United States ex rel. Michaels v. Agape Senior Community, Inc.
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 0:12-cv-03466-JFA. [1000023126]. [15-2145, 15-2147]
Appeal: 15-2145
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-2145
UNITED STATES OF AMERICA ex rel. BRIANNA MICHAELS AND AMY
WHITESIDES,
Plaintiffs – Appellants,
v.
AGAPE SENIOR COMMUNITY, INC.; AGAPE SENIOR PRIMARY CARE,
INC.; AGAPE SENIOR SERVICES, INC.; AGAPE SENIOR, LLC; AGAPE
MANAGEMENT SERVICE, INC.; AGAPE COMMUNITY HOSPICE, INC.;
AGAPE NURSING AND REHABILITATION CENTER, INC., d/b/a Agape
Rehabilitation of Rock Hill, a/k/a Agape Senior Post Acute
Care Center-Rock Hill, a/k/a Ebenezer Senior Services, LLC;
AGAPE SENIOR FOUNDATION, INC.; AGAPE COMMUNITY HOSPICE OF
ANDERSON, INC.; AGAPE HOSPICE OF THE PIEDMONT, INC.; AGAPE
COMMUNITY HOSPICE OF THE GRAND STRAND, INC.; AGAPE
COMMUNITY HOSPICE OF THE PEE DEE, INC.; AGAPE COMMUNITY
HOSPICE OF THE UPSTATE, INC.; AGAPE HOSPICE HOUSE OF HORRY
COUNTY, INC.; AGAPE HOSPICE HOUSE OF LAURENS, LLC; AGAPE
HOSPICE HOUSE OF THE LOW COUNTRY, INC.; AGAPE HOSPICE HOUSE
OF THE PIEDMONT, INC.; AGAPE REHABILITATION OF CONWAY,
INC.;
AGAPE
SENIOR
SERVICES
FOUNDATION,
INC.;
AGAPE
THERAPY, INC.; AGAPE HOSPICE; HOSPICE PIEDMONT; HOSPICE
ROCK HILL; CAROLINAS COMMUNITY HOSPICE, INC.,
Defendants – Appellees,
v.
UNITED STATES OF AMERICA,
Party-in-Interest – Appellee.
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SAVASENIORCARE
ADMINISTRATIVE
SERVICES,
LLC;
AMERICAN
HEALTH CARE ASSOCIATION; AMERICAN HOSPITAL ASSOCIATION;
CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES,
Amici Supporting Defendants – Appellees.
No. 15-2147
UNITED STATES OF AMERICA ex rel. BRIANNA MICHAELS AND AMY
WHITESIDES,
Plaintiffs,
v.
AGAPE SENIOR COMMUNITY, INC.; AGAPE SENIOR PRIMARY CARE,
INC.; AGAPE SENIOR SERVICES, INC.; AGAPE SENIOR, LLC; AGAPE
COMMUNITY HOSPICE, INC.; AGAPE NURSING AND REHABILITATION
CENTER, INC., d/b/a Agape Rehabilitation of Rock Hill,
a/k/a Agape Senior Post Acute Care Center-Rock Hill, a/k/a
Ebenezer Senior Services, LLC; AGAPE MANAGEMENT SERVICE,
INC.; AGAPE COMMUNITY HOSPICE OF ANDERSON, INC.; AGAPE
HOSPICE OF THE PIEDMONT, INC.; AGAPE SENIOR FOUNDATION,
INC.; AGAPE COMMUNITY HOSPICE OF THE PEE DEE, INC.; AGAPE
COMMUNITY HOSPICE OF THE UPSTATE, INC.; AGAPE COMMUNITY
HOSPICE OF THE GRAND STRAND, INC.; AGAPE HOSPICE HOUSE OF
LAURENS, LLC; AGAPE HOSPICE HOUSE OF THE LOW COUNTRY, INC.;
AGAPE
HOSPICE
HOUSE
OF
HORRY
COUNTY,
INC.;
AGAPE
REHABILITATION OF CONWAY, INC.; AGAPE SENIOR SERVICES
FOUNDATION, INC.; AGAPE HOSPICE HOUSE OF THE PIEDMONT,
INC.; AGAPE HOSPICE; HOSPICE PIEDMONT; AGAPE THERAPY, INC.;
CAROLINAS COMMUNITY HOSPICE, INC.; HOSPICE ROCK HILL,
Defendants – Appellants,
v.
UNITED STATES OF AMERICA,
Party-in-Interest – Appellee.
--------------------------------
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SAVASENIORCARE
ADMINISTRATIVE
SERVICES,
LLC;
AMERICAN
HEALTH CARE ASSOCIATION; AMERICAN HOSPITAL ASSOCIATION;
CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES,
Amici Supporting Defendants – Appellants.
Appeals from the United States District Court for the District
of South Carolina, at Rock Hill.
Joseph F. Anderson, Jr.,
Senior District Judge. (0:12-cv-03466-JFA)
Argued:
October 26, 2016
Decided:
February 14, 2017
Before KING, KEENAN, and DIAZ, Circuit Judges.
Affirmed in part and dismissed in part by published opinion.
Judge King wrote the opinion, in which Judge Keenan and Judge
Diaz joined.
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
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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.
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KING, Circuit Judge:
In this qui tam action under the False Claims Act (the
“FCA”), defendant Agape Senior Community, Inc., and the twentythree other
entities
defendants
that
Carolina. 1
operate
(collectively,
elder
care
“Agape”)
facilities
are
affiliated
throughout
South
The relators, Brianna Michaels and Amy Whitesides,
are former Agape employees who allege that Agape fraudulently
billed
Medicare
services
to
and
thousands
other
of
federal
patients
health
—
care
services
programs
that
were
for
not
actually provided, or that were provided to patients who were
not
eligible
for
them.
The
United
States
Government
was
entitled, but declined, to intervene.
To establish liability and damages, the relators sought to
rely on statistical sampling.
The district court determined,
however, that using statistical sampling to prove their case
1
In addition to Agape Senior Community, Inc., the
defendants are Agape Senior Primary Care, Inc.; Agape Senior
Services, Inc.; Agape Senior, LLC; Agape Management Service,
Inc.;
Agape
Community
Hospice,
Inc.;
Agape
Nursing
and
Rehabilitation Center, Inc.; Agape Senior Foundation, Inc.;
Agape Community Hospice of Anderson, Inc.; Agape Hospice of the
Piedmont, Inc.; Agape Community Hospice of the Grand Strand,
Inc.; Agape Community Hospice of the Pee Dee, Inc.; Agape
Community Hospice of the Upstate, Inc.; Agape Hospice House of
Horry County, Inc.; Agape Hospice House of Laurens, LLC; Agape
Hospice House of the Low Country, Inc.; Agape Hospice House of
the Piedmont, Inc.; Agape Rehabilitation of Conway, Inc.; Agape
Senior Services Foundation, Inc.; Agape Therapy, Inc.; Agape
Hospice; Hospice Piedmont; Hospice Rock Hill; and Carolinas
Community Hospice, Inc.
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would
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be
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improper
(the
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“statistical
sampling
ruling”).
Additionally, the court rejected a proposed settlement between
the
relators
and
Agape,
because
United States objected to it.
the
Attorney
General
of
the
In so doing, the court concluded
that the Government — despite not having intervened in an FCA
qui tam action — possesses an unreviewable veto authority over
the
action’s
proposed
settlement
(the
“unreviewable
veto
ruling”).
The district court certified both its statistical sampling
and unreviewable veto rulings for these interlocutory appeals
under 28 U.S.C. § 1292(b).
We thereafter granted the petitions
for permission to appeal submitted to this Court by the relators
(seeking an appeal from both rulings) and by Agape (requesting
an appeal from the unreviewable veto ruling only).
As explained
below, we affirm the unreviewable veto ruling and dismiss as
improvidently granted the relators’ appeal as to the statistical
sampling ruling.
I.
A.
The FCA, codified at 31 U.S.C. §§ 3729-3733, 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.
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See 31 U.S.C. § 3730(b)(1).
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Pursuant to § 3730(b)(1), 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.”
At
the
outset
of
the
qui
tam
action,
the
relator’s
complaint must be served on the Government, filed in camera, and
kept under seal for at least sixty days, with no service of
process on the defendant until the court so orders.
U.S.C.
§ 3730(b)(2).
During
the
sixty-day
period
See 31
after
it
receives the complaint, the Government may elect to intervene in
the qui tam action.
the
sixty-day
Id.
period
Specifically, before the expiration of
—
or
any
extension
thereof
under
§ 3730(b)(3) — the Government must either (A) “proceed with the
action”
by
assuming
primary
responsibility
for
the
action’s
prosecution, or (B) “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.
§ 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).
Once
the
Government
intervenes,
the
relator
retains
the
right to continue as a party to the action, subject to certain
limitations.
See
31
U.S.C.
§ 3730(c)(1).
7
For
example,
the
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Government is authorized to settle the action over the relator’s
objection, but only “if the court determines, after a hearing,
that the proposed settlement is fair, adequate, and reasonable
under all the circumstances.”
When
the
qui
tam
Id. § 3730(c)(2)(B).
action
is
successful,
the
relator
entitled to share with the Government in the award.
U.S.C.
§ 3730(d)(1)-(4).
The
amount
of
the
See 31
relator’s
share
depends on whether the Government intervened in the action.
the
Government
did
not
intervene,
“the
person
is
bringing
If
the
action or settling the claim shall receive an amount which the
court decides is reasonable for collecting the civil penalty and
damages.”
Id. § 3730(d)(2) (specifying that such “amount shall
be not less than 25 percent and not more than 30 percent of the
proceeds of the action or settlement”).
B.
Here, the relators served their initial Complaint on the
Government and, on December 7, 2012, filed it under seal in the
District of South Carolina.
The district court extended the
Government’s deadline for its intervention decision to March 5,
2013.
By its notice of that date, the Government declined to
intervene
but
provision
of
Agape
solicit
called
attention
§ 3730(b)(1),
the
Attorney
to
the
requesting
General’s
consent-for-dismissal
that
the
written
relators
consent
asking the court to rule on any proposed dismissal.
8
and
before
Two days
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later, on March 7, 2013, the court unsealed the Complaint and
directed the relators to serve it on Agape.
The relators filed their operative Second Amended Complaint
on March 6, 2014, and discovery ensued. 2
and
Agape
dispute
the
exact
numbers,
Although the relators
they
agree
that
Agape
admitted more than 10,000 patients to its facilities in South
Carolina and submitted more than 50,000 claims to federal health
care programs during the relevant time period.
The relators
sought to use statistical sampling to prove their case in order
to avoid the cost of reviewing each patient’s chart to identify
which claims were fraudulent — a task that the relators said
would take their experts four to nine hours per patient, at a
rate
of
million.
$400
per
hour,
potentially
totalling
more
than
$36
For its part, Agape opposed the use of any evidentiary
form of statistical sampling.
Thus, the district court received
briefing and conducted a hearing on the issue.
By Order of
March 16, 2015, the court made its statistical sampling ruling
“that
based
on
the
would be improper.”
facts
of
this
case,
statistical
sampling
See United States ex rel. Michaels v. Agape
2
Like the initial Complaint, the Second Amended Complaint
alleges claims under not only the FCA, but also the AntiKickback Statute, 42 U.S.C. § 1320a-7b, and the Health Care
Fraud Statute, 18 U.S.C. § 1347.
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Senior Cmty., Inc., No. 0:12-cv-03466, at 2 (D.S.C. Mar. 16,
2015), ECF No. 255 (the “March 2015 Order”).
Meanwhile,
the
relators,
Agape,
and
the
Government
had
mediated unsuccessfully in November 2014, and the relators and
Agape had mediated again — without the Government’s knowledge —
in January 2015.
and
Agape
The proposed settlement between the relators
emerged
§ 3730(b)(1),
the
from
the
Attorney
second
General
mediation.
objected
to
Relying
the
on
proposed
settlement.
The Government has not, however, sought permission
pursuant
to
§ 3730(c)(3)
to
standing
by
its
decision
initial
intervene
in
under
this
action,
thus
§ 3730(b)(2)-(4)
to
decline intervention.
In
objecting
to
the
General
protested
in
part
proposed
that
settlement,
the
settlement
the
Attorney
amount
was
appreciably less than $25 million, the Government’s estimate of
total damages based on its own use of statistical sampling.
The
various bases for the Attorney General’s objection were stated
and discussed during a series of status conferences conducted by
the district court in an effort to determine if this action
could be settled. 3
3
To protect the confidentiality of the settlement
negotiations, the district court sealed transcripts and other
documents in which details of the proposed settlement were
revealed.
We thus do not specify herein the amount of the
(Continued)
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Agape eventually filed a motion to enforce the proposed
settlement
over
the
Attorney
General’s
objection,
Government filed a response opposing that motion.
and
the
By Order of
June 25, 2015, the district court rendered its unreviewable veto
ruling and thereby sustained the Attorney General’s objection to
the proposed settlement.
See United States ex rel. Michaels v.
Agape Senior Cmty., Inc., No. 0:12-cv-03466 (D.S.C. June 25,
2015), ECF No. 296 (the “June 2015 Order”).
The June 2015 Order
also expounded on the statistical sampling ruling that had been
made in the March 2015 Order.
Additionally, the June 2015 Order
certified sua sponte both the unreviewable veto and statistical
sampling rulings for these interlocutory appeals under 28 U.S.C.
§ 1292(b).
The district court prefaced its analysis in the June 2015
Order with a description of the “unique dilemma” that it faced:
The Government, claiming an unreviewable veto right
over the tentative settlement in this case, objects to
a settlement in a case to which it is not a party,
using as a basis of its objection some form of
statistical sampling that this Court has rejected for
use at the trial of the case.
See
June
2015
Order
6.
In
rendering
its
unreviewable
veto
ruling, the district court rejected the argument supporting the
proposed settlement or the Attorney General’s other grounds for
objection.
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proposed settlement that the relators and Agape jointly advanced
in reliance on the Ninth Circuit’s decision in United States ex
rel.
Killingsworth
1994).
Their
v.
Northrop
argument
was
Corp.,
that,
25
F.3d
because
the
715
(9th
Cir.
Government
had
declined to intervene herein, the Attorney General’s objection
to the proposed settlement was subject to the district court’s
reasonableness review.
The district court instead agreed with
the Government — as well as the Fifth Circuit in Searcy v.
Philips Electronics North America Corp., 117 F.3d 154 (5th Cir.
1997),
and
the
Sixth
Circuit
in
United
States
v.
Health
Possibilities, P.S.C., 207 F.3d 335 (6th Cir. 2000) — that the
Attorney General possesses an absolute veto power over voluntary
settlements in FCA qui tam actions.
In so ruling, the district
court explained that it was adhering to the plain language of 31
U.S.C.
§ 3730(b)(1),
Attorney
review
General’s
the
which
“provides
authority,
Attorney
and
General’s
no
no
limitation
right
objection
for
of
[a
on
court]
the
to
reasonableness.”
See June 2015 Order 6-7.
Nevertheless, the district court noted that, if it “did
have
the
General
authority
for
compelling
to
review
reasonableness
case
could
be
an
in
made
objection
a
case
here
position is not, in fact, reasonable.”
of
that
by
the
this
the
Attorney
nature,
a
Government’s
See June 2015 Order 10.
Such a compelling case would include that the relators “could be
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looking at an expenditure of between $16.2 million and $36.5
million
in
pretrial
preparation
alone
Government values at $25 million.”
court
observed,
although
“the
for
a
Id. at 11.
Government
case
that
the
Moreover, as the
has
admitted
that
statistical sampling of the entire universe of claims played a
major part in its calculation of the value of this case,” it
resisted
(with
the
court’s
reluctant
approval)
discovery
requests seeking specific details about its calculation.
Id. at
12.
Turning
to
its
earlier
statistical
sampling
ruling,
the
district court spelled out its rationale for concluding that it
would be improper to use statistical sampling evidence to prove
the
relators’
case.
In
sum,
the
court
explained
that
statistical sampling can be appropriate “where the evidence has
dissipated, thus rendering direct proof of damages impossible.”
See June 2015 Order 13-14 (citing example of FCA qui tam action
where
defendant
household
bumping
allegedly
belongings
weight
of
of
defrauded
military
shipments
Government
personnel
that
had
since
by
been
in
moving
artificially
completed).
Here, however, “nothing has been destroyed or dissipated . . . .
The patients’ medical charts are all intact and available for
review by either party.”
Finally,
statistical
Id. at 14.
in
certifying
sampling
rulings
its
for
13
unreviewable
these
veto
interlocutory
and
appeals,
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the district court observed that the relators and Agape “face a
trial of monumental proportions, involving a staggering outlay
of expenses by the [relators] and a significant drain of [court]
resources.”
See June 2015 Order 18.
The court deemed it to “be
much more judicially efficient to have a ruling on both of the
questions before, rather than after, such a monumental trial.”
Id.
Echoing the requirements of 28 U.S.C. § 1292(b), the court
also stated that each ruling involves “a controlling question of
law as to which there is substantial ground for difference of
opinion,
and
that
an
immediate
appeal
. . .
may
materially
advance the ultimate termination of this litigation.”
19.
Id. at
Because we granted the relators’ and Agape’s subsequent
petitions
for
permission
to
appeal,
we
possess
jurisdiction
pursuant to § 1292(b). 4
II.
A.
We
ruling.
first
assess
the
district
court’s
unreviewable
veto
Because the interpretation of 31 U.S.C. § 3730 presents
4
Briefs were separately filed in these appeals by the
relators (challenging both the unreviewable veto and statistical
sampling rulings), Agape (challenging the unreviewable veto
ruling and defending the statistical sampling ruling), and the
government (defending the unreviewable veto ruling without
addressing the statistical sampling ruling).
Each participated
in oral argument of these appeals.
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a pure question of law, our review is de novo.
See United
States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency, 804
F.3d 646, 654 (4th Cir. 2015).
Our focus, of course, is on
§ 3730(b)(1), which provides in full:
A person may bring a civil action for a violation of
[the FCA] for the person and for the United States
Government.
The action shall be brought in the name
of the Government.
The action may be dismissed only
if the court and the Attorney General give written
consent to the dismissal and their reasons for
consenting.
31 U.S.C. § 3730(b)(1) (emphasis added).
1.
The
General’s
question
power
presented
under
—
the
§ 3730(b)(1)
extent
to
of
veto
the
the
Attorney
voluntary
settlement of an FCA qui tam action in which the Government
declined to intervene — is not one that we have heretofore
squarely
confronted. 5
Thus,
it
is
helpful
to
begin
with
a
discussion of the three courts of appeals decisions debated in
the
district
court:
United
States
5
ex
rel.
Killingsworth
v.
We observed in a 1992 decision that, “[e]ven where the
government allows the qui tam relator to pursue the action, the
case may not be settled or voluntarily dismissed without the
government’s consent.” See United States ex rel. Milam v. Univ.
of Tex. M.D. Anderson Cancer Ctr., 961 F.2d 46, 49 (4th Cir.
1992).
There, however, we were not called on to decide the
extent of the Attorney General’s veto power. Rather, the issue
before us was “whether the inapplicability of the Eleventh
Amendment to suits brought by the United States extends to
actions brought on the United States’ behalf by qui tam
relators.” Id. at 47 (ruling “that it does”).
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Northrop Corp., 25 F.3d 715 (9th Cir. 1994); Searcy v. Philips
Electronics North America Corp., 117 F.3d 154 (5th Cir. 1997);
and United States v. Health Possibilities, P.S.C., 207 F.3d 335
(6th Cir. 2000).
In the Killingsworth decision, the Ninth Circuit determined
that § 3730(b)(1)’s consent-for-dismissal provision is limited
by § 3730(b)(2)-(4), which delineates the initial sixty-day (or
extended)
period
intervene,
as
during
well
as
which
by
the
Government
§ 3730(c)(3),
which
may
elect
authorizes
to
the
court to permit later intervention upon a showing of good cause.
See 25 F.3d at 722.
The Killingsworth court ruled that “the
consent provision contained in § 3730(b)(1) applies only during
the initial sixty-day (or extended) period.”
Id.
Thereafter,
the Government’s settlement-related authority depends on whether
it has intervened, i.e., whether the Government or the relator
is
empowered
to
control
the
litigation.
Id.
When
the
Government has not intervened, Killingsworth merely permits the
Attorney
General
to
object
with
“good
cause”
to
a
proposed
settlement and obtain a hearing on whether the settlement is
“fair and reasonable.”
Id. at 723-25 (cobbling standard from
§ 3730(c)(2)(B), § 3730(c)(3), and other aspects of § 3730).
The
Ninth
Circuit
resolved
in
Killingsworth
that
the
Government’s position — “that without intervention [the Attorney
General]
possesses
an
absolute
16
right
to
reject
a
proposed
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settlement at any time and for any reason” — cannot comport with
the plain language of § 3730(b)(4)(B), which affords the relator
“the
right
to
conduct
declined to intervene.
the
action”
once
the
See 25 F.3d at 722.
Government
has
According to the
court, that is because “[t]he right to conduct a qui tam action
obviously includes the right to negotiate a settlement in that
action.”
Id.
§ 3730(d)(2),
intervened,
claim
For
which
“the
shall
that
proposition,
provides
person
receive
that
if
the
the
court
Government
on
the
action
or
amount
which
the
court
has
not
settling
bringing
an
relied
the
decides
reasonable for collecting the civil penalty and damages.”
is
The
Killingsworth decision emphasized the “or settling the claim”
language
of
§ 3730(d)(2),
propounding
that
it
“confirms
the
relator’s right to settle the action if the government declines
to intervene.”
The
See 25 F.3d at 722-23.
Ninth
Circuit’s
interpretation
in
Killingsworth
of
§ 3730 was subsequently rejected by the Fifth Circuit in its
Searcy
decision
and
Possibilities decision.
the
Sixth
Circuit
in
its
Health
Unlike the Ninth Circuit, those latter
two courts recognized “an absolute veto power over voluntary
settlements in qui tam [FCA] suits,” see Searcy, 117 F.3d at
158, under which a relator “may not seek a voluntary dismissal
of any action . . . without the Attorney General’s consent,” see
Health Possibilities, 207 F.3d at 336.
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As the Fifth Circuit explained in Searcy, the language of
§ 3730(b)(1)’s
consent-for-dismissal
provision
“is
as
unambiguous as one can expect,” and there is “nothing in § 3730
to negate [that language’s] plain import.”
In
particular,
the
§ 3730 utilized
the
relator
Searcy
in
“the
court
confronted
Killingsworth:
right
to
See 117 F.3d at 159.
those
aspects
§ 3730(b)(4)(B)
conduct
the
action”
of
(according
when
the
Government declines to intervene), and § 3730(d)(2) (providing a
reasonable amount to “the person bringing the action or settling
the claim”).
More specifically, Searcy refuted Killingsworth’s
pronouncements that the § 3730(b)(4)(B) “right to conduct a qui
tam
action
obviously
includes
the
right
to
negotiate
a
settlement in that action,” and that § 3730(d)(2) “confirms the
relator’s right to settle the action if the government declines
to
intervene.”
Searcy
court
See
Killingsworth,
expounded
that
“[a]
25
F.3d
relator
at
has
722-23.
The
‘conducted’
an
action if he devises strategy, executes discovery, and argues
the
case
in
court,
even
settlement efforts.”
the
court
observed
if
the
government
frustrates
See Searcy, 117 F.3d at 160.
that
“the
government’s
power
his
Moreover,
to
block
settlements does not mean that the relator will never be the
person settling the claim.”
The
Searcy
court
Id.
further
recognized
“that
relators
can
manipulate settlements in ways that unfairly enrich them and
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reduce
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benefits
to
the
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government,”
including
away claims on behalf of the United States.”
160.
Section
3730(b)(1)’s
“by
bargaining
See 117 F.3d at
consent-for-dismissal
provision,
however, “allows the government to resist [such] tactics and
protect its ability to prosecute matters in the future.”
Id.
Along those same lines, the Sixth Circuit observed in Health
Possibilities that “the power to veto a privately negotiated
settlement
of
public
claims
is
a
critical
aspect
of
the
government’s ability to protect the public interest in qui tam
litigation.
interests
of
The FCA is not designed to serve the parochial
relators,
but
to
vindicate
avoiding fraud against public monies.”
civic
interests
in
See 207 F.3d at 340.
The Health Possibilities court underscored that “[t]he location
of the consent provision [in § 3730(b)(1)] immediately after the
command
that
the
action
be
brought
in
the
government’s
name
suggests that it is an important component of the government’s
ability to regulate qui tam actions.”
Id. at 342.
Notably, the Fifth, Sixth, and Ninth Circuits considered
the legislative history of the FCA.
Circuit
discerned
a
congressional
On the one hand, the Ninth
“intent
to
place
full
responsibility for [FCA] litigation on private parties, absent
early intervention by the government or later intervention for
good
cause”
—
an
intent
that
the
court
deemed
to
be
“fundamentally inconsistent with the asserted ‘absolute’ right
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of the government to block a settlement and force a private
party to continue litigation.”
See Killingsworth, 25 F.3d at
722.
On the other hand, the Fifth and Sixth Circuits perceived
Congress’s
intent
to
grant
the
Attorney
General
full
veto
authority that has existed since the original FCA statute was
enacted in 1863 during the Civil War.
See Health Possibilities,
207 F.3d at 342-43; Searcy, 117 F.3d at 159.
saw
it,
that
intent
has
endured
even
As those courts
through
subsequent
amendments to the FCA providing more incentives to relators and
creating and expanding the Government’s power to intervene.
Id.
Those courts thus concluded:
For more than 130 years, Congress has instructed
courts to let the government stand on the sidelines
and veto a voluntary settlement.
It would take a
serious conflict within the structure of the [FCA] or
a profound gap in the reasonableness of the [consentfor-dismissal] provision for us to be able to justify
ignoring this language. We can find neither.
Health Possibilities, 207 F.3d at 344 (quoting Searcy, 117 F.3d
at 160).
district
Here, in rendering its unreviewable veto ruling, the
court
similarly
interpreted
§ 3730(b)(1)
and
its
consent-for-dismissal provision.
2.
We agree 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.
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In reaching that conclusion, we rely on the plain language of 31
U.S.C. § 3730(b)(1), “read[ing] the words in their context and
with a view to their place in the overall statutory scheme.”
See King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (internal
quotation marks omitted).
Simply put, nothing else in § 3730
leads us to doubt that Congress meant exactly what it said in
§ 3730(b)(1) — 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.”
On
appeal,
neither
the
relators
nor
Agape
advocate
the
Ninth Circuit’s theory that the consent-for-dismissal provision
“applies only during the initial sixty-day (or extended) period”
in which the Government must decide whether to intervene in a
qui tam action.
See Killingsworth, 25 F.3d at 722.
like
Circuit,
the
Ninth
Government
settlement.
flows
from
cannot
however,
unreasonably
Agape
withhold
contends
its
Somewhat
that
consent
the
to
a
According to Agape, the reasonableness requirement
§ 3730(b)(1)
itself.
See
Br.
of
Agape
20
(“[A]
correct reading of § 3730(b)(1) recognizes that the Government’s
consent
to
withheld.”).
from
other
a
qui
tam
settlement
cannot
be
unreasonably
For its part, the Ninth Circuit cobbled a standard
aspects
of
§ 3730,
including
§ 3730(c)(2)(B)
and
§ 3730(c)(3), limiting the Attorney General to an objection for
“good cause” and a hearing on whether the proposed settlement is
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“fair and reasonable.”
Pg: 22 of 27
See Killingsworth, 25 F.3d at 723-25.
Both Agape and the Ninth Circuit have reasoned that an unlimited
veto power cannot coexist with § 3730(b)(4)(B) insofar as it
confers on the relator “the right to conduct the action” when
the
Government
declines
to
intervene,
or
with
§ 3730(d)(2)
insofar as it provides for a share of the award to “the person
bringing the action or settling the claim.”
Of course, as the Fifth Circuit deftly explained, the right
to conduct the action does not necessarily include the right to
settle
the
claim,
although,
absent
the
Attorney
objection, the relator may yet settle the claim.
117
F.3d
at
160.
That
is,
§ 3730(b)(4)(B)
and
General’s
See Searcy,
§ 3730(d)(2)
cannot reasonably be understood to create an unfettered right to
settle on the part of the relator.
Furthermore,
§ 3730(b)(1)
and
its
consent-for-dismissal
provision 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.
A
prime example is § 3730(c)(2)(B), under which the Government may
settle a qui tam action over the relator’s objection, but only
“if the court determines, after a hearing, that the proposed
settlement
is
circumstances.”
fair,
adequate,
and
reasonable
under
all
the
Congress could have readily included similar
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language in § 3730(b)(1); that it decided against doing so is
enlightening.
See Barnhart v. Sigmon Coal Co., 534 U.S. 438,
452 (2002) (“[W]hen Congress includes particular language in one
section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally
and
purposely
in
the
disparate
inclusion
or
exclusion.”
(internal quotation marks omitted)).
Finally,
Attorney
we
would
General’s
be
remiss
absolute
not
veto
to
recognize
authority
consistent with the statutory scheme of the FCA.
that
is
the
entirely
Even where the
Government declines to intervene, “the United States is the real
party in interest in any [FCA] suit.”
See United States ex rel.
Milam v. Univ. of Tex. M.D. Anderson Cancer Ctr., 961 F.2d 46,
50 (4th Cir. 1992).
Meanwhile, “[a]s a class of plaintiffs, qui
tam relators are different in kind than the Government.
They
are motivated primarily by prospects of monetary reward rather
than the public good.”
See Hughes Aircraft Co. v. United States
ex rel. Schumer, 520 U.S. 939, 949 (1997).
Instead of freeing
relators to maximize their own rewards at the public’s expense,
Congress
has
unqualified
granted
right
to
the
Attorney
General
the
veto
proposed
settlements
broad
of
qui
and
tam
actions.
Accordingly, we reject Agape’s interpretation of § 3730 and
conclude today that, under the plain language of § 3730(b)(1),
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the
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Attorney
voluntary
Filed: 02/14/2017
General
settlements
possesses
in
FCA
Pg: 24 of 27
an
qui
absolute
tam
veto
actions.
power
The
over
district
court having concluded the same, we affirm its unreviewable veto
ruling. 6
B.
Turning
to
the
district
court’s
statistical
sampling
ruling, we find it prudent to re-examine whether that aspect of
the
relator’s
appeal
is
appropriate
under 28 U.S.C. § 1292(b).
for
interlocutory
review
Pursuant thereto, the order being
reviewed must involve “a controlling question of law as to which
there is substantial ground for difference of opinion,” and an
immediate appeal from that order must promise to “materially
advance the ultimate termination of the litigation.”
We have
cautioned “that § 1292(b) should be used sparingly and thus that
its
requirements
must
be
strictly
construed.”
See
Myles
v.
Laffitte, 881 F.2d 125, 127 (4th Cir. 1989).
6
Notably, the relators have taken a different tack from
Agape on appeal, conceding that “[i]t may be the case that the
Government has the authority under [§ 3730(b)(1)] to reject a
relator and defendant’s settlement in a typical [FCA] matter in
which the Government has declined to intervene.”
See Br. of
Relators 18-19.
The relators argue instead that, because the
Government engaged in a so-called “de facto intervention” in
this action, the Attorney General’s objection to the proposed
settlement
must
be
reviewed
by
the
district
court
for
reasonableness.
Id. at 19.
Unfortunately for the relators,
their novel theory finds no support in the FCA.
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Strictly construing § 1292(b), we recognize that it may be
proper to conduct an interlocutory review of an order presenting
“a pure question of law,” i.e., “an abstract legal issue that
the
court
Mamani
of
v.
appeals
Berzain,
can
825
decide
F.3d
quickly
1304,
(internal quotation marks omitted).
and
1312
cleanly.”
(11th
Cir.
See
2016)
In other words, § 1292(b)
review may be appropriate where “the court of appeals can rule
on a pure, controlling question of law without having to delve
beyond
the
facts.”
surface
of
record
in
order
to
determine
the
See McFarlin v. Conseco Servs., LLC, 381 F.3d 1251,
1259 (11th Cir. 2004).
issue
the
raised
in
the
Such a pure question of law includes the
relators’
and
Agape’s
appeals
from
the
district court’s unreviewable veto ruling.
By contrast, § 1292(b) review is not appropriate where, for
example, the question presented “turns on whether there is a
genuine issue of fact or whether the district court properly
applied settled law to the facts or evidence of a particular
case.”
See
McFarlin,
381
F.3d
at
1259;
see
also
Harriscom
Svenska AB v. Harris Corp., 947 F.2d 627, 631 (2d Cir. 1991)
(“Where, as here, the controlling issues are questions of fact,
or, more precisely, questions as to whether genuine issues of
material fact remain to be tried, the federal scheme does not
provide for an immediate appeal . . . .”).
Significantly, there
is “a distinction between a question of law, which will satisfy
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§ 1292(b), and a question of fact or matter for the discretion
of the trial court.”
See McFarlin, 381 F.3d at 1258 (internal
quotation marks omitted).
In
its
statistical
sampling
ruling,
the
district
court
determined that the use of statistical sampling evidence can
sometimes be permissible, but is not appropriate here based on
the particular facts and evidence in this case.
Moreover, in
their opening appellate brief, the relators clarify that “[t]he
true question for the District Court is not whether statistical
sampling and extrapolation, in and of itself, is appropriate.”
See Br. of Relators 11 (emphasis added).
Rather, the relators
insist that the issue is whether their proposed “statistical
sampling is conducted in a scientifically proven and accepted
manner pursuant to the Supreme Court’s ruling in [Daubert v.
Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)].”
Id.
Thus, the relators’ appeal raises the question of whether the
district court may, in its discretion, allow the relators to use
statistical sampling to prove their case.
Household,
Inc.,
429
F.3d
469,
475
(4th
See Bryte v. Am.
Cir.
2005)
(“[T]he
district court has broad latitude in ruling on the admissibility
of evidence, including expert opinion, and we will not overturn
Daubert
evidentiary
rulings
with
respect
reliability absent an abuse of discretion.”).
26
to
relevance
and
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In these circumstances, we are satisfied that, as to the
statistical
present
a
sampling
pure
ruling,
question
the
of
relators’
law
interlocutory review under § 1292(b).
that
is
appeal
subject
does
not
to
our
Accordingly, although we
understand and appreciate the district court’s desire to obtain
review of its statistical sampling ruling prior to undertaking
complex trial proceedings, we are constrained to dismiss that
aspect of the relators’ appeal as improvidently granted.
III.
Pursuant to the foregoing, we affirm the district court’s
unreviewable veto ruling and dismiss as improvidently granted
the
relators’
appeal
as
to
the
court’s
statistical
sampling
ruling.
AFFIRMED IN PART
AND DISMISSED IN PART
27
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