D.C. Circuit Decision May Throw Wrench Into <i>Qui Tam</i> Settlement Efforts

We recently posted here regarding a Tenth Circuit decision affirming the government’s unilateral dismissal of a qui tam complaint – before it was served on the defendant – over the objection of the relators. In that case, the Tenth Circuit noted a circuit split regarding the standards governing dismissal pursuant to 31 U.S.C. § 3730(c)(2)(A), with the D.C. Circuit holding that the government has a virtually unfettered right to dismiss a case pursuant to that statutory provision. On April 20, 2012, the D.C. Circuit issued another decision on the subject, Océ N.V. v. Schweizer, — F.3d –, 2012 WL 1372219 (D.C. Cir. April 20, 2012), this time holding that the court’s expansive view of the government’s power pursuant to § 3730(c)(2)(A) does not extend to § 3730(c)(2)(B), which requires a district court to determine “after a hearing, [whether] the proposed settlement is fair, adequate, and reasonable under all the circumstances.”

In Océ, relator Schweizer sued her former employer for various FCA violations related to GSA contract provisions and regulations governing product pricing and country-of-origin requirements. She also sued Océ based upon the FCA’s retaliation provisions, § 3730(h). The government moved to dismiss the qui tam claims based upon a settlement agreement the government reached with Océ. The district court granted the motion over the relator’s objection.

On appeal, the relator argued that the government may not invoke § 3730(c)(2)(A) because the government never intervened in the case. The D.C. Circuit rejected that argument because the government’s intervention is necessary only if it wishes to proceed with the action. Here, however, “the government did not seek to proceed with the qui tam portion of the case; it sought to end it.” Nevertheless, the court held that “[t]he settlement agreement here falls squarely within § 3730(c)(2)(B)” because that provision covers dismissals arising from a settlement, whereas § 3730(c)(2)(A) covers unilateral dismissals. The court thus rejected the government’s position that because it may unilaterally dismiss a complaint pursuant to § 3730(c)(2)(A) – i.e., absent a hearing and judicial approval – the government may similarly dismiss a qui tam complaint without judicial approval of the settlement upon which the dismissal is based. The D.C. Circuit explained that “[t]hat the language of § 3730(c)(2)(B) leaves no space for [the government’s] interpretation” and that “allowing dismissal without judicial review of the settlement would render § 3730(c)(2)(B) a nullity and thus contravene” the canon of statutory construction disfavoring any interpretation which renders a provision meaningless or superfluous.

The D.C. Circuit also rejected Océ’s argument that § 3730(c)(2)(B) violated the separation of powers and is therefore unconstitutional, and also reversed the district court’s grant of summary judgment to Océ on the relator’s retaliation claims.