By Taylor Steele and Ben Fuchs
A California appellate court[1] recently handed whistleblowers and their counsel a win by safeguarding their right to thoroughly prepare their cases for trial and thus fully expose and root out fraud.
Following the trial court’s dismissal, the Second District Court of Appeal reinstated a qui tam lawsuit brought by a whistleblower, Ms. Sills, and the State of California against several parties accused of defrauding Medi-Cal and California’s workers’ compensation fund, among other violations. The ruling confirmed that delays because of the government investigation phase at the beginning of a whistleblower case do not count toward the plaintiff’s five-year deadline to bring the case to trial.
Under California law, any person who knows about a fraud committed against the government[2] or a private insurer[3] can sue on behalf of the government. Successful whistleblowers have a right to share in the government’s recovery. These whistleblower awards can be significant. To start the case, the whistleblower must file the complaint under seal (i.e., in secret) so the government has time to investigate and consider whether to take an active role in the case without tipping off the defendants. After assessing the case, the government will either intervene—taking over lead prosecution duties from the whistleblower who brought the case—or decline to intervene, leaving the whistleblower and their attorneys in charge of prosecuting the matter.
In Sills, the government took almost three years after Ms. Sills filed her lawsuit to decide not to intervene in the case. Only then was the complaint unsealed and served on the defendants. The trial court later dismissed the case, contending that Ms. Sills had failed to bring the case to trial within the required five-year timeframe. Ms. Sills appealed.
The Second District overturned the trial court, reasoning that the five-year timeline was paused while the government assessed the case because Ms. Sills could do nothing to advance the case toward trial during that period. Id. at 844-45. Even though over seven years passed between when Ms. Sills filed the complaint and when the trial court dismissed the case, the matter was still within the five-year deadline because it had been stayed for many of those years. Id. at 833.
The Sills decision resolves any uncertainty that the initial government case-assessment period might somehow count against the plaintiffs’ five-year trial deadline in qui tam whistleblower lawsuits. As the Second District noted, a decision to the contrary would have a potentially disastrous effect on whistleblowers’ ability to prosecute these important cases on behalf of the State and the public—an outcome that would run “contrary to [the Legislature’s] directive” that these two important anti-fraud statutes “be liberally construed and applied to promote the public interest.” Id. at 847
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[1] California ex rel. Sills v. Gharib-Danesh (2023) 88 Cal.App.5th 824.
[2] California False Claims Act, Gov. Code § 12650 et seq.
[3] California Insurance Frauds Prevention Act, Ins. Code § 1871 et seq.