Opinion ID: 554
Heading Depth: 2
Heading Rank: 3

Heading: analysis

Text: Upon his departure from Purdue, and in exchange for a considerable sum of money and other benefits to which he would not otherwise have been entitled, Radcliffe signed the Release, an exceedingly broad document. In the Release, Radcliffe agreed to forever discharge[ ] [Purdue] of and from any and all liability to Employee for actions or causes of action, suits, [or] claims . . . whatsoever, in law or equity, which, Employee . . . ever had, may now have or hereafter can, shall or may have against [Purdue] as of the date of the execution of this Agreement . . . . J.A. 134-35 (emphasis added). Radcliffe enter[ed] into this agreement intending to waive, settle and release all liability for and recovery from claims [he] ever had, now has or might have against the company as of the date of this agreement. J.A. 141. Finally, he waive[d] any right to accept any relief or award from any charge or action against [Purdue] before any . . . federal, state or local court . . . . J.A. 136. The FCA clearly provides that once a qui tam action is filed, the relator and the defendant may not settle (or at least may not voluntarily dismiss) the action. 31 U.S.C. § 3730(b)(1). The statute does not, however, address whether the relator’s release of qui tam claims, executed before the filing of a complaint, is enforceable. Purdue asserts that prefiling releases are presumptively enforceable and that enforcing such agreements in FCA cases is no different than what is done routinely in other cases involving civil rights, antitrust, securities fraud, and RICO claims where private enforcement deters conduct detrimental to the public. Br. of Appellee at 38. According to Purdue, private qui tam suits are a hallmark of FCA enforcement 14 UNITED STATES v. PURDUE PHARMA . . . . The government, and other private individuals, remain free to prosecute released claims. Id. at 40. In Purdue’s view, enforcing the Release in this case upholds a number of important public policies, such as encouraging settlement, enforcing the sanctity of contract, supporting the use of general releases in the employment context, preventing unjust enrichment, and discouraging duplicity among contracting parties. Radcliffe opposes enforcement of the Release, arguing that qui tam claims belong to the government, not the relator. In Radcliffe’s view, he had no individual legally cognizable claim to release as of August 1, 2005 (the date he signed the Release) because he only became a partial assignee of the government’s claim upon filing the complaint, not before. He further contends that, to be effective, any release purporting to settle . . . qui tam claims and bar a qui tam action . . . must have the express consent of the Attorney General. Response and Reply Br. of Appellant at 42. Finally, he argues that enforcing prefiling releases undermines the purposes of the FCA. The government, as amicus curiae, advances a somewhat middle-ground position in which it asserts that although prefiling releases should generally be considered unenforceable, the district court should have enforced the Release in this case. Amicus Br. at 3. This is so, the government argues, because the relator’s allegations of fraud were disclosed to the government independent of the filing of the qui tam action itself. Id. The government proposes adoption of a rule making an FCA qui tam release[ ] . . . enforceable if the government has knowledge of the relator’s allegations of fraud independent of the filing of the qui tam action itself. Amicus Br. at 12. This government knowledge exception, the government argues, comports with the purposes of the FCA because it vindicates the public interest and simultaneously promotes the orderly and efficient private resolution of FCA cases. Amicus Br. at 14. UNITED STATES v. PURDUE PHARMA 15 Radcliffe, Purdue and the government agree that the enforceability of the Release should be evaluated using the test applied by the Supreme Court in Town of Newton v. Rumery, 480 U.S. 386 (1987). In Rumery the Supreme Court reiterated the well-established rule that a promise is unenforceable if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.5 Id. at 392. A. Radcliffe’s general release of claims did not require the government’s consent to be effective. As an initial matter, we do not accept Radcliffe’s assertion that the Release was ineffective because the Attorney General did not sign off on it. In United States ex rel. Ritchie v. Lockheed Martin Corp., 558 F.3d 1161, 1168 (10th Cir. 2009), the United States Court of Appeals for the Tenth Circuit rejected this same argument. We agree with that court’s analysis. The FCA provides that [a] person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dis- missed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting. 5 As the district court correctly noted, we have not interpreted Rumery in the context of the FCA, though we have stated that public policy is implicated only where ‘it is explicit, well defined and dominant, and ascertainable by reference to the laws and legal precedents and not from general considerations of supposed public interests.’ Radcliffe, 582 F. Supp. 2d at 778 n.9 (quoting L & E Corp. v. Days Inns of Am., Inc., 992 F.2d 55, 58 (4th Cir. 1993)). 16 UNITED STATES v. PURDUE PHARMA 31 U.S.C.A. § 3730(b)(1) (West 2003); see, e.g., Webster v. United States, 217 F.3d 843 at  (4th Cir. 2000) (Table) (with the government’s consent relator voluntarily dismissed her qui tam action without prejudice). As the Tenth Circuit explained: [t]he statute itself only mentions the dismissal of a qui tam action and further requires the consent of the court. When there is a release preceding the filing of the qui tam action, as in this case, no action has been filed, so there is neither an action to dismiss nor a judge to consent to the agreement. As a conse- quence, the statute only governs the enforceability of settlement agreements made after the filing of a qui tam claim. Ritchie, 558 F.3d at 1168 (citing Green, 59 F.3d at 960). Section 3130(b)(1) manifests Congress’ express intent to prohibit a relator’s unilateral settlement of FCA claims, absent the government’s consent, once a suit has been filed. If Congress specifically intended to preclude a relator from releasing his claims only with the Attorney General’s consent prior to filing suit, it could have done so, but did not. We do not lightly assume that Congress has omitted from its adopted text requirements that it nonetheless intends to apply . . . . Jama v. Immigration and Customs Enforcement, 543 U.S. 335, 341 (2005). Thus, the consent of the government is not a necessary condition precedent to enforcement of an otherwise valid release where such a release is executed prior to filing a qui tam action. B. Radcliffe possessed a legally cognizable claim subject to the terms of the Release. Radcliffe next argues that the plain language of the Release does not encompass his qui tam claims against Purdue. Specifically, in paragraph 4 he released Purdue from all liability UNITED STATES v. PURDUE PHARMA 17 to Employee for . . . claims . . . which Employee . . . ever had, may now have or hereafter can, shall or may have . . . as of the date of the execution of this Agreement [August 1, 2005]. Response and Reply Br. of Appellant at 54. Radcliffe asserts that as of the date the Release was executed, he had no FCA claim against Purdue. As support for this proposition, he relies on the Supreme Court’s statement in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 773 (2000), that [t]he FCA can reasonably be regarded as effecting a partial assignment of the Government’s damages claim. In Radcliffe’s view, no such assignment occurred until he filed his complaint under seal with the district court, which occurred after he signed the Release. We disagree. In Vermont Agency, the Supreme Court explained the three elements necessary to establish Article III standing. First, a plaintiff must establish that he suffered an ‘injury in fact’ . . . that is both ‘concrete’ and ‘actual or imminent, not conjectural or hypothetical.’ 529 U.S. at 771 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)). Second, he must establish causation—a ‘fairly . . . trace[able]’ connection between the alleged injury in fact and the alleged conduct of the defendant. Vermont Agency, 529 U.S. at 771 (quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41 (1976)). Finally, he must demonstrate redressability — a ‘substantial likelihood’ that the requested relief will remedy the alleged injury in fact. Vermont Agency, 529 U.S. at 771 (quoting Simon, 426 U.S. at 45). Noting that in qui tam cases it is the government and not the relator that has sustained the injuryin-fact, the Vermont Agency Court held that a relator nonetheless possesses Article III standing to bring an FCA claim because the [FCA] ‘effect[s] a partial assignment of the Government’s damages claim’ and that assignment of the ‘United States’ injury in fact suffices to confer standing on [the relator].’ Sprint Commc’ns Co. v. APCC Servs., Inc., ___ U.S. ___, 128 S. Ct. 2531, 2542 (2008) (quoting Vermont Agency, 529 U.S. at 773, 774). Thus, an adequate basis for 18 UNITED STATES v. PURDUE PHARMA the relator’s suit for his bounty is to be found in the doctrine that the assignee of a claim has standing to assert the injury in fact suffered by the assignor. Vermont Agency, 529 U.S. at 773 (emphasis added). In the course of its analysis the Supreme Court further explained that the statute gives the relator himself an interest in the lawsuit, and not merely the right to retain a fee out of the recovery. Thus, [the statute] provides that [a] person may bring a civil action for a violation of section 3729 for the person and for the United States Government, § 3730(b). Id. at 772. According to Radcliffe’s own allegations, the government suffered an injury-in-fact caused by Purdue’s deceptive marketing of OxyContin’s 2:1 equianalgesic ratio from 1995 to 2005. Thus, once the government suffered an injury (and Radcliffe became aware of the fraud causing the injury), Radcliffe had a statutory claim, and the necessary legal standing as partial assignee, to file a qui tam lawsuit.6,7 In short, he had an interest in the lawsuit regardless of when he opted to vindicate it.8 The fact that Radcliffe chose 6 Indeed, Radcliffe’s attempts to settle his claims with Purdue in early 2005, via anonymous emails, indicates that even he understood that he had an FCA claim well before he signed the Release. 7 We note that the elements of causation and redressability are not, in the context of Racliffe’s allegations, at issue. Clearly, Radcliffe has alleged that the cause of the fraud was Purdue’s marketing practices prior to his execution of the Release. There is also no doubt that, if violations of the FCA were eventually proven, monetary damages would be the appropriate remedy. 8 This is not to say that Radcliffe possessed an indefinite, indefeasible claim. For example, another relator alleging the same fraudulent conduct UNITED STATES v. PURDUE PHARMA 19 not to file suit until after signing the Release does not negate the fact that he had the right to file suit beforehand – a right he waived under the terms of the Release. See 6A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 1545, pp. 351-353 (2d ed. 1990) ([W]hen there has been . . . a partial assignment the assignor and the assignee each retain an interest in the claim and are both real parties in interest.). Because Radcliffe possessed a presently enforceable claim at the time he signed the Release, the plain terms of the Release encompassed his FCA claims. C. The Government’s Knowledge Having determined that Radcliffe’s FCA claims were encompassed by the terms of the Release and that the Attorney General’s consent to the Release was unnecessary, we next address, in a Rumery context, whether overriding public policy considerations nonetheless prevent enforcement of the Release. We hold that they do not under the facts of this case. Most courts considering the enforceability of releases executed prior to filing an FCA suit, including the district court in this case, apply the analytical framework established by the Ninth Circuit in Green and Hall. See, e.g., Ritchie, 558 F.3d at 1169; United States ex rel. McLean v. County of Santa Clara, No. C05-01962, 2008 WL 1947015 (N.D. Cal. Apr. 30, 2008); U.S. ex rel. El-Amin v. George Washington Univ., No. 95-2000, 2007 WL 1302597 (D.D.C. May 2, 2007); United States ex rel. Longhi v. Lithium Power Techs., Inc., 481 F. Supp. 2d 815 (S.D. Tex. 2007); United States ex rel. Bahrani v. ConAgra, Inc., 183 F. Supp. 2d 1272 (D. Colo. 2002). could have preempted Radcliffe’s suit or Radcliffe could have let the statute of limitations expire. See 31 U.S.C. § 3730(b)(5) (barring a relator from bringing a related action based on the facts underlying [a] pending action). The Release, of course, did not prohibit the government or another relator from pursuing similar claims against Purdue. 20 UNITED STATES v. PURDUE PHARMA Green involved an employee who, during his tenure with a defense contractor, alleged that the company had ‘double charged’ the U.S. Air Force for equipment procured for the B- 2 bomber program and that he had been discharged for raising the overcharges with company officials. Green, 59 F.3d at 956. Green filed suit against his former employer, asserting various state-law claims arising out of his termination. Id. The parties eventually reached a settlement and Green signed a general release resolving all of the matters which [had] arisen between them including but not limited to disputes relating to or arising out of the [lawsuit] and Green’s employment with and separation from the company. Id. Green subsequently filed a qui tam suit against his former employer alleging fraudulent conduct subject to the FCA. The Ninth Circuit concluded that enforcing the release . . . would impair a substantial public interest and declined to enforce Green’s release. Id. at 963. The court deemed it critical to its analysis, however, that the government only learned of the allegations of fraud and conducted its investigation because of the filing of the qui tam complaint. Green, id. at 966. After considering additional interests favoring enforcement, the Green Court determined that application of the Rumery[ ] test compels the conclusion that prefiling releases of qui tam claims, when entered into without the United States’ knowledge or consent, cannot be enforced to bar a subsequent qui tam claim. Id. at 969. A few years after its decision in Green, the en banc Ninth Circuit upheld a prefiling release in Hall because, contrary to the facts in Green, the government had full knowledge of the . . . charges and had investigated them before the relator and the defendant settled. Hall, 104 F.3d at 231. In Hall, the court specifically stated that its refusal to enforce the release in Green turned on the public interest in learning about claims of government contractor fraud, and upon the fact that in that case, the government had not been aware of [the relator’s] allegations at the time of the settlement release. Id. at 233. UNITED STATES v. PURDUE PHARMA 21 But because the government was aware of and had investigated the claims raised by the relator in Hall, the public interest in having information brought forward that the government could not otherwise obtain [was] not implicated. Id. In Green and Hall, the Ninth Circuit focused heavily upon the federal interest in the disclosure of fraud. In Green, the government had no knowledge of the fraud prior to the filing of the qui tam suit, while in Hall the government had already been apprised of the allegations due to prior disclosures [by the defendant] to a federal agency. Ritchie, 558 F.3d at 1170. Purdue asserts that independent of any contribution from Radcliffe, the government’s long-standing investigation of Purdue’s marketing of OxyContin had specifically come to include the precise focus of Radcliffe’s suit: ‘whether Purdue falsely marketed OxyContin as being twice as potent . . . and, accordingly, less expensive than MSContin [sic] and the accuracy of ‘the 2:1 comparison of OxyContin to MSContin [sic].’ Radcliffe, 582 F. Supp. 2d at 781. Purdue points out that not only did the government already have access to the documents Radcliffe would subsequently attach to his complaint, it also had high-level documents to which Radcliffe would not have had access as an employee. This is not, therefore, a suit based on information that was otherwise unavailable to the government. As such, Purdue argues, this is not a case where public policy precludes enforcement of the Release. Radcliffe argues that for the Hall exception to apply, and thus for the Release to be enforceable, the government must (1) have known the substance of the relator’s allegations, and (2) have fully investigated them by the time a release was signed. Radcliffe asserts that in refusing to enforce the Release, the district court correctly focused on the fact that 22 UNITED STATES v. PURDUE PHARMA the government had begun, but not completed, its investigation of these allegations as of the date of the release. Id. at 781. The government, as amicus, contends the Release should be enforced in this case because the government’s knowledge of a relator’s allegations of fraud vindicates the public interest goals of the FCA. The government asserts that such a government knowledge rule combats any attempt by defendants to buy relators’ silence and encourages defendants’ disclosure of fraud and cooperation with investigations. The government contends that by relying on the fact that it had not fully investigated the substance of Radcliffe’s allegations, id. at 783 (emphasis added), the district court erroneously applied the Green/Hall analysis. This is so, the government argues, because the district court’s reasoning overlooks the primary purpose of requiring disclosure of fraud allegations, which is not to ensure that the government exhaustively investigates and prosecutes every allegation of fraud, but rather that it has an adequate opportunity to do so. Amicus Br. at 16. According to the government, giving conclusive weight to the completeness of its investigation as a condition of enforcing an FCA release could lead to an inappropriate, time-consuming, and amorphous inquiry into the government’s internal investigative deliberations and processes. Moreover, such a completed investigation rule contradicts 31 U.S.C. § 3730(b)(2), which grants the government discretion under the FCA to initiate or participate in an FCA action without precondition. The district court identified several interests to be considered when enforcing a release of qui tam claims, including the public interest in having relators disclose inside information of alleged fraud to the government, in having relators supplement federal enforcement of the FCA by assisting the government in its investigation and prosecution or prosecuting the claim itself, and in deterring future fraud against the government. Radcliffe, 582 F. Supp. 2d at 782. The district court acknowledged that the government [learned] of the UNITED STATES v. PURDUE PHARMA 23 substance of Radcliffe’s allegations independently and was interested enough in them to request documents pertaining to and question various Purdue employees about the relative cost and potency issue. Id. Noting that the government’s investigation eventually went in a different direction and the final settlement did not refer to the issue raised by Radcliffe, the district court ultimately concluded that Radcliffe’s continued ability to supplement federal enforcement of the FCA by prosecuting these allegations best served the public interest. Id. The district court believe[d] that enforcing the release under these circumstances would substantially impact important public interests associated with the FCA, id., and that the fullness of [the government’s] investigation was a necessary condition precedent to the enforceability of a release. Id. at 779-80. We disagree. The Tenth Circuit recently addressed analogous issues and determined that [b]ecause the federal interests served by enforcing releases signed after disclosure to the federal government outweigh the interests served by not enforcing them, . . . the releases [were] enforceable. Ritchie, 558 F.3d at 1163. In Ritchie, the defendant self-reported fraud to the government, which conducted its own audit and investigation. Id. The relator assisted the government in its investigation but subsequently settled claims that the company retaliated against her because of her whistleblowing activities. Id. at 1165. As a result of the settlement, in which she agreed to leave the company, the relator signed two releases purporting to waive any and all claims [she] might have under federal, state or local law. Id. Ten days after signing the second release she filed a qui tam action against her former employer. Id. Despite the relator’s contentions that the government lacked full knowledge of the scope of the fraud at the time she signed the release, id. at 1170, the Tenth Circuit affirmed the district court’s enforcement of the release. In doing so, the court of appeals determined that [t]he disclosures to the gov24 UNITED STATES v. PURDUE PHARMA ernment in this case were sufficient to satisfy the public interest in uncovering fraud. Id. According to the court of appeals, [e]nforcing releases of qui tam claims only when the allegations of fraud have been disclosed to the government before the release . . . has the benefit of encouraging voluntary disclosure by government contractors. Id. In Ritchie, the federal government had not issued its final audit report when the settlement was reached or the qui tam suit was filed. Id. at 1171. Accordingly, the circuit court recognized, as did the district court in this case, that under such circumstances an interest in having private citizens supplement federal enforcement remains, but [o]n balance . . . that interest does not outweigh the federal interests served by enforcement of settlements following disclosure of fraud allegations to the government, namely the interest in disclosure of fraud allegations and the interest in encouraging settlement. Id. This is so, in part, because [c]ontractors . . . have an interest in settling qui tam claims prior to the filing of a lawsuit. If they can settle qui tam claims only after fraud allegations have been disclosed to the government, then contractors effectively have an incentive to disclose. On policy grounds, then, conditioning the enforceability of releases of qui tam claims upon the prior disclosure of the fraud allegations to the government promotes the federal interest in uncovering fraud against the government. Id. at 1170. Enforcing prefiling releases also encourages the settlement of disputes.9 See Crandell v. United States, 703 9 The government also points out that if it has knowledge of the alleged fraud, [s]uch . . . knowledge . . . reduces the perverse incentive a qui tam defendant would otherwise have to buy the silence of relators, because that defendant faces the real threat of an independent government action. Amicus Br. at 13. UNITED STATES v. PURDUE PHARMA 25 F.2d 74, 75 (4th Cir. 1983) (Public policy, of course, favors private settlement of disputes.). When the government is unaware of potential FCA claims the public interest favoring the use of qui tam suits to supplement federal enforcement weighs against enforcing prefiling releases. But when the government is aware of the claims, prior to suit having been filed, public policies supporting the private settlement of suits heavily favor enforcement of a prefiling release. We therefore agree with the government that [t]he proper focus of the inquiry is whether the allegations of fraud were sufficiently disclosed to the government, not on whether the government’s investigation was complete. Amicus Br. at 17. We find that application of this government knowledge rule meets the balancing analysis required under Rumery. Thus, we concur with the Tenth Circuit that when, as in this case, the government was aware, prior to the filing of the qui tam action, of the fraudulent conduct represented by the relator’s allegations, the public interest has been served and the Release should be enforced. Accordingly, because the allegations of fraud were sufficiently disclosed to the government prior to Radcliffe’s filing of the qui tam suit, the district court erred in failing to enforce the Release as a bar to Radcliffe’s claims.