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Louisiana Association of Business and Industry opposes state False Claims Act

By Russell Boniface | Apr 15, 2016

BATON ROUGE – A bill aiming to combat and prevent fraud and abuse committed by any person against the state government was recently introduced into the Louisiana State Legislature.

While the Federal False Claims Act (FCA) has been used to address alleged false claims against the federal government in many economic sectors—including health care, pharmaceuticals, finance  and defense—many states have False Claims Acts that work to discourage frauds perpetrated against state governments.

The Louisiana False Claims Act, also known as SB 327, was introduced by Sen. Jay Luneau (D-Dist. 29). The proposed law would protect the state’s monetary resources from persons who engage in fraud, misrepresentation, abuse, or other ill practices against the state and who seek to obtain payments to which they are not entitled. The legislation would entitle a private citizen to make what is currently a public claim.

The Louisiana Association of Business and Industry (LABI) opposes this bill because it could lead to nuisance lawsuits that defendants would feel compelled to settle.

“The big, overarching opposition to this is that it’s duplicative litigation, which means unnecessary litigation,” Lauren Chauvin, director of the Civil Justice Reform Council at LABI, recently told the Louisiana Record. “There is already a federal False Claims Act that people can get sued under. What happens is you end up having two different laws that you have to abide by that can contradict each other, which happens in a lot of different states. It’s very complicated, and you have to have someone who can make sure you are in compliance with two different regulations and two different systems.”

Chauvin said she believes the legislature is unnecessary in Louisiana.

“There are a myriad of different, broad claims and causes of action that people can take,” she said. “I think this statue is likely to increase lawsuits. That isn’t really beneficial. One of the big things about the False Claims Act is that there is the potential for attorney fees—punitive damages, fines, penalties—to be three times your actual damages. So when a company is looking at their books and they see they have one of these claims going out against them, a lot of times it makes more financial sense to settle to get that liability off of your books. It can be a self-perpetuating type of situation where they keep suing and you keep settling. There aren’t many legitimate claims.”

Chauvin pointed out that because false lawsuits are per claim, trial attorney can file the lawsuit and have as many claims as they want to make the potential liability huge against a company.

“For every claim, you are looking at combining all these damages with no intention of actually bringing that to a judge to get a finding of fraud or guilt,” Chauvin said. “They never intend to do that. What they intend to do is to use it as leverage, ‘we’ll drop this one, if you just pay this.’ All they have to do is put enough on the plate so it outweighs fighting it. It will cost less to settle it. Trial attorneys are just trying to give themselves a leg up when they’re coming into settlement agreements. They are doing that in multiple states.” 

Chauvin added that false claims tend to target the medical industry.

Proponents of state FCAs say it would improve law enforcement and promote state-specific fraud detection.

“It’s not that we don’t want people who are acting fraudulent to be brought to justice,” Chauvin said. “We are working with the attorney general to come up with something that won’t cause unnecessary litigation and complication in the system.”

LABI serves as Louisiana's state chamber of commerce, and advocates for business interests through legislative lobbying and political action.

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