Government Asserts Right to Final Say in FCA Settlements

A recent decision from the U,S. District Court for the District of Columbia illustrates the power of the government to block False Claims Act settlements between relators and defendants. United States ex rel. Landis v. Tailwind Sports Corp., 2015 U.S. Dist. LEXIS 46140 (D.D.C. April 9, 2015) involves former professional cyclist Floyd Landis, who brought FCA violations against Lance Armstrong and other defendants, including Armstrong’s agents and their company, called Capital Sports and Entertainment. The case was based on Landis’s allegations that defendants submitted claims for sponsorship payments to the U.S. Postal Service while knowing that the team had been using performance-enhancing drugs in violation of the sponsorship agreement.  

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The government intervened in Landis’s claims against Armstrong and certain other defendants, but not in his claims against Capital Sports and its principals. Landis and the Capital Sports defendants then reached a settlement, but the government refused to consent. The Capital Sports defendants moved the court to accept the settlement agreement, notwithstanding the government’s objection, and dismiss the action against them. The court refused, holding that the statute was clear that an FCA case can only be dismissed if the court and the attorney general both give written consent to the dismissal.  While the court acknowledged that “it might seem unfair for the government to be able to force a relator to continue to litigate non-intervened claims that he would prefer to settle, the broader purposes of the FCA are served . . . by a plain reading of [the statute’s] consent provision.” Thus, the court refused to approve the settlement.

According to court filings, Landis and the Capital Sports Defendants agreed to a settlement of $500,000, but the government demanded that the Capital Sports Defendants agree to a cooperation agreement, which allegedly allowed the government to unwind the settlement if the cooperation was not “helpful.” The government also allegedly attempted to compel one of the principals of Capital Sports to waive his spousal privilege. According to the Capital Sports Defendants, when they refused these demands, the government refused to consent to the settlement.

This case makes clear that the government has the last say in FCA cases, even when it does not intervene in them.  And, at least according to the Capital Sports defendants, the government may want significant concessions to be made before agreeing to a settlement.

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