Last week, the federal district judge presiding over the AWP litigation invited relators Linnette Sun and Greg Hamilton to move to reopen the judgment in another, related case that had been previously settled and closed. In re Pharm. Indus. Average Wholesale Price Litig., 2012 WL 3263922 (D. Mass. Aug. 7, 2012). The order requires some parsing of procedural history. A few months earlier, the court granted defendant Baxter Healthcare’s motion for partial summary judgment of Sun and Hamilton’s claims based upon a broadly worded settlement agreement in another matter brought by a different relator (Ven-A-Care of the Florida Keys). In re Pharm. Indus. Average Wholesale Price Litig., 2012 WL 366599 (D. Mass. Jan. 26, 2012). Although Ven-A-Care had sued ten years before Sun and Hamilton, the cases concerned similar allegations—that Baxter fraudulently inflated the prices of drugs and caused overpayments—and the court thus read the Ven-A-Care settlement’s release to cover, and bar, Sun and Hamilton’s cause of action. In response to concerns about construing releases too broadly, the court placed the onus on the government to police such risks through its statutory authority to withhold consent on expansive settlements. Id. at *3-4 (citing 31 U.S.C. § 3730(b)(1)).
Fast forward a couple of months and the picture muddies. Sun and Hamilton moved for reconsideration, arguing that they were entitled to a fairness hearing on the Ven-A-Care settlement that apparently covered their claims, and to a share of the proceeds. The government, for its part, maintained that it did not understand or intend the Ven-A-Care release to cover Sun and Hamilton’s suit, into which it had declined to intervene. Caught in this “procedural pretzel,” 2012 WL 3263922 at *5, the court maneuvered as follows. First, it held that, by consenting to the Ven-A-Care settlement, the government had “effectively settled” Sun and Hamilton’s claims against Baxter and thus pursued an “alternate remedy” for those claims despite declining to intervene. Id. at *1-4 (citing 31 U.S.C. § 3730(c)(5)). Relying primarily on authority from the Sixth and Ninth Circuits, the court reasoned that a broad reading of § 3730(c)(5) to include the settlement was consistent with FCA’s goal of encouraging relators and would avoid the potential for government abuse. Id. Next, the court found that, because Sun and Hamilton’s rights do not change when the government pursues an “alternate remedy,” the FCA requires that they receive a hearing to determine the fairness of the Ven-A-Care settlement that had extinguished their claims. Id.; 31 U.S.C. § 3730(c)(2)(B). But, because that settlement had been approved and judgment entered, the court was forced to suggest an atypical path—that relators move to reopen the Ven-A-Care judgment (to which they were not parties) pursuant to Fed. R. Civ. P. 60(b)(6). Id. at *5.
In the end, this decision may prove inconsequential—the first-to-file bar lurks and the court noted that it will ultimately “have to determine whether it has jurisdiction.” Id. at *5. But, especially for now, it signals a serious solicitousness for the relators and a willingness to pack much (perhaps too much) into § 3730(c)(5)’s “alternate remedy” language. That could carry significant implications for FCA defendants around the country, who are routinely subject to overlapping FCA claims, because it gives fodder to relators in other cases to wreak havoc on completed settlements and to disturb what the government and the parties all think has been … well, settled.