Tony Munter summarizes the laws which address qui tam in North Carolina, including the North Carolina False Claims Act (N.C. Gen. Statutes Sections 1-605-618 et seq.). He does not practice in the jurisdiction of North Carolina.
Qui tam is the Latin shorthand we use to describe the special rights created by false claims laws that allow an individual to sue on behalf of the government. Under both the federal and the North Carolina False Claims Acts, an individual can file suit and the government has the opportunity to take over the false claims action.
The case is filed under seal for the government to investigate the matter, and it is almost always preferable for the whistleblower if the government takes over the case. However, qui tam rights dictate that even if the government fails to take over the action, an individual may pursue the case in court without the government.
North Carolina Qui Tam Rights
The state False Claims Act provides many of the same protections and rights for an individual to pursue a qui tam in North Carolina as the rights and protections granted and described in the Federal False Claims Act (31 U.S.C. Section 3729 et. seq.). Under the federal and the North Carolina laws, if either government has some connection to the funding and fraud has been committed in some way, the defendant may be liable for three times—or treble—the damages. The ways in which North Carolina and the federal law determine “causes of action creating liability” and the definition and meaning of important terms like “claim” are fairly similar.
What Rewards Might I Receive in North Carolina?
Under the North Carolina FCA, the whistleblower—who is referred to as the plaintiff-relator—may receive 15 to 25 percent of the reward on a case in which the government takes over the claim. If the government chooses not to pursue the claim, the whistleblower can still pursue civil action on their own. If successful, they may earn 25 to 30 percent of the government’s reward.
What Progress has the North Carolina FCA Seen?
The state FCA has a requirement for reporting on the progress of any North Carolina qui tam litigation, but the progress so far has been limited by the relative newness of the law, which was enacted in 2009. However, the North Carolina False Claims Act does make it much more likely for the state to recover funds lost as part of a nationwide scheme, because the state can now work in conjunction with a case filed under the federal law if the fraud in question is based on the same scheme.
The law has been used as part of several collections, including a modest but important local case against Duke University. Duke settled a case for $1 million under the False Claims Act to dispense with allegations that “it made false claims in conjunction with certain services provided to beneficiaries of Federal health care programs.” See United States of America and State of North Carolina ex rel. Leslie Johnson v. Duke University Health System, Inc, et al., 5:12-CV-822-BO.
Though $1 million may not seem like a lot compared to some federal false claims settlements, it’s a significant amount of money for many states to recover. North Carolina and its residents owe a debt of gratitude to whistleblower Leslie Johnson and her lawyers. Additionally, that case and others like it make it more likely that we will see more cases filed with the federal and state false claims acts.
State Employees and North Carolina Qui Tam Rights
One key difference between the North Carolina and federal False Claims Acts is the North Carolina FCA does not extend qui tam rights to employees of the state. There is no similar restriction of qui tam rights under the federal law, despite the rulings of some courts that have taken it upon themselves to determine that federal employees may not collect as plaintiff-relators. Many other federal courts have upheld the right for government employees to take such action.
The states that do allow for a state employee to be a plaintiff-relator often require that certain internal procedures—such as internal reporting requirements—take place prior to the filing of any qui tam in North Carolina. The lack of a provision allowing a North Carolina state employee to file an FCA claim based on information they have gleaned in the course of their job is problematic for several reasons.
Most importantly, North Carolina state employees who learn of fraudulent activity are subject to being blocked by managers and other administrative officials when they try to address or correct the wrong-doing. It’s important to note, however, that nothing prevents a North Carolina state employee from filing a case under the Federal False Claims Act if that employee has information demonstrating or proving fraud against the federal government.