Sixth Circuit Affirms Orders Compelling Relator to Seek Government Consent to Dismiss Qui Tam Pursuant to Settlement Agreement

The Sixth Circuit recently confirmed that there is no per se bar on relators releasing previously filed FCA claims as part of a settlement agreement, although the government must still subsequently consent to the dismissal of such claims. See State Farm Mut. Auto. Ins. Co. v. Angelo, 95 F.4th 419 (6th Cir. 2024).

The defendant insurer in the FCA case originally began as a plaintiff in a RICO lawsuit it filed against the future relator. Four months after the RICO litigation began, the RICO defendant turned into an FCA relator and filed a sealed qui tam complaint against the insurer. In February 2021, the parties entered into a settlement agreement to resolve the RICO litigation, which included a provision in which the relator released “any and all judgments, claims, demands, losses, liabilities, costs, actions, causes of action, or suits of any kind whatsoever, whether in law or equity, known or unknown, foreseen or unforeseen” against the insurer. Id. at 428. Six weeks later, the qui tam complaint was served upon the insurer, which promptly moved to enforce the settlement agreement’s dismissal. The district court ordered the relator to solicit the government’s consent to dismiss his qui tam claims, but the relator sought to evade the order and finally appealed to the Sixth Circuit.

The relator argued in part that release agreements executed after the filing of a qui tam complaint are per se unenforceable. The Sixth Circuit, looking to the plain text of the FCA, determined that the statute was “silent on the issue of settlement agreements,” and declined to “embellish the text of the statute to create a broad rule that such agreements are per se unenforceable against qui tam actions.” Id. at 430. The Court found that both the text of the FCA and Sixth Circuit caselaw stood for the proposition that the FCA demands the government’s consent before a qui tam relator may dismiss their claims—something which “neither party dispute[d].” See id. at 429-30. However, neither the text of the statute nor relevant caselaw prevented a district court from ordering a relator to seek such consent. Id.

The Sixth Circuit also rejected the relator’s arguments that enforcing the settlement agreement would conflict with the FCA’s public policy rationale. The Court noted that although a settlement agreement may be unenforceable if the interest in its enforcement is “outweighed in the circumstances” by a public policy harmed by its enforcement, the “enforcement mechanism in this case—an order requiring [relator] to seek the government’s consent to dismiss his claims—poses no threat to the FCA’s policy.” Id.

A copy of the decision can be found here.

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