748 F.3d 818
8th Cir.2014Background
- Relators Norman Rille and Neal Roberts filed qui tam complaints alleging contractors (including Cisco) committed kickback and defective-pricing fraud against the United States under the False Claims Act (FCA).
- Relators investigated Cisco and its distributor Comstor, produced voluminous documents to the government, and alleged defective pricing arising both from kickbacks and broader nondisclosure of best pricing.
- The government intervened in the Cisco suit (adopting the relators’ complaint) and later settled with Cisco and Comstor for a combined $48 million; settlement was conditioned on dismissal with prejudice of the relators’ action.
- Relators moved for a statutory share under 31 U.S.C. § 3730(d)(1); the district court awarded $8,081,200 (17% of Cisco portion; 15% of Comstor portion).
- The government appealed, arguing (1) Rule 9(b) pleading standards should bar relators’ share, (2) the settlement proceeds were not "proceeds of the action" because the settled claims were unrelated to the relators’ allegations, and (3) relators were not entitled to the Comstor portion because Comstor was not named in the complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Rule 9(b) to relator's right to share under § 3730(d)(1) | Relators: Rule 9(b) is not required to determine entitlement to statutory share once government intervenes. | Government: Relator’s complaint failed Rule 9(b); insufficiency should deny share. | Court: Affirmed Roberts — Rule 9(b) does not bar a relator from a share when government intervenes and adopts the complaint. |
| Whether settlement funds conditioned on dismissal are “proceeds of the action” under § 3730(d)(1) | Relators: Funds received by government after intervening and conditioning on dismissal of relators’ action are proceeds of that action. | Government: Settled claims were factually unrelated to relators’ claims, so funds are not proceeds of the relators’ action. | Court: Where government intervenes and settlement required dismissal with prejudice of relator’s action, those funds are proceeds of the action as a matter of law; relators entitled to share. |
| Inclusion of Comstor payment though Comstor not named in complaint | Relators: They discovered and provided the Comstor-related fraud to the government; intervention prevented them from detailing Comstor; they remain original source entitled to share. | Government: Comstor not named; relators failed to plead particularity as to Comstor. | Court: Rule 9(b) inapplicable to entitlement; relators originated the information and government’s settlement precluded relators from separate suit — relators get share of Comstor payment. |
Key Cases Cited
- Roberts v. Accenture, LLP, 707 F.3d 1011 (8th Cir. 2013) (Rule 9(b) not bar to relator’s statutory share when government intervenes)
- United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634 (6th Cir. 2003) (government may not settle a relator’s claims then avoid paying relator by excluding relator’s claims from settlement terms)
- United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011) (qui tam complaint need not meet Rule 9(b) particularity to provide government sufficient notice to investigate)
- United States ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28 (1st Cir. 2013) (qui tam complaint need not comport with Rule 9(b) to provide sufficient notice)
- Gurley v. Hunt, 287 F.3d 728 (8th Cir. 2002) (res judicata/privity bars relitigation where claims could have been raised)