False Claims Act and Qui Tam: Lawsuits, Relator Rights, and Legal Defenses in New York

Congress enacted the federal FCA during the Civil War to penalize dishonest military suppliers. Today, the law applies broadly to defense contractors, healthcare providers, construction vendors, and research institutions receiving public funds. Under New York law, contractors face liability for overbilling state agencies, submitting falsified invoices, or failing to report known overpayments.

Liability under the law carries severe financial consequences for defendants. Courts impose mandatory civil penalties for each false claim submitted, with amounts adjusted annually for inflation. Defendants also face treble damages, making them liable for three times the actual financial loss sustained by the government program.

The private citizen who files the lawsuit is called a relator. To initiate the legal action, the relator must file a complaint secretly in court under seal. The complaint and a detailed disclosure of material evidence must be served on government prosecutors while remaining hidden from the defendant.

While the case remains under seal, government attorneys review the evidence to decide whether to intervene. If authorities intervene, the government leads the litigation against the defendant. If the government declines to enter the suit, the relator maintains the legal right to pursue the litigation independently.

Employers cannot fire, demote, suspend, threaten, or harass employees because of lawful whistleblower actions. The initial court seal protects the relator's identity and prevents premature destruction of evidence by target companies during early government reviews.

Successful relators receive a financial award calculated as a percentage of the total monetary recovery. The exact share depends on whether government attorneys intervened in the action:

Government Intervened Cases: Relators generally receive between 15% and 25% of the total settlement or judgment proceeds.

Declined Cases: Relators pursuing independent litigation generally receive between 25% and 30% of the recovered funds.

Retaliation Remedies: Employees subjected to retaliation can recover reinstatement, double back pay with interest, and legal fees.

Common violations involve billing for services not rendered, upcoding medical treatments, and substituting inferior materials on public infrastructure projects. Delivering goods or services that fail to meet clear contractual specifications constitutes an actionable false claim.

Hypothetical Example for Educational Purposes Only A corporate vendor secures a municipal contract to supply safety equipment to local public transportation authorities. The vendor submits invoices claiming all items passed mandatory durability testing, knowing that internal quality tests were skipped to meet shipment deadlines. Submitting those invoices for payment constitutes a false claim under applicable laws.

Liability extends to express or implied false certifications of compliance. Under the implied false certification doctrine, submitting a claim for payment implies compliance with key statutory or contractual requirements. Failing to disclose material non-compliance makes the payment claim fraudulent.

Cases move through systematic statutory steps from filing to final resolution:

Sealed Filing and Investigation: Prosecutors inspect relator evidence and issue Subpoenas or Civil Investigative Demands.

Intervention Decision: Government attorneys elect to intervene, request seal extensions, or decline participation.

Unsealing and Discovery: The court unseals the complaint for service, starting document production and witness depositions.

Settlement Negotiations: Parties conduct structured negotiations to resolve potential treble damages before trial.

When parties cannot reach a settlement, the action proceeds to trial before a judge or jury. Plaintiffs must establish every element of the violation, including materiality and knowledge, by a preponderance of the evidence. Unfavorable verdicts can subsequently be appealed to federal or state appellate courts.

Targeted entities often challenge the legal sufficiency of the complaint. The table below outlines standard defense strategies used in qui tam litigation:

Contractors and healthcare facilities should establish internal compliance programs to detect billing errors early. Effective risk mitigation requires creating internal reporting channels, conducting regular audits, and addressing internal complaints promptly before external lawsuits arise. SJKP's attorneys draw on combined firm experience to help organizations establish internal oversight systems and defend against government inquiries.