246 F. Supp. 3d 995
S.D.N.Y.2017Background
- Khurana, a former Spherion consultant on the CityTime payroll project, filed a sealed qui tam suit alleging large‑scale fraud on the City and State related to CityTime; he later amended the complaint and the City and State declined to intervene.
- SAIC (named in earlier complaints but not in Khurana’s operative second amended complaint) entered a 2012 deferred prosecution agreement admitting fraud and agreed to a $500 million civil forfeiture to repay the City.
- Khurana moved for a relator’s share of the $500 million SAIC recovery, arguing the DPA/settlement constituted an “alternate civil remedy” (NYS FCA) and an “alternate action” (NYC FCA).
- The court previously dismissed Khurana’s NYS FCA and NYC FCA qui tam claims as barred by public disclosure or otherwise inadequately pleaded; his retaliatory discharge claims remained but were not the basis for the relator share motion.
- The City opposed Khurana’s motion; the Court denied the motion because a valid qui tam action is a prerequisite to recovering a share of an alternate remedy under the NYS FCA or NYC FCA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the SAIC DPA/settlement qualifies as an “alternate civil remedy”/“alternate action” entitling relator to a share | Khurana: DPA/settlement is an alternate remedy under NYS/NYC FCA and he should receive a relator’s share | City: Even if an alternate remedy, relator’s share requires a valid qui tam action; City declined to intervene | Court: Even assuming DPA qualifies, relator must have a valid qui tam action to recover; Khurana’s qui tam claims were dismissed, so no share allowed |
| Whether a relator may recover an alternate remedy share absent a valid qui tam action | Khurana: His whistleblowing and prior filings justify recovery despite dismissal | City: Recovery depends on existence of a valid qui tam claim; pre‑filing conduct alone is insufficient | Court: Relator rights to alternate remedies depend on a valid qui tam action; pre‑filing whistleblowing does not substitute |
| Applicability of public disclosure/original source exception to permit recovery | Khurana: Claimed he provided original information and was an original source | City: Public disclosures (media, DOJ unsealing, City Council) undercut his claim | Court: Court already found public disclosure bar applied or pleading defective; original source exception not met in prior ruling |
| Effect of failure to obtain Corporation Counsel authorization under NYC FCA | Khurana: Relies primarily on state law but referenced NYC FCA | City: Khurana never alleged Corporation Counsel authorization required for NYC FCA suit | Court: Khurana’s NYC FCA claim also deficient for failing to plead Corporation Counsel authorization; supports denial of relator share |
Key Cases Cited
- United States ex rel. Newell v. City of St. Paul, 728 F.3d 791 (8th Cir. 2013) (federal circuit decisions holding relator cannot recover alternate remedy without valid qui tam action)
- United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493 (6th Cir. 2007) (relator recovery of alternate remedy contingent on valid qui tam complaint)
- United States ex rel. Hefner v. Hackensack Univ. Med. Ctr., 495 F.3d 103 (3d Cir. 2007) (similar holding regarding necessity of valid qui tam action)
- Int'l Controls Corp. v. Vesco, 556 F.2d 665 (2d Cir. 1977) (an amended complaint supersedes the original)
- United States ex rel. Bilotta v. Novartis Pharm. Corp., 50 F. Supp. 3d 497 (S.D.N.Y. 2014) (NYS FCA parallels federal FCA; federal precedent informative)
- United States ex rel. Lee v. N. Adult Daily Health Care Ctr., 174 F. Supp. 3d 696 (E.D.N.Y. 2016) (district court applying the rule that a valid qui tam action is prerequisite to alternate remedy recovery)
- L-3 Commc'ns Eotech, Inc. v. [relator], 232 F. Supp. 3d 583 (S.D.N.Y. 2017) (district court denying alternate remedy share where qui tam action was dismissed)