cases is that a person is automatically required to file a case under seal of federal court if they are going to initiate an action as a private party. It is unusual to seal cases, especially since people usually think of business being conducted in courts as being open and subject to public scrutiny. This idea also runs counter to the initial psychology of most whistleblowers.
When the False Claims Act was created and amended, the idea in Congress was to give the government an opportunity to pursue allegations in a protected manner that did not expose their investigation and did not become public until the government determined whether it wanted to pursue the case. They created the additional step of an investigation conducted by a government under seal that is part of the statute and is required. An individual cannot initiate a case in compliance with the statute unless they do so by filing it under seal to afford the government an opportunity to investigate.
Filing a Case Under Seal
Whistleblowers often understandably like to talk to as many people as possible about their allegations, but being a whistleblower on a False Claims Act case requires filing the case under seal at least initially. The case remains under seal for 60 days, and in practice, that time period is typically extended by the government with a showing of good cause. Of course, the seal of a False Claims Act case can stay that way for quite some time, depending on what the court and the government decide to do with the investigation.
Even more unusual, once the government is done investigating the case, the government can decide to intervene and take over the case entirely. If they decline to do so, the plaintiff-relator has the right to pursue the action on their own. It is a rare occurrence for the plaintiff to proceed on their successfully, but it does happen.
It is important to keep in mind that the government has to be very thorough in their investigation. It will not always see the events in the same light as the whistleblower may see them. The government is looking to obtain a case that is easy to prove and is substantial enough to make it worth the government’s time and resources to pursue justice.
False Claims Act Confidentiality Requirements
You and your DC lawyer should be aware that filing a False Claims Act case like this requires you to keep it confidential until the seal is lifted by the Court. So, when you file the case, the government has your information and they are obligated to keep your identity confidential as well.
However, sometimes people are able to draw their own conclusions. If you are the only one in a position to know certain facts or one of a very few people, and the government has to investigate those facts, sometimes the defendants can figure out what is happening.
In addition, the government’s investigation does not last forever, so at some point, the Court will unseal your case, at which point it does become a public matter. The investigation and the order to unseal your case takes time, so if you need time to move on with your life, this is something to discuss with your lawyer.
False Claims Act Whistleblower Retaliation Protections
Under False Claims Act Section 3730(h), you certainly have the right to sue when you have suffered retaliation as a whistleblower. If you have not suffered retaliation, though, you may prefer—and this is putting it mildly—to avoid such circumstances. If you really want to stay anonymous, you may want to see if you have a case under either the new Securities and Exchange Commission whistleblower reward law or the similar law under the Commodities Future Trading Commission.
So far, there has been one collection of a few cases filed under the new S.E.C. Law, and the agency and kept the person’s identity anonymous even after paying a reward to the whistleblower. The cases involving securities fraud, and the people who reported then chose to stay anonymous. The S.E.C. honored the special provision in that law that allows for such anonymity. So, you could file a case anonymously through your lawyer and eventually, the S.E.C. would have to know who you are, but so far they have protected the identity of anonymous whistleblowers from the public at large.
If you have a case of securities fraud and want to remain anonymous for any number of good reasons, at least so far it appears the SEC will respect that right. It may also be possible for you to file more than one kind of case at a time.
Knowledge of a Filed FCA Claim
The government wants time to investigate the claims in any serious False Claims Act case, and the 6o-day seal of court period can be beneficial to an individual who wants the filing to remain private for some period of time. A whistleblower may file the case and move on to another job before anyone discovers the case was filed. Then, when the government investigates and corroborates the allegations, they can join the case and—along with the plaintiff—usually prevail whether in court or through a settlement.
However, maintaining the seal of a False Claims Act case can also be burdensome for individuals. It is very difficult for anyone to refrain from discussing their allegations, while the government takes the time needed to investigate. Ultimately, two things will likely expose the existence of the suit.
First, at some point, the court will insist that the seal be lifted. The court will do this when the Department of Justice decides either to “intervene”—meaning they take over the litigation—or decline or to intervene in the case. If the government does decide to intervene in the case, the chances of success increase. If they decline to intervene, a plaintiff can proceed by serving the complaint on the defendant in the normal course of litigation, or the plaintiff may drop the case. Either way, the court would lift the seal and it becomes public.
Second, defendants may learn about the matter inadvertently as a result of the unique nature of the information in any good False Claims Act case. After all, when investigators start to ask a company about facts only a few people know, the defendant may figure out what is happening even if the name of the plaintiff is kept secret.
However, all these events do take some time to occur. The government will need that time to investigate, especially when the facts involve a large or complicated fraud scheme. So, while its existence is likely to be revealed in the future, a case remains secret for quite a while after a plaintiff files it in court.
Consequences of Violating the Seal of the Case
The seal of a False Claims Act case is required if an individual files a case or a group of people files a case under the Federal or a State False Claims Act. The seal is imposed by statute, and it is not lifted until the government requests the court to lift it or the court decides to lift it. While in place, the seal requires all the parties to keep confidential the existence of the whistleblower action(s).
The consequences of violating the seal are a little better understood now than they used to be. Before, there was an important case heard in Supreme the Court, State Farm Fire & Casualty Co. v. ex rel Rigsby et al., in which the Rigsbys were plaintiffs suing State Farm and actions involving State Farm claims that were backed by the government. A DC lawyer for the plaintiffs discussed some case information with the media, the media released it, the story went public, and obviously, that qualifies as breaking the seal.
State Farm wanted the whole case thrown out and to force everybody to start all over again, but the Supreme Court decided that the case could go forward. Of course, the lawyer who broke the seal was in a big trouble, but the case could go forward, and they left it up to the discretion of the district court as to what to do in these instances, but the plaintiffs themselves had not done anything to violate the seal. Despite this ruling, which at least does not destroy the case for a seal violation, breaking the seal in federal court is not acceptable and can have serious implications on a whistleblower case.