Whistling in Silence: The Implications of Arbitration on Qui Tam Claims Under the False Claims Act

Abstract

For nearly twenty years, corporate defendants have sought unsuccessfully to use arbitration to roll back protections for whistleblowers suing under federal law. The state and federal judiciaries have long stymied these efforts, on the grounds that defendants cannot force the Government’s claims into the secretive forum of arbitration. In January 2013, this protection came to an end. A federal court ruled for the first time that a whistleblower suing on behalf of the United States must pursue its action in arbitration. Five months later, this trend continued as federal courts have compelled arbitration of state law qui tam actions This article argues that while the courts foundered in their reasoning, their holdings were legally correct based on Supreme Court case law and a legislative loophole in the Dodd-Frank Amendments of 2010. As a result, arbitration could fundamentally alter the way that whistleblower actions are investigated and prosecuted, and may blunt what has been described as the “government’s primary litigation tool for recovering losses sustained as the result of fraud.”

Keywords: Qui tam, PAGA, Iskanian, False Claims Act, Arbitration, Federal Arbitration Act, Assignments, Alternative Dispute Resolution, Dodd-Frank, Whistleblower, Fraud