False Claims Act Lawsuit By Private Party Requires Governmental Approval

This post was written by Chadd Reynolds and David Cook.

Like many states, Georgia has enacted a False Claims Act, which is an important piece of legislation for public contractors and subcontractors.  The Act is largely similar to the Federal False Claims Act, which was discussed in a prior blog post and article by AHC attorneys.  The Act permits the State, or a private party with the State’s permission, to pursue a private entity for false claims against the State.  Given its broad reach and severe penalties, public contractors and subcontractors should pay attention to case law under the Act.

In a recent case, McKinney v. Fuciarelli, No. S15G1885, 2016 WL 1627947 (Ga. April 26, 2016), the Supreme Court of Georgia granted certiorari to decide whether governmental approval is required before a private party can bring a claim under the Act.

The plaintiff was a tenured faculty member at Valdosta State University (“VSU”).  VSU eventually terminated his contracts to serve as assistant vice president for research and a dean of the graduate school when he complained about the school’s noncompliance with laws, rules, and regulations.  Although the plaintiff remained a faculty member, his salary and benefits were reduced as a result of the schools decision.  The plaintiff appealed the decision to the Board of Regents which affirmed the VSU’s decision.

The plaintiff then filed suit under the Act, seeking damages against the Board of Regents, the president of VSU, and the vice president of VSU.  The trial court denied the defendants’ motion to dismiss the retaliation claim, but granted the defendants’ motion to dismiss the taxpayer retaliation claim because the plaintiff failed to obtain the approval of the Attorney General before filing suit.  The Court of Appeals reversed in part, holding that approval was not required prior to filing suit under the Act.

The sole question for the Court was whether the Court of Appeal’s faithfully followed the plain text of the Act.  The Act allows the State of Georgia to recoup funds lost when obtained through false or fraudulent claims for public funds.  The funds are to be recouped by the Attorney General.  As for claims brought by a private party, the Court examined the language of the statute which provided that “a civil action under this article may also be brought by a private party upon written approval by the Attorney General.”  O.C.G.A. § 23-3-122(b)(1).

According to the Court of Appeals, the words “this article” were used by mistake.  It reasoned that “civil action” referred only to cases brought in the name of the State or local government, and the Attorney General’s approval is not required for a taxpayer retaliation claim brought on behalf of a private party.  The Court disagreed, holding that the plain terms of the statute state that subsection (b)(1) is applicable to any civil action brought by a private party “under this article.”  This, therefore, requires the Attorney General’s approval before a taxpayer retaliation claim is filed.

As for contractors, if a situation occurs where taxpayer funds were falsely claimed on a project, the McKinney makes it clear that any suit brought by a private party under the Act must be approved by the Attorney General before it is filed.


 

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