“Proceeds” Means Proceeds: Relators Are Entitled to a Share of All Taxpayer Money Recouped Through False Claims Act Lawsuits

In United States ex rel. Merena v. SmithKline Beecham Corp., the Eastern District of Pennsylvania was asked to determine the base amount for disbursing relators’ shares under a settlement agreement that included multiple claims arising from multiple qui tam actions. Merena, 52 F. Supp. 2d 420 (E.D. Pa. 1998) (rev’d in part on other grounds, 205 F. 3d 97 (3d Cir. 2000)). The government paid the relators a share of less than the entire settlement proceeds, arguing that the relators were only entitled to payment on some of the released claims. The district court rejected the government’s position, instead finding the relators entitled to a share of the proceeds of the entire action, as the plain language of the statute requires. Id. at 437. 

The court noted the defendant did not distinguish between which claims it had paid for in exchange for a release and those it had not. Id. Instead, the defendant received a release from all the claims for the sum of $325 million. Id. From this “bottom line” figure, the Court found no basis for the government’s decision to pay the relators’ shares on a claim-by-claim basis. Id. at 437-39. 

“The [False Claims Act] makes no suggestion that a qui tam award should be based on a claim by claim basis to determine which claims are valid or what the individual monetary worth of separate claims were to the overall settlement.” Id. at 439. The “proceeds” were the Medicare funds paid to the federal government under the federal FCA case alleging Medicare fraud, and were calculated based upon the action as a whole, not a claim, portion or pro-rated amount of the action. “The statute speaks of the action and claim as a single unit or whole entity.” Id. at 437. 

The Middle District of Florida also recently clarified the “claims” versus “action” distinction discussed in Merena for purposes of determining the proper relator share of a settlement. In United States ex rel. Mustafa v. Najjar,[1] the relator filed a qui tam action against one defendant, the government intervened, and then repeated the allegations in its complaint in intervention against both the original defendant an additional defendant not named by the relator. Najjar, 2015 U.S. Dist. LEXIS 99737 at *1-2. When the government settled with the newly named defendant, the relator claimed he was entitled to a portion of the proceeds paid by both defendants to resolve the qui tam action he had filed. Id

The District Court agreed, holding the relator’s lawsuit, which included information underlying the allegations against the additional defendant, significantly contributed to the prosecution and resolution with respect to both defendants. Id. at 6.Accordingly, the relator was entitled to a percentage of the overall proceeds paid by the defendants to resolve the action. Id.

Whistleblowers often make great sacrifices to bring qui tam cases on behalf of the government. Moreover, generous relator shares are key to the primary purpose of the False Claims Act, which is to encourage private citizens to uncover, report and prosecute fraud and abuse. 

Recently, Senator Chuck Grassley of Iowa, an original architect of the modern federal False Claims Act (“FCA”), spoke about Congress’s objectives in connection with the FCA and emphasized the importance of the role relators play and of properly rewarding them for exposing fraud against taxpayers:

Just recently the Justice Department tried to minimize a relator award in a Medicare and Medicaid fraud suit.  The relator contributed significantly to the case.  The Judge recognized that Congress intended that the only measuring stick for an award is the contribution of the relator.

The judge was right.  Congress intended to empower, protect and reward relators who identify fraud against the taxpayers.  History teaches us that weakening the relator’s rights weakens the government’s ability to fight fraud. . . . That is not the result we intended with the False Claims Act.

Statement of Sen. Grassley, July 19, 2015, available at http://www.grassley.senate.gov/news/news-releases/grassley-floor-statement-false-claims-act (last accessed Sept. 11, 2015) (internal quotations omitted). With the backing of statements such as this, whistleblowers and their attorneys should fight for all they are entitled to.

[1] United States v. Najjjar, Case No. 6:10-cv-414-ORL-31DAB, 2015 U.S. Dist. LEXIS 99737 (M.D. Fl. July 30, 2015).


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