United States: Three Years After Escobar: Lessons Learned Regarding Plaintiffs' Efforts To Neutralize Escobar And Opportunities This Practice Raises For Defendants

Last Updated: July 3 2019
Article by Robert S. Salcido

Key Points

  • Under the FCA there are multiple circuit court splits related to how power should be allocated between the United States and the relator and whether the relator has contributed sufficient value to merit obtaining a significant portion of the government's recovery.
  • These circuit splits include whether the government must consent to a dismissal, whether the government has essentially unfettered discretion to dismiss qui tam actions that do not advance the government's interest, whether relators have the same ability as the United States to toll the FCA statute of limitations beyond the FCA's six-year statute of limitations, and whether relators can intervene in an existing qui tam or the extent to which a qui tam can survive if it is filed while another qui tam action is pending based upon related facts.
  • Courts should apply the FCA's plain language and effectuate its purpose by construing it to ensure the primacy of the United States over private individuals in determining what allegations advance the government's interest and to ensure that relators obtain only a portion of the government's funds when the relator actually contributes real value to the government.

The False Claims Act (FCA) is the government's primary weapon to police fraud committed against the government. The FCA's qui tam provisions authorize private citizens, known as "relators," to file lawsuits where they have suffered no personal injury and obtain a substantial statutory bounty from funds that otherwise would be remitted to the government.1

In crafting the FCA, Congress confronted many challenges. One was to provide private plaintiffs with sufficient incentives to file an action and yet not usurp the executive branch's constitutional power to enforce the law.2 Another was to allow private persons to receive a statutory bounty from the government that is proportionate to the value that the private person contributed in filing the action so that excessive wealth (in the form of recoveries) is not redistributed from the government, the actual victim in any FCA action, to private persons and their counsel.3

In seeking to strike the right balance in the allocation of power and providing an appropriate reward when the relator actually contributes valuable information rather than repeating public information or information disclosed in a prior qui tam lawsuit (and, hence, no "whistleblower" is needed), Congress, at times, used ambiguous language that presents, as the Supreme Court has noted, "many interpretative challenges" for courts.4 These "many interpretative challenges" have resulted in multiple circuit splits. Indeed, going into 2018, there are more than one half dozen circuit court splits regarding the FCA. Given the overall goals underlying the FCA, not surprisingly, some splits center on how power should be allocated between the United States and the relator and whether relators (private citizens) motivated by their private financial interest, should have equal authority and power as the United States. These splits include:

  • Under Section 3730(b)(1), which requires that the Attorney General "give written consent to the dismissal" of an FCA action, does the relator, when the United States declines to participate in the action, have the power to settle FCA lawsuits when the United States does not believe that a settlement is in the United States' interest and therefore refuses to provide written consent to the dismissal of the underlying FCA action?
  • Under Section 3730(c)(2)(A), which authorizes the "Government [to dismiss the action notwithstanding the objections of the person initiating the action if . . . the court has provided the person with an opportunity for a hearing on the motion," does the United States have essentially an unfettered right to dismiss the litigation that is brought in its name, or can the relator compel the FCA action to continue when the United States does not believe that the FCA action advances its interest?
  • Under Section 3731(b)(2), which extends the statute of limitations beyond six years if an "official of the United States" did not know of a right of action within three years of the time in which the action is brought, can the relator be considered an "official of the United States" and have the statute of limitations extended if the relator did not know of a right to action within three years of the time in which the relator filed?

Other circuit splits center on whether the relator's action brings sufficient value such that a substantial portion of the government's recovery should be transferred to a private individual. More specifically, these splits include:

  • Under Section 3730(b)(5), which bars relators from intervening or bringing an FCA action "based on the facts underlying" a pending FCA action, there have been multiple splits, including:
    • Does the bar prohibit relators from amending the complaint to join additional relators?
    • Does the bar prohibit relators from proceeding when they file a viable qui tam action, but some other relator previously filed a defective qui tam that is subject to dismissal?
    • Does the bar prohibit relators from proceeding when the prior-filed qui tam is no longer pending?
  • Under Section 3730(e)(4), which, unless the relator qualifies as an original source, prohibits actions based upon the "public" disclosure of specified types of information, what disclosures qualify as "public"? Is a disclosure to a single individual sufficient to be a public disclosure? Are employees and agents of the defendant members of the public? Are government employees members of the public such that disclosures to them are public disclosures?
  • In applying Fed. R. Civ. P. 9(b) to FCA actions, must the relator, who presumably is an insider privy to fraud, be able to specify at least a single false claim with specificity to be permitted to proceed with an FCA action?

Resolving those circuit splits is important for multiple reasons. First, the FCA is a national statute that should be applied uniformly, but, instead, as a result of these multiple splits, it is applied differently depending upon in which circuit the lawsuit is pending. Second, such a divergence in application results in forum–shopping, since relators, who frequently file their lawsuits against companies operating across the country,5strategically file their actions in jurisdictions based upon which jurisdiction is deemed most favorable based upon its case law and which United States Attorney's Office may view their claims more sympathetically. Third, the splits indicate which issues are more likely to be reaching the Supreme Court in the near term in an era in which the Court has been taking FCA cases almost annually. Fourth, the splits also indicate issues that may soon result in additional congressional amendments to the FCA.

I. Circuit Splits Addressing The Proper Allocation Of Power Between The Government And Relators

Courts have split regarding whether the government should have the ultimate say regarding whether an FCA case is dismissed, either on the relator's motion or the government's, and whether Congress ever considered the relator to be an "official of the United States." Set forth below is a description of the splits and how they should be resolved.

A. Section 3730(b)(1) and the Government's Power to Oppose Dismissal of an FCA Action

Section 3730(b)(1) mandates that an FCA "action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting." This provision has its origin in the FCA's initial passage in 1863.6The purpose of the provision is to ensure that the executive branch can bar the relator from dismissing the lawsuit when the relator is not acting in the public's best interest.7

In construing Subsection (b)(1), the precise issue upon which circuits have split concerns whether the United States, in a case in which it does not intervene, can unilaterally veto a settlement reached between the relator and defendants when the United States is not a party to the litigation. For example, imagine a scenario where the United States declines to intervene; the relator and the defendant litigate over a period of years, incurring substantial cost; and they ultimately reach a settlement and thus move to dismiss the action. At that point, can the United States, after spending the litigation on the sidelines, refuse to consent to settlement or dismissal, under Subsection (b)(1), and thereby compel the relator and defendant to continue to litigate the matter through trial?

The majority of circuits—specifically, the 4th, 5th, and 6th—have ruled in the affirmative, noting that the FCA's plain language and purpose support the conclusion that the FCA grants the executive branch a unilateral veto over the relator's decision to dismiss a qui tam that is not in the United States' interest.8For example, as to the plain language, the 5th Circuit, in Searcy, noted that Subsection (b)(1) is "unambiguous" in providing that dismissal may be granted only if the Attorney General provides his or her "written consent to the dismissal"9 and that, given that this statutory language has existed since the FCA's initial passage in 1863, the plain language should be given full force.10 As to policy, the court noted that this interpretation fully effectuates the statutory purpose of prohibiting relators from undertaking actions contrary to the public interest because, if this provision were not enforced, there is a danger that a relator can boost the value of settlement by bargaining away claims on behalf of the United States, and, thus, Section 3730(b)(1) allows the government to resist these tactics and protect its ability to prosecute matters in the future.11

Footnotes

1 Under the qui tam provisions, a private person files the lawsuit under seal, and the government determines whether to intervene or decline to intervene in the action. 31 U.S.C. § 3730(b). If the government intervenes, it assumes primary responsibility to litigate the action. Id. § 3730(c)(1). Alternatively, if the government declines, the relator may litigate as the government's assignee. Id. § 3730(b)(4)(B); Vermont Agency of Nat. Resources v. United States, 529 U.S. 765, 773-74 (2000).

See, e.g., United States ex rel. Ridenour v. Kaiser-Hill Comp., L.L.C., 397 F.3d 925, 934-35 (10th Cir. 2005) (noting that courts should construe FCA provisions consistently with the Constitution's Take Care clause, which requires that the executive branch maintains sufficient control over qui tam actions so that there is no violation of its duty to enforce the laws of the land).

3 For example, Congress created various bars to the relator's action to preclude lawsuits that do not sufficiently benefit the government to merit a reward. For example, under the public disclosure bar, 31 U.S.C. § 3730 (e)(4), Congress barred actions that are substantially similar to specified information in the public domain, unless the relator is the original source of the information in the public domain or materially adds to the information in the public domain. Similarly, under the first-to-file rule, 31 U.S.C. § 3730(b)(5), Congress prohibited all actions that are based upon the facts underlying a pending qui tam action.

Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970, 1979 (2015) (noting in construing 31 U.S.C. § 3730(b)(5) that the "qui tam provisions present many interpretive challenges, and it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine").

5 In cases against defendants operating in several jurisdictions, relators have flexibility regarding where to file the action. Under the FCA, an action "may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transactions business, or in which any act proscribed by section 3729 occurred."  31 U.S.C. § 3732(a).

See Act of March 2, ch 67, 12 Stat. 696 (1863) ("Such suit may be brought and carried on by any person, and shall be in the name of the United States, but shall not be withdrawn or discontinued without the consent, in writing, of the judge of the court and the district attorney, first filed in the case, setting forth  their reasons for such consent.").

Searcy v. Philips Electronics North America Corp., 117 F.3d 154, 159 (5th Cir. 1997) (noting that, although Congress substantially revised the FCA in 1986, it did not revise this provision, which had its roots in the original FCA and thus reasoned that, as "far as we can tell, Congress decided that it should combine its effort to reinvigorate the qui tam provisions of the Act with a continuation of its policy of encouraging the government to monitor relators' actions and step in when relator is not acting in the best interest of the public").

See United States ex rel. Michaels v. Agape Senior Community, Inc., 848 F.3d 330, 339-40 (4th Cir. 2017) (noting that, instead of "freeing relators to maximize their own rewards at the public's expense, Congress granted the Attorney General the broad and unqualified right to veto proposed settlements of qui tam actions" and agreeing "with the district court, and with the Fifth and Sixth Circuits, that the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions"); United States ex rel. Smith v. Lampers, 69 Fed. Appx. 719, 721 (6th Cir. 2003) (the language of Subsection (b)(1) "means that a relator may not seek a voluntary dismissal of any qui tam action under the FCA without the government's consent") (citation omitted); United States v. Health Possibilities, P.S.C., 207 F.3d 335, 339 (6th Cir. 2000) ("We now join the Fifth Circuit in rejecting the Ninth Circuit's analysis, and hold that a relator may not seek voluntary dismissal of any qui tam action without the Attorney General's consent."); Searcy v. Philips Electronics North America Corp., 117 F.3d 154 (5th Cir. 1997).

9 117 F.3d at 159.

10 Id.

11 Id. at 160. The rule does not apply to involuntary dismissals. See, e.g., United States ex rel. Mergent Servs. v. Flaherty, 540 F.3d 89, 91 (2d Cir. 2008) ("While the False Claims Act appears to bar dismissal of qui tam actions absent the Attorney General's consent, . . . we have previously construed this provision to apply only in cases where a plaintiff seeks voluntary dismissal of a claim or action brought under the False Claims Act, and not where the court orders dismissal.") (citations and internal quotation omitted).

Please click here to view the full article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions