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Attorneys and Whistleblowing

By Howard W. Goldstein

The False Claims Act (FCA), enacted shortly after the Civil War, allows private parties, known as relators, to bring qui tam actions on behalf of the United States government for violating the Act, and awards those parties up to 30% of all monies recovered. See 31 U.S.C. ' 3730(d). Similarly, under the new Dodd-Frank Act regulations, whistleblowers may reap up to 30% of the damages over $1 million. But for lawyers, there's more to the calculus than just the potential payouts. Disclosing client confidences is fraught with difficult legal and ethical issues that are only further complicated when financial incentive drives disclosure.

While the FCA does not expressly prohibit an attorney-relator, a recent opinion from the Southern District of New York, United States ex rel. Fair Lab. Practices Assocs. v. Quest Diagnostics Inc., 05-Civ-5393, 2011 WL 1330542 (S.D.N.Y. Apr. 4, 2011), indicates that lawyers will typically be prohibited from bringing qui tam actions against their former clients. And the new Dodd-Frank regulations expressly limit when an attorney can reap a whistleblower reward.

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