The qui tam provisions of the False Claims Act (FCA) are broad in scope and permit a wide array of individuals to pursue FCA litigation as relators acting on behalf of the Government. However, the ability of individuals to pursue FCA litigation on behalf of the Government is not unfettered. For example, a member of the armed forces is barred from bringing an FCA action “arising out of such person’s service in the armed forces.” 31 U.S.C. § 3730(e)(1). Another provision of the FCA prevents an individual who was convicted of criminal conduct relating to the individual’s involvement in the violation of the FCA from bringing a claim as a relator. 31 U.S.C. § 3730(d)(3). Specifically, Section 3730(d)(3) provides that:
Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.
31 U.S.C. § 3730(d)(3).
The scope of the claims bar that is set forth in Section 3730(d)(3) was recently analyzed in the case of Schroeder ex rel. United States v. CH2M Hill, Case No. 13-35479, 2015 U.S. App. LEXIS 12287 (9th Cir. July 16, 2015). The defendant in the Schroeder case, CH2M Hill, was alleged to have engaged in the fraudulent submission of claims for hourly work. Schroeder was a former employee of the defendant who had submitted false time cards. Schroeder had previously pled guilty to one count of conspiracy to commit fraud, which is a felony. Despite his participation in the fraud, Schroeder commenced a qui tam action against the defendant based on its alleged fraudulent billing and the Government eventually intervened in the action and filed a motion to dismiss Schroeder as a relator because of his prior felony conviction for conspiracy to commit fraud. The motion to dismiss was granted.
On appeal, Schroeder challenged the district court’s decision to grant the motion to dismiss by arguing that the involvement of minor participants in the alleged fraud should not require dismissal. The Ninth Circuit rejected Schroeder’s argument and held that the dismissal was appropriate because the plain language of Section 3730(d)(3) did not include an exception for individuals who had played only a small role in the fraud at issue.