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Can a False Claims Act case settle before the government intervenes?

The False Claims Act (FCA) allows private citizens, known as “relators,” to file lawsuits on behalf of the government alleging fraud against federal programs. These lawsuits are known as “qui tam” actions. Many qui tam cases settle before the government decides whether to intervene in the case. However, settling an FCA case without government involvement can be tricky.

The False Claims Act Process

Here’s a quick overview of how an FCA case typically proceeds:

  • A relator files a qui tam complaint under seal and serves it on the government.
  • The government investigates the allegations (typically for at least 60 days).
  • The government decides whether to intervene in the case.
  • If the government intervenes, it takes over primary control of the litigation. If not, the relator can proceed alone.
  • The defendant usually doesn’t find out about the case until the complaint is unsealed.
  • The case proceeds through the litigation process, and often settles before trial.

As this shows, FCA cases usually settle at some point after the complaint is unsealed. However, settlement discussions sometimes begin even before the unsealing and intervention decision.

Settling Before Unsealing or Intervention

In some cases, the relator and defendant engage in early settlement talks and reach an agreement before the government decides whether to intervene. This avoids airing the fraud allegations publicly. It also gives the defendant closure and avoids litigation costs. The relator receives a portion of the settlement amount.

However, settling before unsealing requires consent from the U.S. Department of Justice (DOJ). The DOJ reviews the proposed settlement and ensures it is fair, adequate, and in the public interest. If the DOJ feels the settlement does not reflect the value of the claims, it can reject the agreement and proceed with the case.

According to one analysis, over 75% of qui tam cases that settled before intervention in recent years received government consent. So obtaining consent is very possible with an appropriate settlement.[1]

Settling After Unsealing But Before Intervention

After a qui tam complaint is unsealed, the relator and defendant have a window of time to discuss settlement before the government decides whether to intervene. In some cases, they can reach an agreement during this period.

Again, settling at this stage requires consent from the DOJ. The DOJ will ensure the government’s interests are protected, even though the government is not technically a party yet. This includes assessing the settlement amount and making sure the release of claims is proper.

One advantage of settling after unsealing but before intervention is that the allegations are public, so the DOJ can consider public interest in its review. The DOJ may be more likely to approve a settlement at this stage than before unsealing.

Settling After Intervention

Once the government intervenes in an FCA case, settling becomes more complicated. Now there are three parties at the table – the relator, the defendant, and the government. The relator and defendant cannot settle without the government’s agreement.

The DOJ will negotiate settlement terms including the total settlement amount and allocation between the parties. Generally, the DOJ tries to obtain at least three times the damages sustained by the government plus civil penalties.

Having the government involved in settlement discussions can be a positive, because the DOJ has significant leverage to maximize recovery. However, it also means the relator has less control over settlement terms.

Partial Settlements

In some cases, the relator and defendant may wish to settle just the relator’s claims, while the government continues litigating its own claims. This is known as a “partial settlement.”

Partial settlements require DOJ consent and typically involve the relator receiving a reduced settlement amount. The government may then pursue its own claims against the defendant separately. This approach can make sense if the parties cannot agree on a global settlement amount.

Alternatives to Settlement

Settlement is certainly the most common outcome for FCA cases, but not the only option. If settling before intervention does not occur, here are some other potential results:

  • Government declination – The government declines to intervene, and the relator decides to dismiss the case voluntarily. This results in no settlement.
  • Unilateral settlement – The government declines intervention. The relator and defendant then settle the remaining claims without government involvement.
  • Litigation – The case proceeds to litigation on the merits between the relator, defendant, and possibly the government.

As these alternatives show, settlement does not always happen. But when it does, the government plays an important oversight role.

Key Considerations for Early Settlement

For relators and defendants interested in settling before the unsealing or intervention decision, there are some key considerations:

  • The settlement amount must reflect a fair resolution of the claims. The DOJ will assess if it is too low.
  • The release language cannot be too broad. The DOJ will review which claims are included.
  • The relator’s share percentage needs to be within an acceptable range. Typically 15-30% is reasonable.
  • The DOJ may request additional terms, like cooperation requirements, to protect the public interest.

Engaging in transparent discussions with the DOJ addresses these concerns. Being receptive to DOJ feedback also smooths the approval process.

Confidentiality Considerations

Maintaining confidentiality is often a key motivation for early settlement. However, total confidentiality is not guaranteed. For instance:

  • The DOJ may notify other agencies affected by the allegations.
  • The settlement itself may become public later if the DOJ or relator must enforce its terms.
  • A copy of the settlement will remain under seal with the court.

That said, settling before unsealing does limit public disclosure compared to post-intervention settlements. This depends on the nature of the case.

Getting Creative

The FCA provides a framework for settling qui tam cases, but allows some creativity within that structure. For example, parties could agree to mediation for setting the settlement amount. Or they could propose staggered payment schedules and unique cooperation terms.

There are opportunities to craft solutions that address both sides’ needs while satisfying the DOJ. Experienced FCA counsel can provide guidance on creative settlement strategies.

The Benefits of Early Settlement

Despite the complexities, settling a qui tam case before intervention offers several benefits:

  • Avoids costly litigation and associated business disruption
  • Provides certainty and closure around the allegations
  • Lessens public exposure of the fraud claims
  • Allows negotiation before positions harden after intervention
  • Obtains a return for the relator’s effort in filing the case

For the right FCA case, early settlement can be in all parties’ interests, as well as the public’s. The key is understanding the process and working constructively with the DOJ.

The Role of Experienced Counsel

Navigating FCA settlement discussions requires specific expertise. Experienced qui tam counsel can provide invaluable guidance, including:

  • Assessing the strength of the relator’s claims and likelihood of DOJ intervention.
  • Negotiating settlement terms that address both sides’ interests.
  • Drafting settlement agreements that satisfy DOJ review.
  • Communicating effectively with DOJ officials throughout the process.
  • Strategizing alternatives if early settlement is not feasible.

The right counsel makes a major difference in successfully settling an FCA case before government intervention.

The Bottom Line

While complicated, settling False Claims Act cases before government intervention is certainly possible. With careful planning, experienced counsel, and a spirit of cooperation, many qui tam cases can be resolved to the satisfaction of all parties involved.

The government oversight built into the FCA process helps ensure early settlements are fair and protect the public interest. Navigating the nuances requires thoughtful strategy and able guidance from counsel. When done right, though, pre-intervention settlement provides a reasonable solution for resolving allegations of fraud against the government.


[1] Gibson Dunn, “2020 Year-End False Claims Act Update,” January 2021, https://www.gibsondunn.com/2020-year-end-false-claims-act-update/

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