Jan 212016

Relators Urge Fourth Circuit to Limit DOJ Authority to Veto FCA Settlements

Scott D. Stein and Brenna E. Jenny
,

Under what circumstances can the government veto a settlement between a relator and the defendant in a case in which the government has not intervened?  That is a question that has divided the Circuits, and one that the Fourth Circuit will soon be deciding.  See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.).

The district court held that the plain language of the FCA gives the government absolute veto authority, adopting the approach of the Fifth and Sixth Circuits, and rejecting a Ninth Circuit ruling that the government has unreviewable veto authority only during the period following the filing of a qui tam suit when the government is deciding whether to intervene.  Under the Ninth Circuit rule, once the government declines to intervene, government rejections of settlements are subject to a reasonableness review by the Court.

In their opening brief in the Fourth Circuit, the relators argue that while the government had not formally intervened, its active participation rose to the level of a “de facto” intervention.  Once the government was effectively a party to the litigation, the relators argue, the district court could exercise its inherent power to review government settlement objections for reasonableness.  The defendant hospice chain, Agape, filed its own brief taking a similar position and emphasizing the weight of the caselaw against the district court’s ruling.

Agape also criticizes the district court’s interpretation of the statutory text.  First, while the district court had viewed its conclusion as necessarily flowing from the plain meaning of the text, Agape points out that if the language truly requires government consent before dismissal of a suit, then any district court would need first to receive the government’s consent before granting any motion to dismiss or defense motion for summary judgment.  This, however, would lead to troubling separation of powers questions.  Agape also notes that endowing the government with an unreviewable veto authority would conflict with another provision of the FCA, which gives the relator in a declined case “the right to conduct the action.”  Such a right to “conduct” the suit would be meaningless, Agape argues, “without the right to decide whether to go to trial or settle.”  Finally, Agape emphasizes that the FCA’s “consent” requirement applies to both courts and the government.  But courts are limited to withholding consent to settlements only if they have a sufficient reason for doing so.  Agape explains that “[i]f ‘consent’ as applied to the district court means consent that is not unreasonably withheld, it must mean the same thing as applied to the Government.”  Agape urges the Fourth Circuit to adopt a rule allowing the government to veto a settlement only upon a showing of good cause.

A copy of the relators’ brief and Agape’s brief can be found here and here.

Scott D. Stein

Chicago

sstein@sidley.com

Brenna E. Jenny

Washington, D.C.

bjenny@sidley.com

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