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Recent Amendments to Michigan's False Claims Statute – Increased Incentives for Employees to File a Qui Tam Action

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Alan G. Gilchrist
Foster Swift Health Care Law Report
August 2009

Recent amendments to the State of Michigan False Claims Statute make it more likely for employees (relators) to decline dealing with the federal government and opt towards dealing directly with the State's Attorney General's office.

These amendments, effective January 6, 2009, are in response to the Federal Deficit Reduction Act.  The Deficit Reduction Act authorizes state attorney generals to receive enhanced recovery when the attorney general brings an action for recovery and penalties under the State Medicaid False Claims Act.  This enhanced recovery is available so long as the state statute is at least as draconian as the federal statutes.  The recent amendments by the Michigan legislature seek to insure that this is the case.

The state statute basically follows most of the provisions of the federal statute.  A qui tam relator must first file an action under seal and serve the attorney general.  The attorney general has 90 days to elect to intervene in the matter.  This time period can be extended on motion by the attorney general for good cause.  The recovery for the relator in the event the attorney general intervenes is 15% to 25%.  If the attorney general does not intervene, it is 25% to 30%.

Significantly, the statute was also amended as to damages.  Previously, damages were limited to treble damages.  The statute now provides for treble damages as well as a penalty per claim of not less than $5,000 and no more than $10,000.

In addition, the statute of limitations has been extended under the statute and is now six years or three years from the date of discovery, not to exceed ten years.

One of the more bizarre changes concerns who may bring a qui tam action.  The 2005 statute provided that if the person bringing the action "planned, initiated, or participated in the activity upon which the action is brought, the court may reduce or eliminate a share of the proceeds of the relator."  The newly amended statute authorizes a reduction in the share of the proceeds if the relator planned and initiated the conduct.  In other words, a wrongdoer may be a relator.

The plaintiff's bar has consistently complained as to long delays between the filing of a qui tam case in federal courts in Michigan and the Department of Justice's decision whether or not to intervene.  This new statute provides a new forum for a relator dealing with the State Attorney General's office.  We have already seen activity in this area over the last few months.  In contrast, there were no reported Michigan cases on the qui tam statute and there was very sporadic activity until the passage of this new statute.  The enhanced penalties are likely a major factor in this increased activity.