New Jersey False Claims Act: Liability, Damages & Qui Tam Suits

The New Jersey False Claims Act, codified at N.J.S.A. 2A:32C-1 through 2A:32C-18 and signed into law on January 13, 2008, lets the state and private citizens sue anyone who knowingly defrauds the New Jersey government out of money or property. Violators owe three times the state’s actual loss plus a civil penalty on every false claim, currently between $14,308 and $28,619 per claim.¹² A private citizen who brings the case on the state’s behalf can keep between 15 and 30 percent of the recovery, depending on whether the Attorney General takes over.³

What the Act Covers

A “claim” under the Act is any request or demand for money, property, or services directed at a state employee, officer, or agent. It also reaches money paid to contractors or grant recipients when those funds are spent on the state’s behalf or used to advance a state program.⁴

Two things fall outside that definition. Anything connected to New Jersey state tax laws is excluded, as are direct payments the state makes to individuals for government employment compensation or unrestricted income subsidies.⁴ A company cheating on its New Jersey tax returns answers under tax law, not the NJFCA.

Within that scope, the statute lists seven categories of conduct that trigger liability: submitting a false claim, making or using false records to support one, conspiring with others to do either, short-delivering state property or money, falsely certifying receipt of state property with intent to defraud, buying public property from someone with no right to sell it, and using false records to avoid an obligation to pay the state. That last category — “reverse” false claims — catches people and companies who are not seeking payment but are hiding what they owe, such as a contractor burying overcharges in an audit response.¹

The Knowledge Standard

Liability only attaches when the person acts “knowingly.” The statute defines that three ways: actual knowledge that the information was false, deliberate ignorance of its truth or falsity, or reckless disregard of its truth or falsity.⁴

No proof of specific intent to defraud is required. At the same time, the statute says innocent mistakes and mere negligence are valid defenses.⁴ The practical line runs between carelessness and willful blindness. A billing clerk who enters a wrong code because of a software glitch has been negligent. A company that ignores repeated internal warnings about overbilling, refuses to investigate, and keeps collecting payments is recklessly disregarding the truth.

What a Violation Costs

Anyone found liable owes the state treble damages plus the per-claim civil penalty. Because the penalty attaches to each false claim, a contractor who submitted dozens of fraudulent invoices over several months faces that penalty on every invoice. Cumulative exposure can easily dwarf the underlying fraud.

Liability is joint and several. The state can collect the full judgment from any single defendant in the scheme, so if one conspirator goes bankrupt, the others are on the hook for the entire amount.¹

A court can bring treble damages down to double damages, but only if three conditions are all met: the violator reported the fraud to state officials within 30 days of learning about it, fully cooperated with the government’s investigation, and came forward before any criminal prosecution, civil action, or administrative proceeding had begun. The violator also must not have known an investigation was already underway.⁵

Bringing a Qui Tam Case

The Act’s qui tam provision allows a private citizen, called a relator, to file suit on the state’s behalf and share in the recovery. The size of the share depends on who runs the case:

If the Attorney General intervenes and takes over, the relator receives between 15 and 25 percent of the judgment or settlement, with the exact figure tied to how much the relator contributed to prosecuting the case.
If the Attorney General declines and the relator proceeds alone, the share rises to between 25 and 30 percent.³

The filing process does not look like ordinary civil litigation. The complaint is filed under seal and stays sealed for at least 60 days while the government reviews the allegations. Neither the defendant nor the public can see it during that period.⁶

At the time of filing, the relator must serve the Attorney General by registered mail with the complaint and a written disclosure containing substantially all material evidence the relator possesses.⁶ That disclosure is the factual foundation of the case: names of the people involved, specific dates and amounts, and internal records such as emails, invoices, or accounting data showing the gap between what was billed and what was actually provided. The Attorney General can ask the court to extend the seal for good cause, and in complex cases those extensions can run for months or years.

What Can Block a Whistleblower Case

Several barriers can stop a qui tam suit before the merits are ever reached.

First to file. Once a qui tam complaint is on file, no other private party can intervene or bring a related action based on the same underlying facts. Only the state itself can join. A second whistleblower who independently uncovered the same fraud is shut out.⁶

Public disclosure. A court must dismiss the case if the fraud was already publicly disclosed through a criminal, civil, or administrative hearing involving the state, through a legislative investigation or audit, or through media reporting. A relator survives this bar only by qualifying as an “original source” — either by disclosing the information to the state before it became public, or by holding knowledge that is independent of and materially adds to what was publicly disclosed. Either way, the information must have been voluntarily provided to the state before the lawsuit was filed. The Attorney General can oppose dismissal and keep the case alive.⁷

Parallel government action. A relator cannot bring a qui tam case when the state is already a party to a civil suit or administrative penalty proceeding based on the same allegations.⁷

Relator’s own role in the fraud. A relator who planned and initiated the very fraud being reported does not get the standard cut; the court can reduce the share to whatever it considers appropriate. If the relator is convicted of criminal conduct arising from that role, the court dismisses them from the civil case entirely and they receive nothing, though the Attorney General can continue the case without them.³

Protection from Retaliation

Employers cannot punish workers for participating in NJFCA activity. The statute prohibits any rule or policy that stops an employee, contractor, or agent from disclosing information to a state or law enforcement agency, or from investigating, testifying in, or assisting with a false claims case. Firing, demoting, suspending, threatening, or harassing someone for those activities is illegal.⁸

A successful retaliation claim entitles the worker to reinstatement with the seniority they would have had absent the retaliation, double back pay plus interest, special damages for other losses caused by the discrimination, punitive damages where appropriate, and litigation costs and attorney fees paid by the defendant.⁸

Retaliation claims carry a three-year deadline from the date the retaliatory act occurred. Missing that window forfeits the claim, no matter how strong the underlying evidence.

Taxes on a Whistleblower Award

Qui tam recoveries are taxable income. The IRS requires relators to report the full gross award, including the portion that goes to attorney fees. You cannot simply report the net amount you kept.

Federal tax law provides an above-the-line deduction for attorney fees and court costs paid in connection with a state false claims act case, including qui tam actions, for taxable years beginning after December 31, 2017. The deduction cannot exceed the amount of the award included in gross income for that year.⁹ Because it is above the line, the deduction reduces adjusted gross income directly rather than running through itemized deductions, which can affect eligibility for other tax benefits. To claim it, the attorney fees must be paid in the same tax year the award is received.

1
Justia. New Jersey Code 2A:32C-3 – Civil Liability for False, Fraudulent Claim
2
eCFR. 28 CFR Part 85 – Civil Monetary Penalties Inflation Adjustment
3
Justia. New Jersey Code 2A:32C-7 – Distribution of Proceeds
4
Justia. New Jersey Code 2A:32C-2 – Definitions
5
Justia. New Jersey Code 2A:32C-4 – Reduction of Treble Damages by Court, Conditions
6
Justia. New Jersey Code 2A:32C-5 – Investigation of Violation; Civil Actions
7
Justia. New Jersey Code 2A:32C-9 – Immunity from Civil Liability; Limitations on Bringing an Action
8
Justia. New Jersey Code 2A:32C-10 – Relief for Employees, Contractors, or Agents
9
Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined