Eighth Circuit Limits A Relator’s Right To Recovery Only To Those Portions Of A Settlement Attributable To His Claims

Last month, the Eighth Circuit, sitting en banc, overturned a district court’s decision to grant two qui tam relators a share of an FCA settlement that resolved multiple claims, including some claims allegedly unrelated to the relators’ complaint.  Rille v. Pricewaterhouse Coopers LLP, et al., No. 11-3514, 2015 WL 5778810 (8th Cir. Oct. 5, 2015).  Joining the Sixth Circuit, the Eighth Circuit held that the FCA only entitles a relator to share in the portion of the settlement attributable to the claims that he or she brought.  Id.

In 2004, relators Norman Rile and Neal Roberts filed a qui tam complaint against several vendors and consultants that provided information technology services to the Government.  DOJ elected to intervene in the action, and later settled with two of the defendants.  Following settlement, the relators moved to recover a share of the settlement proceeds.  DOJ opposed that award, arguing that the relators’ claims lacked merit and were limited to an alleged kickback scheme.  According to DOJ, the settlement covered a separate defective pricing scheme.  Id. at 4. The district court rejected DOJ’s argument and granted relators an $8.1 million share of the total $48 million settlement award.  The Eighth Circuit reversed.

When DOJ elects to intervene in a qui tam relator’s suit, the FCA provides that the relator is entitled to a percentage share of “the proceeds of the action or settlement of the claim.”  31 U.S.C. § 3730(d)(1).  According to the relators, once DOJ intervened in their suit, they were “automatically entitled to a percentage of any ‘proceeds’ that the government receives as a result,” including proceeds of the settlement attributable to unrelated claims.  Rille, 2015 WL 5778810, at 5.

The Eighth Circuit disagreed.  It held that the FCA limits the relator’s share only to proceeds from the “settlement of the claim” the relator brought.  31 U.S.C. § 3730(d)(1) (emphasis added).  The statute does not allow recovery for “a different claim that is settled by the government when that claim was not originally ‘brought by’ the relator.”  Op. at 6.

Thus, joining the Sixth Circuit, the Eighth Circuit concluded that a relator can obtain a share of an FCA settlement only if he or she can establish an ‘“overlap between [r]elator’s allegations and the conduct discussed in the settlement agreement.”  Id. at 8 (quoting United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 343 F.3d 634 (6th Cir. 2003)).  “A relator is not entitled to a share of the proceeds derived from a non-overlapping claim.”  Id.  The Eighth Circuit remanded the case to the district court to make factual findings regarding whether such an overlap existed between the relators’ claims and the conduct covered by the settlement agreement.

Judges Bye and Smith dissented, and would have upheld the award the district court granted to the relators.  They rejected the majority’s view that additional factfinding was necessary to determine whether the settlement agreement covered claims beyond those raised in the relators’ complaint because DOJ “never added any claims to the relators’ action after intervening.”  Op. at 12 (emphasis in original).  According to the dissent, once DOJ intervened in the action without adding claims, it was obligated to award relators the FCA’s “finders’ fee” for the entire settlement award.  Id. at 11.

The en banc majority’s ruling articulates an important limit on relators’ ability to share in settlement awards.  As the Court reasoned, it would be inconsistent with the purposes of the FCA to allow a relator to share the proceeds of a claim that the relator did not assist the Government in recovering.  The case also serves as a reminder that settlement may not bring an FCA case to a close.  Litigation over the relator’s share of the recovery is not uncommon, and is likely to continue under the Eighth Circuit’s standard.  It remains to be seen just how much “overlap” courts will require between a relator’s allegations and the conduct covered by a settlement agreement.  That point may well trigger considerable litigation in the future.