Partial Settlement and Allocation of Damages Liability under the False Claims Act (“FCA”)

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Jennifer A. ShortBridget Mayer Briggs, and Tjasse L. Fritz ●

Jennifer A. Short headshot image
Bridget Mayer Briggs headshot image
Tjasse L. Fritz headshot image

On August 30, 2022, the D.C. Circuit Court of Appeals brought renewed attention to the conundrum of False Claims Act (“FCA”) damages by applying a pro tanto allocation rule to a partially settled case. In United States v. Honeywell International Inc., No. 21-5179, 2022 WL 3723020 (D.C. Cir. Aug. 30, 2022), the court reasoned that, because the government had already recovered its full alleged damages through co-defendants’ settlements, it could not seek additional damages from the remaining defendant, regardless of that defendant’s alleged misconduct.

The FCA’s Treble Damages Provision

Under the FCA, 31 USC § 3729-3733, “any person” found to have violated the statute:

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted … plus 3 times the amount of damages which the Government sustains because of the act of that person.

In United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943), the Supreme Court described “damages which the Government sustains because of the act of that person” as the amount the government would have paid for the fraudulent goods or services had it known the relevant facts. The Court further rationalized that allowing damages to be multiplied per the statute was consistent with the common law tradition of civil punitive damages. In the 80 years since Marcus, courts have continued to grapple with the nature and calculation of FCA damages: whether they are punitive or compensatory; whether they are sufficiently predictable to encourage settlement; and whether they serve as a sufficient deterrent for wrongful conduct.

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Polansky and the Future of FCA Qui Tam Prosecution

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Jennifer A. ShortTjasse L. Fritz, and Bridget Mayer Briggs

Jennifer A. Short headshot image
Tjasse L. Fritz headshot image
Bridget Mayer Briggs headshot image

In its upcoming term, the U.S. Supreme Court is poised to address the issue of whether the United States can seek to dismiss a whistleblower’s False Claims Act (“FCA”) lawsuit after it has elected not to participate in the case. And, if it can seek dismissal, what standard should apply?

On June 21, 2022, the Court agreed to consider the matter of United States ex rel. Polansky v. Executive Health Resources, Inc. (Case No. 19-3810). In his cert petition, the whistleblower presses the theory that after the United States declines to intervene in an FCA qui tam case, it lacks any authority to dismiss the action. At a minimum, the petitioner argues that the Court should resolve a long-standing split among the Circuit Courts regarding the standard that applies to such a motion—a split that has splintered even further in response to an uptick in such motions since 2018.

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