Yes, but only if the government declines to intervene in the action. United States ex rel. Kolbeck v. Point Blank Solutions, Inc., 1:08-cv-1187 (E.D. Va.), recently addressed this issue.

Section 362(a) of the Bankruptcy Code, commonly referred to as the automatic stay provision, provides the general rule that a petition filed under Title 11 of the Bankruptcy Code “[o]perates as a stay, applicable to all entities, of … the commencement or continuation … of a judicial, administrative, or other action or proceeding against a debtor that was or could have been commenced before the commencement of the case under [the Bankruptcy Code].” 11 U.S.C. § 362(a).

An exception to this rule is the “governmental police powers” exception, codified at 11 U.S.C. § 362(b)(4), which provides that the filing of a bankruptcy petition does not operate to stay “an action or proceeding by a governmental unit” to enforce that governmental unit’s police and regulatory power. Courts have held that an action under the False Claims Act qualifies as an action to enforce the government’s police or regulatory power. See United States ex rel. Goldstein v. P & M Draperies, Inc., 303 B.R. 601, 603 (D. Md. 2004); In re Commonwealth Companies, Inc., 913 F.2d 518, 527 (8th Cir. 1990); United States ex rel. Jane Doe v. X, Inc., 246 B.R. 817, 818 (E.D. 2000).

In the Point Blank Solutions case, the Eastern District of Virginia held that a qui tam action under the federal False Claims Act in which the government has expressly declined to intervene is not “an action or proceeding by a governmental unit” so as to fall within the governmental police powers exception to the Bankruptcy Code’s automatic stay. Because the government declined intervention in the FCA case, the court therefore held that the action was appropriately stayed against two corporate defendants in bankruptcy.