Document Type

Case Summary

Publication Date

2-9-2006

Case Synopsis

Petitioner, Nevada’s Attorney General, appeals from the district courts’ refusals to dismiss actions brought under Nevada’s False Claims Act (“FCA”) by respondents, James McAndrews and Beeler, Schad & Diamond, P.C. Nevada permits individuals to become private attorneys general, which grants individuals the right to sue on behalf of the state. This individual is known as a quitam plaintiff. After filing an action, the quitam plaintiff must send the Attorney General a copy of the complaint and a written disclosure of all material information, and then the complaint is sealed. The complaint remains sealed and the defendants are not served until the Attorney General decides whether to intervene. From here, the Attorney General may choose to intervene and to proceed with the action. If the Attorney General intervenes and elects to proceed with the action, the quitam plaintiff must relinquish control of the litigation but may remain a party to the action. On the other hand, if the Attorney General chooses not to intervene initially, the Attorney General may still later intervene upon timely application “if the interest of the State . . . in recovery of the money or property involved is not being adequately represented by the private plaintiff.”2 In addition, the Attorney General may settle the action and “may move to dismiss the action for good cause.”3 Respondent, McAndrews, filed suit under the FCA against International Game Technology, Anchor Coin, Inc., and Spin For Cash Wide Area Progressive (“IGT”). McAndrews filed suit because IGT allegedly falsified tax records. After receiving a copy of McAndrew’s FCA complaint, the Nevada Attorney General asked the Nevada Department of Taxation (“tax department”) to perform an audit of IGT. The Attorney General then elected to intervene pursuant to NRS 357.080(4) and moved to dismiss the false claims action for several reasons: (1) the FCA does not cover tax matters; (2) Nevada’s tax-collection preempts false claims actions brought by private litigants based on tax deficiencies; and (3) good cause is present in order to dismiss the action. The district court denied the Attorney General’s motion to dismiss and held that the express language of Nevada’s FCA does not forbid tax deficiency claims. Furthermore, the district court found that the Attorney General failed to demonstrate good cause for dismissal because he had not demonstrated that the dismissal served a legitimate governmental purpose. Respondent Beeler, Schad & Diamond filed suit under the FCA against several retailers who maintain stores or warehouses in Nevada. After receiving a copy of the complaint, the Nevada Attorney General declined to intervene. Nevertheless, the Attorney General later moved to intervene pursuant to NRS 357.130(2) for the purpose of filing a motion to dismiss. The district court denied the Attorney General’s motion to dismiss and concluded that an individual may appropriately bring tax deficiency claims under Nevada’s FCA. Again, the district court found that the Attorney General failed to demonstrate good cause. The Attorney General responded by filing a petition for a writ of mandamus or prohibition. Beeler, Schad & Diamond asserted that since the Attorney General intervened later in the course of litigation, after originally declining, the Attorney General could not move to dismiss the action. Beeler, Schad & Diamond attempted to distinguish this from McAndrew’s situation where, pursuant to NRS 357.120, the Attorney General could dismiss an action for good cause because he intervened without first declining. The Nevada Supreme Court disagreed and held that, in addition to allowing private individuals to bring false claims actions in situations where the claim arises from a tax deficiency, the Attorney General may move to dismiss the false claims action regardless of when he intervened.

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