False Claims Act and Qui Tam Funding: Financing Whistleblower Litigation

How funders evaluate qui tam cases, the government intervention decision, and the first-to-file rule.

False Claims Act litigation allows private individuals, known as relators, to sue on behalf of the government to recover funds lost to fraud against federal programs, sharing in any recovery. These qui tam actions address fraud in healthcare, defense contracting, and other areas of federal spending, and they can yield substantial recoveries given the FCA's treble damages and per-claim penalties. Because qui tam cases are complex, lengthy, and risky, they are well suited to third-party funding, though they present unique underwriting considerations.

The government intervention decision is the pivotal event. After a relator files under seal, the Department of Justice investigates and decides whether to intervene and take over the litigation. Cases in which the government intervenes have dramatically higher success rates and recoveries, because the government brings resources and credibility. Cases the government declines proceed with the relator litigating alone, at much higher risk. Funders weigh the likelihood of intervention heavily, and the procedural posture, pre- or post-intervention decision, materially changes a case's risk profile.

The first-to-file rule and the public disclosure bar are critical threshold issues. The FCA generally bars a later relator from bringing a qui tam action based on the same underlying facts as an earlier-filed case, so being first to file is essential. The public disclosure bar can defeat a claim based on already-public information unless the relator qualifies as an original source. Funders diligence these issues carefully, because a case vulnerable to dismissal on first-to-file or public disclosure grounds may have little value regardless of the merits.

Damages and timing complete the analysis. FCA recoveries benefit from treble damages and statutory penalties, which amplify the upside, but the cases are protracted, often spending years under seal and more years in litigation after the intervention decision. The relator's share, the percentage of recovery the relator receives, varies with whether the government intervened and with the relator's contribution. Funders model the long timeline and the contingent share structure when valuing qui tam matters.

Criterica Capital funds qui tam and False Claims Act litigation, assessing intervention likelihood and procedural risk against outcome data drawn from 106M+ court records. This grounds our valuation of these complex, lengthy matters in observed outcomes. Relators' counsel and firms building FCA practices can contact our institutional team to discuss funding structures.

Discuss your matter with our institutional team.