West Virginia Considers New False Claims Act Legislation

Posted by Jonathan F. Cohn and Brian P. Morrissey

Earlier this month, the West Virginia House Judiciary Committee approved a State False Claims Act by a 15-9 vote, advancing the bill for consideration by the full House. If enacted, the bill would add West Virginia to the list of over 30 states that currently have False Claims Act legislation in place.

The proposed bill mirrors the federal False Claims Act in many key respects. Like the federal Act, the bill would punish any person who “knowingly presents or causes” the presentment of a “false or fraudulent claim” to an agent of the State government. W. Va. H.B. 4001 § 14-4-2(a)(1). In addition, it subjects violators to potential treble damages, as well as civil penalties and costs. Id. § 14-4-2(a). Qui tam relators may initiate suits under the proposed law, and may proceed with litigation even when the State elects not to intervene. Id. § 14-4-4. Relators would be entitled to a share of any recovery, not to exceed 25% in cases in which the State has intervened and 30% in cases the relator has pursued alone. Id. § 14-4-6(a)-(b). Also like the federal Act, the proposed bill imposes “first-to-file” and “original source” limitations on qui tam actions. Id. § 14-4-7(c), (d)(1).

Importantly, the proposed bill’s “original source” limitation may impose only a modest hurdle to prospective qui tam suits. The proposed bill states that a court “shall” dismiss a qui tam action if “substantially the same allegations were publicly disclosed” by another source. Id. § 14-4-7(d)(1). Like the federal FCA, however, the proposed bill appears to prevent the court from dismissing the case if the State opposes dismissal. Id.; see 31 U.S.C. § 3730(e)(4)(A). In addition, the proposed bill explicitly contemplates that a qui tam relator may pursue litigation and share in the recovery even if the relator’s claims are based “primarily” on a prior public disclosure from another source. W. Va. H.B. 4001 § 14-4-6. In this respect, the proposed bill appears to diverge from the federal FCA, which (after its 2009 and 2010 amendments), prohibits a qui tam relator from proceeding with a suit based on a prior public disclosure unless the relator provided the information to the Government prior to the public disclosure, or has knowledge that is “independent of and materially adds to” that public disclosure. 31 U.S.C. §3730(e)(4)(B).

Critics of the proposed legislation, including the West Virginia Chamber of Commerce, have expressed concern that the bill may adversely affect the business climate in the State and may unduly burden the West Virginia Attorney General’s Office. The Attorney General’s Office has not formally taken a position on the bill, although its General Counsel has noted that the bill would “dramatically” increase whistleblower litigation, and thereby impose “significant” challenges on the Office’s limited resources.

We will continue to monitor the bill’s progress in the West Virginia Legislature.