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Expanded Protection for Whistleblowers: California Amends its False Claims Act

On August 16, 2012, the California Assembly passed a bill (AB 2492) amending California’s state False Claims ActCal. Gov’t Code §§ 12650-12656 (“CAL FCA”) to largely conform to the provisions of the federal False Claims Act (“FCA”).  According to the Deficit Reduction Act of 2005, states with FCAs “at least as effective” as the federal FCA qualify for an additional 10 percent of any recoveries related to false Medicaid claims.  Due to the recent changes in the federal FCA as a result of the Fraud Enforcement and Recovery Act of 2009 (“FERA”), the Patient Protection and Affordable Care Act (“ACA”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), states which seek to qualify for the additional payments must be proactive in ensuring that their FCAs are “at least as effective” as the federal FCA by the March 31, 2013 deadline.

The proposed amendments to the CAL FCA would expand both the liability of defendants and the rights of qui tam plaintiffs in a number of ways, including broadening the definition of “original source” and increasing protections for whistleblowers.  .

Some of the key amendments include:

  • Allowing the Attorney General to override the public disclosure bar.  The CAL FCA would permit the California Attorney General (“AG”) to prevent dismissal of a CAL FCA claim based on publicly disclosed information by “opposing” dismissal.
  • Expanding the definition of “original source.”  The CAL FCA definition would broaden to include individuals who have voluntarily disclosed to the state the information upon which a claim is based, or have knowledge that is independent of, and “materially adds” to, publicly disclosed allegations of false claims.
  • Broadening the definition of “claim” to include “contractor, grantee, or other recipient, if the money, property, or service is to be spent or used on a state or any political subdivision’s behalf or to advance a state or political subdivision’s program or interest . . . .”;
  • Incorporating the federal FCA’s definition of an “obligation”: An obligation includes retention of an overpayment, thereby giving rise to liability under the CAL FCA for retention of an overpayment;
  • Statute of limitations/relation back:  The CAL FCA would provide that, for statute of limitations purposes, if the AG files a complaint in intervention, it will relate back to the filing date of the relator’s complaint;
  • Making relators eligible for an award even if they planned and initiated the violation upon which the CAL FCA action was based; 
  • Eliminating the requirement that a claim must have been presented to an officer, employee, or agent of the state;
  • Clarifying that the CAL FCA’s anti-retaliation provisions apply when relators are discriminated against for furthering an action under the CAL FCA or for trying to stop a violation of the CAL FCA;
  • Granting relief to relators who are discriminated against, including reinstatement with the same seniority status, twice the amount of back pay plus interest, and compensation for special damages.
  • Defendant can recover attorneys’ fees:  clarifying an existing provision allowing defendants to recover attorneys’ fees if the defendant prevails in a CAL FCA case and the court finds that the claim was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.

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