Whistleblowers (called “relators” in the False Claims Act) may have difficulty in seeking a qui tam award if they have filed for bankruptcy. A federal court has previously held that a whistleblower who filed for bankruptcy lacks standing to be a plaintiff. See United States ex rel. Gebert v. Transport Administrative Services, 260 F.3d 909 (8th Cir. 2001). In the Gebert case, the whistleblowers filed their False Claims Act case in 1998, but had previously filed for bankruptcy in 1994. Their bankruptcy case closed in 1997. The relators schedule of assets filed in the bankruptcy case did not itemize their qui tam claim. They also signed a settlement contract that released Transport Administrative Services, their old employer, from any causes of action (which, obviously, includes whistleblower lawsuits).
The Eighth Circuit held that the whistleblowers had all the information required to file a qui tam complaint when they filed for bankruptcy. The Court held that the relators accordingly transferred their whistleblower lawsuit to the bankruptcy estate when they filed bankruptcy. This voided their standing to bring a qui tam complaint.
Although the Gebert case appears discouraging to potential whistleblowers who have previously filed for bankruptcy, this is a complex area of law with many exceptions that may apply. It may be possible to have a whistleblower attorney appointed to pursue a case by the trustee of the bankruptcy estate. With complex legal issues, it’s best to be aware of a potential challenge early in a case in order to sufficiently prepare and address the problem. During your confidential consultation with a whistleblower attorney, be sure to mention any bankruptcy issues so that your attorney may adequately analyze your case.
