Bill Text: AZ HB2713 | 2010 | Forty-ninth Legislature 2nd Regular | Introduced
Bill Title: Civil actions; false claims actions
Spectrum: Moderate Partisan Bill (Democrat 12-3)
Status: (Introduced - Dead) 2010-02-11 - Referred to House COM Committee [HB2713 Detail]
Download: Arizona-2010-HB2713-Introduced.html
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REFERENCE TITLE: civil actions; false claims actions |
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State of Arizona House of Representatives Forty-ninth Legislature Second Regular Session 2010
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HB 2713 |
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Introduced by Representatives Patterson, Chabin: Ableser, Cajero Bedford, Campbell CH, Crandall, Deschene, Farley, Heinz, Lopes, Meyer, Meza, Montenegro, Quelland
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AN ACT
Amending title 12, Arizona Revised Statutes, by adding chapter 21; relating to false claims actions.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 12, Arizona Revised Statutes, is amended by adding chapter 21, to read:
CHAPTER 21
FALSE CLAIMS ACT
ARTICLE 1. GENERAL PROVISIONS
12-3001. Definitions
In this chapter, unless the context otherwise requires:
1. "Claim" includes any request or demand for money, property or services made to any employee, officer or agent of this state or any political subdivision of this state, or to any contractor, grantee or other recipient whether under contract or not if any portion of the money, property or services requested or demanded issued from or was provided by this state or state funds or by any political subdivision of this state or political subdivision funds.
2. "Knowing" and "knowingly" mean that a person, with respect to information, does any of the following:
(a) Has actual knowledge of the information.
(b) Acts in deliberate ignorance of the truth or falsity of the information.
(c) Acts in reckless disregard of the truth or falsity of the information.
3. "Political subdivision" means any city, town or county, a special taxing district or any other special district of a city, town or county.
4. "Prosecuting authority" means a county attorney, city attorney or other local government official who is charged with investigating, filing and conducting civil legal proceedings on behalf of or in the name of a particular political subdivision.
12-3002. False claims action; damages; civil penalty; applicability
A. A person who does any of the following is liable to this state or a political subdivision of this state:
1. Knowingly presents or causes to be presented to an officer or employee of this state or any political subdivision of this state a false claim for payment or approval.
2. Knowingly makes, uses or causes to be made or used a false record or statement to get a false claim paid or approved by this state or any political subdivision of this state.
3. Conspires to defraud this state or any political subdivision of this state by getting a false claim allowed or paid by this state or any political subdivision of this state.
4. Has possession, custody or control of public property or money used or to be used by this state or any political subdivision of this state and who knowingly delivers or causes to be delivered less property than the amount for which the person receives a certificate or receipt.
5. Is authorized to make or deliver a document certifying receipt of property used or to be used by this state or any political subdivision of this state and who knowingly makes or delivers a receipt that falsely represents the property used or to be used.
6. Knowingly buys or receives, as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property.
7. Knowingly makes, uses or causes to be made or used a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to this state or any political subdivision of this state.
8. Is a beneficiary of an inadvertent submission of a false claim to this state or a political subdivision of this state and who subsequently discovers the falsity of the claim and fails to disclose the false claim to this state or the political subdivision of this state within a reasonable time after discovery of the false claim.
B. A person who violates subsection A is liable for three times the amount of damages that this state or a political subdivision of this state sustains because of the act of that person, is liable for the costs of a civil action brought to recover any of those penalties or damages and is liable to this state or a political subdivision of this state for a civil penalty of not less than five thousand five hundred dollars and not more than eleven thousand dollars for each false claim.
C. Notwithstanding subsection B, the court shall assess not less than two times and not more than three times the amount of damages that this state or a political subdivision of this state sustains because of the act of the person and may not assess a civil penalty if the court finds all of the following:
1. The person committing the violation furnished officials of this state or a political subdivision of this state responsible for investigating false claims violations with all information known to that person about the violation within thirty days after the date on which the person first obtained the information.
2. The person fully cooperated with any investigation of the violation by this state or a political subdivision of this state.
3. At the time the person furnished this state or a political subdivision of this state with information about the violation no criminal prosecution, civil action or administrative action had commenced with respect to the violation and the person did not have actual knowledge of the existence of an investigation into the violation.
D. Liability under this section is joint and several for any act committed by two or more persons.
E. This section does not apply to:
1. Any controversy involving an amount of less than five hundred dollars in value. For the purposes of this paragraph, "controversy" means one or more false claims submitted by the same person in violation of this section.
2. Claims, records or statements that are made pursuant to chapter 7, article 2 of this title, title 23, chapter 6 or title 42 or 43.
ARTICLE 2. INVESTIGATIONS AND PROSECUTIONS
12-3010. Investigation and prosecution of false claims; attorney general; prosecuting authority; state funds; political subdivision funds
A. The attorney general shall diligently investigate any act that is listed in section 12-3002 involving state funds. If the attorney general finds that a person has committed an act or is committing an act listed in section 12-3002 the attorney general may bring a civil action against that person.
B. If the attorney general brings a civil action under this section on a claim involving a political subdivision's funds as well as state funds the attorney general, on the same date that the complaint is filed in the action, shall serve by certified mail, return receipt requested, a copy of the complaint on the appropriate prosecuting authority.
C. The prosecuting authority may intervene in an action brought by the attorney general within sixty days after receipt of the complaint pursuant to subsection b of this section. Thereafter, the court may permit intervention in accordance with the rules of civil procedure.
D. The prosecuting authority of a political subdivision of this state shall diligently investigate any act that is listed in section 12-3002 involving political subdivision funds. If the prosecuting authority finds that a person has committed or is committing an act listed in section 12-3002 the prosecuting authority may bring a civil action against that person.
E. If the prosecuting authority brings a civil action under this section on a claim involving state funds as well as political subdivision funds, the prosecuting authority, on the same date that the complaint is filed in this action, shall serve a copy of the complaint on the attorney general.
F. Within sixty days after receiving the complaint pursuant to subsection E of this section the attorney general shall do either of the following:
1. Notify the court that it intends to proceed with the action, in which case the attorney general shall assume primary responsibility for conducting the action and the prosecuting authority shall have the right to continue as a party.
2. Notify the court that it declines to take over the action, in which case the prosecuting authority shall have the right to conduct the action.
G. Within sixty days after receiving a complaint pursuant to section 12-3011 alleging violations that involve state funds but not political subdivision funds the attorney general shall do either of the following:
1. Notify the court that it intends to proceed with the action, in which case the seal shall be lifted.
2. Notify the court that it declines to take over the action, in which case the seal shall be lifted and the private party plaintiff, if any, may conduct the action pursuant to section 12-3011.
H. Within fifteen days after receiving a complaint pursuant to section 12-3011 alleging violations that exclusively involve political subdivision funds the attorney general shall forward the complaint and written disclosure to the appropriate prosecuting authority for disposition and shall notify the private party plaintiff of the transfer.
I. Within forty-five days after the attorney general forwards the complaint and written disclosure pursuant to subsection J of this section, the prosecuting authority shall do either of the following:
1. Notify the court that it intends to proceed with the action, in which case the seal shall be lifted.
2. Notify the court that it declines to take over the action, in which case the seal shall be lifted and the private party plaintiff may conduct the action.
J. Within fifteen days after receiving a complaint pursuant to section 12-3011 alleging violations that involve both state and political subdivision funds the attorney general shall forward copies of the complaint and written disclosure to the appropriate prosecuting authority and shall coordinate its review and investigation with those of the prosecuting authority.
K. Within sixty days after receiving a complaint pursuant to section 12-3011 alleging violations that involve both state and political subdivision funds the attorney general shall do either of the following:
1. Notify the court that it intends to proceed with the action, in which case the seal shall be lifted.
2. Notify the court that it declines to take over the action but that the prosecuting authority of the political subdivision involved intends to proceed with the action, in which case the seal shall be lifted and the prosecuting authority shall conduct the action.
3. Notify the court that both it and the prosecuting authority decline to take over the action, in which case the seal shall be lifted and the private party plaintiff may conduct the action.
L. If the attorney general proceeds with the action pursuant to subsection K, paragraph 1 of this section, the political subdivision shall be permitted to intervene in the action within sixty days after the attorney general notifies the court of its intentions. The court may authorize intervention in accordance with the rules of civil procedure.
M. On a showing of good cause and reasonable diligence in its investigation the attorney general or the prosecuting authority of a political subdivision may move the court for extensions of the time during which a complaint remains under seal but in no event may the complaint remain under seal for longer than ninety days.
12-3011. False claims; qui tam actions
A. A private person may bring a qui tam action for an act that is committed or has been committed by another person and that is listed in section 12-3002 for the person and either for the State of Arizona in the name of the state, if any state funds are involved, or for a political subdivision in the name of the political subdivision, if political subdivision funds are exclusively involved. The action may be dismissed only with the written consent of the court taking into account the best interest of the parties involved. The complaint shall be filed in superior court in camera and may remain under seal for up to sixty days. The defendant shall not be served until after the complaint is unsealed.
B. On the same day as the complaint is filed pursuant to subsection A of this section the plaintiff shall serve on the attorney general by certified mail, return receipt requested, a copy of the complaint and a written disclosure of substantially all material evidence and information the person possesses.
C. After a person brings an action under this section no other person may bring a related action based on the facts underlying the pending action.
D. A court does not have jurisdiction over an action that is:
1. Brought under subsection A of this section against a member of the senate or house of representatives, a member of the judiciary, an elected official in the executive branch or a member of the governing body of any political subdivision of this state if the action is based on evidence or information that is known to this state or a political subdivision of this state when the action was brought.
2. Based on the public disclosure of allegations or transactions in a criminal, civil or administrative hearing in an investigation, report, hearing or audit conducted by or at the request of the senate, the house of representatives, the auditor or governing body of a political subdivision of this state or from the news media unless the action is brought by the attorney general or the prosecuting authority of a political subdivision or the person bringing the action is an original source of the information. For the purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based, who voluntarily provided the information to this state or a political subdivision of this state before filing an action based on that information and whose information provided the basis or catalyst for the investigation, hearing, audit or report that led to the public disclosure.
3. Brought under subsection A of this section based on either:
(a) Information discovered by a present or former employee of this state or a political subdivision of this state during the course of the person's employment unless that employee first in good faith exhausted existing internal procedures for reporting and seeking recovery of such falsely claimed sums through official channels and unless this state or a political subdivision of this state failed to act on the information provided within a reasonable period of time.
(b) Allegations or transactions that are the subject of a civil suit or an administrative civil penalty proceeding in which this state or a political subdivision of this state is already a party.
E. If this state or a political subdivision of this state proceeds with the action it shall have the primary responsibility for prosecuting the action. The plaintiff shall have the right to continue as a full party to the action.
F. This state or a political subdivision of this state may seek to dismiss the action for good cause notwithstanding the objections of the plaintiff if the plaintiff has been notified by the state or political subdivision of the filing of the motion and the court has provided the plaintiff with an opportunity to oppose the motion and present evidence at a hearing.
G. This state or a political subdivision of this state may settle the action with the defendant notwithstanding the objections of the plaintiff if the court determines after a hearing providing the plaintiff an opportunity to present evidence that the proposed settlement is fair, adequate and reasonable under all of the circumstances.
H. If this state or a political subdivision of this state elects not to proceed the plaintiff shall have the same right to conduct the action as the attorney general or prosecuting authority would have had if it had chosen to proceed under section 12-3010. If this state or a political subdivision of this state requests, and at its expense, the state or political subdivision shall be served with copies of all pleadings filed in the action and supplied with copies of all deposition transcripts.
I. On timely application, the court shall permit this state or a political subdivision of this state to intervene in an action that it had initially declined to take over if the interest of this state or a political subdivision of this state in recovery of the property or funds involved is not being adequately represented by the plaintiff.
J. If this state or a political subdivision of this state is allowed to intervene pursuant to subsection I of this section the plaintiff shall retain principal responsibility for the action and the recovery of the parties shall be determined as if this state or a political subdivision of this state had elected not to proceed.
K. The court may stay discovery of the person initiating the action for a period of not more than sixty days if the attorney general or prosecuting authority shows that discovery would interfere with an investigation or prosecution of a criminal or civil matter arising out of the same facts regardless of whether the attorney general or prosecuting authority proceeds with the action. The court shall conduct this showing in camera. The court may extend the sixty day period on a further showing in camera that the attorney general or prosecuting authority has pursued the criminal or civil investigation or proceedings with reasonable diligence and that any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.
L. On a showing by the attorney general or prosecuting authority that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the attorney general's or prosecuting authority's prosecution of the case or would be repetitious, irrelevant or for purposes of harassment, the court may limit the person's participation by:
1. Limiting the number of witnesses the person may call.
2. Limiting the length of the testimony of called witnesses.
3. Limiting the person's cross-examination of witnesses.
4. Otherwise limiting the participation by the person in the litigation.
12-3012. Awards; apportionment of proceeds; fees and costs; definition
A. The court shall apportion any proceeds in a civil action filed pursuant to section 12-3010 in the following manner:
1. If the attorney general initiates an action pursuant to section 12‑3010, subsection A or assumes control of an action initiated by a prosecuting authority pursuant to section 12-3010, subsection F, paragraph 1, the attorney general shall receive thirty-three per cent of the proceeds of the action or settlement of the claim and shall use the monies to support its ongoing investigation and prosecution of false claims.
2. If a prosecuting authority initiates and conducts an action pursuant to section 12-3010, subsection D the prosecuting authority shall receive thirty-three per cent of the proceeds of the action or settlement of the claim and shall use the monies to support its ongoing investigation and prosecution of false claims.
3. If a prosecuting authority intervenes in an action initiated by the attorney general pursuant to section 12-3010, subsection C or remains a party to an action assumed by the attorney general pursuant to section 12-3010, subsection F, paragraph 1 the court may award the prosecuting authority a portion of the attorney general's recovery under paragraph 1 of this subsection taking into account the prosecuting authority's role in investigating and conducting the action.
4. If this state or a political subdivision of this state proceeds with an action brought by a private party plaintiff under section 12-3011, the private party plaintiff is subject to paragraphs 6 and 7 of this subsection and shall receive at least fifteen per cent but not more than thirty-three per cent of the proceeds of the action or settlement of the claim depending on the extent to which the plaintiff substantially contributed to the prosecution of the action. If the attorney general or the prosecuting authority conducts the action, it shall receive a fixed thirty‑three per cent of the proceeds of the action or settlement of the claim and shall use the monies to support its ongoing investigation and prosecution of false claims made against this state or a political subdivision of this state. If both the attorney general and a prosecuting authority are involved in a qui tam action pursuant to section 12-3011, the court may award the prosecuting authority a portion of the attorney general's recovery under paragraph 1 of this subsection taking into account the prosecuting authority's contribution to investigating and conducting the action.
5. If this state or a political subdivision of this state does not proceed with an action under section 12-3010 the private party plaintiff, subject to paragraphs 6 and 7 of this subsection, shall receive an amount that the court decides is reasonable for collecting the civil penalty and damages on behalf of the government. The amount shall not be less than twenty-five per cent and not more than fifty per cent of the proceeds of the action or settlement and shall be paid out of the proceeds.
6. If section 12-3011, subsection D, paragraph 3, subdivision (a) applies, the present or former employee of this state or a political subdivision of this state is not entitled to any minimum guaranteed recovery from the proceeds. The court may award the plaintiff those sums from the proceeds as it considers appropriate but shall not award more than thirty‑three per cent of the proceeds if this state or a political subdivision of this state goes forth with the action or fifty per cent if this state or a political subdivision of this state declines to go forth with the action, taking into account the significance of the information, the role of the qui tam plaintiff in advancing the case to litigation and the scope of and response to the employee's attempts to report and gain recovery of the falsely claimed funds through official channels.
7. If the court finds the action is based primarily on information from a present or former employee who actively participated in the fraudulent activity the employee shall not be entitled to any minimum guaranteed recovery from the proceeds. The court may award the plaintiff such sums from the proceeds as it considers appropriate but shall not award more than thirty-three per cent of the proceeds if this state or a political subdivision of this state goes forth with the action or fifty per cent if this state or a political subdivision of this state declines to go forth with the action, taking into account the significance of the information, the role of the plaintiff in advancing the case to litigation, the scope of the present or past employee's involvement in the fraudulent activity, the employee's attempts to avoid or resist the fraudulent activity and all other circumstances surrounding the activity.
B. The portion of the recovery not distributed pursuant to subsection A, paragraphs 3, 4, 5, 6 and 7 of this section reverts to the state if the underlying false claims involved state funds exclusively and to the political subdivision if the underlying false claims involved political subdivision funds exclusively. If the violation involved both state and political subdivision funds the court shall make an apportionment between the state and political subdivision based on their relative shares of the funds falsely claimed.
C. If this state, a political subdivision of this state or the private party plaintiff prevails in or settles any qui tam action under section 12‑3011 the court shall award the plaintiff reasonable expenses that the court finds to have been necessarily incurred, reasonable costs and attorney fees against the defendant. Under no circumstances shall the expenses, costs and fees be the responsibility of this state or a political subdivision of this state.
D. If the state or a political subdivision of this state does not proceed with the action and the plaintiff conducts the action the court may award to the defendant its reasonable attorney fees and expenses if the defendant prevails in the action and the court finds that the claim of the plaintiff was clearly frivolous, clearly vexatious or brought solely for purposes of harassment.
E. For the purposes of this section, "proceeds" includes civil penalties and double or treble damages pursuant to section 12-3002.
12-3013. Statute of limitations; burden of proof; use of criminal conviction
A. A civil action pursuant to section 12-3010 or 12-3011 may not be filed more than three years after the date of discovery by an official of this state or a political subdivision of this state charged with the responsibility to act in the circumstances or not more than ten years after the date on which the act is committed.
B. A civil action pursuant to section 12-3010 or 12-3011 may be brought for activity that occurred before the effective date of this act if the limitations period under subsection A of this section has not lapsed.
C. In any action pursuant to section 12-3010 or 12-3011 this state, a political subdivision of this state or the plaintiff shall be required to prove all essential elements of the cause of action including damages by a preponderance of the evidence.
D. Notwithstanding any law to the contrary, a guilty verdict rendered in a criminal proceeding charging false statements or fraud, whether on a verdict after trial or on a plea of guilty or no contest, shall estop the defendant from denying the essential elements of the offense in any action that involves the same transaction as in the criminal proceeding and that is brought pursuant to section 12-3010, subsection A or D or section 12-3011.
ARTICLE 3. EMPLOYER INTERFERENCE
12-3020. Employer interference with employee disclosures; liability; civil action
A. An employer shall not make, adopt or enforce any rule, regulation or policy preventing an employee from disclosing information to a government or law enforcement agency or from acting in furtherance of a false claims action including investigating, initiating, testifying or assisting in an action filed or to be filed pursuant to section 12-3010 or 12-3011.
B. An employer shall not discharge, demote, suspend, threaten, harass, deny promotion to or in any other manner discriminate against an employee in the terms and conditions of employment because of lawful acts done by the employee on behalf of the employee or others in disclosing information to a government or law enforcement agency or in furthering of a false claims action including investigation for, initiation of, testimony for or assistance in an action filed or to be filed pursuant to section 12-3010 or 12-3011.
C. An employer who violates subsection B of this section is liable for all relief necessary to make the employee whole including reinstatement with the same seniority status that the employee would have had but for the discrimination, two times the amount of back pay, interest on the back pay, compensation for any special damage sustained as a result of the discrimination and, where appropriate, punitive damages. The defendant shall be required to pay litigation costs and reasonable attorney fees. An employee may bring an action in superior court for the relief provided in this section.
D. An employee who is discharged, demoted, suspended, harassed, denied promotion or in any other manner discriminated against in the terms and conditions of employment by his employer because of participation in conduct that directly or indirectly resulted in a false claim being submitted to this state or a political subdivision of this state is entitled to the remedies under subsection C of this section if both of the following occur:
1. The employee voluntarily disclosed information to a government or law enforcement agency or acted in furtherance of a false claims action including investigation for, initiation of, testimony for or assistance in an action filed or to be filed.
2. The employee had been harassed, threatened with termination or demotion or otherwise coerced by the employer or its management into engaging in the fraudulent activity in the first place. END_STATUTE
