In another notable False Claims Act development, a Massachusetts federal district court recently held that, when the United States intervenes in a relator's qui tam lawsuit under the False Claims Act ("FCA") and later enters into settlements with individuals, the relator may be entitled to recover a share of the settlement—even when the relator's complaint did not name the settling party as a defendant.
Although the decision is not binding on any other courts, it is the first to directly address whether FCA whistleblowers must name each settling party as a defendant to share in the settlement. Birchall is notable for presenting in a public, litigated context what has previously been a matter of negotiation and closed-door advocacy in relator share negotiations with the United States.
FCA Qui Tam Litigation
The FCA's qui tamprovisions permit private citizens, referred to as whistleblowers or relators, to bring civil suits on behalf of the United States—the "real party in interest" in the suit—against those who have submitted false or fraudulent claims for payment to the government. By bringing a qui tamlawsuit, the relator stands in the shoes of the government, and, in collaboration with the government, prosecutes the lawsuit against any entity (such as a grantee or contractor) that has falsely or fraudulently received or retained federal funds. The FCA's qui tam provisions promote relator actions by providing whistleblowers a considerable percentage of any monetary recovery.
The Birchall Plaintiff-Relator Actions
In Birchall, Judge Leo T. Sorokin held that, when the United States settles claims with entities not named as defendants in relators' FCA pleadings, the relators are nevertheless entitled to recover a portion of those settlements when the relators' complaints "specifically, and with particularity, allege the fraud, mechanism, the essential facts, and the conduct giving rise to the claim settled by the government." U.S. ex rel. Birchall v. SpineFrontier, Inc., 2024 WL 4686985 (D. Mass. Nov. 4, 2024).
The case began in July 2015 when plaintiff-relator Charles Birchall filed a complaint against SpineFrontier and various other defendants, describing a scheme whereby a "sham consulting company" was utilized to pay kickbacks—as "consulting fees"—to at least 10 surgeons in exchange for using SpineFrontier's products. Birchall's complaint did not name those surgeons as defendants.
Approximately two weeks after Birchall filed his complaint, different plaintiff-relators filed a complaint alleging substantially similar conduct and provided more detail, asserting that at least 34 surgeons were retained by the sham consulting company.
Government's Intervention
After conducting a required investigation of a relator's allegations, the U.S. Department of Justice ("DOJ") can opt to "intervene," i.e. join and take the lead in the case—or can decline to do so, leaving the relator to litigate on her own (while retaining important final authority on things like settlement terms). In this instance, five years after both complaints were filed, the United States partially intervened in each case. In its complaint in intervention, the United States described the same conduct identified in both relator complaints.
The Government referenced existing settlement agreements with five of the surgeons who had been identified in the relator complaints, but none of the surgeons involved in those settlements had been named as a defendant in either relator complaint.
Decision
After failing to reach an agreement with the Government regarding a possible share of the Government's settlements with the surgeons, the relators jointly moved for a relator's award order pursuant to 31 U.S.C. § 3730(d)(1). Section 3730(d) of the FCA expressly permits a relator's share of the "proceeds of the action or settlement of the claim," but does not address whether the proceeds must come from a suit where the settling party is named in the complaint.
Noting the absence of binding First Circuit or U.S. Supreme Court caselaw resolving the issue, the Massachusetts court examined various approaches to "claim comparisons"—determinations of whether two claims are substantially similar for purposes of Section 3730's award and first-to-file provisions—and the statute's structure and purpose. Because claim comparisons focus on substance rather than pleading technicalities, the court concluded the relators were entitled to a share of the settlement because their complaints contained all the essential facts underlying the Government's settlements. Specifically, the complaints alleged the same fraud, the same mechanism (kickbacks disguised as consulting fees and other grants and expenses), the surgeons involved, and the surgeons' specific conduct. The court reasoned that the nature and substance of the relators' allegations aligned with the purpose of the FCA's qui tam provisions, which is to encourage citizens to act as whistleblowers while also preventing opportunistic lawsuits.
Impact
Birchall's potential impact remains to be seen. Although the issue of relators' settlement shares may not be top of mind for FCA defendants, Birchall teaches that non-parties who are not named as defendants but may still be connected to the qui tam litigation would do well to keep a close watch on case developments. Government complaints in intervention are not limited by the scope of a relator's suit—and sometimes go beyond the pleadings of a single relator, particularly where, as in Birchall, multiple whistleblowers independently brought the alleged conduct to light.
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