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Release of Claims and the False Claims Act: An Employee’s Ability to Pursue Qui Tam Claims Against Its Former Employer After Signing a Release

DATE: October 1, 2011
BY: Shauna Itri
SOURCE: The Employee Advocate, A Publication of the National Employment Lawyers Association

In ruling on the viability of a qui tam suit filed after the relator has signed a release of claims with the alleged defendant, the courts focus on whether the government knew of the fraud alleged prior to the filing of the complaint and use a balancing test which weighs competing public policy interests when deciding whether or not to enforce the release. The public policy interests balanced include: (1) the interest in deterrence and restitution of fraud against the government by promoting the uncovering and disclosure of the fraud, (2) the interest in encouraging settlements, and (3) the interest in supplementing the government’s investigation of the claims alleged.

Courts in multiple circuits have been consistent in their holdings relating to this balancing of interests and all of the holdings revolve around whether or not the government has knowledge of the claims alleged prior to the signing of the release. The manner in which the government attained the knowledge is irrelevant. When the government has knowledge of the claims alleged the courts will likely enforce the release. Moreover, case law suggests that in such circumstances the Department of Justice will honor the terms of the release as well, thus undermining the realtor’s ability to receive an award in the event that the government obtains a recovery. Although there could conceivably be instances in which the government is aware of a fraud but has at hand very few facts about it and had little time to investigate such that a court might come down on the side of not enforcing the pre-filing release, no court has adjudicated the pre-filing release issue in this context and such a result is nevertheless unlikely.

The courts do not focus on the particular language contained in the release, which, after a review of the case law, has proven to be broad and encompassing. Case law reveals that the release language contains waivers of rights to bring claims and some releases include waivers of rights to collect relief from a claim. Although the courts do not focus on the language of a release, in drafting a pre-filing release, the whistleblower should avoid language agreeing to waive “any right to any relief of any kind or any share of any recovery from such claim or charge,” and should consider inserting language expressly excluding from the release claims the employee may bring on behalf of a government entity.

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