What Is 31 USC 3730(b) and How Does It Work?

The United States Code contains a provision, 31 U.S.C. § 3730, that serves as the legal foundation for a lawsuit known as a qui tam action. This section of the False Claims Act empowers private citizens to file a lawsuit against a person or company on behalf of the U.S. government. The law’s purpose is to recover government funds lost to fraudulent activities, and the individual who initiates this action is called a “relator.”

The law establishes an incentive for whistleblowers by allowing them to share in a percentage of the recovered money. The term qui tam is derived from a Latin phrase meaning “who sues on behalf of the king as well as for himself,” reflecting the dual nature of the lawsuit.

Who Can File a Qui Tam Lawsuit

The False Claims Act permits any “private person” to file a qui tam lawsuit, a term that is interpreted broadly. This means an individual does not need to be a U.S. citizen or have any personal financial stake in the fraud to act as a relator. Relators are often current or former employees of the company committing the fraud, but they can also be competitors, subcontractors, or any individual with knowledge of the wrongdoing.

A significant restriction on who can file is the “first-to-file” rule. This provision states that once a relator files a qui tam action, no other person may bring a related action based on the same underlying facts. This rule creates a race to the courthouse, as only the first individual to properly file the claim will be eligible to proceed and potentially receive an award.

Another hurdle is the “public disclosure bar,” which prevents a person from filing a lawsuit if the allegations of fraud are already in the public domain through channels like federal court cases, government reports, or news media. An exception exists for an “original source” of the information. An individual can qualify as an original source if they have direct and independent knowledge of the information and have voluntarily provided it to the government before filing an action.

Required Information and Initial Filing

To initiate a qui tam lawsuit, a relator must prepare two documents. The first is a formal complaint, which is the legal document that outlines the specific allegations of fraud against the defendant. This complaint must detail the who, what, when, where, and how of the fraudulent scheme and identify the parties involved and the specific provisions of the False Claims Act allegedly violated.

Alongside the complaint, the relator must provide the government with a “written disclosure of substantially all material evidence and information” they possess. This can include emails, internal memos, billing records, and witness names that substantiate the claim of fraud. This disclosure is provided exclusively to the government to give federal investigators a roadmap to validate the claims.

The filing process is confidential. The complaint must be filed in camera, meaning it is reviewed by the court in private, and under seal, which means it is kept secret from the public and the defendant. This secrecy is designed to give the government time to investigate the allegations without alerting the target of the investigation.

As part of this confidential process, the relator serves the complaint and the written disclosure on the U.S. Attorney General and the U.S. Attorney for the judicial district where the case is filed. The defendant is not served with the complaint at this stage, and the case remains under seal while the government evaluates its merits.

The Government’s Investigation and Intervention Decision

Once the qui tam lawsuit is filed under seal, the government is given an initial 60-day period to investigate the relator’s allegations. During this time, federal investigators, often from agencies like the Department of Justice or the Office of Inspector General, will review the evidence provided by the relator, interview witnesses, and conduct their own inquiry to determine if the claims have merit.

In practice, the initial 60-day period is often insufficient for a thorough investigation, especially in complex fraud cases. The government can request extensions from the court for “good cause shown.” These extensions allow the investigation to continue while the case remains under seal, sometimes for many months or even years. The relator and their legal counsel cooperate with the government throughout this investigative phase.

At the conclusion of its investigation, the government must decide whether to “intervene” or “decline to intervene.” If the government chooses to intervene, it takes over as the primary prosecutor of the action, with the Department of Justice leading the litigation. If the government declines, the case is not dismissed; instead, the right to prosecute the action falls to the relator.

The Relator’s Role and Potential Award

The government’s decision on intervention significantly impacts the relator’s role in the lawsuit. If the government intervenes, the relator and their counsel still remain a party to the action. They have the right to participate in the litigation, including the right to object to a proposed settlement or a motion to dismiss the case. The relator’s continued involvement is valuable, as they often possess detailed knowledge that assists the government’s legal team.

Should the government decline to intervene, the relator’s attorney takes the lead in litigating the case against the defendant, from discovery and motions to trial. The government remains a party in interest and must be consulted on key developments. It can also choose to intervene at a later date if there is good cause.

A significant aspect of a qui tam action for the relator is the potential for a financial award, known as the “relator’s share.” This award is a percentage of the total amount recovered from the defendant. The specific percentage range is determined by statute and depends heavily on whether the government intervened in the case.

If the government intervenes, the relator is eligible to receive between 15 and 25 percent of the proceeds. The exact amount is determined by factors such as the significance of the information provided and the extent of their contribution to the prosecution. If the government declines and the relator successfully prosecutes the case, the award is higher, ranging from 25 to 30 percent of the recovery. This higher percentage compensates the relator for the increased risk and resources required.