North Carolina False Claims Act

In August 2009, the State of North Carolina adopted the North Carolina False Claims Act (“North Carolina FCA”), its own version of the federal False Claims Act (“FCA”). The North Carolina FCA, which became effective on January 1, 2010, allows private individuals who know about fraud to bring a qui tam case against a person or entity for submitting or causing the submission of false claims to the State.

The North Carolina Medical Assistance Provider False Claims Act is a narrower predecessor to the North Carolina FCA. It specifically applies to the presentation of false claims by providers of medical assistance under the North Carolina Medical Assistance Program,.

Like the federal FCA, the North Carolina FCA allows for financial rewards to whistleblowers for bringing an action on behalf of the State. If the State decides to intervene in a case, the whistleblower may receive 15-25% of the recovery. If the State does not intervene and the whistleblower pursues the case on their own, they may receive 25-30% of the recovery.

North Carolina False Claims Act and Federal False Claims Act Similarities

Key provisions of the North Carolina FCA mirror the federal FCA, such as:

1. Employers are prohibited from retaliating against whistleblower employees. Retaliation includes firing, demoting, suspending, threatening, or harassing the employee. If the employer does retaliate, the employee is entitled to the reinstatement of their position, two times the amount of back pay, interest on the back pay, and compensation for any damages sustained because of the discrimination, including litigation costs and reasonable attorney fees.
2. The language of the liability provisions are virtually identical.
3. Both laws provide for the same measure of damages.
4. The key definitions (i.e., “knowing,” “material,” and “obligation”) are the same under both statutes.

North Carolina False Claims Act and Federal False Claims Act Differences

While the North Carolina FCA and the federal FCA have numerous similarities, they also have some differences:

1. Government Employees as Relators: North Carolina does not allow state employees to be Plaintiff-Relators under the State False Claims Act if they gain their information through their employment. There is no similar restriction under the federal law. Although some federal district courts have taken it upon themselves to determine that federal employees may not collect as plaintiff-relators, others have upheld the right for government employees to take such action.
2. Seal Period: Once an action is brought under the North Carolina FCA, it remains under seal for at least 120 days (the State can petition the Court to have the action remain under seal for longer than 120 days). The federal FCA, however, provides for a more limited 60-day seal period to investigate the relator’s claim and to make the decision on whether to intervene before the case is unsealed.
3. Public Disclosure Bar: Under the federal FCA, a court shall dismiss an action or claim if substantially the same allegations or transactions were publicly disclosed, unless the government opposes the dismissal. By contrast, the North Carolina FCA does not allow the state of North Carolina to oppose a defendant or court’s dismissal of a case based on its public disclosure bar.

Furthermore, the North Carolina FCA includes a broader definition of what constitutes a public disclosure by including disclosures made in hearings in which the government was not a party.

1. The Original-Source Exception: The original-source exception to the public disclosure bar permits a relator to proceed, even if there is a public disclosure, if the relator qualifies as an original source.  North Carolina’s original-source exception to the public disclosure bar is narrower than its federal counterpart. It provides that an individual is an “original source” of publicly disclosed allegations if that individual has “direct and independent knowledge” of the information on which the allegations are based [and has “voluntarily provided the information to the state” before filing an action based on that information].  The federal FCA provides [as of 2010] that an individual need only have “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions” to qualify as an “original source.”

Previous North Carolina False Claims Act Settlements

The North Carolina Attorney General’s Office has prosecuted numerous qui tam cases, recovering funds for both the state government and North Carolina taxpayers:

1. Duke University: In March 2014, Duke University Health System, Inc. agreed to pay $1 million to settle allegations under the U.S. and North Carolina False Claims Acts that it made false claims in conjunction with certain services provided to beneficiaries of Federal healthcare programs, including:
   1.  billing the government for services provided by physician assistants and graduate medical trainees during coronary artery bypass surgeries when the assistants and trainees were acting as surgical assistants, which is not allowed under government regulations, and
   2.  increasing billing by unbundling claims when the unbundling was not appropriate, specifically in connection with cardiac and anesthesia services.
2. Charlotte-Mecklenburg Hospital Authority, dba Carolinas Healthcare System (CHS): In June 2017, CHS agreed to pay the Government $6.5 million to resolve allegations that the company violated the U.S. and North Carolina False Claims Acts by “up-coding” claims for urine drug tests in order to receive higher payment than allowed for the tests. According to court documents, from 2011 to 2015, CHS conducted urine drug tests, categorized as “moderate complexity” tests by the Food and Drug Administration (FDA), but submitted claims that indicated the company had conducted “high complexity” tests.

For more information on the North Carolina False Claims Act or to speak with an attorney, please contact one of our experienced qui tam lawyers.

One last thing…

For more than a decade, the Berger Montague Whistleblower, Qui Tam & False Claims Act Practice Group has represented whistleblowers in matters involving healthcare fraud, defense contracting fraud, IRS fraud, securities fraud, and commodities fraud. While the information on this blog is not legal advice, we would be more than happy to speak with you directly about your potential case. Any information you share with us will be treated with the highest level of confidentiality.