USA v. Everglades College, Inc.
855 F.3d 1279
11th Cir.2017Background
- Relators (former Keiser University admissions employees) brought a qui tam False Claims Act (FCA) suit alleging Keiser violated the Incentive Compensation Ban and thus caused thousands of false Title IV claims; the government initially declined intervention.
- After a bench trial the district court found ICB violations but limited liability: Keiser only knowingly submitted two false certifications (statutory penalties totaling $11,000) and the government suffered no actual damages.
- Relators appealed; while the appeal was pending the United States entered into a settlement with Keiser for $335,000 and preserved Keiser’s Title IV eligibility, then moved to intervene and dismiss over Relators’ objections.
- The district court allowed intervention (and approved the settlement as "fair, adequate, and reasonable"), denied Relators’ requests for discovery and an evidentiary hearing into the government’s settlement deliberations, and dismissed the case with prejudice.
- The district court awarded Relators substantially reduced attorneys’ fees and costs because of their limited success at trial and their consistent opposition to the government settlement; Relators appealed those rulings.
Issues
| Issue | Relators' Argument | United States' Argument | Held |
|---|---|---|---|
| Whether gov’t must meet §3730(c)(3) good-cause intervention requirement when intervening to settle | §3730(c)(3) requires showing good cause for late intervention; gov’t failed that test | §3730(c)(3) applies only when the gov’t seeks to "proceed with the action"; gov’t may settle or dismiss under §3730(c)(2) without satisfying §3730(c)(3) | The court held gov’t need not satisfy §3730(c)(3) to intervene solely to settle a qui tam action |
| Whether the proposed $335,000 settlement was "fair, adequate, and reasonable" under §3730(c)(2)(B) | Settlement was unreasonable given Relators’ substantial appellate chances and massive potential recovery (billions) | Settlement was reasonable given litigation risk, prosecutorial priorities, resource allocation, and precedent risk in the circuit; deference owed to gov’t rationale | The court held the settlement was fair, adequate, and reasonable and approved it |
| Whether Relators were entitled to an evidentiary hearing and discovery into the gov’t settlement deliberations | Relators sought discovery and an evidentiary hearing to probe potential improper motives and alleged inadequate investigation | The FCA guarantees a fairness hearing but not a right to develop new evidence; discovery/hearing permitted only upon showing substantial, particularized need | The court held Relators failed to show a colorable, non‑speculative claim of improper motive or inadequate investigation and affirmed denial of discovery and an evidentiary hearing |
| Whether the district court abused its discretion in reducing Relators’ attorneys’ fees and costs dramatically | Recovery amount should not heavily diminish fee awards in FCA qui tam cases because of public‑interest enforcement policy | Degree of success is a critical factor (Hensley/Farrar); limited success and opposition to the settlement justify significant reduction | The court affirmed the fee and costs reductions as within discretion, rejecting Relators’ attempt to cabin Hensley/Farrar from FCA cases |
Key Cases Cited
- United States ex rel. Schweizer v. Oce N.V., 677 F.3d 1228 (D.C. Cir. 2012) (government need not intervene to settle a qui tam action)
- Ridenour v. Kaiser‑Hill Co., 397 F.3d 925 (10th Cir. 2005) (statutory dismissal/settlement authority not dependent on prior intervention)
- Heckler v. Chaney, 470 U.S. 821 (1985) (agency decisions to prosecute or not are presumptively unreviewable and merit deference)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (lodestar may be reduced based on degree of success)
- Farrar v. Hobby, 506 U.S. 103 (1992) (nominal damages may warrant a significant fee reduction)
- Yellow Pages Photos, Inc. v. Ziplocal, LP, 846 F.3d 1159 (11th Cir. 2017) (court reversed mechanical, strictly mathematical lodestar reductions)
- United States ex rel. Sequoia Orange Co. v. Baird‑Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998) (discussing rational‑basis review for government dismissals of qui tam claims)