In US ex rel Radcliffe v Purdue Pharma L P, et al, 2010 WL 1068229 (4th Cir Mar 24, 2010) the Fourth Circuit followed the Ninth Circuit and adopted a public policy balancing test to hold that employment releases are not presumptively void for public policy, when challenged to bar qui tam suits by relators who executed employment releases with employers. The Fourth Circuit found that the relator could, through a comprehensive release given to his employer in exchange for a generous severance package, agree to relinquish his right to file a qui tam action against a former employer. A significant factor in the Court’s decision, however, was that the government was independently aware of the potentially fraudulent conduct of the relator’s former employer, Purdue Pharma L.P. (“Purdue”), and was conducting its own investigation before the qui tam suit was filed.

The relator alleged in the qui tam that Purdue was fraudulently marketing its pain-relief drugs (e.g. OxyCotin) to physicians, directly leading to false claims being submitted. One month before filing the qui tam, the relator signed a severance agreement with Purdue that released Purdue from any past, present, or future claims or liability of any kind whatsoever, and prohibited the relator’s acceptance of any relief or award arising from any charge or action against his employer before any federal court. Though not explicitly stated, this release covered any qui tam actions filed by the relator. A year prior to the relator’s filing of the qui tam, the government had begun an independent investigation of Purdue’s drug marketing practices. The qui tam suit, which the government did not join, was ultimately dismissed on grounds that the fraud allegations were not sufficiently pleaded with specificity.

The Fourth Circuit held that the right to bring qui tam actions for fraudulent conduct belongs to the relator, and therefore the right to bring such actions can be waived and relinquished by a potential relator. The Court agreed with the government’s position that releases, like the one entered into between Purdue and the relator, which prohibits an individual’s filing of a qui tam action, are generally against public policy and unenforceable. But here, where the government had independent knowledge of the potential fraud by Purdue before the qui tam suit was filed, the filing of the suit was not important to the public interest and public policy supported the enforcement of private settlements of employment suits and releases.

Health care providers should always be cognizant of the fact that former employees may be able to file qui tam actions even after cessation of employment, and even when they have signed a release of such claims, provided the government is unaware of the potential false claims. Given the plethora of opportunistic qui tam suits that neither supplement nor assist the government’s enforcement mission, the existence of an employment release must be fully explored at the outset of False Claims litigation for potential jurisdictional challenges to the relator’s right to proceed with a declined qui tam action.