Maryland Senate Bill 374
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Update On False Claims Developments at the State Level

On March 21, 2015, the Maryland state senate passed a revised version of Bill No. 374, which, as previously noted, would create a state version of the federal False Claims Act (FCA) if signed into law.  As amended, however, the proposed statute is somewhat less plaintiff-friendly than before.  For example, it:

  • imposes an absolute 10-year statute of limitations, whereas the original bill allowed actions to be filed up to three years “after the date when facts material to the right of action . . . reasonably should have been known,” regardless of how long after the actual violation this was;
  • limits whistleblower protection, by narrowing the scope of actionable retaliatory conduct to omit the phrase “any other adverse action taken against an employee, contractor, or agent . . . .”; and
  • removes the possibility of the government obtaining attorney’s fees for successful actions.

See generally 2015 Md. Senate Bill No. 374.  The other house of the Maryland state legislature made similar amendments to its version of the bill on April 2, 2015.  See generally 2015 Md. House Bill No. 405.  The combined bills were sent to Governor Larry Hogan—who is expected to sign them into law—on April 8, 2015.  Until the law’s October 1, 2015 effective date, however, Maryland remains one of nine states with false claim laws that are only applicable in the health care context, along with Colorado, Connecticut, Louisiana, Michigan, New Hampshire, Texas, Wisconsin and Washington.

With respect to Washington, it is worth noting that the state’s Medicaid Fraud False Claims Act is set to expire on June 30, 2017.  See Wash. Rev. Code § 43.131.420 (2012).  As of now, the Act imposes civil penalties of $5,500–11,000, plus triple damages, for, inter alia, “[k]nowingly present[ing] . . . a false or fraudulent [Medicaid] claim for payment or approval,” and includes a qui tam provision and whistleblower protections.  See generally Wash. Rev. Code § 74.66 (2012).  Both of the state’s legislative houses have introduced bills to reauthorize and extend the law.  See Jan. 19, 2015 Washington Senate Bill No. 5287; Jan. 22, 2015 Washington House Bill No. 1067.  Legal practitioners, health care providers and other government contractors should keep a close eye on these developments and other legislation designed to add to or modify FCA analogs at the state level.

States Continue to Develop False Claims Act Analogs

On February 6, 2015, both houses of the Maryland legislature introduced bills that would add Maryland to the growing list of states with their own version of the False Claims Act (FCA).  If signed into law, Maryland will, effective October 1, 2015, impose a $10,000 civil penalty and triple damages for, inter alia, “knowingly present[ing] or caus[ing] to be presented a false or fraudulent claim for payment or approval.”  Act of Feb. 6, 2015, § 8-102, 2015 Md. Senate Bill No. 374 (establishing Maryland False Claims Act); Act of Feb. 6, 2015, § 8-102, 2015 Md. House Bill No. 405 (same).  Maryland already has a False Health Claims Act, which imposes similar liability only for false claims submitted to Maryland state health plans or programs (including Medicaid).  See Md. Code, Health–Gen. § 2-602 (2010).

At present, 20 states (plus the District of Columbia) have their own versions of the federal FCA: California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Massachusetts, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee and Virginia.  Note that several of these (e.g., New Mexico and Virginia) style their versions as Fraud Against Taxpayer Acts.  Eight additional states have narrower versions that, like Maryland (for the time being), address only fraud in the health care context: Colorado, Connecticut, Louisiana, Michigan, New Hampshire, Texas, Washington and Wisconsin.

Because of the obvious financial incentives represented by civil penalties and multiple damages, the number of states with their own FCAs is likely to continue growing.  Furthermore, federal law provides other financial incentives for states to establish FCAs.  See 42 U.S.C. § 1396h (2007) (states with FCA-like statutes meeting certain requirements entitled to 10 percent increase with respect to amounts recovered under state action brought pursuant to such a law).  Indeed, state lawmakers have pitched FCAs as effective means for narrowing budget deficits.

State law FCA claims are routinely brought alongside federal FCA claims.  Given that state law claims typically mirror claims under the federal statute, all such claims will usually be subject to dismissal on the same or similar grounds.  However, defense practitioners should familiarize themselves with any differences or nuances that may exist between the federal FCA and the state law analog at issue in a given case, particularly if such differences give rise to additional grounds to dispose of a complaint.  For example, Florida bars actions under its version of the FCA by relators who are former state employees if the action is based in part on information obtained in the course of state employment.  Compare Fla. Stat. 68.087(4)(b) (2013) with 31 U.S.C. § 3730(e) (2010).  Potential, additional grounds such as this for dismissal of state law FCA claims should not be overlooked.