As we have written about on this blog previously, Lance Armstrong’s former teammate, Floyd Landis, filed a qui tam suit alleging that Armstrong’s and his team’s use of performance enhancing drugs and practices violated their sponsorship agreement with the United States Postal Service and thereby defrauded the government of approximately $40 million over six years. Landis brought suit against Armstrong individually, as well as Armstrong’s management company, Tailwind Sports, and his talent agent, Capital Sports & Entertainment Holdings (CSE). The government joined in the claims against Armstrong and Tailwind Sports in February 2013, but declined to intervene against CSE.
Landis and CSE subsequently negotiated a settlement, which was presented to DOJ for approval. However, after DOJ declined to approve the settlement – or to explain why it would not approve the settlement – CSE moved the Court to accept the settlement notwithstanding DOJ’s opposition. However, on April 9, the district court denied the motion. The court held that the False Claims Act affords DOJ essentially unfettered power to veto settlements, even in cases in which it has not intervened. While the D.C. Circuit has not expressly ruled on whether the government’s right to veto a settlement in a non-intervened case is unfettered, several appellate courts that have ruled on the issue have held that it is. Both the Fifth and Sixth Circuits have held explicitly that settlements in non-intervened cases are subject to government approval. See, e.g., Searcy v. Philips Elecs. N. Am. Corp., 117 F.3d 154, 159-60 (5th Cir. 1997) (cited by the District Court here, and reasoning that the government is allowed to “stand on the sidelines and veto a voluntary settlement”). The Ninth Circuit, by contrast, has held that the government’s decision to veto a settlement is reviewable when the government has declined to intervene. See, United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715 (9th Cir. 1994) (reasoning that the government’s settlement veto power exists only while the case is under seal, prior to an intervention decision).
In its opposition to the motion, the government noted that it is willing to continue negotiations to reach settlement terms on which all parties agree. For now, however, Landis and CSE must continue their litigation.