The New Jersey False Claims Act Does Not Apply to Claims Made in Connection With State Tax Laws

State ex rel. Campagna v. Post Integrations, Inc., 451 N.J. Super. 276 (App. Div. 2017).  The New Jersey False Claims Act, N.J.S.A. 2A:32C-1 to -18 (“NJFCA”), encourages lawsuits by private parties, known as relators, in the interest of the State of New Jersey, to help the State recoup monies wrongly taken from or not paid to the State.  But the NJFCA expressly excludes “claims, records, or statements made in connection with State tax laws.”  The qui tam complaint in today’s opinion by Judge Rothstadt alleged that defendants, who were “out-of-state credit card processors who served New Jersey based hotels … violated the NJFCA by making false statements in order to avoid paying New Jersey ‘assessments, fees, license costs and other charges.”  Defendants moved to dismiss for failure to state a claim, and the Law Division granted that motion, finding that the exclusion for tax-related matters barred the claim.  The Appellate Division today affirmed.

Judge Rothstadt’s opinion applied de novo review, as required on a motion to dismiss, and affirmed substantially for the reasons given by Judge Hollar-Gregory in the Law Division.  Plaintiff had relied on a section of the NJFCA that prohibited the knowing use of a “false record or statement” to conceal, avoid, or reduce a payment obligation to the State.  Plaintiff’s argument was that because that section did not prohibit a false “claim,” plaintiff’s qui tam action could proceed.

Judge Rothstadt did not agree.  He cited the basic principle of statutory interpretation that calls for reading a statute as a whole, and found it “clear that, as the motion judge concluded, the Legislature intended to exclude state tax matters from the Act’s purview.  Contrary to plaintiff’s argument, the fact that subparagraph (g) does not refer to ‘claims’ does not compel a contrary reading, especially since the introductory language of the statute specifically includes that reference.”  The panel also cited the fact that caselaw under the federal Tort Claims Act, 31 U.S.C. §3729 to 3733, which has similar tax bar, has followed the same approach as the court did here.

Judge Rothstadt also agreed with Judge Hollar-Gregory that the fees involved were alternative minimum assessments required as a tax on corporate income by the Corporation Business Tax Act, N.J.S.A. 54:10A-1 to -40.  Similarly unpersuasive was plaintiff’s argument that the NJFCA’s tax bar does not apply to assessments and fees imposed upon foreign corporations by the New Jersey Business Corporation Act, N.J.S.A. 14A:13-1 to -23.  That statute states that it is, in general, governed by New Jersey’s state tax uniform procedure law, and the Legislature assigned the administration of that statute to the Division of Taxation.  Both of those facts confirmed that those charges were taxes that cannot be the subject of a claim under the NJFCA.