Relators’ Award for Settled Defective Pricing Claim Affirmed

A district court’s award to the relators in a False Claims Act action was affirmed by the Court of Appeals for the Eighth Circuit because the court correctly found the defective pricing claim settled by the government was related to the action brought by the relators. The relators brought the action against a contractor that allegedly engaged in unlawful kickback and defective pricing schemes in its sale of computer equipment to the government. The government intervened in the action and reached a settlement with the contractor, allocating $9 million of the settlement to the kickback scheme and $46 million to the defective pricing scheme. The district court awarded the relators a 21 percent share of the kickback settlement and a 15 percent share of the defective pricing settlement pursuant to 31 USC 3730(d)(1). The government appealed, contending the relators were not entitled to any share of the $46 million allocated to the defective pricing scheme.

No Prior Knowledge

According to the government, the relators’ allegations of defective pricing failed to satisfy the requirements for pleading fraud under Federal Rule of Civil Procedure 9(b). A majority of the appellate court, however, rejected the government’s contention that Rule 9(b) plays a part in determining whether a relator is entitled to share in the settlement proceeds in an action in which the government elects to intervene. Rule 9(b)’s standards are meant to test the sufficiency of a complaint at its outset, and nothing in the FCA’s text supports the use of Rule 9(b) to deny a relator the right to a share of settlement proceeds. In addition, the government contended the discovery of defective pricing resulted from the contractor’s voluntary disclosure and the government’s investigation, not the relators’ action. The appellate court disagreed, concluding the government had no knowledge of the contractor’s misconduct prior to the relators’ complaint, and the relators had devoted substantial effort to investigating the contractor’s fraud, including drafting the subpoenas that caused the contractor to hire an independent third party to conduct an audit of its pricing practices. The appellate court thus concluded the district court’s findings of fact were sufficient to justify awarding the relators a share of the defective pricing settlement. Justice Colloton, dissenting, concluded additional findings of facts were needed to determine whether there was sufficient overlap between the two settlements and would have vacated the judgment and remanded for further proceedings. ( U.S. ex rel. Roberts, et al. v. Accenture, LLP, et al., CA-8, 57 CCF ¶80,037)