May 29, 2014
The False Claims Act provides that a whistleblower, or “relator,” who brings a successful qui tam suit is entitled to a percentage share of the money the defendant agrees to, or is ordered to, pay back to the government. In a recent federal qui tam case, Rille v. PricewaterhouseCoopers LLP, 2014 U.S. App. LEXIS 6597 (8th Cir. April 10, 2014), the relators not only had to prevail against the defendants, but also win an action against the federal government, which after taking over the relators’ lawsuit and settling with the defendants for $48 million, refused to pay relators a share.
What Happened in the Rille Case?
The relators in the case brought allegations against several major government contractors. According to the relators, the contractors were committing fraud by paying kickbacks and engaging in improper pricing. The case was originally filed in 2004.
After a lengthy investigation, the government intervened in, or took over, the case. The contractors settled for $48 million, but relators were cut out of the settlement. They petitioned the trial court for a share of the settlement, and the court awarded them $8 million. However, the government appealed, arguing that the relators in the case were not entitled to receive a share of the settlement because their complaint had been defective and because the claims that the government settled differed from the relators’ original allegations.
The Court of Appeals rejected the government’s arguments, concluding that the relators in the case took a risk and were responsible for far more of the actual investigation than the government was. They were the ones initially responsible for the litigation, as well as for obtaining, reviewing and analyzing additional evidence, including hundreds of thousands of documents, which they then presented to the government and cause the government to join the case.
The court also held that any technical deficiency in the relators’ complaint did not affect their entitlement to a percentage of the settlement. The court noted that the government had adopted the relators’ complaint after it intervened, rather than filing its own complaint, which undermined the government’s argument that the pleading was deficient. The court also declared that where the “settlement is conditioned on the dismissal of the action the settlement funds constitute ‘proceeds of the action’ under the False Claims Act” and that “the government cannot compromise a relator’s action by having it dismissed with prejudice and then claim the funds it received as a direct consequence are not ‘proceeds of the action.’”
The decision in Rille was a major victory for relators who often spend years, along with their attorneys, investigating, compiling and analyzing evidence, and working in partnership with the government, with the understanding and expectation that if the government succeeds in proving the fraud and obtaining a recovery, the relators will get the reward to which they are entitled under the law. However, it also serves as a vivid illustration of how lengthy, risky and complicated the course of a qui tam case can be, and how important it is for whistleblowers to retain experienced, skillful qui tam counsel who are respected by the government attorneys — attorneys like those at Seeger Weiss LLP. Contact us today for a consultation about your potential qui tam case.