Delaware False Claims and Reporting Act
By: Joel M. Androphy1, Rachel Grier and Nisha Ghosh
The Delaware False Claims and Reporting Act2 generally models the Federal False Claims Act (FCA)3.
1. LIABILITY AND DAMAGES PROVISIONS
The liability and damages provisions under the DFCRA are similar to those under the federal FCA. Generally, an individual will be liable under the DFCRA for the same violations as the federal FCA. For example, an individual will be liable for knowingly presenting or causing the presentation of a false claim, or knowingly making, using, or causing to be made or used a false record or statement to get a false or fraudulent payment.4 But, unlike the federal FCA, the DFCRA does not explicitly exclude false tax claims.5
The damages provision in the DFCRA is similar to the statutory language of the federal FCA in that it allows the state to recover treble damages and civil penalties ranging from $5,500 to $11,000 per unlawful act.6 In addition, the DFCRA follows the federal act and provides for the reduction of liability to not less than twice the damages if the defendant voluntarily discloses the violations within thirty days of obtaining it, if there was no ongoing investigation into the violation at the time of the disclosure, and if the person fully cooperates with any investigation into the violations.7
2. PROCEDURAL ISSUES
a. General Procedural Provisions
The DFCRA allows a private person to bring a civil suit for a violation under the statute.8 It also requires an action brought pursuant to the statute to be filed in Superior Court.9 Several of the other DFCRA procedural provisions are the same as in the federal statute, including the sixty-day sealing provisions and the state’s right to petition the court for an extension for good cause;10 the required delivery of the complaint and disclosure of all material evidence and information the relator possesses to the to the Department of Justice;11 the government’s primary responsibility for litigating the action if it chooses to intervene and the right to limit the relator’s participation;12 the government’s right to dismiss the action as long as the relator is notified and is allowed an opportunity for a hearing on the motion;13 and the government’s right to settle the case despite the relator’s objections as long as the court determines that the settlement is “fair, adequate and reasonable under all the circumstances.”14The relator may also litigate the case if the government chooses not to intervene.15 However, the government may intervene at a later date upon a showing of good cause without limiting the status and right of the relator.16
Both statutes also give the government the right to order a stay of proceedings if the civil action would interfere with a criminal investigation arising from the facts of the violation and the right to petition the court for an extension of the stay upon a showing that the criminal matter has been pursued with “reasonable diligence.”17 In addition, both statutes place the burden of proof on the government or the person bringing the action to prove each essential element of the charge, including damages, by a preponderance of the evidence.18 The federal FCA and the DFCRA also state that a judgment rendered in favor of the government in a criminal action will estop the defendant from denying the essential elements of the offense in an action brought pursuant to the statute if it involves the same transaction as in the criminal proceeding.19
b. Statute of Limitations
The Delaware statute follows the same limitations period as the federal act.20 It provides that an action may not be brought more than six years after the date on which the violation is committed or more than three years after the date on which government officials knew or reasonably should have known of facts material to the violation.21 In any case, an action may not be brought later than ten years after the violation occurred.22
3. JURISDICTIONAL BARS TO ACTIONS
a. First to File Bar and Bar Against Members of Legislative, Executive or Judicial Branches
Like the federal FCA, the DFCRA provides jurisdictional bars to certain qui tam actions. The DFCRA contains a first to file bar and a bar prohibiting actions against state government officials if the action is based on information or evidence already known to the government.23 There is also a bar on actions based upon allegations or transactions which are the subject of a civil or administrative proceeding in which the government is already a party.24
b. Public Disclosure Bar
The DFCRA also contains a public disclosure bar which prohibits a relator from bringing an action based upon
“allegations or actions in a criminal[,] civil[,] or administrative proceeding, or from the news media, unless the action is brought by the Attorney General or the party bringing the action is an original source of this information.”25
In order to be an “original source,” the DFCRA requires the party to have “independent knowledge, including knowledge based on its own investigation of the defendant’s conduct” and to voluntarily provide this information to the government before filing the suit.26 This used to be similar to the federal FCA language, but the Patient Protection and Affordable Care Act (“the Affordable Care Act”)27 amended that section of the federal FCA in 2010.28 Delaware has not yet enacted these changes.
The DFCRA, like the federal statute, protect whistleblowers from retaliation.29 Relief includes reinstatement of the employee with the same seniority status and damages necessary to make the employee whole, such as double the back pay, interest on the back pay, and special damages, including litigation fees and reasonable attorney’s fees.30
5. RELATOR’S SHARE
The relator’s recovery under the DFCRA is generally identical to the relator’s recovery under the federal FCA. Both provide that, if the government decides to intervene, the relator is entitled to fifteen to twenty-five percent of the recovery31 and, if the government does not intervene, the relator is entitled to twenty-five to thirty percent of the recovery.32 The DFCRA also allows the relator to recover reasonable expenses, plus reasonable attorney’s fees and costs.33 Like the federal FCA, the state statute allows for a reduction of the award to not more than ten percent of the proceeds if the suit is based upon public disclosure and the relator is not an original source.34 Both statutes also allow a reduction of the award if the relator “planned and initiated” the violation.35 If the relator is convicted of criminal conduct due to his role in the fraud, the relator shall be dismissed from the civil action and will not share in the proceeds.36 If the government does not intervene and the relator proceeds with the action, the DFCRA allows a successful defendant to recover reasonable attorney’s fees and expenses from the relator if the suit was filed for improper, unwarranted, or unsubstantiated purposes.37
- Author of treatise,Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
- 6 Del. Code Ann. §§ 1201-1211. Delaware False Claims and Reporting Act.
- 31 U.S.C. §§ 3729-3733. Federal False Claims Act.
- 6 Del. Code Ann. § 1201(a)(1)-(2).
- Compare 31 U.S.C. § 3729(d).
- 6 Del. Code Ann. § 1201(a)(7). Compare 31 U.S.C. § 3729(a). The civil penalties under the federal FCA have now been raised to $5,500 and $11,000 to account for inflation. See Chapter 4, supra, for further discussion of this issue.
- 6 Del. Code Ann. § 1201(b).
- 6 Del. Code Ann. § 1203(b)(1).
- 6 Del. Code Ann. § 1201(c).
- 6 Del. Code Ann. § 1203(b)(2)-(3).
- 6 Del. Code Ann. § 1203(b)(2).
- 6 Del. Code Ann. § 1204(a).
- 6 Del. Code Ann. § 1204(b).
- 6 Del. Code Ann. § 1204(c).
- 6 Del. Code Ann. § 1204(d).
- 6 Del. Code Ann. § 1204(e).
- 6 Del. Code Ann. § 1209(b).
- 6 Del. Code Ann. § 1209(c).
- 6 Del. Code Ann. § 1209(a).
- 6 Del. Code Ann. §§ 1203(b)(5) & 1206(a). Compare 31 U.S.C. § 3730(b)(5) and (e)(2).
- 6 Del. Code Ann. § 1206(b).
- 6 Del. Code Ann. § 1206(c).
- Patient Protection and Affordable Care Act (“the Affordable Care Act”), Pub. L. No. 111-148, 124 Stat. 119 (March 23, 2010).
- 31 U.S.C. §3730(e)(4)(B). In the amended version, the federal FCA now allows a person to qualify as an “original source” if that person discloses the information to the government before the public disclosure is made or if they have “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.” In addition, in the amended version of the federal FCA, the court can only dismiss an action based upon a public disclosure if the government does not oppose the dismissal. Also, actions based on public disclosures are only barred if they are made in a criminal, civil, or administrative hearing in which the government is a party.
- 6 Del. Code Ann. § 1208(a).
- 6 Del. Code Ann. § 1205(a).
- 6 Del. Code Ann. § 1205(b).
- 6 Del. Code Ann. §§ 1205(a)-(b).
- 6 Del. Code Ann. § 1205(a).
- 6 Del. Code Ann. § 1205(c).
- 6 Del. Code Ann. § 1205(d). However, the government will not be liable for expenses that a party incurs in bringing an action under the DFCRA, pursuant to 6 Del. Code Ann. § 1207.
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