The Fifth Circuit’s Determination of Prejudice With A Non-Intervening Government

The Issue

On September 7, 2018, the Fifth Circuit Court of Appeals decided a previously unanswered question regarding the False Claims Act (FCA) in United States ex rel. Vaughn: can a non-intervening Government plaintiff be dismissed without prejudice in FCA cases where the relator voluntarily dismisses its qui tam claims with prejudice?

The Facts

In April 2013, four board certified allergists, the Vaughn Relators, brought a qui tam action alleging that United Biologics improperly billed Medicare for unnecessary medical treatments, and then used the illegal Medicare payments to pay kickbacks to non-allergist physicians. In November 2015, the Government declined to intervene in their action. In October 2016, the Vaughn Relators filed a motion to voluntarily dismiss the case with prejudice as to themselves but without prejudice as to the United States which was granted by the District Court in March 2017. In April 2017, United Biologics appealed the dismissal on the grounds that the District Court erred when it dismissed the Vaughn Relators with prejudice, but dismissed the Government without prejudice.

Under the False Claims Act, relators bring qui tam actions on behalf of themselves and the Government. 31. U.S.C. § 3730(b)(1). After relators file suit, the Government has the option to intervene in the action or decline to intervene. Id. § 3730(b)(4). Even if the Government declines to intervene, relators must act in the best interests of the Government. Id. § 3730(c)(3). In this case, United Biologics argued that the District Court should have dismissed Government with prejudice because the Vaughn Relators were acting on behalf of the Government. The Fifth Circuit rejected this argument, and determined that, when relators act on private interests unrelated to the legal merits of the case, the Government is not bound by the relators’ decision which was apparently based on their inability to continue with the litigation, and was not based upon the merits of the case.

For the Record

“The Government-even one that chooses not to intervene-should not be bound by this decision, powerless to vindicate the public’s interest in other actions that may have a stronger basis or a relator more able to shoulder the burdens of litigation.” United States ex rel. Vaughn, No. 17-20389, 2018 U.S. App. LEXIS 25450 at *11 (5^th Cir. September 7, 2018).

The Take Away

The Fifth Circuit’s decision in United States ex rel. Vaughn determined a previously undecided aspect of qui tam litigation: when relators act on their own private interest, rather than acting on behalf of the Government, the Government is not bound by those actions. In order for the Government’s claims in a non-intervening FCA case to be dismissed with prejudice, the dismissal must be based on the merits of the case.