Published on:

Legislators Propose Bill to Retroactively Apply New Jersey False Claims Act

170px-Seal_of_New_Jersey_svg.pngOn December 11, 2014, New Jersey State Senator Nicholas P. Scutari introduced S. 2645, a bill that would make the provisions of the New Jersey False Claims Act, N.J.S.A. 2A:32C-1 to -15 and N.J.S.A. 2A:32C-17 to -18 (“NJ FCA” or the “Act”), retroactive under certain circumstances (available at http://www.njleg.state.nj.us/). Senator Scutari introduced the bill to amend the NJ FCA in response to the New Jersey Superior Court, Appellate Division’s October 2011 opinion finding that the NJ FCA did not apply retroactively. State ex rel. Hayling v. Correctional Medical Services, Inc., 422 N.J. Super. 363 (App. Div. 2011). Provided S. 2645 is enacted, the State and private individuals will have a greater ability to hold accountable those who defraud the State and to recover additional funds for New Jersey taxpayers.

Governor Jon Corzine signed the NJ FCA into law on January 13, 2008, with an effective date of March 13, 2008. P.L. 2007, c. 265. Similar to False Claims Act statutes in other states, the Act was modeled after the Federal False Claims Act and has a “remedial and deterrent purpose,” N.J.S.A. 2A:32C-17, aimed at fighting and reducing fraud perpetrated against the State. In order to accomplish its goal of reducing fraud, the NJ FCA provides for civil penalties and treble damages. N.J.S.A. 2A:32C-3. Additionally, similar to the Federal False Claims Act, the NJ FCA contains a qui tam provision to encourage private individuals, known as “relators,” to report fraud and to bring actions on behalf of the State. N.J.S.A. 2A:32C-5. If the State “proceeds with and prevails in an action brought by a person” under the Act, the relator shall receive between 15% and 25% “of the proceeds recovered under any judgment obtained by the Attorney General under this act or of the proceeds of any settlement of the claim . . . .” N.J.S.A. 2A:32C-7(a). In cases in which the Attorney General does not intervene and the relator prosecutes the action, “the person bringing the action or settling the claim shall receive” between 25% and 30% “of the proceeds of the action or settlement of a claim under th[e] act.” N.J.S.A. 2A:32C-7(d). Provided that a fraud was perpetrated against both the State and Federal governments, a relator may bring an action under both the Federal False Claims Act and the NJ FCA and recover a relator’s share under both statutes.

Approximately three and one-half years following the NJ FCA’s enactment, the Appellate Division was presented with the question whether the Act should be given retroactive effect. State ex rel. Hayling, 422 N.J. Super. 363. In a published opinion authored by the Honorable Edith K. Payne, P.J.A.D., the Appellate Division found that the Legislature did not intend for the Act to apply retroactively. Id. at 369-70. In its analysis, the Panel noted that “‘[t]he courts of this State have long followed a general rule of statutory construction that favors prospective application of statutes.'” Id. at 370 (quoting Gibbons v. Gibbons, 86 N.J. 515, 521 (N.J. 1981)). The Panel found, inter alia, that because the Legislature had delayed the effective date of the Act, it had expressed a clear intention that the NJ FCA only be applied prospectively. Id. Thus, the Panel declined to give the Act retroactive effect.

This month, State Senator Scutari introduced S. 2645, a bill that would give the NJ FCA retroactive effect in certain circumstances. State Senator Scutari explained that contrary to the Appellate Division’s holding in State ex rel. Hayling, “it is the view of the sponsor that the Legislature did intend the New Jersey False Claims Act to be retroactive.” S. 2645, 216th Leg., at 3 (N.J. 2014) (Statement). Thus, the bill proposes an amendment to the NJ FCA that, inter alia, will allow the Attorney General and relators to pursue civil actions to recover for false claims made before the 2008 effective date, provided that 1) the actions were filed after the Act’s 2008 effective date but before the Panel’s October 11, 2011 ruling in State ex rel. Hayling; and 2) the actions comply with the NJ FCA’s statute of limitations.

Assemblyman Herb Conaway, Jr. introduced an identical bill, A. 4041, in the New Jersey Assembly on December 18, 2014 (available at http://www.njleg.state.nj.us/). Both S. 2645 and A. 4041 have been referred to their respective Houses’ Judiciary Committees and likely will be considered in the upcoming legislative session. If S. 2645, A. 4041, or a substantially similar form of either bill is ultimately enacted, relators and the Attorney General will be provided with an even greater ability to recover funds for the State and to hold accountable those that defraud the taxpayers.