John O'Brien Feb. 25, 2014, 4:20pm

CHARLESTON, W.Va. (Legal Newsline) - The Democrat-led West Virginia House of Delegates on Monday shot down a Republican amendment to a proposed version of the federal False Claims Act.

In a 51-45 vote, Democrats rejected changes to House Bill 4001, which would penalize businesses that submit false claims for reimbursements to federal- and state-run programs like Medicaid, that would have capped awards given to whistleblowers who file lawsuits against those businesses.

Only one delegate crossed his party's line in the vote - Wayne County Democrat Tim Kinsey, who voted to adopt the amendment. All other Democrats voted no, while all Republicans voted yea and four delegates were absent.

Under the federal FCA, whistleblowers bring lawsuits under seal against, usually, their employers. The federal government then decides if it wants to intervene.

If the lawsuit proves successful, the whistleblower is entitled to an award that ranges from 15 percent of the recovery to 30 percent.

Under Monday's proposed amendment - which was introduced by delegates John Shott, Patrick Lane, Paul Espinosa and John McCuskey - would have limited whistleblower awards in several ways.

In the current bill, if a whistleblower brings a lawsuit for fraud and abuse against the Medicaid program and the state Attorney General's Office decides to intervene, the whistleblower would receive between 15-25 percent of the recovery.

If in the same scenario, the lawsuit's success is found to be based primarily on information other than what was disclosed by the whistleblower, the whistleblower will receive no more than 10 percent.

In claims that don't allege fraud and abuse against the Medicaid program, the whistleblower's award would be capped at 20 percent of the recovery or $250,000, whichever is smaller, the amendment said.

If the AG's office does not intervene, the whistleblower would be entitled to up to 30 percent of any recovery, capped at $1 million, the amendment said.

The amendment also would have only allowed False Claims Act lawsuits brought when the amount in question was more than $25,000.

Twenty-nine states and the District of Columbia have state versions of the False Claims Act, which allows them to recover a greater percentage of multi-jurisdiction FCA settlements and judgments because they have False Claims Act laws that are as stringent as the federal version.

"This is a fantastic bill that is going to crack down on taxpayer fraud," Del. Stephen Skinner said at a recent House Judiciary Committee meeting. Skinner is a Jefferson County personal injury lawyer who was one of the bill's sponsors.

Shott's amendment came after he urged the Judiciary Committee to vote down the bill. He said there is no way to know a cost-benefit ratio and that the bill will only serve to perpetuate the feeling that West Virginia's legal climate is a bad one for businesses.

The state has been on the American Tort Reform Association's list of Judicial Hellholes every year since ATRA began its report in 2002.

"How do we fix that?" Shott said. "The first bill we take up in this committee is a bill that can only reinforce that."

Shott was also bothered by certain language in the bill that holds a company liable for "deliberate ignorance." He wondered if an employee accidentally moves a decimal point to the wrong place on a claim for reimbursement from the government, if a company has committed deliberate ignorance by not reviewing the claim.

"I don't think it is but a competent plaintiff lawyer could argue that it is a deliberate act," Shott said.

"Would they win? I don't know, but it creates enough of a risk, as a defendant whose business may be in jeopardy because of a bad outcome, I may settle this case.

"What we've done is what should be called the 'Qui Tam Lottery Act.'"

Of the nine sponsors of the bill, all are Democrats and four are personal injury lawyers, including Judiciary Chair Tim Manchin.

Manchin says the bill, once fine-tuned, has the potential to return to taxpayers up to $90 million a year. He says those funds could be used for road repair, in-home care for seniors and assistance for volunteer firefighters.

Fiscal Year 2013 brought in the most recovery from FCA claims in the act's history. The federal government accounted for $3.8 billion in settlements and judgments, though some judgments are being appealed.

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