On October 20, 2014 in a case brought by a whistleblower under the False Claims Act (“FCA”), a federal jury handed down a $175 million verdict in favor of the plaintiff. While the outcome was newsworthy because of its size (it may be potentially tripled to $525 million) and the fact that it calls into question a highway guardrail design currently in use on many highways, one of the most startling aspects of the case was, as Rachel Louise Ensign of the Wall Street Journal put it in her article on October 22, “the fact that the government has not intervened in the case.”
Why Did the Government Stay Silent on This Case?
When a private entity is alleged to have defrauded the government, usually by overcharging or in this case delivering a defective product, citizens and whistleblowers are allowed to file these qui tam lawsuits under the FCA.
However, what is unusual in this case is that, generally, in particularly high profile or extremely complex cases, the government will join in the suit. This makes sense because the suit is brought on behalf of the government and the government claims a share of the award, a portion of which is split with the plaintiff.
So why was the government oddly silent in this case? What will it mean for future qui tam claims?
Implications for Future Qui Tam Claims
For this particular case, the most likely immediate response will be halting production or shipping of the guardrail in question, at least until further testing. In fact Law360 reported on October 24, 2014 that the manufacturer had announced it would cease shipping the guardrails for the time being. More lawsuits are also likely—two new suits have already been filed.
In the future, this will likely lead to more FCA lawsuits. Lori Pines, a partner and head of FCA claims practice at Weil, Gotshal and Manges, indicated in Ensign’s WSJ article that she expected more whistleblowers to bring FCA cases, and that, “…more and more unintervened cases would likely be pursued and will proceed to trial.”
What Can You do to Reduce the Likelihood of Qui Tam Whistleblowers?
- Be Preemptive: Make sure that you have a strong and effective compliance department working with business units to identify and address risks.
- Encourage Communication: Make sure that you have a clearly communicated process for employees to raise issues internally. Both “Open Door” policies and an effective employee helpline should be communicated to employees, vendors and third parties as appropriate.
- Create and Foster a Culture of Non-Retaliation: The fastest way to thwart transparency and end open communication is to retaliate or allow retaliation against reporter. Make sure your company has a strong non-retaliation policy and regularly train on how to recognize and avoid retaliation in the workplace.