First District, Division 4 Adds to State False Claims Act Fee Shifting Jurisprudence.
In our June 6, 2011 post, we explored the Second District, Division 6’s recent decision in County of Kern v. Jadwin, where Justice Yegan on behalf of a unanimous panel discussed the California False Claims Act (“CFCA”) (explained, along with the public disclosure bar, at the end of the post) fee shifting provision codified at former Government Code section 12652(g)(9) [a provision allowing fee recovery to a defendant where a false CFCA suit was brought solely for harassment purposes, with the present statutory version containing even broader primarily language].
Now, the First District, Division 4 in State of California ex rel. Standard Elevator Co. v. West Bay Builders, Inc., Case Nos. A124892/A125340 (1st Dist., Div. 4 July 22, 2011) (certified for publication) also has considered issues arising under the former section 12652(g)(9) version with the “solely” language.
In this most recent decision, an unlicensed subcontractor was found liable to contractor for fraud in a bid submission on a public works project. Contractor was awarded damages from using a replacement licensed sub when the work exceeded the unlicensed sub’s agreed-to costs. Subcontractor then sued the general contractor under the state CFCA, based on the theory that gen made illegal certifications based on improperly substituting the unlicensed sub. The trial court granted summary judgment to general contractor and awarded it $201,483.75 in attorney’s fees for defending against a frivolous/harassing lawsuit under former section 12652(g)(9).
Appealing sub raised numerous challenges to the fee award.
All for naught.
Appellant first argued that the CFCA public disclosure bar (the basis for decision) was jurisdictional in nature and deprived the lower court of the ability to award fees. No, said the appellate court, because the trial court can award fees as ancillary even though a dismissal is deemed to be jurisdictional in nature.
Disappointed sub then argued that the general contractor was not a prevailing party. Analogous false claims act federal cases came to the aid of respondent, cases which held that dismissal of a qui tam suit under the public disclosure bar did materially alter the legal relationships of the parties so as to make the defense prevailing for purposes of fee recovery. (U.S. ex rel. Atkinson v. Pennsylvania Shipbuilding Co., 528 F.Supp.2d 533, 541-543 (E.D. Pa. 2007).)
The third argument was that the fee award was inconsistent with an earlier ruling in a different action that respondent was not entitled to recovery under its malicious prosecution complaint. Nope, this one failed because one can be a prevailing party even if no favorable termination was found against an opponent in a malicious prosecution suit.
Finally, there was substantial evidence showing the claim was brought solely for harassment purposes and the fee request was not excessive in nature.
BLAWG BONUS. For those who do not practice under the CFCA, and for whom this post is gobbledygook [sometimes gobbledegoo], here is the ½ minute explanation of the CFCA and public disclosure bar. The CFCA is a litigation tool for combating fraud. The CFCA imposes liability for submitting a fraudulent claim for payment to the government. The CFCA empowers private party whistleblowers to institute civil actions (qui tam actions) to enforce the CFCA, enabling them to collect bounties if their actions are successful.
However, there needs to be a way to separate worthy whistleblowers from unworthy whistleblowers. In general, the public disclosure bar limits the ability of a whistleblower to bring a qui tam suit based upon public information, unless the private party is also the original source of that information — and the bar is jurisdictional.