Dear Readers,
I commend to you a remarkable
case, U.S. ex rel. Wride v. Stevens-Henager College, Inc., 2019 U.S. Dist. LEXIS 6783, 2019 WL 186663 (D. Utah 2019), which
addresses the question of whether a qui
tam in which the government has partially intervened has “two masters,” the
government and the relator, each controlling their own sphere of the litigation,
or just one. The District Court held that only one master — the government — can
conduct the litigation in a partially intervened qui tam and relator cannot proceed with its own non-intervened claims or amend to
bring new claims. The Court specifically found that where the government has
intervened in a qui tam “action,”
including where the government has intervened in only some but not all of the
relators’ qui tam claims, the False
Claims Act (FCA) provides that the government alone has the “primary
responsibility for conducting the action” and the relators do not have the
right to “amend his or her complaint to add defendants and claims to the
government’s action.”
In Wride, two relators filed a FCA qui
tam against a for-profit school and its successor (herein “for profit
schools”). The government intervened in some but not all of their claims
against the for-profit schools and filed its own complaint in intervention,
which it later amended. Subsequently, relators filed amended complaints (four
in all) adding new claims and new defendants. The Court observed that the
complaint against the for-profit schools had “two masters,” the government and the
relators. Additionally, relators had also been pursuing its separate claims
against the for-profit schools and other defendants. The defendants moved to dismiss,
and in the process of considering that motion, the Court asked the parties to
brief whether the FCA permitted the relators to independently pursue claims
against the defendants after the government elected to intervene in the
lawsuit. Finding that the relator cannot maintain a separate complaint against
the defendant, the Court struck all of the relators’ post-intervention
complaints.
The Court observed that
nothing in the FCA or its legislative history suggests that “a relator can
maintain the non-intervened portion of an [qui
tam] action. In fact, the plain language of the statute suggests
otherwise.” The FCA, the Court concluded, “is clear that the Government either
‘elect[s] to intervene and proceed with the action,’ sec. 3730(b)(2), or it
‘declines to take over the action,’ sec. 3730(b)(4)(B). There is no in-between.”
The government
contended that 31 USC 3730(b)(1) “allows a realtor to maintain the
non-intervened portion of the action
in the name of the United States.” (Emphasis added.) The references to “the
action” here and in other parts of the FCA, the government argued, mean “cause
of action” as opposed to “civil action.” The Court rejected that argument and
conducted a plain language analysis of the FCA references to “action.” The
Court found that the FCA’s text and “its structure” undermine the government’s
interpretation because the FCA “unambiguously uses ‘action’ to mean ‘civil
action.’”
The government’s chief
argument was that Congress’ silence in the FCA as to whether a relator may
prosecute the non-intervened portion of an action “suggests that the relator
retains a right to do so.” In support of its argument, the government cited 31
USC 3731(c) which in discussing government intervention provides “the
Government may file its own complaint or amend the complaint of [the relator] to
clarify or add detail to the claims in which the Government is intervening and
to add any additional claims. . . .” The Court did not read the provision to
permit the relator the right to proceed with claims of its own once the
government intervenes. Congress, the Court asserted, “would not have given
relators the primary responsibility for prosecuting the non-intervened claims
in such a cryptic fashion. . . .[its] silence as to the relator’s right to prosecute
non-intervened claims leads to the conclusion that no such right exists.”
Analyzing the portion of the FCA that deals with
awards to relators, 31 USC 3730(d), the Court found that “[n]either the statute
nor the legislative history suggests that a relator can pursue claims that are
separate from the Government’s to recover an increased award” which “undermines
the idea that the relators can pursue non-intervened claims.” Key to the
Court’s conclusion was that the FCA provides only limited rights to the relator
to “continue as a party to the [intervened] action” which the Court
distinguished from the government’s right to “conduct the action” when it
intervened. Once the government intervenes, the relator has only limited rights
and according to the FCA, the Court can limit the relator’s “participation” in
the intervened case. In sum, once the government intervened in the qui tam, its complaint “superseded the
relators’ complaint and became the operative pleading. The relators then lost
the right to add defendants and claims to the action” and “any pleading filed
by the relators” thereafter “lacked legal effect.”
This interesting case
and the Court’s exhaustive analysis sheds light on an area of FCA litigation
that has long needed closer review: just
who controls FCA claims and what is the role of the relator? The FCA appears to
provide that a relator’s qui tam must
be moored to his or her original disclosure statement. Section 3730(b)(2)
requires that at the beginning of the case, the relator “serve” the government
with a “written disclosure of substantially all material evidence and
information the person possesses.” Presumably
when his or her claim is filed, the relator is blowing the whistle on that
alleged misconduct about which she or he has knowledge and is presenting their knowledge
to government for its investigation.
When
relators start bringing in new parties, asserting new theories and new claims
beyond the scope of their disclosures, however, then relators are transforming
the qui tam provision into an
independent vehicle — like a
search warrant — that they can use to search
for and assert new claims and add new parties about which they may know little
or nothing. That is what occurred in Wride. Relators essentially used their “right”
to bring a qui tam to independently
bring new claims that were unmoored from their original disclosure statement to
the government and without first submitting their new claims under seal to the
government. When the government argued that relators’ new complaints simply
“added detail to the fraudulent schemes already described and thus did not have
to filed under seal,” the Court described that argument as “at best, a
misstatement.” Indeed, ruling on alternative basis, the Court struck the
relators’ fourth amended complaint as a sanction for the relators’ failure to
first file it under seal in violation of 31 USC 3730(b)(2).
Unfortunately, I give
the Court’s decision in Wride a 50/50
chance of surviving. My prognosis does not result from the decision running
afoul of any case law already out there, but simply because it violates that
most powerful rule, “this is the way we’ve always done things.”
A. Brian
Albritton
January 23, 2019
