The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we continue to take a closer look at recent legal developments involving the FCA. This week, we examine judicial review of FCA settlements and recent cases considering this issue.
In U.S. ex rel. Michaels v. Agape Senior Cmty., Inc., the Fourth Circuit considered the scope of DOJ’s authority to review and ultimately veto a settlement reached by relators and the defendants. The panel had little difficulty affirming the district court’s determination that DOJ’s veto authority in this regard is unreviewable.
After the relators and the defendants had reached a settlement, DOJ objected to the proposed settlement, in part, on the basis that the settlement amount was far less than the government’s estimated $25 million in damages. When the parties challenged this objection, the district court concluded that the Attorney General’s veto authority was absolute in connection with voluntary settlements reached in FCA actions, even while noting that “a compelling case could be made here that the Government’s position is not, in fact, reasonable.”
After dissecting appellate opinions considering the scope of the government’s settlement-related authority, the Fourth Circuit determined that the “Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.” The Fourth Circuit looked no further than the plain language of § 3730(b)(1), which provides that a qui tam action “may be dismissed only if the Attorney General gives written consent to the dismissal and their reasons for consenting.” The reasonableness of the government’s decision to withhold consent with respect to any particular settlement simply does not enter into the equation.
In U.S. ex rel. Howze v. Sleep Centers Fort Wayne, the relator filed a qui tam action asserting state and federal FCA claims and a claim for wrongful termination. After dismissing the wrongful termination claims under res judicata, the parties drafted a settlement agreement that would allow the relator to receive 100% of the proceeds from the settlement. After the settlement agreement was drafted, but prior to its execution or government consent, the defendant obtained new counsel and repudiated the agreement. The relator moved to enforce the settlement, arguing that the government knew of the settlement agreement, suffered no harm from the agreement and had declined to intervene in the action. The district court rejected those arguments and held that government consent is required to dismiss an FCA action. The district court further held that it could not enforce an agreement where 100% of the proceeds go to the relator because “[i]n bringing an FCA claim, the relator is acting on behalf of the United States.”
In U.S. ex rel. Trinh v. Northeast Medical Services, the district court rejected a defendant’s arguments that an oral settlement reached with relators and the government should not be enforced. The defendant argued that the terms of the oral settlement agreement, which was reached after a settlement conference and placed on the record in open court, were contingent on satisfactory resolution of any administrative remedies with HHS-OIG. For its part, the state and federal governments accepted the settlement agreement subject to the contingency of final supervisory approvals. After confirmation that both of the contingencies had been satisfied, the magistrate judge concluded that the settlement—which was characterized as “the standard federal and state False Claims Act settlement agreement”—was binding and enforceable. For its part, the district court refused to alter or otherwise set aside the judgment entered by the magistrate judge.