2013 -- S 0557

=======

LC01034

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO COURTS AND CIVIL PROCEDURE - THE STATE FALSE CLAIM ACT

     Introduced By: Senator Michael J. McCaffrey

     Date Introduced: February 28, 2013

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Sections 9-1.1-3, 9-1.1-4 and 9-1.1-5 of the General Laws in Chapter 9-1.1

1-2

entitled "The State False Claim Act" are hereby amended to read as follows:

1-3

     9-1.1-3. Liability for certain acts. -- (a) Any person who:

1-4

     (1) Knowingly presents, or causes to be presented, to an officer or employee of the state

1-5

or a member of the guard a false or fraudulent claim for payment or approval;

1-6

     (2) Knowingly makes, uses, or causes to be made or used, a false record or statement to

1-7

get a material to a false or fraudulent claim paid or approved by the state;

1-8

     (3) Conspires to defraud the state by getting a false or fraudulent claim allowed or paid

1-9

commit a violation of subdivisions 9-1.1-3 (1), (2), (3), (4), (5) (6) or (7);

1-10

     (4) Has possession, custody, or control of property or money used, or to be used, by the

1-11

state and, intending to defraud the state or willfully to conceal the property, knowingly delivers,

1-12

or causes to be delivered, less property than all of that money or property the amount for which

1-13

the person receives a certificate or receipt;

1-14

     (5) Is Authorized authorized to make or deliver a document certifying receipt of property

1-15

used, or to be used, by the state and, intending to defraud the state, makes or delivers the receipt

1-16

without completely knowing that the information on the receipt is true;

1-17

     (6) Knowingly buys, or receives as a pledge of an obligation or debt, public property

1-18

from an officer or employee of the state, or a member of the guard, who lawfully may not sell or

1-19

pledge the property; or

2-20

     (7) Knowingly makes, uses, or causes to be made or used, a false record or statement

2-21

material to conceal, avoid or decrease an obligation to pay or transmit money or property to the

2-22

state, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to

2-23

pay or transmit money or property to the state; is liable to the state for a civil penalty of not less

2-24

than five thousand dollars ($5,000) five thousand five hundred dollars ($5,500) and not more

2-25

than ten thousand dollars ($10,000) eleven thousand dollars ($11,000), plus three (3) times the

2-26

amount of damages which the state sustains because of the act of that person. A person violating

2-27

this subsection (a) shall also be liable to the state for the costs of a civil action brought to recover

2-28

any such penalty or damages.

2-29

      (b) Knowing and knowingly defined. As used in this section, the terms "knowing" and

2-30

"knowingly" mean that a person, with respect to information:

2-31

     (b) Definitions. – For purposes of this section:

2-32

     (1) “Knowing” and “knowingly” means that a person with respect to information:

2-33

     (i)(1) Has actual knowledge of the information;

2-34

     (ii)(2) Acts in deliberate ignorance of the truth or falsity of the information; or

2-35

     (iii)(3) Acts in reckless disregard of the truth or falsity of the information; and no proof of

2-36

specific intent to defraud is required.

2-37

     (iv) Requires no proof of specific intent to defraud.

2-38

     (c) Claim defined. - As used in this section, "claim" includes any request or demand,

2-39

whether under a contract or otherwise, for money or property which is made to a contractor,

2-40

grantee, or other recipient if the state provides any portion of the money or property which is

2-41

requested or demanded, or if the state will reimburse such contractor, grantee, or other recipient

2-42

for any portion of the money or property which is requested or demanded.

2-43

     (2) “Claim” means any request or demand, whether under a contract or otherwise, for

2-44

money or property and whether or not the state has title to the money or property, that:

2-45

     (i) Is presented to an officer, employee, or agent of the state; or

2-46

     (ii) Is made to a contractor, grantee, or other recipient, if the money or property is to be

2-47

spent or used on the state’s behalf or advance a state program or interest, and if the state:

2-48

     (A) Provides or has provided any portion of the money or property requested or

2-49

demanded; or

2-50

     (B) Will reimburse such contractor, grantee, or other recipient for any portion of the

2-51

money or property which is requested or demanded; and

2-52

     (iii) Does not include requests or demands for money or property that the state has paid to

2-53

an individual as compensation for state employment or as an income subsidy with no restrictions

2-54

on that individual’s use of the money or property;

3-1

     (3) “Obligation” means an established duty, whether or not fixed, arising from an express

3-2

or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or

3-3

similar relationship, from statute or regulation, or from the retention of any overpayment; and

3-4

     (4) “Material” means having a natural tendency to influence, or be capable of

3-5

influencing, the payment or receipt of money or property.

3-6

     (c)(d) Exclusion. - This section does not apply to claims, records, or statements made

3-7

under the Rhode Island personal income tax law contained in Rhode Island general laws chapter

3-8

44-30.

3-9

     9-1.1-4. Civil actions for false claims. -- (a) Responsibilities of the attorney general and

3-10

solicitor. - The attorney general or solicitor diligently shall investigate a violation under section 9-

3-11

1.1-3 of this section. If under this section the attorney general or solicitor finds that a person has

3-12

violated or is violating section 9-1.1-3 the attorney general or solicitor may bring a civil action

3-13

under this section against the person.

3-14

     (b) Actions by private persons.

3-15

     (1) A person may bring a civil action for a violation of section 9-1.1-3 for the person and

3-16

for the state. The action shall be brought in the name of the state. The action may be dismissed

3-17

only if the court and the attorney general give written consent to the dismissal and their reasons

3-18

for consenting.

3-19

     (2) A copy of the complaint and written disclosure of substantially all material evidence

3-20

and information the person possesses shall be served on the state upon the attorney general. The

3-21

complaint shall be filed in camera, shall remain under seal for at least sixty (60) days, and shall

3-22

not be served on the defendant until the court so orders. The state may elect to intervene and

3-23

proceed with the action within sixty (60) days after it receives both the complaint and the material

3-24

evidence and information.

3-25

     (3) The state may, for good cause shown, move the court for extensions of the time

3-26

during which the complaint remains under seal under paragraph (2). Any such motions may be

3-27

supported by affidavits or other submissions in camera. The defendant shall not be required to

3-28

respond to any complaint filed under this section until twenty (20) days after the complaint is

3-29

unsealed and served upon the defendant.

3-30

     (4) Before the expiration of the sixty (60) day period or any extensions obtained under

3-31

paragraph (3), the state shall:

3-32

     (i)(A) Proceed with the action, in which case the action shall be conducted by the state; or

3-33

     (ii)(B) Notify the court that it declines to take over the action, in which case the person

3-34

bringing the action shall have the right to conduct the action.

4-1

     (5) When a person brings an action under this subsection (b), no person other than the

4-2

state may intervene or bring a related action based on the facts underlying the pending action.

4-3

     (c) Rights of the parties to Qui Tam actions.

4-4

     (1) If the state proceeds with the action, it shall have the primary responsibility for

4-5

prosecuting the action, and shall not be bound by an act of the person bringing the action. Such

4-6

person shall have the right to continue as a party to the action, subject to the limitations set forth

4-7

in paragraph (2).

4-8

     (2) (A) The state may dismiss the action notwithstanding the objections of the person

4-9

initiating the action if the person has been notified by the state of the filing of the motion and the

4-10

court has provided the person with an opportunity for a hearing on the motion.

4-11

     (i)(B) The state may settle the action with the defendant notwithstanding the objections of

4-12

the person initiating the action if the court determines, after a hearing, that the proposed

4-13

settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good

4-14

cause, such hearing may be held in camera.

4-15

     (ii)(C) Upon a showing by the state that unrestricted participation during the course of the

4-16

litigation by the person initiating the action would interfere with or unduly delay the state's

4-17

prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the

4-18

court may, in its discretion, impose limitations on the person's participation, such as:

4-19

     (A)(i) Limiting the number of witnesses the person may call:

4-20

     (B)(ii) Limiting the length of the testimony of such witnesses;

4-21

     (C)(iii) Limiting the person's cross-examination of witnesses; or

4-22

     (D)(iv) Otherwise limiting the participation by the person in the litigation.

4-23

     (iii)(D) Upon a showing by the defendant that unrestricted participation during the course

4-24

of the litigation by the person initiating the action would be for purposes of harassment or would

4-25

cause the defendant undue burden or unnecessary expense, the court may limit the participation

4-26

by the person in the litigation.

4-27

     (3) If the state elects not to proceed with the action, the person who initiated the action

4-28

shall have the right to conduct the action. If the state so requests, it shall be served with copies of

4-29

all pleadings filed in the action and shall be supplied with copies of all deposition transcripts (at

4-30

the state's expense). When a person proceeds with the action, the court, without limiting the status

4-31

and rights of the person initiating the action, may nevertheless permit the State to intervene at a

4-32

later date upon a showing of good cause.

4-33

     (4) Whether or not the state proceeds with the action, upon a showing by the state that

4-34

certain actions of discovery by the person initiating the action would interfere with the state's

5-1

investigation or prosecution of a criminal or civil matter arising out of the same facts, the court

5-2

may stay such discovery for a period of not more than sixty (60) days. Such a showing shall be

5-3

conducted in camera. The court may extend the sixty (60) day period upon a further showing in

5-4

camera that the state has pursued the criminal or civil investigation or proceedings with

5-5

reasonable diligence and any proposed discovery in the civil action will interfere with the

5-6

ongoing criminal or civil investigation or proceedings.

5-7

     (5) Notwithstanding subsection (b), the state may elect to pursue its claim through any

5-8

alternate remedy available to the state, including any administrative proceeding to determine a

5-9

civil money penalty. If any such alternate remedy is pursued in another proceeding, the person

5-10

initiating the action shall have the same rights in such proceeding as such person would have had

5-11

if the action had continued under this section. Any finding of fact or conclusion of law made in

5-12

such other proceeding that has become final shall be conclusive on all parties to an action under

5-13

this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been

5-14

finally determined on appeal to the appropriate court, if all time for filing such an appeal with

5-15

respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to

5-16

judicial review.

5-17

     (d) Award to Qui Tam plaintiff.

5-18

     (1) If the State proceeds with an action brought by a person under subsection 9-1.1-4(b),

5-19

such person shall, subject to the second sentence of this paragraph, receive at least fifteen percent

5-20

(15%) but not more than twenty-five percent (25%) of the proceeds of the action or settlement of

5-21

the claim, depending upon the extent to which the person substantially contributed to the

5-22

prosecution of the action. Where the action is one which the court finds to be based primarily on

5-23

disclosures of specific information (other than information provided by the person bringing the

5-24

action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a

5-25

legislative, administrative, or Auditor General's report, hearing, audit, or investigation, or from

5-26

the news media, the court may award such sums as it considers appropriate, but in no case more

5-27

than ten percent (10%) of the proceeds, taking into account the significance of the information

5-28

and the role of the person bringing the action in advancing the case to litigation. Any payment to

5-29

a person under the first or second sentence of this paragraph (1) shall be made from the proceeds.

5-30

Any such person shall also receive an amount for reasonable expenses which the court finds to

5-31

have been necessarily incurred, plus reasonable attorneys' fees and costs. The state shall also

5-32

receive an amount for reasonable expenses which the court finds to have been necessarily

5-33

incurred by the attorney general, including reasonable attorneys' fees and costs, and the amount

5-34

received shall be deposited in the false claims act fund created under this chapter. All such

6-1

expenses, fees, and costs shall be awarded against the defendant.

6-2

     (2) If the state does not proceed with an action under this section, the person bringing the

6-3

action or settling the claim shall receive an amount which the court decides is reasonable for

6-4

collecting the civil penalty and damages. The amount shall be not less than twenty-five percent

6-5

(25%) and not more than thirty percent (30%) of the proceeds of the action or settlement and shall

6-6

be paid out of such proceeds. Such person shall also receive an amount for reasonable expenses

6-7

which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs.

6-8

All such expenses, fees, and costs shall be awarded against the defendant.

6-9

     (3) Whether or not the state proceeds with the action, if the court finds that the action was

6-10

brought by a person who planned and initiated the violation of section 9-1.1-3 upon which the

6-11

action was brought, then the court may, to the extent the court considers appropriate, reduce the

6-12

share of the proceeds of the action which the person would otherwise receive under paragraph (1)

6-13

or (2) of this subsection (d), taking into account the role of that person in advancing the case to

6-14

litigation and any relevant circumstances pertaining to the violation. If the person bringing the

6-15

action is convicted of criminal conduct arising from his or her role in the violation of section 9-

6-16

1.1-3, that person shall be dismissed from the civil action and shall not receive any share of the

6-17

proceeds of the action. Such dismissal shall not prejudice the right of the state to continue the

6-18

action.

6-19

     (4) If the state does not proceed with the action and the person bringing the action

6-20

conducts the action, the court may award to the defendant its reasonable attorneys' fees and

6-21

expenses if the defendant prevails in the action and the court finds that the claim of the person

6-22

bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of

6-23

harassment.

6-24

     (e) Certain actions barred.

6-25

     (1) No court shall have jurisdiction over an action brought by a former or present member

6-26

of the guard under subsection 9-1.1-4(b) (actions by private persons) against a member of the

6-27

guard arising out of such person's service in the guard.

6-28

     (2) No court shall have jurisdiction over an action brought pursuant to subsection 9-1.1-

6-29

4(b) (actions by private persons) against the governor, lieutenant governor, the attorney general,

6-30

members of the general assembly, a member of the judiciary, the treasurer, secretary of state, the

6-31

auditor general, any director of a state agency, and any other individual appointed to office by the

6-32

governor if the action is based on evidence or information known to the state when the action was

6-33

brought.

7-34

     (3) In no event may a person bring an action under subsection 9-1.1-4(b) which is based

7-35

upon allegations or transactions which are the subject of a civil suit or an administrative civil

7-36

money penalty proceeding in which the state is already a party.

7-37

     (4) (A) No The court shall have jurisdiction over dismiss an action or claim under this

7-38

section, unless opposed by the state, if substantially the same allegations or transactions as

7-39

alleged in the action or claim where publically disclosed: based upon the public disclosure of

7-40

allegations or transactions

7-41

     (i) in In a state criminal, civil, or administrative hearing, in which the state or its agents is

7-42

a party;

7-43

     (ii) in In a legislative, administrative, or auditor general's or other state of Rhode Island

7-44

report, hearing, audit, or investigation,; or

7-45

     (iii) from From the news media, unless the action is brought by the attorney general or

7-46

the person bringing the action is an original source of the information.

7-47

     (B) For purposes of this exclusion paragraph, "original source" means an individual who

7-48

either: (i) Prior to the public disclosure under subparagraph 9-1.4-4(e)(4)(A), has voluntarily

7-49

disclosed to the state has direct and independent knowledge of the information on which the

7-50

allegations or transactions in a claim are based; or (ii) Who has knowledge that is independent of

7-51

and materially adds to the publicly disclosed allegations or transaction, and who has voluntarily

7-52

provided the information to the state before filing an action under this section which is based on

7-53

the information.

7-54

     (f) State not liable for certain expenses. - The state is not liable for expenses which a

7-55

person incurs in bringing an action under this section.

7-56

     (g) Any employee, contractor, agent, or associated others who is discharged, demoted,

7-57

suspended, threatened, harassed, or in any other manner discriminated against in the terms and

7-58

conditions of employment by his or her employer because of lawful acts done by the employee,

7-59

contractor, agent or associated others on behalf of the employee or others in furtherance of an

7-60

action under this section, or other efforts to stop one or more violations of this subsection

7-61

including investigation for, initiation of, testimony for, or assistance in an action filed or to be

7-62

filed under this section, shall be entitled to all relief necessary to make the employee, contractor,

7-63

agent or associated others whole. Such relief shall include reinstatement with the same seniority

7-64

status such employee, contractor, agent or associated others would have had but for the

7-65

discrimination, two (2) times the amount of back pay, interest on the back pay, and compensation

7-66

for any special damages sustained as a result of the discrimination, including litigation costs and

7-67

reasonable attorneys' fees. An employee, contractor, agent or associated others may bring an

7-68

action in the appropriate superior court for the relief provided in this subsection 9-1.1-4(g).

8-1

     (h) Limitation on bringing civil action.- A civil action under this subsection may not be

8-2

brought more than three (3) years after the date when the retaliation occurred.

8-3

     9-1.1-5. False claims procedure. -- (a) A subpoena requiring the attendance of a witness

8-4

at a trial or hearing conducted under section 9-1.1-4, may be served at any place in the state.

8-5

     (b) A civil action under section 9-1.1-4 may not be brought:

8-6

     (1) More than 6 years after the date on which the violation of section 9-1.1-3 is

8-7

committed, or

8-8

     (2) More than three (3) years after the date when facts material to the right of action are

8-9

known or reasonably should have been known by the official of the state charged with

8-10

responsibility to act in the circumstances, but in no event more than ten (10) years after the date

8-11

on which the violation is committed, whichever occurs last.

8-12

     (c) If the state elects to intervene and proceed with an action brought under subsection 9-

8-13

1.1-4(i), the state may file its own complaint or amend the complaint of a person who has brought

8-14

an action under section 9-1.1-4 to clarify or add detail to the claims in which the state is

8-15

intervening and to add any additional claims with respect to which the state contends it is entitled

8-16

to relief. For statute of limitations purposes, any such state pleading shall relate back to the filing

8-17

date of the complaint of the person who originally brought the action, to the extent that the claim

8-18

of the state arises out of the conduct, transactions, or occurrences set forth, or attempted to be set

8-19

forth, in the prior complaint of that person.

8-20

     (d)(c) In any action brought under section 9-1.1-4, the state shall be required to prove all

8-21

essential elements of the cause of action, including damages, by a preponderance of the evidence.

8-22

     (e)(d) Notwithstanding any other provision of law, a final judgment rendered in favor of

8-23

the state in any criminal proceeding charging fraud or false statements, whether upon a verdict

8-24

after trial or upon a plea of guilty or nolo contendere, shall stop the defendant from denying the

8-25

essential elements of the offense in any action which involves the same transaction as in the

8-26

criminal proceeding and which is brought under subsections 9-1.1-4(a) or 9-1.1-4(b).

8-27

     SECTION 2. This act shall take effect upon passage.

=======

LC01034

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO COURTS AND CIVIL PROCEDURE - THE STATE FALSE CLAIM ACT

***

9-1

     This act would make amendments to the false claim act that is required by the federal

9-2

government in order for the state to retain federal funding.

9-3

     This act would take effect upon passage.

=======

LC01034

=======