BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 2492 (Blumenfield)
As Amended April 16, 2012
Hearing Date: June 12, 2012
Fiscal: Yes
Urgency: No
TW
SUBJECT
The False Claims Act
DESCRIPTION
This bill would update the California False Claims Act (CFCA) to
conform to the Federal False Claims Act as follows:
expands whistleblower protections to include contractors and
agents;
requires the court to dismiss an action or claim, if
substantially the same allegations or transactions alleged in
the action or claim were publicly disclosed, as specified;
provides a statute of limitations for the Attorney General to
file CFCA actions from six years from the date on which the
CFCA violation is committed or three years from the date when
facts material to the right of action are known or reasonably
should been known;
authorizes government employees to file CFCA claims relating
to Medi-Cal Fraud in civil courts without having to exhaust
internal claims procedures;
increases the range of civil penalties for violations of the
CFCA from $5,000-$10,000 to $5,500-$11,000; and
updates various defined terms.
BACKGROUND
The California False Claims Act (CFCA), enacted more than 20
years ago, is widely regarded as the most effective tool
available to detect, deter, and punish those who defraud the
government of public money. In addition to making it unlawful
to intentionally commit specified acts - or false claims -
against the government, the CFCA is best known for two key
(more)
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components: (1) it encourages private citizens to report fraud
by providing a right to share in any recovery; and (2) it
imposes treble damages on violators.
California's law is modeled after its federal counterpart, the
Federal False Claims Act (FFCA), which was first enacted during
the Civil War, reportedly for the purpose of combating fraud
against the federal government by suppliers to the Union Army.
Over the years, both Acts have been instrumental in recovering
billions of dollars in fraudulently obtained public money.
The CFCA permits private citizens to initiate and prosecute
false claims actions on behalf of the state or local government
entity whose funds are at issue. Unlike most "private attorney
general" statutes, which usually provide for an award of
reasonable attorney's fees when private litigants prevail in
actions brought in the public interest, private suits under the
CFCA are permitted as "qui tam" actions, in which prevailing
private litigants are entitled to a percentage of the proceeds
recovered as payment for their efforts in successfully
prosecuting fraudulent claims against the government.
In May of 2009, President Barack Obama signed the Fraud
Enforcement and Recovery Act, which included amendments designed
to strengthen the FFCA. In order to make similar improvements
to the CFCA, California enacted AB 1196 (Blumenfield, Ch. 277,
Stats. 2009). The FFCA subsequently was updated further by the
Fraud Enforcement and Recovery Act of 2009, the Patient
Protection and Affordable Care Act, and the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
Pursuant to the federal Deficit Reduction Act, California
receives a ten percent federal bonus on all Medicaid-related
false claims recoveries because California has enacted the CFCA.
The California Attorney General (AG) reports that, since 2008,
California has recovered almost $95 million in additional
federal incentive awards on Medicaid-related false claims
recoveries. Overall, the AG's office states that it "has
recovered more than $1 billion taxpayer dollars, on all types of
CFCA recoveries since 1999."
However, given the recent updates to the FFCA, the AG has been
advised by the Inspector General of the United States Department
of Human & Health Services that California is in danger of
losing its ten percent federal bonus on Medicaid-related false
claims recoveries because the CFCA is out of date and out of
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compliance with the Deficit Reduction Act.
This author-sponsored bill would conform the CFCA to the minimum
standards of the FFCA in order to maintain the federal bonus.
CHANGES TO EXISTING LAW
1. Existing law establishes the California False Claims Act
(CFCA), which provides that a person who commits any one of
several specified acts relating to the submission of a false
claim to the state or a political subdivision shall be liable
to the state or political subdivision for triple the amount of
damages sustained by the government as well as the costs of
the civil action to recover the damages. (Gov. Code Secs.
12650 and 12651(a).)
Existing law provides defined terms applicable to CFCA
actions. (Gov. Code Sec. 12650.)
Existing law defines a claim as "any request or demand for
money, property, or services made to any employee, officer, or
agent of the state or of any political subdivision, or to any
contractor grantee, or other recipient, whether under contract
or not, if any portion of the money, property, or services
requested or demanded issued from, or was provided by the
state . . . or by any political subdivision thereofÝ.]" (Gov.
Code Sec. 12650(b)(1).)
This bill would provide that "obligation" means an established
duty, whether or not fixed, arising from an express or implied
contractual, grantor-grantee, or licensor-licensee
relationship, from a fee-based or similar relationship, from
statute or regulation, or from the retention of any
overpayment.
This bill would amend the structure of the existing state law
definitions of "claim," "political subdivision of funds," and
"state funds" to those definitions provided in the FFCA.
2. Existing law provides, in addition to treble damages, that a
person who commits specified violations of the CFCA shall be
liable for a civil penalty, ranging from $5,000 to $10,000,
for each false claim. (Gov. Code Sec. 12651(a).)
This bill would increase these penalties, ranging from $5,500
to $11,000, for each false claim.
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3. Existing law provides that no court has jurisdiction over a
CFCA action based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative hearing,
in an investigation, report, hearing, or audit conducted by or
at the request of the Senate, Assembly, auditor, or governing
body of a political subdivision, or by the news media unless
the action is brought by the Attorney General or prosecuting
authority of a political subdivision, or the person bringing
the action is an original source of the information. (Gov.
Code Sec. 12652(d)(3)(A).)
Existing law provides that "original source" means an
individual who has direct and independent knowledge of the
information on which the allegations are based, who
voluntarily provided the information to the state or political
subdivision before filing an action based on that information,
and whose information provided the basis or catalyst for the
investigation, hearing, audit, or report that led to the
public disclosure. (Gov. Code Sec. 12652(d)(3)(B).)
This bill would revise and recast these provisions to require
a court to dismiss a CFCA action or claim, unless opposed by
the Attorney General or prosecuting authority of a political
subdivision, if substantially the same allegations or
transactions as alleged in the action or claim were publicly
disclosed in any of the following:
a criminal, civil, or administrative hearing in which
the state or prosecuting authority of a political
subdivision or their agents are a party;
a report, hearing, audit, or investigation of the
Legislature, the state, or governing body of a political
subdivision; or
the news media.
This bill would except from this provision an action that is
brought by the Attorney General or prosecuting authority of a
political subdivision, or if the person bringing the action is
an original source of the information.
This bill would define "original source" to mean an individual
who either:
voluntarily discloses, prior to a public disclosure, to
the state or political subdivision the information on which
allegations or transactions in a claim are based; or
has knowledge that is independent of, and materially
adds to, the publicly disclosed allegations or
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transactions, and has voluntarily provided the information
to the state or political subdivision before filing an
action.
4. Existing law provides that a person, or "qui tam plaintiff,"
may bring a civil action for a violation of the CFCA for
himself or herself and either for the State of California in
the name of the state, if any state funds are involved, or for
a political subdivision in the name of the political
subdivision, if political subdivision funds are exclusively
involved. (Gov. Code Sec. 12652(c).)
Existing law provides that a court does not have jurisdiction
over CFCA qui tam plaintiff actions based upon information
discovered by a present or former employee of the state or a
political subdivision during the course of his or her
employment unless that employee first, in good faith,
exhausted existing internal procedures for reporting and
seeking recovery of the falsely claimed sums through official
channels and unless the state or political subdivision failed
to act on the information provided within a reasonable period
of time. (Gov. Code Sec. 12652(d)(4).)
This bill would exempt from this provision actions involving
Medi-Cal claims.
5. Existing law provides that, if a CFCA action is one that the
court finds to be based primarily on information from a
present or former employee who actively participated in the
fraudulent activity, the employee is not entitled to any
minimum guaranteed recovery from the proceeds. The court,
however, may award the qui tam plaintiff any sums from the
proceeds that it considers appropriate, but in no case more
than 33 percent of the proceeds if the state or political
subdivision goes forth with the action or 50 percent if the
state or political subdivision declines to go forth, taking
into account the significance of the information, the role of
the qui tam plaintiff in advancing the case to litigation, the
scope of the present or past employee's involvement in the
fraudulent activity, the employee's attempts to avoid or
resist the activity, and all other circumstances surrounding
the activity. (Gov. Code Sec. 12652(g)(5).)
This bill would revise and recast this provision to conform it
to that provided by the FFCA.
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6. Existing law provides that, if the state, a political
subdivision, or the qui tam plaintiff proceeds with the
action, the court may award to the defendant its reasonable
attorney's fees and expenses against the party that proceeded
with the action if the defendant prevails in the action and
the court finds that the claim was clearly frivolous, clearly
vexatious, or brought primarily for purposes of harassment.
(Gov. Code Sec. 12652(g)(9).)
This bill would provide these same attorney's fees provisions
separately as applied to a qui tam plaintiff and a government
entity plaintiff.
7. Existing law prohibits an employer from preventing an employee
from disclosing information to a government agency or from
acting in furtherance of a false claims action. (Gov. Code
Sec. 12653(a).)
Existing law prohibits an employer from taking adverse
employment actions, as specified, against an employee because
of lawful acts done by the employee on behalf of himself or
herself or others in disclosing information to a government
agency in furtherance of a false claims action. (Gov. Code
Sec. 12653(b).)
Existing law requires an employer who violates these
provisions to be liable for all relief necessary to make the
employee whole, including reinstatement with the same
seniority status that the employee would have had but for the
discrimination, two times the amount of back pay, interest on
the back pay, compensation for any special damage sustained as
a result of the discrimination, and, where appropriate,
punitive damages. In addition, the employer is required to
pay litigation costs and reasonable attorneys' fees of the
employee. (Gov. Code Sec. 12653(c).)
Existing law also provides these remedies to an employee
against whom an adverse employment action, as specified, was
taken because of participation in conduct which directly or
indirectly resulted in a false claim being submitted to the
state or a political subdivision shall be entitled to the
remedies if, and only if, both of the following occur:
the employee voluntarily disclosed information to a
government or law enforcement agency or acted in
furtherance of a false claims action, including
investigation for, initiation of, testimony for, or
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assistance in an action filed or to be filed; and
the employee had been harassed, threatened with
termination or demotion, or otherwise coerced by the
employer or its management into engaging in the fraudulent
activity in the first place. (Gov. Code Sec. 12653(d).)
This bill would revise and recast these whistleblower
protections and extend these protections to a contractor, or
agent.
This bill would repeal whistleblower protections provided to
an employee who participated in the false claim but
voluntarily reported the misconduct and was forced by the
employer to engage in the fraudulent conduct.
This bill would provide a statute of limitations for
whistleblowers of three years from the date the retaliation
occurs.
8. Existing law provides a statute of limitations on CFCA
actions, which may not be filed more than three years after
the date of discovery by the Attorney General or prosecuting
authority or, in any event, not more than 10 years after the
date on which the CFCA violation was committed. (Gov. Code
Sec. 12654(a).)
This bill would provide a statute of limitations of six years
after the date the CFCA violation was committed, or within
three years after the date when facts material to the right of
action are known or reasonably should have been known by the
Attorney General or prosecuting authority, but in no event
more than 10 years after the date on which the violation is
committed, whichever occurs last.
9. This bill would provide that, for statute of limitations
purposes under the CFCA, any pleading filed by the Attorney
General or prosecuting authority shall relate back to the
filing date of the complaint of the person who originally
brought the action, to the extent that the claim of the state
or political subdivision arises out of the conduct,
transactions, or occurrences set forth, or attempted to be set
forth, in the prior complaint of that person.
COMMENT
1. Stated need for the bill
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The author writes:
The bill is needed to preserve the ability of California to
receive tens of millions of dollars each year in federal
incentives when recovering fraudulent billings of Medicaid
(Medi-Cal in California) through the False Claims Act.
Federal law provides a 10 Ýpercent] federal bonus on all
Medicaid-related false claims recoveries for those states that
maintain a false claims act that is at least as stringent as
the federal False Claims Act.
2. Whistleblower protections
This bill would update whistleblower protections under the
California False Claims Act (CFCA) to those provided under the
recently updated Federal False Claims Act (FFCA).
The Office of Inspector General of the United States Department
of Health & Human Services (OIG) sent a letter to the California
Attorney General (AG) advising that, because the CFCA did not
conform to the FFCA, California is not in compliance with the
requirements of Section 1909 of the Social Security Act (SSA).
(Daniel R. Levinson, Inspector General, U.S. Dept. of Health &
Human Svcs., letter to Cal. Attorney General Kamala Harris,
recvd. Mar. 21, 2011 (OIG Letter), p.1.) Section 1909 "provides
a financial incentive for States to enact laws that establish
liability to the State for individuals and entities that submit
false or fraudulent claims to the State Medicaid Program."
(Id.)
The OIG Letter states that "Section 1909(b)(2) of the Act
requires the State law to contain provisions that are at least
as effective in rewarding and facilitating qui tam actions for
false and fraudulent claims as those described in sections 3730
through 3732 of the ÝFFCA]. The ÝFFCA], as amended by the FERA
ÝFraud Enforcement and Recovery Act of 2009] and the Dodd-Frank
ÝWall Street Reform and Consumer Protection] Act, provides
certain relief to any employees, contractor, or agent who is
retaliated against because of lawful acts done in furtherance of
Ýan FFCA] action or efforts to stop violations of the ÝFFCA]."
(Id. at p. 2; see 31 U.S.C.S. Sec. 3730(h).)
a. Extending whistleblower protections to contractors and
agents
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The CFCA currently only provides whistleblower protections
for employees, but not for contractors or agents. This
bill would extend whistleblower protections to contractors
and agents and would recast the whistleblower protections
to conform to the FFCA. In support of that extension, the
California Employment Lawyers Association (CELA) argues
that extending the whistleblower protections to independent
contractors and agents who are cooperating with anti-fraud
investigations under the CFCA is important because "many
people who do not necessarily have traditional
employer-employee relationships may be nonetheless subject
to retaliation if they are independent contractors or
otherwise associated with the defendants."
b. Protection for whistleblowing employees who participated
in the false claim
Existing law also provides whistleblower protection for
employees who participated in conduct that directly or
indirectly resulted in a false claim being submitted but
who subsequently voluntarily disclosed information in
furtherance of a false claims action and the employee was
harassed, threatened, or coerced by the employer or its
management into engaging in the fraudulent activity in the
first place. (Gov. Code Sec. 12653.) While this bill
would repeal this section, the AG's Office notes that
protection for these employees would be encompassed by the
provisions of this bill.
The FFCA does not, and has not since it was enacted,
provided separate whistleblower protections for employees
who, because of pressure exerted by the employer, engaged
in wrongful conduct related to an FFCA claim. Instead, the
FFCA provides that all whistleblowers, regardless of their
participation in the submission of a false claim to a
government entity, have protection from retaliation for
their lawful acts of disclosing information or
participating in the filing of a false claim action against
their employer. The AG's Office argues that this bill
would provide more protection for these employees because
they would not have the additional burdens of proving that
they voluntarily disclosed information to a government
agency in furtherance of a false claims action and that
they were forced by their employer to participate in the
unlawful activity.
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3. Statute of limitations on CFCA actions
Existing law provides a statute of limitations on CFCA actions,
which may not be filed more than three years after the date of
discovery by the AG or prosecuting authority or, in any event,
not more than 10 years after the date on which the CFCA
violation was committed. (Gov. Code Sec. 12654(a).) This bill
would provide a statute of limitations of six years after the
date the CFCA violation was committed, or within three years
after the date when facts material to the right of action are
known or reasonably should have been known by the AG or
prosecuting authority, but in no event more than 10 years after
the date on which the violation is committed, whichever occurs
last.
The OIG Letter states that the CFCA is not in compliance with
the SSA, in part, because the CFCA does not provide the same
statute of limitations as the FFCA. (OIG Letter at p. 4.) For
this reason, this bill would provide the same statute of
limitations provided in the FFCA. CELA argues that providing
consistency with statutes of limitations will smooth out
cross-jurisdictional enforcement concerns. Accordingly, the
CFCA would be as effective as the FFCA at rewarding and
facilitating qui tam actions.
The OIG Letter also notes that the FFCA "provides that for
statute of limitations purposes, any Government complaint in
intervention, whether filed separately or as an amendment to the
relator's complaint, shall relate back to the filing date of the
relator's complaint, to the extent that the claim of the
Government arises out of the conduct, transactions, or
occurrences set forth, or attempted to be set forth, in the
relator's complaint." (OIG Letter at p. 2; see 31 U.S.C.S. Sec.
3731(c).) Since the CFCA does not include a conforming
"relate-back" provision, this bill would provide that, for
statute of limitations purposes under the CFCA, any pleading
filed by the AG or prosecuting authority shall relate back to
the filing date of the complaint of the person who originally
brought the action, to the extent that the claim of the state or
political subdivision arises out of the conduct, transactions,
or occurrences set forth, or attempted to be set forth, in the
prior complaint of that person.
4. Statute of limitations on retaliation actions related to CFCA
disclosure
This bill would provide a statute of limitations for
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whistleblowers of three years from the date the retaliation
occurs following a whistleblower's efforts to stop or aid in the
prosecution of a false claim. The CFCA currently does not
provide a statute of limitations for whistleblower actions, so
whistleblowers have to rely on the statute of limitations that
relates most closely to the employee's claims against the
employer. (Graham County Soil & Water Conservation Dist. v.
United States ex rel. Wilson (2005) 545 US 409, 410-411.)
Statutes of limitations vary depending upon the claim made
against the employer relating to retaliatory conduct. Many CFCA
retaliation claims are based on either wrongful termination in
violation of public policy or breach of oral or implied
contract, which have a two year statute of limitations. The
FFCA, as recently amended by the Dodd-Frank Wall Street Reform
and Consumer Protection Act, now provides a three year statute
of limitations for retaliation actions. This bill, by
conforming to the FFCA statute of limitations, would provide
increased whistleblower protection by giving the whistleblower
more time to file an action.
5. Additional conduct subject to the CFCA
The OIG Letter states that "relevant to the . . . bases for
liability, the ÝFFCA], as amended by the FERA, defines the term
'obligation.' . . . In contrast, the ÝCFCA] does not establish
liability for the same breadth of conduct as the ÝFFCA], as
amended." (OIG Letter at p. 2.) This bill would provide that
"obligation" means an established duty, whether or not fixed,
arising from an express or implied contractual, grantor-grantee,
or licensor-licensee relationship, from a fee-based or similar
relationship, from statute or regulation, or from the retention
of any overpayment. Although case law provides a similar
definition of "obligation," it does not include an act of
retention of any overpayment. As such, this bill would create
additional conduct that would be a violation of the CFCA.
The AG, in support of this bill, argues that it addresses, and
fixes, each of the deficiencies noted by the Inspector General,
and this bill is focused exclusively on curing those
deficiencies, while strengthening the CFCA. Since this bill is
primarily directed at preserving the SSA discount for CFCA claim
recoveries related to Medi-Cal benefits, it appears appropriate
to include the act of retaining any overpayment of benefits in
the list of conduct that is a violation of the CFCA.
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6. Additional claims subject to the CFCA
This bill also would revise the definitions of "political
subdivision funds" and "state funds." Existing law provides
that "political subdivision funds" and "state funds" only
include funds that are the subject of a claim presented to an
officer, employee, or agent of a political subdivision or state,
where the political subdivision or state provides, has provided,
or will reimburse any portion of the money, property, or service
requested or demanded. (Gov. Code Sec. 12650(b)(6), (9).)
Unlike the CFCA, the FFCA does not restrict a false claim to
apply only to those submitted to an officer, employee, or agent,
of the federal governmental. Rather, the FFCA also provides for
any request or demand that is made to a contractor, grantee, or
other recipient, if the money or property is to be spent or used
on the Government's behalf or interest, as specified. (31
U.S.C.S. Sec. 3731(b)(2)(A)(ii).) In determining whether a
false claim submitted to a wholly owned government corporation
qualified for FFCA remedies, the court in Rainwater v. United
States (1958) 356 U.S. 590, 592 noted that "the objective of
Congress in enacting Ýthe FFCA] was broadly to protect funds and
property of government from fraudulent claims, regardless of
particular form or function of government instrumentality upon
which such claims were made."
CELA argues that, by expanding these definitions, this bill
would "make it clear that any state funds may be pursued. This
bill put an end to specious arguments that some fraud could not
be prosecuted under the state because the fraud was not directly
aimed at a government official." (Emphasis in original.) As
such and in conformity with the FFCA, this bill would provide
that "political subdivision funds" and "state funds" mean funds
that are the subject of a claim. This definition is broader
than existing law and would no longer require that, for the CFCA
to apply, the false claim must be submitted to an officer,
employee, or agent of a political subdivision or state.
7. Exemption from administrative procedure requirement for
Medi-Cal actions
Existing law prohibits a qui tam whistleblower action alleging
CFCA violations against an employer until the employee first, in
good faith, exhausts existing internal procedures for reporting
and seeking recovery of the falsely claimed sums through
official channels and unless the state or political subdivision
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failed to act on the information provided within a reasonable
period of time. (Gov. Code Sec. 12652(d)(4).) As noted in the
OIG Letter, the FFCA does not contain internal reporting or
exhaustion of administrative channels requirements, and because
the CFCA requires these procedures prior to the filing of a CFCA
qui tam action, the CFCA is not as effective or rewarding as the
FFCA and is in violation of the requirements of the SSA. (OIG
Letter at p. 4.)
These administrative reporting requirements were enacted in AB
1441 and have remained largely untouched for twenty-five years.
The legislative analyses of AB 1441 do not specifically discuss
the reasons for enacting these administrative reporting
requirements. However, case law provides insight as to the
purpose of the administrative reporting requirements. In State
of California ex rel. Bowen v. Bank of America Corp. (2005) 126
Cal.App.4th 225, 236-237, the court discussed the reasoning
behind the CFCA:
The ÝCFCA] is designed to supplement governmental efforts to
identify and prosecute fraudulent claims made against state
and local governmental entities by authorizing private parties
(referred to as qui tams or relators) to bring suit on behalf
of the government. . . . The ultimate purpose of the ÝCFCA]
is to protect the public fisc. . . . To that end, the ÝCFCA]
must be construed broadly so as to give the widest possible
coverage and effect to its prohibitions and remedies.
The Bowen court also recognized the need for limitations on the
right of CFCA actions:
ÝT]he ÝCFCA] creates substantial financial incentives for
private "whistleblowers" to help uncover and prosecute
fraudulent claims made to the government. In an attempt to
curb "opportunistic" or "parasitic" actions, however, it also
includes a number of provisions that limit the circumstances
in which a private person may bring or prosecute a qui tam
action. (Id. at p. 241.)
The internal reporting and administrative requirements currently
in the CFCA provide the employer an opportunity to correct an
erroneous claim before a CFCA action is brought against the
mistaken employer, which may curb such opportunistic but valid
actions. However, this bill would exempt Medi-Cal claims from
the requirement that CFCA violation be internally report and
investigated through official channels prior to the filing of a
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CFCA action.
The AG "supports AB 2492 because it would amend Ýthe CFCA] to
conform to federal law, which is necessary for California to
continue to receive the 10 Ýpercent] federal incentive for
Medi-Cal fraud recoveries achieved under the CFCA." The AG
argues that this limited exemption would satisfy the
requirements of the SSA because the SSA requires the State to
establish liability for the submission of false or fraudulent
claims to the State Medicaid program. Further, the AG has been
working closely with the OIG to resolve the conflicts between
the CFCA and the FFCA, and the OIG has not raised an issue with
this provision.
8. Public disclosure
Existing law prohibits a CFCA action based upon the public
disclosure of allegations or transactions in a criminal, civil,
or administrative hearing, in an investigation, report, hearing,
or audit conducted by or at the request of the Senate, Assembly,
auditor, or governing body of a political subdivision, or by the
news media unless the action is brought by the AG or prosecuting
authority of a political subdivision, or the person bringing the
action is an original source of the information. (Gov. Code
Sec. 12652(d)(3)(A).)
The OIG Letter notes that the CFCA "requires a court to dismiss
a broader category of cases based on a public disclosure and
does not give California the opportunity to oppose the
dismissal. " (OIG Letter at p. 3.) Although the CFCA
prohibition of actions based on a publicly disclosed CFCA
violation is substantially similar to the FFCA, the exception to
this prohibition based on information coming from an original
source is substantially more limited than in the FFCA. Existing
law provides that a publicly disclosed CFCA violation action can
be brought by an individual who is the original source of the
information and:
who has direct and independent knowledge of the information on
which the allegations are based;
who voluntarily provided the information to the state or
political subdivision before filing an action based on that
information; and
whose information provided the basis or catalyst for the
investigation, hearing, audit, or report that led to the
public disclosure. (Gov. Code Sec. 12652(d)(3)(B).)
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This bill would revise and recast the prohibition on publicly
disclosed CFCA violation actions to require a court to dismiss a
CFCA action or claim, unless opposed by the AG or prosecuting
authority of a political subdivision, if substantially the same
allegations or transactions as alleged in the action or claim
were publicly disclosed in any of the following:
a criminal, civil, or administrative hearing in which the
state or prosecuting authority of a political subdivision or
their agents are a party;
a report, hearing, audit, or investigation of the Legislature,
the state, or governing body of a political subdivision; or
the news media.
CELA argues that "this bill will clarify the conditions under
which a case may be subject to the 'public disclosure' bar.
This is important because the only interests these provisions
are intended to protect are those of the State. By making sure
that Ýwhistleblowers] with new and significantly helpful
information may still be rewarded, and by giving the AG the
right to oppose dismissal of actions on public disclosure
grounds, the bill strengthens the state's anti-fraud efforts."
This bill also would revise the existing definition of "original
source" to include an individual who either:
voluntarily discloses, prior to a public disclosure, to the
state or political subdivision the information on which
allegations or transactions in a claim are based; or
has knowledge that is independent of, and materially adds to,
the publicly disclosed allegations or transactions, and has
voluntarily provided the information to the state or political
subdivision before filing an action.
With the revised and recast prohibition relating to publicly
disclosed CFCA violation actions and the broader definition of
"original source," this bill would conform the CFCA to the FFCA
and provide more effective enforcement of false claims as
required by the SSA.
9. Increased civil penalties for violations of the CFCA
The OIG Letter states that "Section 1909(b)(4) of the ÝSSA]
requires the State law to contain a civil penalty that is not
less than the amount of the civil penalty authorized under
section 3729 of the ÝFFCA]. As amended by the FERA, the ÝFFCA]
now expressly provides that its civil penalty shall be adjusted
by the Federal Civil Penalties Inflation Adjustment Act of 1990.
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. . . Pursuant to the Federal Civil Penalties Inflation
Adjustment Act, a civil penalty under the ÝFFCA] is not less
than $5,500 and not more than $11,000." (OIG Letter at p. 4.)
The CFCA provides, in addition to treble damages, that a person
who commits specified violations of the CFCA shall be liable for
a civil penalty, ranging from $5,000 to $10,000, for each false
claim. (Gov. Code Sec. 12651(a).) As noted in the OIG Letter,
this penalty range is not consistent with that provided in the
FFCA. In support of this bill, CELA argues that civil penalties
in the CFCA "have not been increased since the statute was first
passed more than twenty-five years ago. It is due time these
penalties account for today's inflation." Accordingly, this
bill would increase the civil penalties, ranging from $5,500 to
$11,000, for each false claim.
10. Technical amendments
This bill contains a technical error, which the author has
agreed to amend in Committee.
Author's Amendment :
On page 15, at line 29, delete and replace "reasonable" with
"reasonably"
Support : California Attorney General; California Employment
Lawyers Association; Consumer Attorneys of California
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 2760 (Tran, 2010) would have restricted awards of attorney's
fees in CFCA actions.
AB 1196 (Blumenfield, Ch. 277, Stats. 2009) See Background.
AB 2761 (Adams, 2008) would have made minor revisions to the
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CFCA; this bill died at the Assembly desk.
AB 940 (Keeley, 2002), among other things, would have eliminated
the minimum civil fine for false claims and provided that a
person would be liable for a civil penalty for twice the amount
falsely claimed when that claim had not been paid. The bill was
not amended and referred in time for Committee consideration.
AB 222 (Wiggins, Ch. 69, Stats. 2001) established CFCA appellate
service provisions.
AB 3257 (Baugh, Ch. 700, Stats. 1996) required a qui tam
plaintiff to provide a written disclosure of material evidence
and information to the Attorney General as a part of the
complaint.
AB 1441 (Floyd, Ch. 1420, Stats. 1987) See Comment 7.
Prior Vote :
Assembly Floor (Ayes 46, Noes 26)
Assembly Committee on Appropriations (Ayes 12, Noes 4)
Assembly Committee on Judiciary (Ayes 7, Noes 3)
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