In my post of February 7, 2012, I discussed a District of Columbia's District Court's opinion in U.S. ex rel Schweizer v. OCE N.V., wherein the District Court found that the Department of Justice ("DOJ") can dismiss a relator's claim pursuant to 31. U.S.C. 3730(c)(2)(A) if the relator refuses the DOJ's settlement with the defendant of the relator's qui tam claims. Section 3730(c)(2)(A) provides that the "Government may dismiss [a qui tam] action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion." This provision has been cited as providing the Government with an "unfettered right to dismiss" qui tam cases. Swift v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003)
In an important ruling on April 20, 2012that favors relators, the D.C. Circuit ruled in U.S. ex rel Schweizer v. OCE N.V., 2012 WL 1372219 (C.A.D.C.) and reversed the District Court, holding (1) that the Government does not have an unfettered right to dismiss a relator's qui tam where there is a settlement pending between the Government and the Defendant as the settlement requires the Court's approval to be finalized if a relator objects; (2) if the relator objects, the Government cannot settle a qui tam with a Defendant unless the Court first determines, in compliance with 31 U.S.C. 3730(c)(2)(B), "after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." Additionally, the Court reversed the District Court's order granting summary judgment in favor of the Defendant on the relator's retaliation claim, holding that although the relator's job was to ensure compliance with government contracts, summary judgment was precluded because the relator acted outside her normal job activities and notified corporate personnel outside her usual chain of command of her protected conduct.
In this case, the relator was a "GSA contracts manager" who was hired to monitor the Defendant's supply contracts to provide copying and printing products to the Government. These contracts provided that the Goverment was to enjoy the same discounted pricing as the Defendant offered to other private sector purchasers. Additionally, the contracts required the Defendant to only sell goods made in the United States or in countries designated under the Trade Agreements Act. The relator discovered that the Defendant was not providing the Government with the agreed discounts and that it was selling the Government products that were not made by countries with the scope of the Trade Agreements Act. The relator took her concerns that the company was violating the False Claims Act to her immediate supervisor, and after he forbid her from investigating the matter and attempted to obstruct her, to other executives and company counsel. The company discharged the relator not long after. The relator sued the Defendant under the False Claims Act, conspiracy to violate the False Claims Act, and for retaliation under 31 U.S.C. 3730(h).
The Government did not intervene, but it eventually "settled" the relator's qui tam case with the Defendant for $ 1.2 million and to set aside 19% of the recovery for the two relators. In turn, the Government's settlement promised to dismiss the two False Claims Act counts and to provide the Defendant with a partial release of liability. The Government then sought to dismiss the case, which the relator opposed, and for the reasons outlined in my February 27, 2012 blog post, the Court dismissed the case over the relator's objections, pursuant to Section 3730(c)(2)(A) and without a "fairness" hearing as required by Section 3730(c)(2)(B) of the False Claims Act.
In overturning the District Court, the D.C. Circuit observed: "We reject the government's argument. Section 3730(c)(2)(B) contains no opt-out clause for rare cases or unusual circumstances. It does not permit the Attorney General to decide when there shall be a hearing on the settlement: the statute says that the government 'may' settle a matter over a relator's objection 'if the court" holds a hearing and finds the' proposed settlement" reasonable. The meaning is clear. The government may not settle a case when the relator objects unless the court approves the settlement."
A. Brian Albritton
April 23, 2012