California False Claims Act
California has independent qui tam laws and procedures. The California False Claims Act (the “CFCA”) was enacted in 1987, making it one of the oldest state false claims act. Numerous cases have been litigated pursuant to the California False Claims Act (the “California FCA”)1. Thus, California courts have had ample opportunity to interpret provisions of the California FCA.
1. Liability Provisions
The language of the California FCA closely tracks the language of the federal statute2. An individual will be liable under the California FCA for the same violations that trigger liability under the FCA. Like the federal statue, the purpose of the California FCA is “to supplement governmental efforts to identify and prosecute fraudulent claims made against state and local governmental entities by authorizing private parties (referred to relators) to bring suit on behalf of the government.”3 A suit may be brought by any “person,” defined by the California FCA to include “any natural person, corporation, firm, association, organization, partnership, limited liability company, business, or trust.”4 However, no claim can be brought against anyone who voluntarily discloses the information, fully cooperates with the investigation, and no enforcement action has commenced.5
Like the federal act, the California FCA explicitly exempts tax claims, records, or statements, but the California FCA also explicitly exempts controversies involving less than five hundred dollars ($500) and does not apply to workers’ compensation claims or claims against public entities or public employees.6 The California legislature provided in that the act should be “liberally construed and applied to promote the public interest.”7
2. Procedural Issues
The California FCA, like its federal counterpart, permits any “person” to bring an action pursuant to the statute.8 However, the California FCA prohibits a present or former state employee from bringing suit based upon information discovered “during the course of his or her employment unless that employee, first, in good faith, exhausted existing internal procedures for reporting and seeking recovery” of the false claims and the state failed to act on the information “within a reasonable period of time.”9
Unlike its Federal counterpart, the California FCA does not provide a six-year statute of limitations. The California FCA provides for a statute of limitations of not “more than three years after the date of discovery by the official of the state or political subdivision charged with responsibility to act in the circumstances or, in any event, no more than ten years after the date” California FCA violation is committed.10 The statute of limitations period begins to run when the official knows or reasonably should know of the false claim.11 Retaliation actions filed pursuant to the California FCA., however, follow the state’s statute of limitations for wrongful termination.12
Certain provisions of California’s procedural code are impacted by the California FCA. California law provides absolute protection of communications made during judicial or quasi-judicial proceedings, or made in anticipation of litigation. However, this litigation privilege is not applicable to any false claims made as part of litigation and then brought pursuant to the California FCA.13 Also, the California Anti-SLAPP statute permits a court to strike a counterclaim “filed solely for delay and distraction” and “to prevent citizens from exercising their political rights.”14 When a defendant files a counterclaim in a qui tam suit and the relator moves to strike under the Anti-SLAPP statute, the court must first determine if the defendant is liable under the California FCA before adjudicating the counterclaim.15 If the court finds the defendants liable for violating the California FCA, then the court can dismiss the counterclaim.16
The remaining procedural provisions of the California FCA are similar to those found in the FCA. The relator must serve the attorney general with a copy of the complaint and a written disclosure of all material evidence and information the relator possesses.17
3. Jurisdictional Bars to Actions
The California FCA provides jurisdictional bars that are similar to those of the FCA. The California FCA contains a first to file bar like its federal counterpart.18 Furthermore, like the FCA, the California FCA prohibits an action based upon allegations or transaction which are the subject of “a civil suit or an administrative civil money penalty proceeding to which the state or political subdivision is already a party.”19 In addition, the CFCA prohibits suits against members of the California legislature, state judiciary, and executive officials.20 The California FCA also provides a public disclosure bar similar to the FCA, unless the whistleblower is an “original source.21
Like the federal statute, to be an “original source” under the California FCA, the individual must have direct and independent knowledge of the information and voluntarily provided the information to the state before filing suit.22 The California FCA, however, adds an additional requirement that the individual’s information provide the basis or catalyst for the public disclosure.23 In order for a public disclosure to occur, there must be an affirmative act of disclosure.24
Like the federal FCA, the California FCA provides protection for state whistleblowers from employer retaliation.25 It prohibits an employer from creating, adopting, or enforcing any rule, regulation or policy that prevents an employee from disclosing information to the state or from acting in furtherance of the prosecution of a false claims action. The California provisions, however, are not a general prohibition against retaliation. The provisions only provide a remedy for retaliation against an employee for reporting fraud against the state pursuant to the California FCA. Prior to bringing suit pursuant to Section 12653, a whistleblower must exhaust all administrative remedies available to him.26
5. Relator Share
The California FCA grants a greater recovery by the relator than its federal counterpart. The California FCA provides a relator with a share of the proceeds between fifteen and thirty-three percent if the state intervenes.27 If the state does not intervene, the qui tam plaintiff may recover a share of the proceeds between twenty-five and fifty percent.28 A present or former employee of the state or a political subdivision who brings suit, in which the state intervenes, is entitled a recovery ranging from zero percent to not more than thirty-three percent. However, if the government does not intervene in a case brought by a present or former employee, the employee may receive a share of the recovery ranging from zero to not more than fifty percent if the state does not intervene.29
The CFCA is found in Cal. Gov’t Code Ann. §§ 12650-12655.
City of Hawthorne ex rel. Wohlner v. H&C Disposal Co., 1 Cal. Rptr.3d 312, 109 Cal. App. 4th 1668, 1676-1677 (2003).
Id., 109 Cal. App. 4th at 1676 (citing to American Contract Services v. Allied Mold & Die, Inc., 94 114 Cal. Rptr.2d, 94 Cal. App.4th 854, 858 (2001)).
Cal. Gov’t Code Ann. § 12650(b)(8). The California Supreme court has held this does not apply to governmental entities, including school districts. See Wells v. One2One Learning Found., 39 Cal.4th 1164, 1192, 48 Cal. Rptr.3d 108, 122 (2006).
Cal. Gov’t Code Ann. § 12651(b)(3).
Cal Gov’t Code Ann. § 12651(e).
Cal. Gov’t Code Ann. § 12655(c).
Cal. Gov’t Code Ann. § 12652(c)(1).
Cal. Gov’t Code Ann. § 12652(d)(4)
Cal. Gov’t Code Ann. § 12654(a).
Debro v. Los Angeles Raiders, 112 Cal. Rptr.2d 329, 92 Cal. App.4th 940, 953 (2001).
I McMahon v. El Camino Community College District, No. B145042, 2002 WL 125734 at *1 (Cal. Ct. App. Jan. 31, 2002). The statute of limitations for wrongful discharge in California is two years. Cal. Corp. Code § 335.1 (2004).
Cal. Gov’t Code Ann. § 12654(e). See also Stacy & Witbeck, Inc. v. City & Cnty of San Franciso, 54 Cal. Rptr.2d 530, 47 Cal. App. 4th 1 (1996).
Kajima Engineering and Construction, Inc. v. City of Los Angeles, 116 Cal. Rptr.2d 187, 95 Cal. App.4th 921, 927 (2002).
Fresno Unified School District v. Wilson, No. F035777, 2002 WL 44440 at *12 (Cal. Ct. App. Jan. 11, 2002).
Cal. Gov’t Code § 12652(c)(3).
Cal. Gov’t Code § 12652(c)(10).
Cal. Gov’t Code § 12652(d)(2).
Cal. Gov’t Code § 12652(d)(1).
Cal. Gov’t Code § 12652(d)(3).
Cal. Gov’t Code Ann. §12652(d)(3)(B).
State ex rel. Harris v. Pricewaterhouse Coopers LLP, 23 Cal. Rptr.2d 529, 125 Cal. App.4th 1219, 1254 (2005).
Cal. Gov’t Code Ann. § 12563. Compare 31 U.S.C. § 3730(h).
Campbell v. Regents of University of California, 25 Cal. Rptr.3d 320, 35 Cal.4th 311, 328 (Cal. 2005).
Cal. Gov’t Code Ann. § 12652(g)(2).
Cal. Gov’t Code Ann. § 12652(g)(3).
Cal. Gov’t Code Ann. § 12652(g)(4 & 5).
Author of treatise, Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
ABOUT THE AUTHOR: Joel M. Androphy, Rachel L. Grier
Berg & Androphy is an experienced national law firm with offices in Texas, Colorado, Washington, D.C., Pennsylvania, and New York. The firm tries big cases. Our lawyers have represented individuals in nationwide qui tam cases against companies that have defrauded federal and state governments. Our track record is a point of pride with us. Opposing lawyers know we do not hesitate to try a case to verdict, most often with extraordinary results. That reputation adds value to the cases we accept.
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