Whistleblowers and Standing – Private Rights of Actions are Limited

gavelI’ve run into two types of problems with understanding whistleblower standing lately – one from prospective clients and one from attorneys.  The prospective clients usually want to know why they can’t sue for violations of a particular statute; the attorneys want to know why they can.  I answer with some kind of reference to the legal concept of “standing.”

Standing is the right to file a lawsuit or a petition under the circumstances.  Many federal laws involving fraud against the government can only be brought the government.  In other words, only government enforcement agencies have standing. In other words, a whistleblower who happens upon fraud against the government cannot sue the fraudster under a specific statute because he does not have standing under that statute.

Three elements must be in place for someone to get standing to appear in court.  These are 1) there must be an actual (live) controversy, 2) the federal statute in question gives the federal court jurisdiction to hear the matter, and 3) the parties are residents of different states or otherwise fit the constitutional requirements for federal court jurisdiction.  All three of these elements must be satisfied in order for a party to bring a case in federal court.

Prospective clients get confused, oddly enough, about the first element, the requirement for an actual or live controversy.  The controversy must be between the plaintiff and the defendant.  Whistleblowers tend to gloss over the fact that the live controversy must have damaged them personally and directly.  They also overlook the fact that many federal statutes give only the government standing to bring an action for violations of those statutes.  Let’s look at a hypothetical.

Client discovers massive off label marketing violations while working in sales for a pharmaceutical manufacturer..  Client looks online and finds out that a US attorney in California is suing another manufacturer for the same conduct and is using Federal Food, Drug, and Cosmetic Act violations as the basis for the lawsuit.  Client reasons that he can also sue under the FD&C.  Client tells attorney to file an FD&C lawsuit on behalf of the client. Attorney wonders why she didn’t go into accounting.

This problem is easy to address.  The live controversy, FD&C violations, is between the government and the manufacturer, not between the manufacturer and the client.  FD&C isn’t in place to recompense individuals.  The client has no recourse under FD&C and cannot bring a case under FD&C.

BUT – if the circumstances allow, the client can bring a False Claims action.  If the client has knowledge of certain kinds of lies told by the manufacturer to the governments, the client may be able to bring an action under the False Claims Act.  The FD&C violations would be “underlying” violations that form the basis for the False Claims action.  In other words, the manufacturer may be lying about its compliance with the FD&C and the client may have knowledge of those lies.  If so, those lies would be false claims, and those false claims could be reported through the False Claims Act.

I run into attorneys who have the opposite reaction to the hypothetical; those attorneys know full well that an individual does not have standing under many statutes, like the FD&C.  They can’t understand how an individual can get standing to address FD&C violations through a False Claims action. I go through the FCA spiel, talk about how the whistleblower stands in the shoes of the government, talk about the obligations the whistleblower has to meet to achieve a monetary award, yada yada.  Attorneys are usually skeptical, and I understand why. FCA actions are exceptions to the normal rules of standing, and they aren’t part of the law school curriculum or bar exams. To a well-trained attorney, an FCA action seems like some kind of ninja law.  Attorneys would rather stick with something more traditional, like wrongful termination actions or anti-retaliation law violations.

Sorting through standing questions is just the start of a qui tam action, but standing is a big hurdle.  Experienced qui tam attorneys have successfully addressed the standing issue, but a lot of attorneys like to dabble in False Claims actions, and they make mistakes.  I’ve been asked to do a post mortem on some of these mistakes, and it’s sad to see how attorneys and clients can get confused and really mess up a qui tam before it ever gets rolling.  Usually, the damage cannot be undone, and the claim is ruined.

FCAs, in the best of circumstances, are highly speculative propositions.  Confusion about standing leads to confusion about rights of action, and if all this leads to a misstep in drafting the complaint, the case is doomed the minute it is filed. Please seek experienced False Claims counsel if you want to use the FCA to address fraud against the government.  Make sure the relator has standing.

 

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