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Fla. court affirms AG's power to dismiss whistleblower lawsuits

W.J. Kennedy Feb. 29, 2016, 9:22am

TALLAHASSEE, Fla. (Legal Newsline) - A Florida appeals court last week reaffirmed the state attorney general's authority to dismiss a whistleblower action under the state’s False Claims Act, even in cases in which the state chooses not to intervene in the action.

Business defense experts on the FCA said they hope the ruling supporting a rare action to dismiss would discourage future lawsuits that are without merit.

“For the attorney general to dismiss this case, it had to be the worst of the worst regarding frivolous lawsuits,” said W. Jerad Rissler, with the Washington, D.C., firm of Arnall Golden Gregory LLP.

“But even in these cases, it costs contractors time and money to defend.”

First filed in 2009, the case involving an automated fingerprinting identification system was brought by an engineer formerly with Motorola, which designed the system. The engineer, Zoltan Barati (relator), claimed the company failed to tell the Florida Department of Law Enforcement, which bought the system, about problems that required several million dollars to correct.

But an affidavit filed by the FDLE said the system “was, and is, successful and fully complies with the contract.”

In FCA cases, the federal government and affected states are given the option to intervene in the case. In 2010, state Attorney General Pam Bondi chose not to intervene in the case, and in 2013, she dismissed it.

Barati’s attorneys argued in part that the Attorney General's Office lost its authority to dismiss when it chose not to intervene.

But in a Feb. 23 decision, First District Court of Appeal Judge Brad Thomas wrote, "We hold that the attorney general possesses the plenary authority to unilaterally dismiss a qui tam (whistleblower) action, regardless of the state's decision to decline to previously intervene in the litigation.”

Thomas was joined by Chief Judge Clay Roberts and Judge Stephanie Ray.

Barati also raised due process arguments. But the Florida FCA, unlike the federal law on which it is largely based, contains no provision for a hearing regarding the attorney general’s decision to dismiss a qui tam action.

In an answer brief, the Attorney General’s Office stated, “The lack of notice and hearing provisions in the dismissal context was a deliberate policy choice by the Legislature to provide the Attorney General with unfettered control over qui tam actions and avoid any need for her to explain the dismissal decision.”

President of the Florida Justice Reform Institute, William W. Large, praised the District Court’s ruling.

“To allow an individual relator – motivated solely by personal financial reward and with no special expertise in, or necessary regard for proper policy implications – to stymie the Attorney General’s discretionary decision to dismiss a case makes no sense,” Large said.

 In the large majority of qui tam cases, the states and federal government choose not to intervene.

At the same time, they will not dismiss, said Kayla Stachniak Kaplan with the Washington, D.C., office of Fried Frank (which filed an amicus brief in the Florida case) “but sit back and watch how the case develops.”

 “Often the contractor will settle because they face treble damages if they lose in court and in a separate proceeding could lose any right to future government contracts,” Kaplan said.

 Dating back to the Civil War, the FCA (also called Lincoln’s law) was created to deal with those who would cheat the Union Army in providing shoddy equipment, sickly horses, even sacks of sand instead of sugar. The law motivates employees, those with inside knowledge of the fraud, to “blow the whistle” on the employer by rewarding them with a share of the damages.

The law also provides for an award of the relator's attorneys' fees, making qui tam actions a boon for the plaintiffs bar.

 Philip Goldberg, with the Washington, D.C., law firm of Shook, Hardy & Bacon, said that amendments to the federal statute and changes rendered through court decisions have emboldened the trial bar, opening the door to actions in which no fraud exists. In many cases, there has been no injury or no loss to the taxpayer, he said.

One of those changes made it no longer necessary for a whistleblower to have “insider” information - information that a government agency did not have on its own. This has led to lawsuits in which the offense might be as inadvertent and harmless as filing an incorrect form.