The False Claims Act Which Would Have Compounded the Mike M. Johnson Notice Issue Dies in Olympia
A bill, modeled on the federal False Claims Act was introduced this year in the Washington Legislature. The law would have imposed civil penalties of up to $10,000 and three (3) times the amount of the government’s damages on anyone who “knowingly” makes a demand or request for payment to the government that is false or fraudulent. The Act gave whistleblowers a percentage of the government’s recovery, and if the Attorney General declines to pursue an allegation, private litigants are empowered to do so in the name of the state, for an even bigger percentage of the recovery. The Act allowed the government or private plaintiffs to recover their attorneys’ fees if they prevail, but allows defendants (contractors) to recover their attorneys’ fees only if the claim is shown to be frivolous, an almost impossible standard to meet. While the main target of the legislation appeared to be Medicare cheats, the bill was drafted so broadly that it encompassed claims by contractors on public works projects as well and created a unique problem in the state of Washington.
In 2003, in the case of Mike M. Johnson v. County of Spokane, the Supreme Court of Washington held that contractual notice provisions that result in a waiver of a contractor’s otherwise meritorious claims will be upheld if the contractor fails to submit timely written notice, even though the owner was not hurt (prejudiced) by the untimely notice. That ruling resulted in the most stringent enforcement of contractual notice provisions in the country, and some public owners have not hesitated to take full advantage of the decision by inserting unreasonably short deadlines for contractors’ claim on public works projects. The short written notice time frames force contractors to submit claims based on nothing more than rough order of magnitude guesses or risk a forfeiture of an otherwise meritorious claim.
Time limits that require contractors to submit claims before they have been fully investigated and developed collide squarely with the proposed False Claims Act’s definition of “knowingly.” The Act specifically states that it does not require proof of specific intent to defraud, but simply makes a party liable if the claim is submitted “in deliberate ignorance of the truth or falsity of the information.” This definition would encompass almost every claim a contractor is required to submit under the Mike M. Johnson stringent written notice deadlines. If passed, the False Claims Act would place the contractor in the position of either waiving its claim by failing to submit it on time, or submitting it on time, but doing so in deliberate ignorance of its truth or falsity and thus, risk a False Claims Act violation.
Contractor groups vehemently opposed this legislation and suggested that construction be exempt from the statute, or, in the alternative, eliminate the Mike M. Johnson forfeiture hammer. Given that no other jurisdiction with a False Claims Act has notice and claim requirements as strict as those in Washington, it would have been manifestly unfair for the legislature to copy such laws without addressing the unique burden that Mike M. Johnson continues to impose on Washington contractors. The legislation failed this session, but expect it to reappear in the future again.
Raves go to Ahlers & Cressman PLLC lawyer Douglas R. Roach for his efforts and testimony and to the tireless work of the AGC Legislative Counsel, Van Collins, in killing this legislation.