MINNEAPOLIS (Legal Newsline) – The U.S. Court of Appeals for the Eighth Circuit recently vacated a settlement award to whistleblowers who filed suit against technology contractors and were involved in a dispute with the federal government that one attorney termed "somewhat unusual."
The court’s decision will likely impact the environment for whistleblowers across the entire circuit, decreasing the incentive to file suit against fraudulent business practices, according to Alex Hontos, an associate at Dorsey & Whitney.
The federal government had asked the court to lower the whistleblowers' award.
“It is, out of the context of this case, somewhat unusual to see the government fighting with whistleblowers, but I think it makes sense because the government is concerned about having to share settlement proceeds with whistleblowers that it otherwise would not have to share," Hontos said.
Overall, this decision could shake the incentives for whistleblowers to file suit on behalf of the United States.
“It is going to make relators and whistleblowers likely have lower recoveries, in terms of the bounty that can be paid. In this case, the Eighth Circuit may be seen as less hospitable, more pro-business, or more pro-defendant than another circuit where this rule doesn’t apply,” Hontos said.
The whistleblowers, Norman Rille and Neal Roberts, initially filed a False Claims Act case in order to prosecute certain technology contractors on behalf of the United States.
In Rille v. PricewaterhouseCoopers LLP, et al., Rille and Roberts, the “relators," alleged that the technology companies, including the major accounting firm PricewaterhouseCoopers, had worked together to defraud the government for internal profit.
In cases filed under the False Claims Act, the government and the relators usually work together in a mutually beneficial relationship: the relators expose instances of fraud by initially filing suit, the government intervenes if it sees fit, and the relators, in turn, get a share of the settlement.
However, after the Rille case was settled, the government and the elators began a separate battle over the $45 million settlement between the government and one of the defendants.
The relators claimed that they were entitled to a share of the total settlement proceeds. However, the government claimed that the particular settlement in question pertained to accusations made that were not included by the relators in their initial complaint.
The District Court decided in favor of the relators, awarding them $8 million.
The government appealed, and the Eighth Circuit remanded the decision back for reevaluation.
According to Hontos, the speculation that the government would not have been aware of any fraud committed by the defendants is good.
“I don’t know whether or not that was the case, but the whistleblowers do what they do – they blow the whistle, the government gets involved, and starts examining, investigating, and looking,” Hontos said.
Now that the case has been remanded, the District Court must reevaluate the settlement given to the DOJ from the defendants in the original case. The court must “parse out” how much of that settlement relates to the relators' claims, and how much of the settlement relates to other claims.
The decision doesn’t mean that the relators will receive no compensation for blowing the whistle, but their reward will likely decrease significantly.
“The relator here is going to recover something. Most likely, it is just going to be not $8 million. It will be $2 million, or $5 million, or something,” Hontos said.