Can DOJ Dismiss a Relator's Claim if the Relator Refuses Settlement?

Corporate Counsel at Law.com just featured an interesting an article, "Taking the Whistle Out of Her Hand," by Mike Scarcella, wihch highlights the case of Stephani Shweizer, a qui tam relator, who has appealed the District Court's dismissal of her qui tam claims based on the government's motion where she refused to approve the government's settlement with False Claims Act defendant.  The  DC Circuit held oral argument in the case, Stephanie Schweizer v. Oce N.V., (D.C. Cir.  No 11-7030), on January 13, 2012, and a decision is awaited.

In an order found here, the District Court noted that a co-relator and the United States reached a settlement with the defendant for approximately $1.2 million, and the relators were supposed to get 19% of that.  Ms. Schweizer, however, refused the settlement, and the government intervened in the case and moved to dismiss her.  The Court akncowledged that prior appellate rulings held that the government had an "unfettered right" to dismiss a qui tam suit and that the decision to do so is "beyond judicial review."  Neverthless, the District Court noted that the provision of the False Claims Act which permitted the govenment to dismiss a suit, 31 U.S.C. 3730(c)(2)(A), was "somewhat at odds" with the section that "envisions an active role for the Court in approving settlement," 31 U.S.C. 3730(c)(2)(B).  Where the government seeks to settlement, the Court must determine "whether the proposed settlement is fair, adequate, and reasonable under all circumstances. Whether that section of the statute can be reconciled with the Court of Appeals' interepretation . . . is uncertain."   Given the "law of the Circuit," the District Court believed that "there is no doubt that section 3730(c)(2)(B) may be circumvented" by the government dismissing the relator's claims.

At oral arument, the relator's counsel argued that the government does not have "unlimited authority" to dismiss a complaint where a whistleblower has rejected settlement, and he argued that the District Court should have evaluated the reasonableness of the proposed settlement.  The government, Scarcella reports, argued that a settlement hearing is "meant not to convince a judge to keep a case going, but . . . to get the government to change its mind about dismissing a suit."  Stated another way, such a hearing is meant to give the relator an opportunity to complain and voice that complaint, but it does not grant the court or the relator the power to keep the government from dismissing a qui tam claim.

The case is being watched because as Scarcella observed:  "A ruling against the government could erode the Justice Department's control of False Claims Act litigation, encourage plaintiffs to reject settlements, and create a potential separation-of-powers conflict in an area of the law that has seen explosive growth in recent years."

A. Brian Albritton