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In January 2010, Oregon joined a growing list of states that have enacted false claims acts modeled after the federal one, which was first enacted during the Civil War.

The Oregon False Claims Act imposes civil penalties against contractors who submit false or fraudulent claims for payment on Oregon public works projects. Although Oregon’s act is similar to the federal act, there are some important differences.

No private right of action

Unlike its federal counterpart, the Oregon False Claims Act can be enforced only by the Oregon attorney general. This is perhaps the biggest difference between the two acts. Under the federal act, individuals may bring civil actions against contractors on behalf of the government (a qui tam action). To bring a qui tam action, an individual must first tender the action to the federal agency, and if the agency declines to prosecute the claim, the individual can continue with the action on behalf of the federal government. If successful, the individual may be entitled to receive up to 25 percent of the proceeds from the action and attorney fees and costs incurred.

Liability – personal and entity

In Oregon, both the entity and any individual associated with that entity can be held liable for violating the act. Under the federal act, liability can be imposed only against either the entity or the individual.

Nonexclusive

A person accused of violating the Oregon act can be concurrently liable under various other theories as well. Under the federal act, there are limitations to the type of action that can be brought concurrently with a False Claims Act claim.

Criminal penalties

The Oregon False Claims Act does not impose criminal sanctions. But conduct violating Oregon law, independent of the act, can form the basis for an independent criminal action. The point is that Oregon does not have the equivalent of what is commonly known under the federal act as the Criminal False Claims Act (18 USC 287).

Attorney fees and costs

If the state were to successfully prove that the Oregon False Claims Act was violated, the court could award attorney fees and costs to the state. A defendant successful in defending a claim, however, is entitled to recover attorney fees and costs only if it can show that the state had no objectively reasonable basis for the claim. Under the federal act, the prevailing defendant is entitled to recover attorney fees and costs, but does not need to show that the government had no an objectively reasonable basis for the claim.

Damages

Damages under the Oregon act are less severe than under the federal act but could actually amount to more because damages can be imposed against the responsible individual and the company concurrently.

A party who violates the Oregon act may be liable for a penalty of $10,000 or twice the amount of damages incurred for each violation – whichever is greater. If a court finds that an individual acted inappropriately on behalf of a corporation, the court can impose a penalty on each, independent of the other. Under the federal act, the court can impose a statutory penalty not less than $5,000 or more than $10,000, plus three times the amount of damage sustained by the government.

The Oregon False Claims Act can result in penalties that could easily cripple, if not destroy, even the most financially stable companies. Given the magnitude of the risk, it is critical for contractors to discuss their quality assurance procedures with their legal counsel in order to make sure billing practices do not run afoul of the law.

Hafez Daraee is an attorney in Jordan Schrader Ramis’ Dirt Law and business-law practice groups. Contact him at 503-598-5579 or at [email protected].