California False Claims Act

Tony Munter summarizes the California False Claims Act below. He does not practice in the jurisdiction of California.

The California False Claims Act, Cal. Gov’t Code §§12650 et seq.

California was an early adopter of False Claims Act legislation, having passed a law in 1987. The law was most recently amended in 2010.

Under the California False Claims Act, the defendant is liable for any false claim when California or a political subdivision provides any portion of the funds. “Political subdivision” is defined in the Act to include “any city, city and county, county tax or assessment district or other legally authorized local entity with jurisdictional boundaries.”

So, liability extends to acts committed which defraud the many large cities and towns located throughout the state. This makes the California False Claims Act, potentially, one of the most powerful whistleblower laws anywhere.

To learn more about other state false claim laws, see our state by state guide page.

Rewards Under the California False Claims Act

California’s False Claims Act also allows for the possibility of a large reward for the whistleblower.  A relator is entitled to 15 to 33 percent of the funds recovered by the State of California in an action taken over by the state or political subdivision.

Additionally, a relator is entitled to a minimum of 25 to 50 percent in a successful case when the State or subdivision does not intervene. While litigating a case without the support of the State may be difficult, the potential of a 50 percent share of the proceeds is likely to encourage relators to consider that prospect.

Kinds of Fraud Prohibited By the California False Claims Act

The California False Claims Act creates liability for—and imposes treble damages and civil fines on—similar activity as proscribed by the federal False Claims Act. There is liability for presenting a false claim using false records in order to unduly collect compensation. There are also statutes specifically listing conspiracy and other common kinds of False Claims Act violations.

In addition to creating liability for the kinds of fraudulent activity the Federal False Claims Act proscribes, the California law makes it possible to sue a defendant who is a beneficiary of an inadvertent submission of a false claim, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery of the false claim. In other words, if you have the chance to be a whistleblower but don’t take that chance, you could be held liable.

It is hard to tell if there have been many cases filed—let alone that produced recovery—as a result of a contractor inadvertently keeping money that belonged to the State of California, but this theory of liability could create some interesting cases or add to the damages involved in a fraudulent scheme.  Since contractors are not simply supposed to obtain money from a state government and keep it knowing it was obtained wrongfully or obtained as the result of a wrongful claim, it is good to see some states willing to make that actionable.

False Claims Act in California

Obviously, California is a huge state with a huge budget—for example, the 2013-2014 budget proposed by the governor included more than $97 billion in general fund spending. Add local government expenditures, including most of the major cities in California, and it is clear there are plenty of government contracts that could be the subject of an action under the California False Claims Act. It is possible that if you have a viable false claims case under state law, you will also be able to move forward with a federal whistleblower claim.

California False Claims Act