DOJ Settlement of Qui Tam Claims Alongside Antitrust Claims Shows that An Additional Remedy Does Not Have to Be an Alternate Remedy

The False Claims Act (“FCA”) incentivizes whistleblowers (“relators”) to provide information to the Government that could lead to a recovery of defrauded taxpayer funds, with a share of that recovery going to the whistleblower. But sometimes a relator’s information can lead the Government to pursue claims only on its own behalf, for which there is no private right of action nor means for the relator to share in any recovery. When a relator’s claim results in a payday for the Government but not for the whistleblower who first identified the wrongdoing, conflict is bound to ensue. The United States Department of Justice’s (DOJ) November 2018 $236 million settlement encompassing both qui tam and antitrust claims shows that conflict is not inevitable, however. Under the right conditions, a relator’s information can support both an FCA claim and an independent claim pursued by the Government on its own behalf and can lead to substantial recoveries for both.

Under the False Claims Act, a relator may only receive a whistleblower award if they can show that the wrongdoing complained of caused the Government to pay money that it would not otherwise have paid. When the relator’s information does not support an FCA claim in this way, the Government has the right to address the wrongdoing through means of an independent claim brought only on its own behalf. For example, if a pharmaceutical manufacturer’s violation of an FDA regulation implicates only private health insurance, the FDA may still impose civil monetary penalties through an independent enforcement proceeding. If a military contractor remains technically compliant with a contract but does not perform to the Department of Defense’s (DoD) satisfaction, the Government may still choose not to renew the contract.

But if a relator’s information forms the basis of both a viable FCA claim and the Government’s independent claim, the Government may not simply use the information to settle the independent claim and deprive the relator of their rightful share. Rather, when the Government declines to intervene in a viable qui tam claim but obtains a recovery based on the same wrongful conduct through an “alternate remedy” in another proceeding, the relator is entitled to an appropriate share of that recovery. 31 U.S.C. § 3730(c)(5). See e.g. United States of Am. & New York State v. N. Adult Daily Health Care Ctr., 174 F. Supp. 3d 696, 703 (E.D.N.Y. 2016) (when the Government elects to pursue an alternate remedy rather than intervene in a viable qui tam action, “the FCA grants all relators the same rights they would have in the relators' qui tam action.”).

Of course, it is not always clear how much the Government’s independent claim was derived from a relator’s qui tam case rather than through its own efforts. Nor is it always clear when relator-derived information establishing the Government’s independent claim would also have established an FCA violation.

But these ambiguities need not always result in internecine litigation between the relator and the Government. This past November, the DOJ announced a $236 million settlement of criminal ($82 million) and civil ($154 million) antitrust and qui tam claims against the defendants SK Energy Co. Ltd., GS Caltex Corporation, and Hanjin Transportation Co. Ltd. The relator’s qui tam case, which had triggered the investigation, alleged that the defendants engaged in a wide-ranging bid-rigging scheme to secure military fuel-supply contracts from the DoD. Under the FCA, the Government and the relator were entitled to recover the amount the Government overpaid the defendants under the DoD contracts due to the bid-rigging scheme, including treble damages. Similarly, through its antitrust claim brought under Section 4A of the Clayton Act, 15 U.S.C. § 15a, the Government was entitled to recover its economic losses caused by the “anti-competitive effect” of that same bid-rigging scheme, including treble damages. Still, there was room in the settlement for both claims, notwithstanding their closely overlapping facts and requested relief. This is because “[h]ad Congress in passing Section 4A [of the Clayton Act] intended to preclude application of the [FCA] to conduct also constituting an antitrust violation, it would not have been difficult, and it would be expected for it, to so indicate ...”. United States v. Beatrice Foods, 330 F. Supp. 577, 580 (N.D. Utah 1971).

Overall, last November’s qui tam and antitrust settlement show that when the Government pursues an additional remedy rather than an alternate one, the relator’s and the Government’s recoveries both have the potential to increase rather than decrease.