In U.S. ex rel. Prince v. Virginia Resources Authority, No. 5:13CV00045, 2014 WL 3405657 (W.D. Va. July 10, 2014), the Western District of Virginia recently held that dismissal of a relator’s suit on procedural grounds does not prejudice the United States’ ability to subsequently to pursue identical FCA claims, despite having declined to intervene in the dismissed action.

Relator Mark Prince filed suit against the Virginia Resources Authority (the “VRA”) and others, alleging FCA violations relating to federal subsidies and tax exempt status for certain bonds through the Build America Bonds program. The VRA moved to dismiss on the basis of collateral estoppel due to Prince’s involvement in prior litigation against the VRA. On April 15, 2014, the District Court granted the motion, dismissing Prince’s claims with prejudice.

The United States had neither intervened in the suit, nor had it been party to Prince’s prior litigation against the VRA. On May 12, 2014, it filed a “Motion to Clarify” the dismissal. Acknowledging that it had “declined to intervene and is therefore not a party to this action,” the Government nevertheless insisted that it “remains the real party in interest, entitled to share in any recovery that may be obtained in the qui tam action.” Accordingly, it asked the Court to amend the order of dismissal “to clarify that the dismissal with prejudice extends only to Relator, and that the dismissal is without prejudice to the United States.”

On July 10, 2014, the district court granted the government’s motion, holding that “dismissals for reasons unrelated to the merits of a FCA claim are appropriately entered without prejudice to the United States.” Prince, 2014 WL 3405657, at *3. The decision not to intervene, the Court observed, does not necessarily suggest that the Government doubts the viability of an FCA claim, but rather may result from “a cost-benefit analysis.” Id. (internal quotation marks omitted). “Accordingly,” it reasoned, “it would be inappropriate to dismiss with prejudice as to the United States … on whose behalf relator brought this claim.” Id. (internal quotation marks omitted). Because the dismissal of Prince’s claims resulted from his procedural failures and not those of the United States, the district court held that “it is proper for the dismissal of these claims to be without prejudice as to the United States.” Id.

The Prince case reminds qui tam defendants that non-intervention is not necessarily the end of the United States’ interest in a matter, and that the Government continues to monitor FCA actions brought on its behalf to maximize its returns.