Eighth Circuit: Justice Department May Not Use Rule 9(b) to Deprive Relator a Share of Intervened Qui Tam Recovery

At the end of every successful False Claims Act qui tam recovery, the Justice Department contemplates whether it will fully abide by its statutory obligation to pay a relator’s share. The Justice Department will investigate the existence of “public disclosures” or “government actions” that potentially bar a relator or, at least, evidence that DOJ would have inevitably discovered the underlying fraud without the assistance of the relator.

When this search is not fruitful, the government has, at times, sought to portray the relator’s qui tam complaint as being somehow deficient, under the veil threat that the whistleblower could be legally barred from receiving a share, under the auspices of the Rule 9(b) pleading requirements. All of these arguments are cobbled together with the hopes of tamping down the relator’s bargaining position, driving the relator to accept a lowball relator’s share.

Relators have increasingly pushed back against DOJ, forcing the government to air its legal arguments in front of a federal judge. To date, these arguments have been largely rejected by the courts, leading to substantial rewards for successful relators. The most recent victory took place in a case before the Eighth Circuit Court of Appeals. In this case, the government argued that a relator was not entitled to a relator’s share, even though the government intervened and settled the qui tam action for $48 million and the defendant only settled the case on the condition that the relators dismissed their qui tam action.

The government argued that it could rely on Rule 9(b) to challenge a relator’s right to recovery under the FCA. The Appellate Court rejected this argument by stressing, “[i]f the government is allowed to contend at the conclusion of a case that a relator’s initial allegations were insufficient, even though the government implicitly acknowledged the legal sufficiency of the pleadings by choosing to intervene, the relator no longer has the opportunity to cure the deficiency.” The Court stated that it found “nothing in the FCA’s statutory text to support this type of post hoc use of Rule 9(b) to deny a relator the right to a share of the t proceeds.”

More information for whistleblowers is located at the Nolan Auerbach & White website.

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