Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-11-03514/USCOURTS-ca8-11-03514-1/pdf.json

Parties Involved:
Boeing Company
Not Party
Cisco Systems
Not Party
Exostar Corporation
Not Party
Exostar LLC
Not Party
IBM Global Services Company
Not Party
International Business Machines
Not Party
Lockheed Martin Corporation
Not Party
Oracle Corporation
Not Party
PWC Consulting LLC
Not Party
PricewaterhouseCoopers LLP
Not Party
Norman Rille
Appellee
Neal Roberts
Appellee
United States of America
Appellant

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 11-3514

___________________________

Norman Rille, United States of America, ex rel.; Neal Roberts, United States of

America, ex rel.,

lllllllllllllllllllll Plaintiffs - Appellees,

United States of America,

lllllllllllllllllllllIntervenor plaintiff - Appellant,

v.

PricewaterhouseCoopers LLP; PWC Consulting LLC; International Business

Machines, Inc.; IBM Global Services Company; Oracle Corporation; Boeing

Company; Cisco Systems, Inc.; Exostar Corporation; Exostar LLC; Lockheed

Martin Corporation,

lllllllllllllllllllll Defendants.

____________

Appeal from United States District Court 

for the Eastern District of Arkansas - Little Rock

____________

 Submitted: April 15, 2015

 Filed: October 5, 2015

____________

Before RILEY, Chief Judge, WOLLMAN, MURPHY, BYE, SMITH, COLLOTON,

BENTON, and SHEPHERD, Circuit Judges, En Banc.

____________

COLLOTON, Circuit Judge.

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As the Supreme Court has observed, “[t]he False Claims Act’s qui tam

provisions present many interpretive challenges.” Kellogg Brown & Root Servs., Inc.

v. United States ex rel. Carter, 135 S. Ct. 1970, 1979 (2015). In this case, two private

parties, called “relators,” brought an action in the name of the United States against

several government contractors, alleging that the contractors defrauded the

government. The United States, after investigating the case, elected to proceed with

the action against several defendants in place of the relators, and the government

eventually reached a settlement with two of the contractors. There followed a dispute

between the relators and the government over how much, if any, of the recovery

should be allocated to the relators. The district court awarded the relators a percentage

of the entire settlement. 

This appeal raises a legal question under the Act: When the government

proceeds with an action brought by a relator under the False Claims Act, and then

settles both the claim brought by the relator and a different claim that does not overlap

factually with the claim brought by the relator, is the relator entitled to a share of the

proceeds of both claims? The better view according to the text and structure of the

statute is that the relator may recover only from the proceeds of the settlement of the

claim that he brought. Because the district court’s order does not clearly apply this

legal standard or make factual findings that are necessary to resolve the case under

this standard, we vacate the order and remand for further proceedings. 

I.

In September 2004, Norman Rille and Neal Roberts, as relators, sued several

government contractors on behalf of the United States, alleging violations of the False

Claims Act, 31 U.S.C. §§ 3729-3733. The contractors were either “systems

integration consultants” who recommend hardware and software products to meet the

government’s information technology needs, or technology vendors who supply those

products. The relators’ original complaint alleged a kickback scheme, under which

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the vendors allegedly paid kickbacks to the consultants in exchange for the consultants

recommending the products of the vendors to the government.

The relators added Cisco Systems, Inc., as a defendant contractor in September

2005. Shortly thereafter, the relators offered the government some 700,000 pages of

documents; according to the relators, these documents contained evidence of

kickbacks and defective pricing involving Cisco and other defendants. Earlier in

2005, the Inspector General in the General Services Administration selected 112

government contracts for review. Among those was a contract with Comstor, a

distributor of Cisco products. Comstor’s contract allowed it to sell Cisco’s technology

products and services to government agencies. After the audit, the Inspector General

concluded that Comstor made inaccurate or incomplete disclosures to the government,

and failed to comply with price reduction obligations under the contract.

In October 2006, the relators amended their complaint to allege that the

defendant contractors failed to provide “current, accurate, and complete disclosure of

their best pricing . . . , thereby causing defective GSA and other government pricing

schedules.” According to the new allegation, the defective pricing resulted in

violations of the False Claims Act “as to both direct sales to the Government by a

Defendant, and indirect sales through [a vendor], with or without a Kickback.” In

April 2007, the government elected to intervene in part of the action, but declined to

intervene against Cisco at that time, as the government had not completed its review

of the company.

In March 2008, the government moved to intervene against Cisco. The

government explained that since April 2007, it had “received and considered

additional information from the Relators,” and that it had “also obtained and assessed

considerable additional information and documents from Cisco, as well as a number

of non-party witnesses that it had not had an opportunity to consider prior to April

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2007.” After the district court granted the motion in April 2008, the government

proceeded with the action as filed by the relators against Cisco and other defendants.

After two years of negotiation, the government reached a settlement with Cisco

and Comstor under which Cisco agreed to pay the government $44.16 million, and

Comstor agreed to pay $3.84 million. According to the agreement, the government

alleged that Cisco and Comstor engaged in the following “Covered Conduct”:

(1) made inaccurate and/or incomplete disclosures and/or false

statements, and/or presented or caused to be presented false claims to the

United States; (2) failed to disclose relevant discount, rebate, true-up,

benefits, credits, value-added, and pricing information to the United

States and, as a result, Contract pricing and orders issued pursuant to the

Contract were inflated; (3) as a result of the defective disclosures of

pricing information, submitted or caused to be submitted false or

fraudulent claims for payment; and (4) failed to comply with price

reduction obligations under the Contract and related letters of supply.

The agreement also provided for the dismissal of the relators’ action against Cisco, but

did not resolve the issue of the relators’ entitlement to a share of the settlement

proceeds.

Following the settlement, the relators moved to recover a share of the proceeds.

The applicable statute allows a relator to receive “at least 15 percent but not more than

25 percent of the proceeds of the action or settlement of the claim, depending upon the

extent to which the person substantially contributed to the prosecution of the action.” 

31 U.S.C. § 3730(d)(1). The government objected to recovery on the ground that the

relators’ complaint did not plead the conduct that formed the basis of the claims that

the government ultimately settled with Cisco and Comstor. The government

maintained that the relators’ claims based on an alleged kickback scheme lacked

merit, and that the settlement covered a separate defective pricing scheme.

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The district court rejected the government’s argument and awarded the relators

seventeen percent of the $44.16 million paid by Cisco and fifteen percent of the $3.84

million paid by Comstor. United States ex rel. Rille v. Cisco Sys., Inc., No.

4:04CV00988-BRW, 2011 WL 4352309, at *4 (E.D. Ark. Sept. 19, 2011). The

government appeals the order.

II.

The False Claims Act provides that a private person “may bring a civil action

for a violation of section 3729 for the person and for the United States Government.” 

31 U.S.C. § 3730(b)(1). Section 3729 establishes liability for certain acts that

constitute false claims against the government. When a private person brings an

action under § 3730(b), the government has the option to “proceed with the action”

or to “decline[] to take over the action.” Id. § 3730(b)(4). If the government

“proceeds with an action brought by a person under [§ 3730](b),” then the private

person is entitled, with an exception not relevant here, to receive a percentage of “the

proceeds of the action or settlement of the claim.” Id. § 3730(d)(1). 

The relators contend that if the government proceeds with an action brought by

a relator, then the relator is automatically entitled to a percentage of any “proceeds”

that the government receives as a result. In their view, it does not matter whether the

claim settled by the government is factually related to the claim brought by the

relators. As long as the settled claim is resolved in an action that was initiated by the

relators, the relators say that they are entitled to recovery. Although the provisions

of the False Claims Act do not always “operate together smoothly like a finely tuned

machine,” Kellogg, 135 S. Ct. at 1979, we conclude that the statute will not bear the

construction advanced by the relators.

The relators are entitled to a share of “the proceeds of the action or settlement

of the claim.” 31 U.S.C. § 3730(d)(1). The Act contemplates that both a relator’s

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“action” and relator’s “claim” are filed in court: Section 3730(e)(4)(A) provides that

“[t]he court shall dismiss an action or claim” brought by a relator under certain

circumstances. The statute also distinguishes between two courses of action for a

relator—“bringing the action” and “settling the claim.” 31 U.S.C. § 3730(d)(2). 

When addressing the relator’s right to recover proceeds, the statute’s distinction

between “the action” and “settlement of the claim” reads as though the first object

(“proceeds of the action”) captures proceeds of an action litigated to judgment and the

second object (“proceeds of the . . . settlement of the claim”) encompasses proceeds

of a settlement. If proceeds of a settlement were covered by the first object

concerning “proceeds of the action,” then the second object concerning settlement of

the claim would be superfluous.1

This case involves a settlement. With respect to settlement, § 3730(d)(1) is

clear that the relator’s share is based only on proceeds of “the claim.” The use of the

definite article refers back to the claim that is “brought by” the relator in “an action”

that he initiates. The next subsection of the statute likewise refers to the relator

“settling the claim” that he brought, in a case where the government does not proceed

with the action. 31 U.S.C. § 3730(d)(2) (emphasis added). The settlement language

of § 3730(d)(1) thus does not extend to a different claim that is settled by the

government when that claim was not originally “brought by” the relator. The relators’

right to recovery is limited to a share of the settlement of the claim that they brought.

The relators focus on the phrase “proceeds of the action,” and assert that “once

the Government intervenes in the relators’ action and receives its proceeds,” the

relator is entitled to a share of all the proceeds. Appellees’ Br. at 25. Even assuming

the proceeds-of-the-action language applies in the case of a settlement, the phrase

1

The dissent’s answer is that when a relator brings only a single claim, and the

government settles that claim, the proceeds of the settlement are not “proceeds of the

. . . settlement of the claim.” Post, at 12. We reject that view as contrary to the plain

meaning of the text.

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“proceeds of the action” refers back to “an action brought by a person.” The relators

would have this mean proceeds not of the action as brought by the relators, but of the

action as developed after intervention by the government. As a textual matter, this

seems unnatural. The phrase “proceeds of the action” is paired with “proceeds of the

. . . settlement of the claim,” and the settlement language refers to “the claim” brought

by the relator, not a claim later added by the government. It would be odd to read the

adjoining phrase—“proceeds of the action”—to encompass more than the action as

brought by the relator. It also would be inconsistent with the purposes of the Act to

permit a relator automatically to receive a share of the proceeds when the relator might

have had nothing to do with the government’s recovery on a particular claim that was

added after the government’s intervention. 

The relators’ reading would create unwarranted disparities in recovery

depending on how the government pursues a new claim. The government has a

choice: it may add a new claim while proceeding with an action brought by a relator,

or it may pursue the same new claim through the use of an alternative remedy. 

Section 3730(c)(5) provides that if the government pursues “its claim through any

alternate remedy available to the Government,” then “the person initiating the action

shall have the same rights” in the alternate proceeding “as such person would have

had” if the government had proceeded with the original action. This means that “the

relator has a right to recover a share of the proceeds of the alternate remedy to the

same degree that he or she would have been entitled to a share of the proceeds of an

FCA action.” United States ex rel. Barajas v. United States, 258 F.3d 1004, 1010 (9th

Cir. 2001) (internal quotation omitted). 

When the government recovers from a defendant in an alternate proceeding,

however, a relator is not entitled to a share of whatever recovery the government

obtains, just because the government’s claim could have been added to the original

action brought by the relator. As the Sixth Circuit explained in United States ex rel.

Bledsoe v. Community Health Systems, Inc., 342 F.3d 634 (6th Cir. 2003), a relator

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seeking recovery must establish that “there exists [an] overlap between Relator’s

allegations and the conduct discussed in the settlement agreement.” Id. at 651. A

relator is not entitled to a share of the proceeds derived from a non-overlapping claim

that the government could have added in the original action but instead pursues in an

alternate proceeding. Given the equivalence of recovery required by § 3730(c)(5) and

§ 3730(d), it follows that the relator also has no right to a share if the government adds

the non-overlapping claim to the original action after intervening. Of course, the

government also may settle a non-overlapping claim without filing it in court. 

Nothing in the Act requires the government to generate unnecessary litigation.

The question in this case, therefore, is whether the government’s recovery from

Cisco and Comstor is the “proceeds of the . . . settlement of the claim,” that is, “the

claim” brought by the relators. We agree with the Sixth Circuit that these proceeds

of “the claim” must extend to proceeds of a settlement in which “the conduct

contemplated in the settlement agreement . . . overlap[s] with the conduct alleged in

[the] Relator’s complaint.” Bledsoe, 342 F.3d at 651. Otherwise, the government

could deprive the relator of his right to recover simply by recasting the same or similar

factual allegations in a new claim or by pursuing the substance of the relator’s claim

in an alternate proceeding. But there must be a factual overlap for the relators to

recover.

In its September 2011 order determining the relators’ share of settlement

proceeds, the district court did not make adequate factual findings to allow appellate

review of whether the settlement was based on claims that factually overlapped with

the claims brought by the relators. See Fed. R. Civ. P. 52(a); King v. United States,

553 F.3d 1156, 1161-62 (8th Cir. 2009); Darst-Webbe Tenant Ass’n Bd. v. St. Louis

Hous. Auth., 339 F.3d 702, 711-12 (8th Cir. 2003). At one point, the court said that

the allegations in the relators’ complaint “appear to fit within the definition of

Covered Conduct” under the settlement agreement, United States ex rel. Rille, 2011

WL 4352309, at *3, but this cryptic statement is not sufficient to afford this court “a

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clear understanding of the basis of the trial court’s decision.” Allied Van Lines, Inc.

v. Small Bus. Admin., 667 F.2d 751, 753 (8th Cir. 1982).

Elsewhere, the district court apparently relied on its conclusion that the relators

“were the catalyst leading to the Government’s settlement,” while acknowledging that

the relators “were more focused on a kickback scheme that the Government asserts did

not exist.” United States ex rel. Rille, 2011 WL 4352309, at *4. A panel of this court

in Roberts v. Accenture, LLP, 707 F.3d 1011 (8th Cir. 2013), appeared to accept this

“catalyst” theory as a basis for recovery, on the view that a causal connection between

the relator’s claim and a later settlement is sufficient to show that a settlement is

“related” to a claim brought by the relator. Id. at 1017.

Whatever the merit of this theory as a policy matter, it is not derived from the

statute. The statute allows relators to recover a percentage of the proceeds of the

settlement of “the claim” brought by the relators, and only that claim. The Act

contemplates that the government, after it elects to intervene, may “clarify or add

detail” to the claims brought by the relators, or may “add any additional claims.” 31

U.S.C. § 3731(c). Recovery under § 3730(d)(1), however, does not extend to

proceeds of the settlement of such “additional claims,” whether or not they are

causally connected to the claim brought by the relators. The Act does not provide for

an award to relators from the proceeds of settlements that “resulted from” the claim

or were “caused by” the claim; relators are limited to a percentage of “proceeds of the

. . . settlement of the claim.”

For these reasons, we conclude that the case must be remanded for application

of the correct legal standard and adequate findings of fact. To resolve the relators’

claim for recovery, the district court should make findings about whether there is a

factual overlap between the claim or claims settled by the government and the claims

brought by the relators, such that proceeds of the settlement (or any portion thereof)

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should fairly be characterized as “proceeds of the . . . settlement of the claim” brought

by the relators.2

The district court’s order of September 19, 2011, R. Doc. 237, is vacated, and

the case is remanded for further proceedings.

BYE, Circuit Judge, with whom SMITH, Circuit Judge, joins, dissenting.

I would affirm the district court's order awarding Norman Rille and Neal

Roberts (the relators) a statutorily-required portion of the government's settlement of

the relators' action. The district court did not apply an incorrect legal standard to the

undisputed facts of this case, nor were the district court's fact findings inadequate for

us to review and affirm the relators' award. I disagree with the Court's textual

interpretation of the statute, and do not believe we should decide the legal question

framed by the Court because it cannot be squared with the actual facts involved here. 

I therefore respectfully dissent from the decision to vacate the district court's award

and to remand for further proceedings.

I

The Court frames the legal question in this appeal as whether a relator is

entitled to a share of settlement proceeds when the government "settles both the claim

brought by the relator and a different claim that does not overlap factually with the

2

In its opening brief, the government argued that the relators are not entitled to

any share of the settlement proceeds because their defective pricing claim was legally

insufficient under Federal Rule of Civil Procedure 9(b). A panel of this court rejected

a comparable contention in Roberts, 707 F.3d at 1017-18, and the government does

not pursue its Rule 9(b) argument before the en banc court. At oral argument, the

government sought a remand for findings on whether the claim settled by the

government overlapped factually with the claims brought by the relators.

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claim brought by the relator." Ante at 2. Because the government never brought a

different claim in the relators' action, the question framed by the Court is not before

us.

I would frame the question as whether proceeds received by the government

after intervening in, settling, and dismissing with prejudice a relator's action constitute

"proceeds of the action" under 31 U.S.C. § 3730(d)(1). Under the facts present in this

case, I agree with the relators' contention that the False Claims Act (FCA) contains

just two preconditions relevant to such an award: (1) the government "proceeds with

an action" originally brought by the relator, and (2) the government receives "proceeds

of the action." This plain and straightforward textual construction reflects the views

expressed by Congress in enacting the FCA that a relator is entitled to a minimum

15% "finders fee" whenever the government elects to intervene in a relator's action

and receives proceeds from the resolution of that action (subject to certain statutory

exceptions not present here). See Roberts v. Accenture, LLP, 707 F.3d 1011, 1016 

(8th Cir. 2013) ("If the Government comes into the case, the person is guaranteed a

minimum of 15% of the total recovery even if that person does nothing more than file

the action in federal court." (quoting 132 Cong. Rec. H9382-03)).

To avoid this plain and straightforward reading of § 3730(d)(1), the Court

reasons the phrase "proceeds of the action" does not refer to proceeds derived from

the settlement of an action, but only captures proceeds of an action litigated to final

judgment. The Court, however, does not explain the significance of a distinction

between proceeds derived from the settlement of an action and proceeds derived from

litigating an action to final judgment. Nor does the Court explain what purpose would

be served within the FCA that would necessitate Congress creating such a distinction.

The Court further reasons that if the proceeds derived from the settlement of an

action were covered by the phrase "proceeds of the action," then the phrase

"settlement of the claim" would be superfluous. I do not follow this reasoning. An

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action can be comprised of multiple claims. A single claim within an action can be

settled, or an entire action can be settled, and both are common occurrences in

litigation. If the government settles a single claim in a multi-claim action, the

proceeds of the settlement naturally fall within § 3730(d)(1)'s reference to "settlement

of the claim." If, however, the government settles the entire action, which was the

case here, the proceeds of the settlement naturally fall within § 3730(d)(1)'s reference

to "proceeds of the action." I do not understand why the phrase "settlement of the

claim" is superfluous unless Congress necessarily meant to limit the phrase "proceeds

of the action" to the proceeds of an action litigated to final judgment.3

The Court also rejects the relators' arguments even assuming the phrase

"proceeds of the action" captures the settlement proceeds at issue in this case. The

Court reasons that the proceeds must still derive from the action as originally brought

by the relators, and not as developed after intervention by the government. Although

I disagree with this premise (as I will explain later), the Court's explanation for its

premise is telling because it identifies precisely why the legal question framed by the

Court is not properly before us.

The Court explains that the settlement language referring to a "claim" must refer

to "the claim" brought by the relator, and "not a claim later added by the government." 

Ante at 7. The court goes on to note "[i]t would be inconsistent with the purposes of

the Act to permit a relator automatically to receive a share of the proceeds when the

relator might have had nothing to do with the government's recovery on a particular

claim that was added after the government's intervention." Id. (emphasis added). But

those are not the facts of this case. The government never added any claims to the

relators' action after intervening.

3

The Court's reasoning is arguably inconsistent with other provisions in the

FCA, which refer to the government settling the action, not just settling the claim. 

See, e.g., 31 U.S.C. § 3730(c)(2)(B) ("The government may settle the action with the

defendant . . .." (emphasis added)).

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As the Court notes, if the government wants to pursue a "different claim" it "has

a choice: it may add a new claim while proceeding with an action brought by a

relator, or it may pursue the same new claim through the use of an alternate remedy." 

Id. This first choice is set forth in § 3731(c), which allows the government – after

intervening in the relators' action – to "file its own complaint or amend the complaint

of a person who has brought an action under section 3730(b) to clarify or add details

to the claims in which the Government is intervening and to add any additional claims

with respect to which the Government contends it is entitled to relief." (emphasis

added). In this case, although the government participated in the relators' action for

approximately two and a half years after intervening, the government never filed its

own complaint setting forth a different claim than the claims brought by the relators. 

Nor did the government amend the relators' complaint to clarify or add details to the

relators' claims. Nor did the government amend the relators' complaint to add any

additional claims with respect to which it contended it was entitled to relief. Rather,

the only persons who made any claims in the relators' action were the relators. This

is undisputed.

The second of the government's two choices for pursuing a different claim is

set forth in § 3730(c)(5), which says "the Government may elect to pursue its claim

through any alternate remedy available to the Government, including any

administrative proceeding to determine a civil money penalty." In this case, the

government did not pursue a different claim through an alternate remedy under

§ 3730(c)(5), but instead elected to intervene in the relators' action. Again, this is

undisputed.

Identifying a "different" claim the government actually pursued – either within

the relators' action via § 3731(c)'s formal pleading provisions, or outside the relators'

action via § 3730(c)(5)'s alternate remedy provisions – would appear to be a necessary

prerequisite to requiring the district court to compare a relator's claim with the

government's claim to determine whether there is a factual overlap.

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Instead of identifying when and in what manner it pursued a different claim, the

government merely relies upon its inclusion of a reference to a particular contract

between Cisco and Comstor in the settlement agreement, the fact that the Inspector

General in the General Services Administration (GSA) audited that contract, and the

fact that the Department of Energy (DOE), Office of Inspector General (OIG) issued

a subpoena to Cisco as a result. While this certainly describes conduct that could form

the basis for the government to pursue a claim as a result of its DOE/OIG

investigation, it does not establish the government ever actually brought such a claim

in accordance with § 3731(c)'s pleading provisions, or pursuant to § 3730(c)(5)'s

alternate remedy provisions.

Because the only manner in which the government ever pursued its allegedly

different claim was within the confines of the relators' action, such a "claim" can not

as a matter of law be considered a different claim than the relators' claims because the

government never availed itself of the choices available to it under § 3731(c). 

Moreover, while "a settlement pursued by the government in lieu of intervening in a

qui tam action asserting the same FCA claims constitutes an 'alternate remedy' for

purposes of 31 U.S.C. § 3730(c)(5)," United States ex rel. Bledsoe v. Cmty. Health

Sys., Inc., 342 F.3d 634, 649 (6th Cir. 2003), the settlement pursued by the

government here was not in lieu of intervening in the relators' action, but within the

relators' action after electing to intervene.

II

The Court's decision has troubling ramifications. First, the Court's approach

necessarily depends upon either ignoring § 3731(c)'s pleading provisions, excusing

the government from complying with § 3731(c) when it advances a post-settlement

litigation position disputing a relator's right to receive a share of the proceeds, or

judicially adding a third option where the government can informally add a claim to

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a relator's action in some manner other than through § 3731(c).4

 I am not willing to

ignore § 3731(c)'s pleading provisions, or excuse the government from having to

comply with them. Nor do I believe it is proper to construct a third option for the

government that is not expressly set forth in the FCA.

I wonder what procedures would govern a judicially-constructed option

allowing the government to add a claim to the relators' action in some manner other

than as outlined in § 3731(c). Would this option employ a different definition of

"claim" than the one used by Congress at 31 U.S.C. § 3729(b)(2)(A)? Is the

government required to give the relators notice when it informally adds a claim to

their action? Does the government at least have to inform the district court when it

informally adds a claim to a qui tam action? Does an informally-added claim relate

back to the original complaint for statute of limitations purposes in the same manner

as when the government actually adds a claim in the "Government pleading" discussed

in § 3731(c)? I agree the FCA presents "many interpretive challenges," Kellogg

Brown & Root Servs., Inc. v. United States ex rel. Carter, 135 S. Ct. 1970, 1979

(2015), but following the Court's approach would cross the line between interpretation

and legislation.

Second, the Court's factual overlap remand is unsound, and I am concerned it

will confuse the district court in this case and district courts who have to wrestle with

future FCA cases. Describing certain conduct in a settlement agreement does not

equate to pursuing a claim, so where is the "different" government claim the district

4

To the extent § 3731(c)'s use of the word "may" is permissive, it merely

permits the government to choose between filing its own complaint or amending the

relators' complaint. If the government elects to add a claim in one of those manners,

however, the statute does not give the government a second permissive choice

between adding the claim through a formal pleading, or adding the claim in some

other unspecified informal manner. See 31 U.S.C. § 3731(c) (expressly referring to

the "Government pleading" contemplated by Congress).

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court is supposed to compare to the relators' claims? In this case, where the conduct

described by the government as a "different claim" was settled within an action

comprised exclusively of the relators' claims, there is no government claim to compare

to the relators' claims.

Typically, a factual overlap analysis is required in cases arising under

§ 3730(c)(5)'s alternate remedy provisions, not intervention cases governed by

§ 3730(d)(1). When the government elects not to intervene in a relator's action, and

instead pursues a claim through an alternate remedy, courts look to determine whether

there is a factual overlap between the claims pursued in the relator's action, and the

claims pursued in the government's independent action, because "the relator has a

right to recover a share of the proceeds of the alternate remedy to the same degree that

he or she would have been entitled to a share of the proceeds of an FCA action." 

United States ex rel. Barajas v. United States, 258 F.3d 1004, 1010 (9th Cir. 2001)

(internal quotation omitted). In such a case, a district court can conduct a side-by-side

comparison of the claims pursued in the relator's action, and the claims pursued by the

government in an alternate proceeding, to determine whether there is a factual overlap.

Significantly, the Court does not cite any cases where a court has held a factual

overlap analysis applies in an intervention case.5

 In fact, the Court cites just two cases

when discussing the need for a factual overlap remand – Barajas and Bledsoe. Both

Barajas and Bledsoe involved alternate remedy proceedings arising under

§ 3730(c)(5), not intervention proceedings governed by § 3730(d)(1).

5

One of the government's arguments in Roberts could arguably be construed as

a contention that a "factual overlap" analysis is required in an intervention case. See

Roberts, 707 F.3d at 1017. We rejected the government's argument on the facts,

however, and thus never addressed the legal question framed by the Court in this case. 

See id.

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In this intervention case, it is improper to address the legal question whether a

factual overlap analysis applies because the government never brought a separate

claim under § 3731(c). But even if the government had complied with § 3731(c)'s

pleading provisions and had actually added a claim to the relators' action, such that the

question framed by the Court was properly before us, the Court's wholesale adoption

of the alternate remedy factual overlap analysis would still be wrong.

As we discussed in Roberts, Congress expressly outlined the three specific

situations where a relator's recovery may be reduced in intervention cases. See

Roberts, 707 F.3d at 1016. The first statutory exception for reducing a relator's

recovery in an intervention case is where the relator "planned and initiated" the FCA

violation. 31 U.S.C. § 3730(d)(3). The second is where the relator "is convicted of

criminal conduct arising from his or her role in the violation." Id. The third statutory

exception is a limitation of the relator's share of the recovery to "no . . . more than 10

percent of the proceeds" where the relator's "action is one which the court finds to be

based primarily on disclosures of specific information" traceable to a source other than

the relator. Id. § 3730(d)(1).

Congress clearly envisioned situations where the government may add

additional claims to a relator's action under § 3731(c), and yet did not see fit to create

a fourth exception allowing for a reduction of a relator's share of the recovery in such

situations. The Court's adoption of the alternate remedy factual overlap analysis in an

intervention case would create a fourth exception allowing a reduction not

contemplated by Congress. Again, this approach would cross the line between

interpretation and legislation.

Here, the government contends the relators' action was unrelated to what I will

call the "Comstor conduct" outlined in the settlement agreement, and thus relators

should not receive any portion of the settlement proceeds because the government

discovered the "Comstor conduct" through the GSA audit and ensuing DOE/OIG

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investigation. The government further contends the entire settlement is attributable

to the "Comstor conduct."

Under the Court's approach, on remand the district court is supposed to

determine whether that different "claim" (even though the government never added

such a claim to the relators' action) overlaps factually with the relators' claims. If

there is no overlap, the relators will receive no portion of the settlement proceeds

attributable to the "Comstor conduct." And if the district court finds that the entire

settlement of the relators' action was attributable to the "Comstor conduct," then the

relators will receive no portion of the settlement proceeds whatsoever, because such

a "claim" was not part of the action as originally brought by the relators.

With all due respect, that is not how the FCA operates in intervention cases. 

In an intervention case, even if the government had asserted and was successful in

showing the "Comstor conduct" was based on disclosures of information traceable to

a source other than the relators, and even if the government had asserted and was

successful in showing the disclosure of the "Comstor conduct" resulted in the relators'

entire action being based "primarily" on those disclosures, the relators would still be

entitled to at least ten percent of the entire recovery, not just the portion of the

recovery attributable to the claims as originally brought by the relators.6

 See 31

U.S.C. § 3730(d)(1) ("Where the action is one which the court finds to be based

primarily on disclosures of specific information . . . relating to allegations or

transactions in a . . . Government Accounting Office report, hearing, audit, or

investigation . . . the court may award such sums as it considers appropriate, but in no

case more than 10 percent of the proceeds, taking into account the significance of the

information and the role of the person bringing the action in advancing the case to

litigation."). Thus, the appropriate inquiry requires a review of the entire action to

6

The government has never contended the relators do not qualify as original

sources of the information in their qui tam action under § 3730(e)(4)(A).

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determine the primary basis of the action, and does not involve an analysis of the

factual overlap of individual claims within the action.

Under the Court's approach, if the government had actually added a claim to the

relators' action which was based upon disclosures of specific information traceable to

a source other than the relators (something not done here), and that additional claim

did not overlap factually with the relators' claim, the relators would not be entitled to

any portion whatsoever of the settlement proceeds arising from such a claim. This

approach – essentially a fourth exception for reducing a relator's recovery not set forth

in the FCA – cannot be reconciled with the express provisions found in § 3730(d)(1).7

The government's choice to intervene in this case clearly triggers specific FCA

provisions that require different inquiries than those applicable to alternate remedy

proceedings. An examination of this record always exposes the same fundamental

flaw in the government's position – the government never added any of its own claims

in the relators' action after intervening. The government's failure to avail itself of the

formal pleading provisions set forth in § 3731(c) is dispositive as a matter of law.

7

The government only made two arguments in the district court when

challenging the relators' right to recover a share of the settlement proceeds: (1) its

"different claim" argument; and (2) a Rule 9(b) argument which it chose not to pursue

in these en banc proceedings. Notably, the government has never argued the relators'

recovery should be limited to ten percent pursuant to § 3730(d)(1)'s statutory

exception. The government's ability to rely upon this statutory exception has therefore

been waived, and the fifteen percent to twenty-five percent provisions of § 3730(d)(1)

govern this case. See George K. Baum & Co. v. Twin City Fire Ins. Co., 760 F.3d

795, 803 (8th Cir. 2014) (explaining that arguments not raised in the district court are

waived, as are arguments not raised on appeal).

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III

Finally, even assuming the district court was required to do some sort of factual

overlap analysis under the circumstances present here, I find nothing lacking in the

factual findings actually made by the district court. The district court compared the

facts the government described in the settlement agreement as the "Covered Conduct"

to the allegations in the relators' complaint. The district court then concluded the

relators' claims "appear to fit" with the facts described by the government in the

settlement agreement.

We can quibble about whether the district court's use of the phrase "appear to

fit" is simply a colloquial expression for "does fit" or an equivocal statement. But the

fact of the matter is, the conduct described by the government in the settlement

agreement does fit within the claims made by the relators in their action, and there is

nothing unclear about this record that requires a remand. In the settlement agreement,

the government described the particular GSA contract it contends was the source of

its "different claim," and alleges with respect to that particular contract that Cisco and

Comstor:

(1) made inaccurate and/or incomplete disclosures and/or false

statements, and/or presented or caused to be presented false claims to the

United States; (2) failed to disclose relevant discount, rebate, true-up,

benefits, credits, value-added, and pricing information to the United

States and, as a result, Contract pricing and orders issued pursuant to the

Contract were inflated; (3) as a result of the defective disclosures of

pricing information, submitted or caused to be submitted false or

fraudulent claims for payment; and (4) failed to comply with price

reduction obligations under the Contract and related letters of supply.

This language is indistinguishable in meaning from the claims outlined in the

relators' third amended complaint, which alleged that "Defendants failed to provide

to GSA and other government agencies current, accurate and complete disclosure of

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their best pricing (after all discounts, rebates, and other benefits)." And why would

the government ever include conduct unrelated to the relators' action in the settlement

of the relators' action to begin with? This makes no sense.

It is clear to me the district court saw through the government's transparent

attempt to dissociate the settlement proceeds from a qui tam action comprised

exclusively of relators' claims, and appropriately awarded the relators a share of the

"proceeds of the action."

IV

In sum, the government's position is flawed on at least three levels: (1) it

depends upon a strained and incorrect reading of the phrase "proceeds of the action;"

(2) it is based upon the factually incorrect premise that the government added a

different claim to the relators' action; and (3) it advocates for the wholesale adoption

of a claim-by-claim factual overlap analysis applicable in § 3730(c)(5) alternate

remedy proceedings that cannot be reconciled with express FCA provisions applicable

in intervention cases.

The government's position was correctly rejected in the original panel decision

after exposing its first flaw, without having to address or discuss its other flaws. It

should be rejected now in these en banc proceedings for the same reason.

I respectfully dissent.

______________________________

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