Dismissing a False Claims Act Case: Is the Whistleblower Still Eligible for a Reward?

By Russell Paul

Consider the following scenario:

-A whistleblower files a complaint against a defendant under the False Claims Act (“FCA”).

-Then, the whistleblower voluntarily dismisses that complaint (perhaps because the government has declined to intervene, and the whistleblower does not wish to pursue the case at that time.)

-But then, the government ultimately settles with that defendant.

In this situation, is the whistleblower entitled to a percentage of the amount of the settlement?

U.S. v. L-3 Communications Holdings Inc. et al.

In U.S. v. L-3 Communications Holdings Inc. et al., case number 1:15-cv-09262, in the U.S. District Court for the Southern District of New York, the court ruled that a whistleblower’s voluntary dismissal of his False Claims Act suit against an L-3 Communications unit, accusing it of selling faulty gun sights to the government, meant he could not claim a share of a $25.6 million settlement later reached with the company.

The court held that relator’s voluntarily dismissal of his qui tam FCA suit allowed the federal government to settle with L-3 Communications without requiring it to share any part of the settlement amount with relator.

“In short, DaSilva’s decision to voluntarily dismiss his qui tam action in 2014 precludes him from clambering back on board for a share of the government’s proceeds as though he had never dismissed his own action,” the Judge said.

About the Case

Relator filed a complaint in April 2014 accusing the company of selling defective holographic weapon sights to military and law enforcement clients that were thrown off by extreme temperatures, according to the opinion.

Shortly after making those disclosures, relator was convicted of an unrelated criminal charge and fled to Brazil, the opinion states. After this, his discussions with the government broke down, and he later filed a qui tam FCA suit. The suit was ultimately voluntarily dismissed, without prejudice, in August 2014.

In November 2015, the government then filed its own FCA complaint against L-3, before filing a $25.6 million stipulation of settlement and dismissal the next day. Relator then asked the court to declare that he was entitled to at least a 15 percent share of that settlement, because it was an “alternate remedy” to the suit he had originally filed.

The Judge found that the terms of the FCA “unambiguously preclude” relators who have voluntarily dismissed their suit from sharing in any later recovery.

The term “alternative remedy” only refers to the government pursuing a claim outside of the choices of either intervening in an ongoing qui tam suit, or declining to intervene in that suit and instead allowing the relator to move forward. In these scenarios, the relator would have been entitled to a share of the settlement. The Judge said that when there is no ongoing qui tam suit, such as when the relator has voluntarily dismissed the case, then the government filing its own action is not considered an “alternative remedy” that would allow relator to recover.

The case is currently on appeal, U.S. v. DaSilva, case number 17-621, in the U.S. Court of Appeals for the Second Circuit. Relator disputes that his dismissal was voluntary, stating that his dismissal had been effectively coerced by the government. The government argues that allowing Relator to share in the settlement would encourage “opportunistic” relators to file qui tam suits, dismiss them voluntarily, then claim a portion of any proceeds if and when the government brings and prosecutes a case

If you have discovered evidence of fraud committed against the government, you may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys at Berger Montague are nationally recognized for their work in Whistleblower/Qui Tam actions. For more information or to schedule your confidential consultation, contact us online or call us at 888-647-9292.

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By | 2018-03-25T15:57:07+00:00 October 4th, 2017|False Claims Act Information|