Bill Text: MI HB5430 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Civil procedure; civil actions; false claims act; enact. Creates new act.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2012-02-28 - Printed Bill Filed 02/24/2012 [HB5430 Detail]
Download: Michigan-2011-HB5430-Introduced.html
HOUSE BILL No. 5430
February 23, 2012, Introduced by Reps. Heise, Lane, Hovey-Wright, Cavanagh, Hooker, Darany, Hughes, Wayne Schmidt, Kowall, Goike, Somerville and Meadows and referred to the Committee on Judiciary.
A bill to provide for remedies and prescribe civil sanctions
against a person who presents a false or fraudulent claim to obtain
money, property, or services from this state or a local unit of
government; to prescribe the powers and duties of certain state and
local government officers and agencies; to prohibit retaliation
against a person who pursues a remedy under this act; and to
authorize the attorney general to promulgate rules.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "false
claims act".
Sec. 2. As used in this act:
(a) "Claim" means, subject to subdivision (b), a request or
demand, whether under a contract or otherwise, for money or
property that is either of the following:
(i) Presented to an officer, employee, or agent of this state
or a local government.
(ii) Made to a contractor, grantee, or other recipient, if the
money or property is to be spent or used on the behalf of this
state or a local government or to advance a state or local
government program or interest, and if either of the following
applies:
(A) This state or a local government has provided or will
provide any portion of the money or property that is requested or
demanded.
(B) This state or a local government will reimburse the
contractor, grantee, or other recipient for any portion of the
money or property that is requested or demanded.
(b) "Claim" does not include a request or demand for money or
property that this state or a local government has already paid to
an individual as compensation for government employment or as an
income subsidy with no restrictions on that individual's use of the
money or property.
(c) "False claim" means any claim that is, either in whole or
part, false or fraudulent.
(d) "Knowing" and "knowingly" mean, subject to subdivision
(e), that 1 of the following applies to a person with respect to
information:
(i) The person has actual knowledge of the information.
(ii) The person acts in deliberate ignorance of the truth or
falsity of the information.
(iii) The person acts in reckless disregard of the truth or
falsity of the information.
(e) "Knowing" and "knowingly" do not require proof of specific
intent to defraud.
(f) "Local government" means county, city, township, village,
school district, board of education, public benefit corporation, or
other municipal corporation or political subdivision of this state
or of a local government.
(g) "Material" means having a natural tendency to influence,
or to be capable of influencing, the payment or receipt of money or
property.
(h) "Obligation" means an established duty, whether or not
fixed, arising from an express or implied contractual, grantor-
grantee, or licensor-licensee relationship, from a fee-based or
similar relationship, from statute or regulation, or from the
retention of any overpayment.
(i) "Original source" means a person to whom either of the
following applies:
(i) Before a public disclosure under section 4(9)(b), the
person has voluntarily disclosed to this state or a local
government the information on which allegations or transactions in
a cause of action are based.
(ii) The person has knowledge that is independent of and
materially adds to the publicly disclosed allegations or
transactions and has voluntarily provided the information to this
state or a local government before or simultaneously with filing an
action under this act.
(j) "Person" means a natural person, partnership, corporation,
association, or other legal entity, other than this state or a
local government.
(k) "Qui tam plaintiff" means an person other this state, the
attorney general on behalf of this state, or a local government who
brings or intervenes in an action brought under section 4(2).
(l) "This state" includes any state department, board, bureau,
division, commission, committee, public benefit corporation, public
authority, council, office, or other governmental entity performing
a governmental or proprietary function for this state.
Sec. 3. (1) Subject to subsection (2), a person who commits
any of the following acts is liable to this state or a local
government, as applicable, for a civil penalty of not less than
$6,000.00 and not more than $12,000.00, plus 3 times the amount of
all damages, including consequential damages, that this state or
the local government sustains because of the acts of the person:
(a) Knowingly presents or causes to be presented a false or
fraudulent claim for payment or approval.
(b) Knowingly makes, uses, or causes to be made or used a
false record or statement material to a false or fraudulent claim.
(c) Conspires to commit a violation of subdivision (a), (b),
(d), (e), (f), or (g).
(d) Has possession, custody, or control of property or money
used, or to be used, by this state or a local government and
knowingly delivers or causes to be delivered less than all of the
money or property.
(e) Is authorized to make or deliver a document certifying
receipt of property used or to be used by this state or a local
government and, intending to defraud this state or the local
government, makes or delivers the receipt without completely
knowing that the information on the receipt is true.
(f) Knowingly buys, or receives as a pledge of an obligation
or debt, public property from an officer or employee of this state
or a local government knowing that the officer or employee is
violating the law by selling or pledging the property.
(g) Knowingly makes, uses, or causes to be made or used a
false record or statement material to an obligation to pay or
transmit money or property to this state or a local government, or
knowingly conceals or knowingly and improperly avoids or decreases
an obligation to pay or transmit money or property to this state or
a local government.
(2) A court may assess not more than 2 times the amount of
damages sustained because of the act of the person described in
subsection (1), if the court finds that all of the following apply:
(a) The person furnished all information known to the person
about the violation to the officials responsible for investigating
false claims on behalf of this state or a local government that
sustained damages within 30 days after the date on which the person
first obtained the information.
(b) The person fully cooperated with any government
investigation of the act.
(c) At the time the person furnished information about the
act, a criminal prosecution, civil action, or administrative action
had not been commenced with respect to the act, and the person did
not have actual knowledge of the existence of an investigation into
the act.
(3) A person who commits an act described in subsection (1) is
also liable for the costs, including attorney fees, of a civil
action brought to recover a penalty or damages under this section.
(4) This section applies to claims, records, or statements
made under a tax law only if both of the following apply:
(a) The net income or sales of the person against whom the
action is brought equal or exceed $1,000,000.00 for a taxable year
subject to an action brought under this section.
(b) The damages pleaded in the action exceed $350,000.00.
(5) The attorney general shall consult with the state
treasurer before filing or intervening in an action under this act
that is based on the filing of false claims, records, or statements
made under a tax law. If this state declines to participate or to
authorize participation by a local government in the action under
section 4(2), the qui tam plaintiff shall obtain approval from the
attorney general before making a motion to compel the department of
treasury to disclose tax records.
Sec. 4. (1) The attorney general may investigate acts
described in section 3(1). If the attorney general believes that a
person has committed any of those acts, the attorney general may
bring a civil action on behalf of the people of this state or on
behalf of a local government against the person. A local government
may also investigate acts described in section 3(1) that may have
resulted in damages to the local government and may bring a civil
action on its own behalf or on behalf of a subdivision of the local
government to recover damages sustained by the local government as
a result of the acts. An action shall not be filed under this
subsection against the federal government, this state, or a local
government or an officer or employee of the federal government,
this state, or a local government acting in his or her official
capacity. The attorney general shall consult with the office of
inspector general of the United States department of health and
human services before filing an action related to the medicaid
program.
(2) Any person may bring a qui tam civil action for an act
described in section 3(1) on behalf of the person and the people of
this state or a local government. All of the following apply to an
action under this subsection:
(a) An action shall not be filed under this subsection against
the federal government, this state, or a local government or an
officer or employee of the federal government, this state, or a
local government acting in his or her official capacity.
(b) A copy of the complaint and written disclosure of
substantially all material evidence and information the qui tam
plaintiff possesses shall be served on the attorney general. A
complaint filed in a court of this state shall be filed in the
circuit court of any county in which the qui tam plaintiff or any
defendant resides or has done or does any business, in camera and
under seal, shall remain under seal for at least 60 days, and shall
not be served on the defendant until the court so orders. The seal
does not preclude the attorney general, a local government, or the
qui tam plaintiff from serving the complaint, other pleadings, or
the written disclosure of substantially all material evidence and
information possessed by the qui tam plaintiff on relevant state or
local government agencies, or on law enforcement authorities of
this state, a local government, or other jurisdictions or the
federal government, so that the acts may be investigated or
prosecuted, except that the seal applies to the agencies or
authorities served to the same extent as the seal applies to other
parties in the action. If the complaint alleges an act described in
section 3(1) that involves damages to a local government, the
attorney general may at any time provide a copy of the complaint
and written disclosure to the attorney for the local government.
However, if the allegations in the complaint involve damages only
to a city with a population of 500,000 or more, or only to this
state and a city with a population of 500,000 or more, the attorney
general shall provide the complaint and written disclosure to the
corporation counsel of the city within 30 days. This state may
elect to supersede or intervene and proceed with the action, or to
authorize a local government that may have sustained damages to
supersede or intervene, within 60 days after it receives both the
complaint and the material evidence and information. However, if
the allegations in the complaint involve damages only to a city
with a population of 500,000 or more, the attorney general shall
not supersede or intervene in the action without the consent of the
corporation counsel of the city. The attorney general shall consult
with the health care fraud division of the department of attorney
general before superseding or intervening in an action related to
the medicaid program. The attorney general may, for good cause
shown, move the court for extensions of the time during which the
complaint remains under seal under this subsection. The motion may
be supported by affidavits or other submissions in camera.
(c) Before the expiration of the 60-day period or any
extensions obtained under subdivision (b), the attorney general
shall notify the court, and shall provide the local government with
a copy of the notification at the same time the court is notified,
that he or she intends to do 1 of the following:
(i) File a complaint against the defendant on behalf of the
people of this state or a local government and by doing so be
substituted as the plaintiff in the action and convert the action
in all respects from an action under this subsection brought by a
private person into a civil enforcement action by the attorney
general under subsection (1).
(ii) Intervene in the action, as of right, so as to aid and
assist the qui tam plaintiff in the action.
(iii) If the action involves damages sustained by a local
government, grant the local government permission to do either of
the following:
(A) File and serve a complaint against the defendant, and by
doing so be substituted as the plaintiff in the action and convert
the action in all respects from an action under this subsection
brought by a private person into a civil enforcement action by the
local government under subsection (1).
(B) Intervene in the action as of right, so as to aid and
assist the qui tam plaintiff in the action.
(d) If this state notifies the court that it intends to file a
complaint against the defendant and by doing so be substituted as
the plaintiff in the action, or to permit a local government to do
so, the complaint must be filed within 30 days after the
notification to the court. For purposes of applying a statute of
limitations, a complaint filed by this state or a local government
under this subdivision relates back to the filing date of the
complaint of the qui tam plaintiff, to the extent that the cause of
action of this state or the local government arises out of the
conduct, transactions, or occurrences alleged or attempted to be
alleged in the complaint of the qui tam plaintiff.
(e) If this state notifies the court that it intends to
intervene in the action, or to permit a local government to
intervene, a motion for intervention shall be filed within 30 days
after the notification to the court.
(f) If this state declines to participate in the action or to
authorize participation by a local government, the action may
proceed subject to judicial review under this section, law and
court rules relating to civil procedure, and other applicable law.
The qui tam plaintiff shall provide this state or a local
government, if applicable, with a copy of any document filed with
the court on or about the date it is filed and any order issued by
the court on or about the date it is issued. A qui tam plaintiff
shall notify this state or a local government, if applicable,
within 5 business days of any decision, order, or verdict that
results in a judgment in favor of this state or the local
government.
(3) If this state decides to participate in an action under
this section or to authorize the participation of a local
government, the court shall order that the complaint be unsealed
and served at the time the complaint or motion by this state or
local government is filed. After the complaint is unsealed, or if a
complaint is filed by this state or a local government under
subsection (1), the defendant shall be served with the complaint
and summons under chapter 19 of the revised judicature act of 1961,
1961 PA 236, MCL 600.1901 to 600.1974. A copy of a complaint that
alleges that damages were sustained by a local government shall
also be served on the local government. The defendant shall respond
to the summons and complaint within the time required under the
applicable court rules.
(4) After an action is filed under this section, a person
other than the attorney general or an attorney for a local
government acting under subsection (1) or (2)(b) shall not
intervene in the action or bring a related civil action based upon
the facts underlying the action, unless the other person has first
obtained the permission of the attorney general to intervene or to
bring a related action. However, this subsection does not prohibit
a person, with leave of court, from filing an amicus curiae brief.
(5) All of the following apply to an action under this
section:
(a) If the attorney general elects to convert the action into
an attorney general enforcement action, this state has the primary
responsibility for prosecuting the action. If the attorney general
elects to intervene in the action, this state and the qui tam
plaitiff, and any local government that sustained damages and
intervenes in the action, share primary responsibility for
prosecuting the action. If the attorney general elects to permit a
local government to convert the action into a civil enforcement
action, the local government has primary responsibility for
investigating and prosecuting the action. If the action involves
damages to a local government but not this state and the local
government intervenes in the action, the local government and the
qui tam plaintiff share primary responsibility for prosecuting the
action. This state or a local government is not bound by an act of
the qui tam plaintiff. The qui tam plaintiff has the right to
continue as a party to the action, subject to the limitations in
subdivision (b). This state is not bound by the act of a local
government that intervenes in an action involving damages to this
state. If neither the attorney general nor a local government
intervenes in the action, the qui tam plaintiff has the right to
prosecute the action, subject to the attorney general's right to
intervene at a later date on a showing of good cause.
(b) All of the following are applicable:
(i) This state may move to dismiss the action notwithstanding
the objections of the qui tam plaintiff if the qui tam plaintiff
has been served with the motion to dismiss and the court has
provided the qui tam plaintiff with an opportunity to be heard on
the motion. If the action involves damages to both this state and a
local government, this state shall consult with the local
government before moving to dismiss the action. If the action
involves damages sustained by a local government but not this
state, the local government may move to dismiss the action
notwithstanding the objections of the qui tam plaintiff if the qui
tam plaintiff has been served with the motion to dismiss and the
court has provided the qui tam plaintiff with an opportunity to be
heard on the motion.
(ii) This state or a local government may settle the action
with the defendant notwithstanding the objections of the qui tam
plaintiff if the court determines, after giving the qui tam
plaintiff an opportunity to be heard, that the proposed settlement
is fair, adequate, and reasonable with respect to all parties under
the circumstances. On a showing of good cause, the opportunity to
be heard may be provided in camera.
(iii) On a showing by the attorney general or a local government
that the qui tam plaintiff's unrestricted participation in the
litigation would interfere with or unduly delay the case or be
repetitious or irrelevant, or on a showing by the defendant that
the qui tam plaintiff's unrestricted participation in the
litigation would be for purposes of harassment or cause the
defendant undue burden, the court may, in its discretion, impose
limitations on the qui tam plaintiff's participation in the case,
including any of the following:
(A) Limiting the number of witnesses the qui tam plaintiff may
call.
(B) Limiting the length of the testimony of the witnesses.
(C) Limiting the qui tam plaintiff's cross-examination of
witnesses.
(D) Otherwise limiting the participation by the qui tam
plaintiff in the litigation.
(c) Regardless of whether the attorney general or a local
government elects to supersede or intervene in the action, the
attorney general or the local government may pursue any remedy
available with respect to the criminal or civil prosecution of the
presentation of false claims, including any administrative
proceeding to determine a civil money penalty or to refer the
matter to the office of inspector general of the United States
department of health and human services for medicaid-related
matters. If an alternate remedy is pursued in another action or
proceeding, the qui tam plaintiff has the same rights in the other
action or proceeding as the qui tam plaintiff would have had if the
action bought under this section had continued.
(d) Regardless of whether the attorney general elects to
supersede or intervene in the action or to permit a local
government to supersede or intervene in the action, on a showing by
this state or a local government that certain discovery by the qui
tam plaintiff would interfere with this state's or the local
government's investigation or prosecution of a criminal or civil
matter arising out of the same facts, the court may stay the
discovery for not more than 60 days. The showing shall be made in
camera. The court may extend the stay on a further showing in
camera that this state or the local government has pursued the
criminal or civil investigation or proceedings with reasonable
diligence and allowing the discovery in the action will interfere
with the ongoing criminal or civil investigation or proceedings.
(6) All of the following apply to awards to the qui tam
plaintiff in an action brought under this section:
(a) If the attorney general elects to convert the action into
an attorney general enforcement action or to permit a local
government to convert the action into a civil enforcement action by
the local government, or if the attorney general or a local
government elects to intervene in the action, the qui tam plaintiff
is entitled to receive from 15% to 20% of the proceeds recovered in
the action or in settlement of the action. The court shall
determine the percentage of the proceeds to which a qui tam
plaintiff is entitled by considering the extent to which the qui
tam plaintiff substantially contributed to the prosecution of the
action. If the court finds that the action was based primarily on
disclosures of specific information, other than information
provided by the qui tam plaintiff, that related to allegations or
transactions in a criminal, civil, or administrative hearing, in a
state legislative or administrative report, hearing, audit or
investigation, or from the news media, the court may award an
amount that it considers appropriate, but not more than 10% of the
proceeds, taking into account the significance of the information
and the role of the qui tam plaintiff in advancing the case to
litigation.
(b) If the attorney general or a local government does not
elect to intervene or convert the action and the action is
successful, a qui tam plaintiff who recovers proceeds is entitled
to receive from 25% to 30% of the proceeds recovered in the action
or settlement of the action. The court shall determine the
percentage of the proceeds to which the qui tam plaintiff is
entitled by considering the extent to which the qui tam plaintiff
substantially contributed to the prosecution of the action.
(c) With the exception of a court award of costs, expenses, or
attorney fees, any payment to a qui tam plaintiff under this
subsection shall be made from the proceeds recovered in the action
or in settlement of the action.
(7) In an action brought under this section, the court may
award the attorney general, on behalf of the people of this state,
a local government that participates as a party in the action, or a
qui tam plaintiff an amount for reasonable expenses that the court
finds to have been necessarily incurred, reasonable attorney fees,
and costs. The expenses, fees, and costs shall be awarded directly
against the defendant, shall not be charged from the proceeds, and
shall only be awarded if this state, a local government, or the qui
tam plaintiff prevails in the action.
(8) If the court finds that an action under this section was
brought by a person who planned or initiated the act described in
section 3(1) on which the action was brought, the court may, to the
extent the court considers appropriate, reduce the share of the
proceeds of the action that the person would otherwise be entitled
to receive under subsection (6), taking into account the role of
the person in advancing the action to litigation and any relevant
circumstances pertaining to the act. If a qui tam plaintiff is
convicted of criminal conduct arising from his or her role in the
act described in section 3(1), that qui tam plaintiff shall be
dismissed from the action and shall not receive any share of the
proceeds of the action. The dismissal does not prejudice the right
of the attorney general to intervene in the action and to prosecute
the action on behalf of this state or a local government.
(9) All of the following apply to an action bought under this
section:
(a) The court shall dismiss the action if any of the following
apply:
(i) The action is based on allegations or transactions that are
the subject of a pending civil action or an administrative action
in which this state or a local government is already a party.
(ii) This state or a local government has reached a binding
settlement or other agreement with the person who committed the act
described in section 3(1) resolving the matter and the agreement
has been approved in writing by the attorney general or an attorney
for the local government, if applicable.
(iii) The action is against a member of the legislature, a
member of the judiciary, or a senior executive branch official and
is based on evidence or information known to this state at the time
the action was brought.
(b) The court shall dismiss the action, unless dismissal is
opposed by this state or, if applicable, a local government or
unless the qui tam plaintiff is an original source of the
information, if substantially the same allegations or transactions
as alleged in the action were publicly disclosed in 1 of the
following ways:
(i) In a state or local government criminal, civil, or
administrative hearing in which this state or a local government or
its agent is a party.
(ii) In a report, hearing, audit, or investigation of the
United States, this state, or a local government that is made on
the public record or disseminated broadly to the general public.
However, information shall not be considered to be publicly
disclosed in a report or investigation if it was disclosed or
provided under the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, or any other federal, state, or local law, rule,
or program enabling the public to request, receive, or view
documents or information in the possession of a public official or
public agency.
(iii) In the news media. However, allegations or transactions
are not publicly disclosed in the news media merely because
information of allegations or transactions have been posted on the
internet or on a computer network.
(10) This state or a local government is not liable for any
expenses that a qui tam plaintiff incurs in bringing an action
under this section.
Sec. 5. (1) A current or former employee, contractor, or agent
of a private or public employer who is discharged, demoted,
suspended, threatened, harassed, or in any other manner
discriminated against in the terms and conditions of employment or
otherwise harmed or penalized by the employer or a prospective
employer because of lawful acts done by the employee, contractor,
or agent, or others associated with the employee, contractor, or
agent in furtherance of an action brought under this section or
other efforts to stop 1 or more acts described in section 3(1) is
entitled to all relief necessary to make the employee, contractor,
or agent whole. Relief available under this subsection includes,
but is not limited to, all of the following:
(a) An injunction to restrain continued discrimination.
(b) Hiring, contracting, or reinstatement to the position the
person would have had but for the discrimination or to an
equivalent position.
(c) Reinstatement of full fringe benefits and seniority
rights.
(d) Payment of 2 times back pay and interest.
(e) Compensation for any special damages sustained as a result
of the discrimination, including litigation costs and reasonable
attorney fees.
(2) For purposes of this section, lawful acts include, but are
not limited to, obtaining or transmitting to this state, a local
government, a qui tam plaintiff, or private counsel solely employed
to investigate a cause of action or potentially file or file an
action under this act documents, data, correspondence, electronic
mail, or any other information, even though the act may violate a
contract, employment term, or duty owed to the employer or
contractor, if the possession and transmission of the documents are
for the sole purpose of furthering efforts to stop 1 or more acts
described in section 3(1). This subsection does not prevent a law
enforcement authority from bringing a civil or criminal action
against a person for violating a provision of law.
(3) An employee, contractor, or agent described in subsection
(1) may bring an action in the appropriate court for the relief
provided in this section.
Sec. 6. (1) An action under this act shall be commenced not
later than 10 years after the date on which the act described in
section 3(1) is committed. For purposes of this act, an action
under this act is commenced by the filing of a complaint.
(2) For purposes of applying any requirements of a court rule
relating to pleading allegations of fraud, in pleading an action
brought under this act, the qui tam plaintiff shall not be required
to identify specific claims that result from an alleged course of
misconduct, or any specific records or statements used, if the
facts alleged in the complaint, if ultimately proven true, would
provide a reasonable indication that 1 or more acts described in
section 3(1) are likely to have occurred, and if the allegations in
the complaint provide adequate notice of the specific nature of the
alleged misconduct to permit this state or a local government
effectively to investigate and defendants fairly to defend against
the allegations made.
(3) In an action brought under this act, this state, a local
government that participates as a party in the action, or a qui tam
plaintiff shall be required to prove the essential elements of the
cause of action, including damages, by a preponderance of the
evidence.
Sec. 7. This act does not do any of the following:
(a) Preempt the authority, or relieve the duty, of a law
enforcement agency to investigate and prosecute a suspected
violation of law.
(b) Prevent or prohibit a person from voluntarily disclosing
any information concerning an act described in section 3(1) to a
law enforcement agency.
(c) Limit the power of the attorney general, a state agency,
or a local government to investigate an act described in section
3(1) and take appropriate action against any wrongdoer.
Sec. 8. The attorney general may promulgate rules as necessary
to implement this act under the administrative procedures act of
1969, 1969 PA 306, MCL 24.201 to 24.328.
