Under 31 U.S.C. § 3730(c)(2)(B), the “Government may settle [a qui tam] action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances.” Section 3730(c)(2)(B) applies when two conditions are met. First, the government and the qui tam defendant must agree to settle the claim brought under the False Claims Act. Second, the relator who initiated the claims objects to the settlement. If both of these criteria are met, section 3730 requires a hearing to determine whether the settlement is “fair, adequate and reasonable.” See U.S. ex rel. Schweizer v. OCE NV, 677 F.3d 1228, 1234 (D.C. Cir. 2012).
The relator in Schweizer filed a qui tam complaint against her former employer. The defendant in Schweizer had two supply contracts with the government’s General Services Administration. The contracts contained provisions requiring the defendant provide the government with the same discount offered to the private sector and only sell goods made either in the United States or by countries included in the Trade Agreement Act, 19 U.S.C. § 2501, et. seq., Schweizer, 677 F.3d at 1229.
The relator in Schweizer suspected that her employer was violating various clauses in its GSA contract. When the relator shared her concerns with her employer, she was subsequently terminated. After the employee brought a qui tam claim against her former employer, the government chose not to intervene in the suit, however, it remained active in settlement negotiations. The government and the employer eventually agreed to settle the qui tam claims brought by the employee on the government’s behalf. The agreement required the employer to pay $1.2 million, plus interest, to the government, setting aside nineteen percent of the settlement to be paid to the employee-relator. Id. at 1231.
The employee objected to the settlement, arguing that the $1.2 million settlement understated the extent of the employer’s violations and therefore could not satisfy section 3730(c)(2)(B)’s requirement that the settlement be “fair, adequate and reasonable under all the circumstances.” Both the employer and the government disagreed with the employee’s argument, instead arguing that § 3720(c)(2)(A) gave the government an “unfettered right to dismiss” qui tam claims. Schweizer, 677 F.3d at 1232, citing U.S. ex rel. Hoyte v. Am Nat’l Red Cross, 518 F.3d 61, 65 (D.C. Cir. 2008).
Under § 3720(c)(2)(A), the “Government may dismiss a [qui tam] action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”
The D.C. Circuit in Schweizer rejected the employer and Government’s argument that the settlement did not require court approval:
“The meaning is clear. The government may not settle a case when the relator
objects unless the court approves the settlement.”
Id. at 1234. The Schweizer court cited to the Supreme Court’s decision in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, where the Court recognized that section 3730(c)(2)(B) “prohibits the Government from settling [a] suit over [a] relator’s objection without a judicial determination of fair[ness], adequa[cy] and reasonable[ness].” Given that the lower court dismissed the qui tam counts in the complaint without finding the settlement agreement fair, adequate and reasonable, the D.C. Circuit in Schweizer reversed the lower court and remanded the case for a hearing pursuant to section 3730(c)(2)(B). Id. at 1237.
Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at 561 899-2111, or firstname.lastname@example.org.