On February 19, 2013, a California appellate court held that a qui tam relator may contact current employees of the defendant in a California False Claims Act case. Contreras v. First Student Inc., 213 Cal. Rptr. 3d 583, 601-05 (Cal. Ct. App. 2013). When directed by an attorney, this type of activity is generally recognized as prohibited by the ethical rules of various jurisdictions. But, here, the court found that the relator's attorney had not directed the contact, and thus was not in violation of those rules. Id. at 601-03. The court, however, then went beyond that narrow ruling and suggested that the policy goals of California's False Claims Act and the principles of the First Amendment could be in tension with the ethics prohibition altogether. See id. at 604-05. "[T]he policies inherent in the False Claims Act would be seriously undermined if the individual plaintiffs could not approach employees who might have knowledge of fraudulent conduct by the employer." Id. at 605.
This latter ruling, particularly if construed broadly without appropriate limits, is quite disturbing. The reasoning could suggest that attorneys in a California False Claims Act case, perhaps even in a federal FCA case, could direct the relators to contact current employees of the defendant to gather evidence and potentially find sympathetic witnesses without regard for the longstanding ethical rules barring an attorney from contacting a represented party.
In another state law development, New York recently considered a troubling addition to its FCA law. New York law previously gave the court discretion in awarding attorney's fees to a prevailing relator. Last month, a proposed bill was debated that could have had the effect of making an award of fees mandatory, even if the relator lost the lawsuit. Thankfully, the version enacted into law does not extend this far, and makes the award fees mandatory only when the relator prevails.
Finally, on April 10, 2013, the attorney general of Massachusetts, Martha Coakley, published an op-ed column in the Boston Globe that was highly critical of private-sector schools. In the column, Attorney General Coakley attempts to analogize private-sector schools to the sub-prime mortgage industry, and promises to bring enforcement actions. And she is following through with her promise: her office recently filed suit against Sullivan & Cogliano Training Centers, Inc. According to the press release, Massachusetts alleges that the Sullivan & Cogliano Training Centers misrepresented its job placement rates. The one time senatorial candidate's recent attack continues the wave of attacks by politicians on the for-profit education sector, and is certainly something to keep an eye on.