American Bar Association
Media Alerts
Media Alerts - United States v. Agape Senior Community, Inc. -- Fourth Circuit
Decrease font size
Increase font size
April 10, 2017
  United States v. Agape Senior Community, Inc. -- Fourth Circuit
Attorney General Has Absolute Veto Power over Voluntary Settlements in FCA Qui Tam Actions

Areas of Law: Whistleblower Law, False Claims Act

Issue Presented: What is the extent of the Attorney General's power under 31 U.S.C. § 3730(b)(1) to veto the voluntary settlement of a False Claims Act qui tam action in which the Government declined to intervene?

Brief Summary: The United States Court of Appeals for the Fourth Circuit held that the Attorney General possesses an absolute veto power under 31 U.S.C. § 3730(b)(1) over voluntary settlements in FCA qui tam actions for three reasons. First, the plain language of 31 U.S.C. § 3730(b)(1) is unambiguous. Second, § 3730(b)(1) is not temporally qualified or explicitly limited in any other manner. Third, the Attorney General's absolute veto power is entirely consistent with the statutory scheme of the FCA, which indicates that the United States is the real party in interest in any FCA suit. Accordingly, the Fourth Circuit affirmed the district court's "unreviewable veto" ruling.

As to the statistical sampling ruling, the Fourth Circuit found that the relators' appeal did not present a pure question of law that is subject to the court's interlocutory review under § 1292(b). Therefore, the court dismissed the appeal of this aspect of the ruling as improvidently granted.

Extended Summary: The False Claims Act (the "FCA") authorizes a private individual (i.e., a relator) to initiate and pursue an action in the name of the United States Government (a qui tam action) to seek civil remedies for fraud against the Government. 31 U.S.C. § 3730(b)(1). The relator's complaint must be served on the Government and kept under seal for at least sixty days. Id. at § 3730(b)(2). Before the expiration of the sixty-day period (or any extension), the Government must either (1) "proceed with the action" by assuming primary responsibility for the action's prosecution, or (2) "notify the court that it declines to take over the action" from the relator, who will then "have the right to conduct the action." Id. at § 3730(b)(4)(A)-(B). If the Government declines to intervene during the initial sixty-day (or extended) period, the court may nevertheless permit its intervention "at a later date upon a showing of good cause." Id. § 3730(c)(3). The qui tam "action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting." Id. § 3730(b)(1).

Defendant Agape Senior Community, Inc., and the other defendants (collectively, "Agape") are affiliated entities that operate elder care facilities throughout South Carolina. The relators, Brianna Michaels and Amy Whitesides, are former Agape employees. In December 2012, the relators served their complaint against Agape on the Government, alleging that Agape fraudulently billed Medicare and other federal health care programs for services to thousands of patients. The Government declined to intervene. Thereafter, the district court unsealed the complaint and the qui tam action proceeded.

In January 2015, the relators and Agape mediated without the Government's knowledge and reached a settlement. Relying on § 3730(b)(1), the Attorney General objected to the proposed settlement. Citing the Ninth Circuit's decision in United States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715 (9th Cir. 1994), the relators and Agape argued that because the Government had declined to intervene, the Attorney General's objection to the proposed settlement was subject to the district court's reasonableness review. The Government instead relied on the Fifth Circuit decision in Searcy v. Philips Electronics North America Corp., 117 F.3d 154 (5th Cir. 1997), and the Sixth Circuit's decision in United States v. Health Possibilities, P.S.C., 207 F.3d 335 (6th Cir. 2000). The Government argued that the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions. In June 2015, the district court agreed with the Government's reasoning and sustained the Attorney General's objection (the "unreviewable veto" ruling).

In addition, the district court rejected the relators' request to use statistical sampling to establish liability and damages, finding that such use would be improper (the "statistical sampling" ruling). The district court certified both rulings for interlocutory appeal. Both parties filed petitions for permission to appeal, which were granted by the Fourth Circuit.

First, the Fourth Circuit acknowledged that the extent of the Attorney General's veto power under § 3730(b)(1) was a novel issue. The court thus began with a discussion of the three circuits' decisions debated in the district court: Killingsworth (Ninth Circuit), Searcy (Fifth Circuit), and Health Possibilities (Sixth Circuit).

In Killingsworth, the Ninth Circuit concluded that when the Government has not intervened, the Attorney General may object to a proposed settlement only with a showing of "good cause;" after which the Government can obtain a hearing on whether the settlement is "fair and reasonable." The Killingsworth court's interpretation was rejected by the Fifth Circuit in its Searcy decision and by the Sixth Circuit in its Health Possibilities decision. The Fourth Circuit agreed with the district court, and with the Fifth and Sixth Circuits, that the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.

First, the Fourth Circuit relied on the plain language of 31 U.S.C. § 3730(b)(1) and agreed with the Fifth Circuit that the language is unambiguous - that a qui tam action "may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting." Second, the Fourth Circuit found that § 3730(b)(1) is not temporally qualified or explicitly limited in any other manner. Unlike other provisions of § 3730, § 3730(b)(1) does not overtly require the Government to satisfy any standard or make any showing reviewable by the court.

Third, the Fourth Circuit held that the Attorney General's absolute veto power is entirely consistent with the statutory scheme of the FCA. Even where the Government declines to intervene, the Fourth Circuit acknowledged that the United States is the real party in interest in any FCA suit. Agreeing with both the Fifth and Six Circuits, the Fourth Circuit observed that qui tam relators are motivated primarily by prospects of monetary reward rather than the public good. The Fourth Circuit found that this is the reason why Congress has granted the Attorney General the broad and unqualified right to veto proposed settlements of qui tam actions.

Therefore, the Fourth Circuit concluded that, under the plain language of § 3730(b)(1), the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions. Accordingly, the Fourth Circuit affirmed the district court's "unreviewable veto" ruling.

As to the statistical sampling ruling, the Fourth Circuit found that the relators' appeal did not present a pure question of law that was subject to the court's interlocutory review under § 1292(b). Therefore, the court dismissed the appeal of the ruling as improvidently granted.

To read the full opinion, click here.

Panel: Judges King, Keenan, and Diaz

Argument Date: 10/26/2016

Date of Issued Opinion: 02/14/2017

Docket Number: No. 15-2145, No. 15-2147

Decided: Affirmed in part and dismissed in part by published opinion

Case Alert Author: Ziyi He, Univ. of Maryland Carey School of Law

Counsel: ARGUED: Mario A. Pacella, STROM LAW FIRM, Columbia, South Carolina, for Appellants. William Walter Wilkins, NEXSEN PRUET, LLC, Greenville, South Carolina, for Appellees. Charles W. Scarborough, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee United States of America. ON BRIEF: T. Christopher Tuck, Catherine H. McElveen, Mt. Pleasant, South Carolina, Daniel Haltiwanger, Terry E. Richardson, Jr., RICHARDSON, PATRICK, WESTBROOK & BRICKMAN, LLC, Barnwell, South Carolina; Christy M. DeLuca, CHRISTY DELUCA, LLC, Mt. Pleasant, South Carolina; Jessica H. Lerer, STROM LAW FIRM, Columbia, South Carolina, for Appellants. Deborah B. Barbier, DEBORAH B. BARBIER ATTORNEY AT LAW, Columbia, South Carolina; Kirsten E. Small, Mark C. Moore, William C. Lewis, NEXSEN PRUET, LLC, Greenville, South Carolina, for Appellees Agape Senior Community, Inc., et al. Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Michael S. Raab, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; William N. Nettles, United States Attorney, Elizabeth C. Warren, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Columbia, South Carolina, for Appellee United States of America. James F. Segroves, Kelly A. Carroll, David J. Vernon, HOOPER, LUNDY & BOOKMAN, PC, Washington, D.C., for Amicus SavaSeniorCare Administrative Services, LLC. Melinda Reid Hatton, Maureen Mudron, AMERICAN HOSPITAL ASSOCIATION, Washington, D.C.; Lisa Gilden, THE CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES, Washington, D.C.; Jessica L. Ellsworth, Washington, D.C., Thomas P. Schmidt, HOGAN LOVELLS US LLP, New York, New York, for Amici American Hospital Association and Catholic Health Association of the United States. Colin E. Wrabley, M. Patrick Yingling, REED SMITH, LLP, Pittsburgh, Pennsylvania, for Amicus American Health Care Association.

Author of Opinion: Judge King

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 04/10/2017 10:34 AM     4th Circuit  

FuseTalk Enterprise Edition - © 1999-2018 FuseTalk Inc. All rights reserved.

Discussion Board Usage Agreement

Back to Top