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Supreme Court to Decide Whether Federal Government is Always a Party in Qui Tam Whistleblower Cases

 

The United States Supreme Court will soon decide whether the federal government is always considered a party to False Claims Act lawsuits. The court heard oral arguments in United States ex rel. Eisenstein v. City of New York, No. 08-660, on April 21. At issue is the timeline to appeal a case’s dismissal. The Federal Rules of Appellate Procedure give private parties, including those acting as relators under the law, 30 days to file a notice of appeal, but it extends that deadline to 60 days for cases in which the federal government is a party. The court will decide which deadline applies to False Claims Act cases, in which private parties bring lawsuits on behalf of the government.

The False Claims Act allows federal prosecutors or individuals to “blow the whistle” on fraud against a federal agency. The individuals are called relators. Because relators are typically insiders who work for or with the fraudulent organization, they first file their claims under a seal that hides the complaint from public view. The Justice Department receives a copy of that complaint, however, and may choose to step in. If it does not, the relator is free to continue the suit on behalf of the United States government. If the claim is successful, the relator is eligible to collect 15% to 25% of the judgment, but most of it goes to the federal government. Thus, the plaintiff is in a sense both the relator and the government.

That unusual situation set the stage for a Second Circuit Court of Appeals decision in 2008, rebuffing the claim of a relator who it said appealed the dismissal of his case too late. In United States ex rel. Eisenstein v. City of New York, 540 F.3d 94 (2d Cir. 2008), Irwin Eisenstein and four city employees sued the City of New York for assessing a fee on its nonresident employees that was equivalent to municipal income taxes on city residents. Among other claims, they asserted that this violated the False Claims Act because it reduced their taxable income and deprived the federal government of tax revenue. The Justice Department declined to intervene.

The complaint was dismissed, and Eisenstein appealed to the Second Circuit 54 days later. The city moved to dismiss on the grounds that Eisenstein’s appeal was not timely under the 30-day time limit for claims in which the government is not a party. After ordering briefing from both sides and from the United States as amicus curiae, the Second Circuit agreed. If the government declines to intervene, it pointed out, it typically does not receive case documents, may not participate without moving to intervene and is not liable for fees and costs incurred by the relator. Thus, even though it is the real party in interest to the case, the government is not a party under the Federal Rules of Civil Procedure, the Second Circuit decided.

This exacerbated a split in the federal circuit courts. Our own Seventh Circuit, along with the Fifth, Ninth and Third Circuits, has concluded that the sixty-day rule does apply for appeals in qui tam cases. Until Eisenstein, only the Tenth Circuit applied the shorter deadline. The
Supreme Court granted certiorari in January and heard oral arguments April 21. According to SCOTUSBlog, the justices heard a lot of arguments interpreting the language of the Federal Rules of Civil Procedure, but seemed more concerned about the possible consequences of shortening the deadline in circuits where the longer one was caselaw.

Based in Oak Brook, Ill. and Chicago, the consumer rights firm DiTommaso Lubin Austermuehle is proud to represent whistleblowers who expose serious wrongdoing and fraud against government agencies. Our Chicago and Naperville False Claims Act, whistlebolower and qui tam attorneys stand ready to represent people around the United States who report fraudulent and dishonest practices against the federal government and its personnel. We also handle qui tam and whistleblower lawsuits at the state and local levels, including claims under the Illinois Whistleblower Reward and Protection Act and the Chicago False Claims Act. If you believe you have a whistleblower claim and you would like to learn more about how we can help, please contact DiTommaso Lubin Austermuehle today for a free, confidential consultation.