On July 26, 2021, a bipartisan group of senators, guided by long-time False Claims Act champion, Charles Grassley (R-Iowa), introduced a bill to amend the federal False Claims Act (FCA). The amendments are meant to address several legal developments in the law that were not necessarily intended by legislators and have left federal dollars vulnerable to fraud and the FCA’s ability to recoup those dollars.

The amendments deal with several issues, including the FCA’s materiality standard. While the materiality standard is probably the most significant potential change to the FCA, we will discuss that topic in another post.

Here, we will focus on another key change in the FCA that the amendment proposes: cost-shifting when a party in a declined FCA case seeks discovery from the government.

When the Government Declines to Intervene

When the government investigates a whistleblower brough action under the FCA, it will either intervene and take over the action, or it will decline to intervene.

Pursuant to 31 U.S.C. 3130(c)(3), the whistleblower and their counsel “shall have the right to conduct the action.” Meaning, the case proceeds without the government actively participating. Relators and their experienced False Claims Act attorneys have been very successful in recovering fraudulently acquired federal funds when proceeding with declined qui tam actions without the government.

Practically speaking, once a case is declined and the FCA action is unsealed, the case commences and proceeds as any other civil action in federal court. That means civil discovery.

What is discovery in a False Claims Act case?

Discovery is best explained as the pre-trial phase of litigation where the parties investigate facts and gather evidence. The Federal Rules of Civil Procedure allow for the parties to request certain information of other parties to the suit.

This includes producing documents, written answers to posed questions (interrogatories), and live questioning of relevant witnesses (depositions), to name a few such methods.

Discovery can be burdensome and costly. I will not delve into discovery strategies here, although I believe one such strategy is the main culprit behind the proposed cost-shifting amendment to the False Claims Act Amendments of 2021.

How the 2021 FCA Amendment Would Change Discovery Costs

Normally, in federal cases (absent a local rule to the contrary), parties bear their own costs for responding to discovery requests in civil actions. It’s the cost of being a litigant in federal court.

However, the Grassley-led amendments shift the burden of costs in declined qui tam actions to the party requesting discovery from the government. The text of the amendment adds the following language to 31 U.S.C. 3130(f):

“(f) If the Government elects not to intervene in an action brought under section 3730(b), the court shall, upon a motion by the Government, order the requesting party to pay the Government’s expenses, including costs and attorneys’ fees, for responding to the party’s discovery requests, unless that party can demonstrate that the information sought is relevant, proportionate to the needs of the case, and not unduly burdensome on the Government.”  False Claims Act Amendments of 2021. S._____, 117th Cong. (2021).

The amendment would apply to any non-government party involved in litigating a declined FCA case. Importantly, for the cost-shifting provision to apply, 1) the government would have to request its costs and fees for responding to a party’s discovery requests, and 2) the requesting party would have to the court after such a request by the government that the information it seeks is “relevant, proportionate to the needs of the case, and not unduly burdensome on the Government.”

Meaning, the burden is not automatically shifted. Even if the government requests its costs and fees for responding to discovery, the requesting party can still demonstrate the need for the information and not get stuck paying the government for responding.

The cost-shifting burden on government discovery included in the amendment is clearly directed at preventing private parties from abusing the discovery process. If a party thinks its discovery strategy is to bury everyone in paper discovery requests, hopefully, this amendment will make them think twice about that strategy.

However, parties who are legitimately seeking relevant information from the government – which is almost universally the case when litigating declined qui tam cases – can still request that information if it is done so in a targeted and reasonable way, and not invoke this potential amendment.

False Claims Act Attorneys Effectively Litigate Declined Cases

In the end, I do not believe this aspect of the proposed FCA amendments put forth by Senator Grassley (and others) will affect a relators’ ability to litigate declined cases. It will, hopefully, prevent parties from engaging in certain discovery tactics that are designed to thwart federal cases from progressing efficiently.

If you have questions about the FCA amendments of 2021 or any other whistleblower matter, please contact the Atlanta whistleblower attorneys at Bracker & Marcus LLC.