If You Voluntarily Dismiss Your Qui Tam Suit, You Cannot Benefit From a Later Settlement

This February, a federal district judge from the Southern District of New York, part of the Second Circuit Court of Appeals, determined a whistleblower who voluntarily dismissed his False Claims Act (FCA) case against L-3 Communications EOTech Inc. in 2014 could not share in a settlement later reached between L-3 Communications and the federal government in 2015. While this ruling may not be law across the U.S., it is an important opinion for potential qui tam plaintiffs to consider since other federal judges would likely come to the same conclusions. Ultimately, whistleblowers will need to see the entire case through to benefit from a settlement or judgment in the government’s favor.

The L-3 Communications Case

The whistleblower against L-3 Communications was a quality control engineer for the company from May to June 2013. In August 2013, he stated that the company sold defective holographic firearm sights to the American military and law enforcement agencies. The sights were supposed to work in temperatures from negative 40 degrees to 140 degrees Fahrenheit and with humidity. However, they were allegedly defective because they were inaccurate in extreme hot and cold temperatures and humid conditions.

After making these accusation through pre-filing disclosures, the whistleblower was convicted of an unrelated crime and fled to Brazil. His conversations with the government regarding the case did not go anywhere, so in April 2014, he filed a qui tam lawsuit. This lawsuit listed the whistleblower, now the relator of the case, as a Michigan resident despite his residing in a foreign country. After some discussion between the government and the relator’s attorney regarding his return to the U.S., the whistleblower voluntarily dismissed his case in August 2014.

In November 2015, the U.S. government decided to move forward with its own FCA suit against L-3 communications. However, the company and government settled the case for $25.6 million the next day.

Relators Who Voluntarily Dismiss Their Qui Tam Actions Cannot Later Recover

The whistleblower returned to court in April 2016 stating he had a right to 15% of the government’s settlement based on the argument that it was an “alternate remedy” to the suit he originally filed in 2014. Under the FCA, the government can decide to pursue its claim through any alternate remedy available to it. If an alternate remedy is pursued in another action, the whistleblower who initiated the original action shall have the same rights in the proceeding.

The district judge disagreed with the whistleblower’s argument and stated the language of the FCA precludes relators who voluntarily dismiss their suits from later sharing in the government’s recovery. This is because the FCA is clear, when a qui tam action is filed, the government can either intervene, decline to intervene, or seek an alternate remedy from these two actions. When there is no qui tam action going on, the government can take its own action, but this action is not an alternative to taking over or declining to join a qui tam suit.

Do You Need a Qui Tam Lawyer?

For more information about qui tam cases, contact the Brod Law Firm today. We have years of experience representing whistleblowers in government fraud cases.