New York City False Claims Act
On May 19, 2005, Mayor Michael Bloomberg signed the New York City False Claims Act (the “NYCFCA”) into law.2 The NYCFCA became effective on August 19, 2005 and will remain in effect until June 1, 2012.3 New York City passed the ordinance because the city distributes funds through “one of the largest budgets in the United States” and the payment of false or fraudulent claims has “considerable impact upon the city’s treasury.”4 New York City enacted the NYCFCA “to recover monetary damages from parties who file fraudulent claims for payment of city funds and to recover substantial costs that are incurred in protecting taxpayers against such fraud.” New York City based the NYCFCA on the federal act due to the success the Federal Government had in recovering funds through the federal statute.5
[a]—Liability and Damages Provisions
The NYCFCA imposes liability for the same kind of conduct that constitutes a violation under the federal act.6 A person who commits a violation of the New York City ordinance is liable for three times the damages sustained by the city due to the violation and a civil penalty ranging from $5,000 to $15,000 for each violation.7 Like the FCA, the NYCFCA permits the court to reduce the liability to no more than two times the damages if the person voluntarily discloses the violation to the city.8 Unlike the FCA, a person who violates the NYCFCA is liable for the costs, expenses and attorneys’ fees for the City, in addition to the relator, and for the cost of the city’s investigation.9
[i]—Who Can be a Relator?
The NYCFCA contains a qui tam provision allowing any person10 to present the city with a proposed civil complaint alleging a violation of the ordinance.11 Like several state statutes, the NYCFCA explicitly bars a city, state, or federal employee from bringing an action based upon information discovered in the course of his employment unless: “(i) such employee first reported such information to the department of investigation and (ii) the city failed to act on the information within six months of its receipt by the department of investigation.”12 However, unlike the FCA, the city has 180 days to notify the relator in writing of its decision to commence a civil enforcement action, to designate the relator or if the relator is not an attorney, his attorney, a “special assistant corporation counsel for purposes of filing a civil enforcement action,” or to decline to commence a civil enforcement action or designate the relator or the relator’s attorney as a “special assistant corporation counsel.”13 The NYCFCA provides similar limitations on the relator’s participation as those found in the federal statute.14
[ii]—Statute of Limitations and Burden of Proof
The statute of limitations provided in the NYCFCA is identical to that found in the FCA. A relator must bring an action within no more than six years after the violation occurred or no more than three years after material facts were known or should have been known by the official responsible for acting, but in no event, more than ten years after the violation occurred, whichever occurs last.15 The burden of proof requirement is identical to the FCA.16 A relator must prove all essential elements of the claim by preponderance of the evidence.17
[iii]—Settlement and Dismissal
The NYCFCA, like the FCA, provides that the corporation counsel may pursue any alternate action and the relator would be entitled to the same share of proceeds recovered that the relator would have been entitled if the civil complaint became a civil enforcement action.18 If the corporation counsel commences a civil enforcement action, it may dismiss or settle an action notwithstanding the objections of the relator.19 If the corporation counsel designates the relator or relator’s attorney to commence the action, the corporation may nevertheless move to dismiss the action as long as the relator has an opportunity to be heard.20 The corporation counsel may also settle the action if the relator has an opportunity to be heard and “the proposed settlement is fair, adequate and reasonable.”21
[iv]—Other Procedural Issues
The NYCFCA states that the city must commence a civil enforcement action or designate the relator or the relator’s attorney as “special assistant corporation counsel” to commence an action unless: 1) the proposed civil complaint is barred by one of the jurisdictional bars described; 2) the proposed civil complaint is “based upon an interpretation of law or regulation which if adopted, would result in significant cost to the city;” 3) commencement of an action would “interfere with a contractual relationship between the city and an entity providing goods or services,” which in turn would interfere with “the provision of important goods or services, or would jeopardize the health and safety of the public;” or 4) the proposed civil complaint would be “dismissed for failure to state a claim upon which relief may be based.”22 The NYCFCA does not discuss intervention or non-intervention. However, the commencement of an action by the corporation counsel is similar to the Government intervening in an FCA action. The designation of the relator or relator’s counsel as a “special assistant corporation counsel” is similar to the Government declining intervention under the FCA.
“If the commissioner of investigation determines that a civil enforcement action may interfere with or jeopardize an investigation by a governmental agency, then the corporation counsel may decline to commence an action” or decline to designate the relator or relator’s attorney to commence an action if the corporation counsel notifies the relator within ninety days of receiving the proposed complaint.23 This has the effect of prohibiting the civil enforcement action from being filed. The corporation counsel can continue to decline to act every 180 days afterwards until the commissioner of investigation determines that the proposed civil complaint would no longer interfere.24
[c]—Bars to Actions
The NYCFCA provides several bars that are similar to those provided in the FCA. Like the FCA, the NYCFCA exempts tax claims.25 The NYCFCA also contains a first to file bar similar to the one provided in the federal statute.26 The NYCFCA bars civil complaints based upon “allegations or transactions which are the subject of any pending criminal or civil action or proceeding, including a civil enforcement action, or an administrative action in which the city is already a party.”27 Like the FCA, the NYCFCA contains a public disclosure bar.28 However, the NYCFCA refers to “primary source” of the information rather than “original source.”29 Furthermore, the NYCFCA defines public disclosure as not only stemming from one of the enumerated sources but also information which is “likely to be seen by the city officials responsible for addressing false claims.”30
The NYCFCA contains several bars not provided in the federal statute. For example, civil complaints based upon one or more false claims totaling less than $25,000 may not be brought under the ordinance.31 In addition, unlike the federal act, the NYCFCA expressly states that a civil complaint may not be brought against “the federal government, the state of New York, the city or any officer or employee acting within the scope of his or her employment.”32
The NYCFCA allows three categories of employees to bring an action for retaliation under the ordinance: 1) any New York City officer or employee who believes that he had been subject of adverse personnel action,33 2) any city or state officer or employee who believes he has been subject of retaliatory action as defined by civil service law,34 or 3) any non-public employee who believes he has been subject of retaliatory action as defined by labor law35 by his employer due to employee’s acts to further a civil enforcement action brought under the ordinance.36 Like the federal statute, an employee is entitled to “all relief necessary to make the employee whole.”37 This relief includes but is not limited to:
“(i) an injunction to restrain continued discrimination, (ii) reinstatement to the position such employee would have had but for the discrimination or to an equivalent position, (iii) reinstatement of full fringe benefits and seniority rights, (iv) payment of two times back pay, plus interest, and (v) compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.”38
The provisions regarding the relator’s share of the recovery under the NYCFCA vary from those found in the FCA. If the corporation counsel elects to commence the civil enforcement action, the relator is entitled to receive a share of the recovery ranging from ten to twenty-five percent of the proceeds recovered.39 If the corporation counsel designates the relator or the relator’s attorney to commence the civil enforcement action, in other words if the city declines to intervene, the relator is entitled to a portion of the recovery ranging from fifteen to thirty percent.40 The NYCFCA provides several factors that the court may use to determine the share to which a relator is entitled: 1) the extent to which relator “contributed to the prosecution of the action,” 2) whether the civil enforcement action was based upon public disclosure, 3) any unreasonable delay by relator, 4) “extent to which the allegations involve a significant safety issue,” 5) whether the relator initiated the violation, 6) whether the relator was charged with criminal conduct, and 6) “fundamental fairness and any other factors the corporation counsel and the court deem appropriate.” Like the FCA, the NYCFCA permits the court to reduce the share of a relator who initiated the violation of the act. A successful relator may also recover attorneys’ fees, costs and expenses from the defendant.41 If the court determines that the civil enforcement action was frivolous, the defendant may recover reasonable attorneys’ fees, costs, and expenses from the relator.42 Unlike the FCA, the NYCFCA expressly allows a defendant to recover reasonable attorneys’ fees, costs, and expenses from the relator’s attorney.43 However, the city shall not be liable for any attorneys’ fees, costs, or expenses that the relator incurs.44
The NYCFCA requires the corporation counsel to submit an annual report to the mayor and speaker of the council no later than March first of each year.45 The report should contain the following information: 1) number of complaints submitted; 2) number of complaints leading to the commencement of an action by the corporation counsel or a relator; 3) disposition of the actions commenced; 4) number of complaints under review; 5) number of complaints that did not lead to commencement of an action; and 6) any other relevant information the corporation counsel deems appropriate.46
- Author of treatise,Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
- “Mayor Michael R. Bloomberg Signs Legislation Protecting City From False Claims,” available at http://www.ci.nyc.ny.us (last visited June 3, 2005).
- New York City, NY., Int. No. 630 §4.
- New York City, NY., Int. No. 630 §1.
- New York City, NY., Code § 7-803(a).
- New York City, NY., Code § 7-803(b).
- Referred to here as the relator for consistency although the New York City FCA does not call this person a relator.
- New York City, NY., Code § 7-804(b)(1).
- New York City, NY., Code § 7-804(d)(4).
- New York City, NY., Code § 7-804(b)(2).
- New York City, NY., Code § 7-804(g)(3).
- New York City, NY., Code § 7-806(a).
- New York City, NY., Code § 7-806(b).
- New York City, NY., Code § 7-804(f)(2). “Corporation counsel” is the equivalent of an attorney general.
- New York City, NY., Code § 7-804(g)(1).
- New York City, NY., Code § 7-804(g)(2).
- New York City, NY., Code § 7-804(b)(3).
- New York City, NY., Code § 7-804(c).
- New York City, NY., Code § 7-804(d).
- New York City, NY., Code § 7-804(f)(1).
- New York City, NY., Code § 7-804(d)(2).
- New York City, NY., Code § 7-804(d)(3).
- New York City, NY., Code § 7-804(d)(1).
- New York City, NY., Code § 7-804(d)(5).
- “Adverse personnel action” is defined in the New York City Administrative Code as “dismissal, demotion, suspension, disciplinary action, negative performance evaluation, any action resulting in loss of staff, office space or equipment or other benefit, failure to appoint, failure to promote, or any transfer or assignment or failure to transfer or assign against the wishes of the affected officer or employee.” New York City, NY., Code § 12-113(a)(1).
- “Retaliatory action” in civil service law refers to:
“1. . . . (d) ‘Personnel action’ shall mean an action affecting compensation, appointment, promotion, transfer, assignment, reassignment, reinstatement or evaluation of performance.”
2. (a) A public employer shall not dismiss or take other disciplinary or other adverse personnel action against a public employee regarding the employee’s employment because the employee discloses to a governmental body information: (i) regarding a violation of a law, rule or regulation which violation creates and presents a substantial and specific danger to the public health or safety; or (ii) which the employee reasonably believes to be true and reasonably believes constitutes an improper governmental action. ‘Improper governmental action’ shall mean any action by a public employer or employee, or an agent of such employer or employee, which is undertaken in the performance of such agent’s official duties, whether or not such action is within the scope of his employment, and which is in violation of any federal, state or local law, rule or regulation.”
(b) Prior to disclosing information pursuant to paragraph (a) of this subdivision, an employee shall have made a good faith effort to provide the appointing authority or his or her designee the information to be disclosed and shall provide the appointing authority or designee a reasonable time to take appropriate action unless there is imminent and serious danger to public health or safety. For the purposes of this subdivision, an employee who acts pursuant to this paragraph shall be deemed to have disclosed information to a governmental body under paragraph (a) of this subdivision.” N.Y. Civ. Svc. Law § 75-b.
- “Retaliatory action” as defined in labor law means “discharge, suspension or demotion of an employee, or other adverse employment action taken against an employee in the terms and conditions of employment.” N.Y. Labor Law § 740.
- New York City, NY., Code § 7-805(a).
- New York City, NY., Code § 7-805(a)(3).
- New York City, NY., Code § 7-804(i)(1).
- New York City, NY., Code § 7-804(i)(2).
- New York City, NY., Code § 7-804(j)(1).
- New York City, NY., Code § 7-804(j)(2).
- New York City, NY., Code § 7-804(j)(3).
- New York City, NY., Code § 7-808.
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