2018 -- H 7540

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LC004310

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE - PROCEDURE GENERALLY - THE

STATE FALSE CLAIM ACT

     Introduced By: Representatives Craven, McKiernan, and McEntee

     Date Introduced: February 09, 2018

     Referred To: House Judiciary

     (Attorney General)

It is enacted by the General Assembly as follows:

     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

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

     9-1.1-3. Liability for certain acts.

     (a) Any person who:

     (1) Knowingly presents, or causes to be presented a false or fraudulent claim for payment

or approval;

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

material to a false or fraudulent claim;

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

(7);

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

state and knowingly delivers, or causes to be delivered, less property than all of that money or

property;

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

be used, by the state and, intending to defraud the state, makes or delivers the receipt without

completely knowing that the information on the receipt is true;

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

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

pledge the property; or

     (7) 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 the state, or knowingly conceals

or knowingly and improperly avoids or decreases an obligation to pay or transmit money or

property to the state; is liable to the state for a civil penalty of not less than five thousand five

hundred dollars ($5,500) and not more than eleven thousand dollars ($11,000) in an amount equal

to the civil penalty set forth in the Federal False Claims Act, following the Federal Civil Penalties

Inflation Agreement Act of 1990, (31 U.S.C. § 3729(a)), Pub. L. No. 101-410 section 5, 104 Stat.

891, note following 28 U.S.C. section 2461, as amended and annually adjusted by the Federal

Civil Penalties Inflation Adjustment Improvements Act of 2015, plus three (3) times the amount

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

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

such penalty or damages.

     (b) Definitions. For purposes of this section:

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

     (i) Has actual knowledge of the information;

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

     (iii) Acts in reckless disregard of the truth or falsity of the information; and

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

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

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

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

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

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

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

demanded; or

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

money or property which is requested or demanded; and

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

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

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

     (3) "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; and

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

the payment or receipt of money or property.

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

the Rhode Island personal income tax law contained in Rhode Island general laws chapter 44-30.

     9-1.1-4. Civil actions for false claims.

     (a) Responsibilities of the attorney general and solicitor. The attorney general or solicitor

diligently shall investigate a violation under § 9-1.1-3 of this section. If under this section the

attorney general or solicitor finds that a person has violated or is violating § 9-1.1-3 the attorney

general or solicitor may bring a civil action under this section against the person.

     (b) Actions by private persons.

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

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

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

consenting.

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

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

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

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

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

evidence and information.

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

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

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

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

unsealed and served upon the defendant.

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

paragraph (3), the state shall:

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

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

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

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

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

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

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

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

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

in paragraph (2).

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

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

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

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

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

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

cause, such hearing may be held in camera.

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

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

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

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

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

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

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

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

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

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

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

by the person in the litigation.

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

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

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

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

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

later date upon a showing of good cause.

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

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

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

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

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

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

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

ongoing criminal or civil investigation or proceedings.

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

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

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

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

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

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

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

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

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

judicial review.

     (d) Award to Qui Tam plaintiff.

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

4(b) § 9-1.1-4, such person shall, subject to the second sentence of this paragraph, receive at least

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

or settlement of the claim, depending upon the extent to which the person substantially

contributed to the prosecution of the action. Where the action is one which the court finds to be

based primarily on disclosures of specific information (other than information provided by the

person bringing the action) relating to allegations or transactions in a criminal, civil, or

administrative hearing, in a legislative, administrative, or Auditor General's report, hearing, audit,

or investigation, or from the news media, the court may award such sums as it considers

appropriate, but in no case more than ten percent (10%) of the proceeds, taking into account the

significance of the information and the role of the person bringing the action in advancing the

case to litigation. Any payment to a person under the first or second sentence of this paragraph (1)

shall be made from the proceeds. Any such person shall also receive an amount for reasonable

expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees

and costs. The state shall also receive an amount for reasonable expenses which the court finds to

have been necessarily incurred by the attorney general, including reasonable attorneys' fees and

costs, and the amount received shall be deposited in the false claims act fund created under this

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

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

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

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

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

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

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

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

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

brought by a person who planned and initiated the violation of § 9-1.1-3 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 (d), 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 § 9-1.1-3, 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 state to continue the action.

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

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

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

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

harassment.

     (e) Certain actions barred.

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

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

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

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

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

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

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

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

brought.

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

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

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

     (4) (A) The court shall dismiss an action or claim under this section, unless opposed by

the state, if substantially the same allegations or transactions as alleged in the action or claim

where were publically disclosed:

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

party;

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

audit, or investigation; or

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

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

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

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

the state the information on which the allegations or transactions in a claim are based; or (ii) Who

has knowledge that is independent of and materially adds to the publicly disclosed allegations or

transaction, and who has voluntarily provided the information to the state before filing an action

under this section.

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

person incurs in bringing an action under this section.

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

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

conditions of employment because of lawful acts done by the employee, contractor, agent or

associated others in furtherance of an action under this section, or other efforts to stop one or

more violations of this subsection chapter including investigation for, initiation of, testimony for,

or assistance in an action filed or to be filed under this section, shall be entitled to all relief

necessary to make the employee, contractor, agent or associated others whole. Such relief shall

include reinstatement with the same seniority status such employee, contractor, agent or

associated others would have had but for the discrimination, two (2) times the amount of back

pay, interest on the back pay, and compensation for any special damages sustained as a result of

the discrimination, including litigation costs and reasonable attorneys' fees. An employee,

contractor, agent or associated others may bring an action in the appropriate superior court for the

relief provided in this subsection 9-1.1-4(g).

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

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

     9-1.1-5. False claims procedure.

     (a) A subpoena requiring the attendance of a witness at a trial or hearing conducted under

§ 9-1.1-4, may be served at any place in the state.

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

     (1) More than 6 years after the date on which the violation of § 9-1.1-3 is committed, or

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

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

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

on which the violation is committed, whichever occurs last.

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

1.1-4(i) § 9-1.1-4, the state may file its own complaint or amend the complaint of a person who

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

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

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

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

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

forth, in the prior complaint of that person.

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

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

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

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

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

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

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

     SECTION 2. This act shall take effect upon passage.

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LC004310

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE - PROCEDURE GENERALLY - THE

STATE FALSE CLAIM ACT

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     This act would amend the State False Claims Act to reflect amendments to the Federal

False Claims Act.

     This act would take effect upon passage.

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LC004310

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