Thursday, June 1, 2017

What Have You Done For Me Today: Government Prevents Relator from Intervening in False Claims Act Case That Was Based in Part on Relator's Prior Qui Tam

Can an unsuccessful qui tam False Claim Act (FCA) relator intervene in lawsuit later filed by the United States if the claims in the United States’ lawsuit mirror the allegations first made by the relator? The Ninth Circuit Court of Appeals recently addressed this issue and said no, rejecting a relator’s attempt to salvage an FCA recovery after the district court had previously dismissed his qui tam claims. See U.S. v. Sprint Comm. (Prather), --- F.3d ---, 2017 WL 1526316 (9th Cir. Apr. 28, 2017).    

In 2009, relator John Prather filed a qui tam FCA lawsuit alleging that Sprint (and others) overcharged the United States for wiretapping services. United States ex rel. Prather v. ATT, et al., Case No. 09-cv-02457 (N.D. Ca.), ECF No. 1. The Government declined to intervene (Id. at ECF No. 15), and the district court ultimately dismissed relator’s claim, finding that he based his lawsuit on publicly disclosed information and did not qualify as an original source.  Id. at ECF No. 159.

Relator appealed and in 2014, while that appeal was pending, the United States filed its own FCA lawsuit against Sprint. United States v. Sprint Comm., Case No. 14-cv-02457 (N.D. Ca.), ECF No. 1. Like the relator, the United States alleged that Sprint had overcharged the United States for wiretapping services. To his chagrin, the relator learned that the Assistant U.S. Attorney that filed the claim on behalf of the United States was actively involved in the investigation of his underlying action and the United States’ decision not to intervene in his qui tam case. Id. at ECF No. 191.
Relator then moved to intervene in the United States’ new FCA lawsuit, arguing that it amounted to an “alternate remedy” that the United States sought in lieu of intervening in his own lawsuit. Under this theory, relator argued that he should recover between 15% - 25% of the United States’ recovery—the same amount he could have recovered had the United States intervened in his qui tam. See 31 U.S.C. § 3730(c)(5) (granting a relator the right to share in the recovery if the United States elects to pursue its claim through any “alternate remedy”). The district court denied relator’s motion to intervene because his own FCA lawsuit had already been dismissed.
On appeal, the Ninth Circuit zeroed in on whether the relator had the “significantly protectable interest” required to intervene under Rule 26. U.S. v. Sprint Comm. (Prather), --- F.3d ---, 2017 WL 1526316 (9th Cir. Apr. 28, 2017). To make this call, the Court set out to determine whether the relator could have recovered had the United States intervened in his qui tam lawsuit. Id. at **4-5.  If he could have recovered, then he had a protectable interest warranting intervention. Id. If he could not have recovered, the district court’s decision to deny intervention was correct. Id.
Ultimately, the Ninth Circuit found that the relator could not have recovered in his qui tam lawsuit even if the United States had intervened. Id. at *7. Relying in large part on Rockwell Int’l Corp. v.  United States, 549 U.S. 457 (2007), the court held that the pre-2010 public disclosure bar jurisdictionally barred by the relator's claim. Id. at *6. Under Rockwell, even if the United States had intervened in relator's lawsuit, that would not have cured the jurisdictional defect, and relator’s lawsuit “would have become an action brought by the Attorney General.” Id. Because the Ninth Circuit held that the relator could not have recovered even if the United States had intervened, he had no protectable financial interest in the United States’ subsequent suit that would warrant intervention.  

In any future case where the defense can plausibly raise the public disclosure bar, Prather will empower the Government to wait and see how the public disclosure defense plays out before intervening. If the public disclosure bar applies, the Government can simply await dismissal and then file a new lawsuit with the same allegations. And the Government can do so safe in the knowledge that the new lawsuit will not be deemed an “alternate remedy” under the FCA, potentially entitling the relator to a portion of the recovery. Although Prather ultimately may have little impact to the FCA defense bar, it will certainly create issues for relators and the Government to consider when the Government weighs its intervention options.

Author:  Scott Terry
Editor:  A. Brian Albritton
June 1, 2017 

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