U.S. ex rel. Michaels v. Agape Senior Cmty., Inc. — Feb. 2017 (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Michaels v. Agape Senior Cmty., Inc.
No. 15-2145 (4th Cir. Feb. 14, 2017)

The United States Circuit Court of Appeals for the Fourth Circuit affirmed in part and dismissed in part a ruling by the district court in a False Claims Act (“FCA”) case brought against a group of affiliated elder care facilities.

Two former employees (“relators”) filed a qui tam action alleging that the elder care facilities fraudulently billed Medicare and other federal programs for services that were not actually provided or that were provided to ineligible patients.  Although the United States Government was entitled to join the lawsuit as a party, it declined to intervene.  The relators and the elder care facilities eventually agreed to a settlement, but the Government objected, contending that the settlement amount was much less than it had estimated the damages.  Based on the Government’s objections, the district court rejected the proposed settlement, holding that the Government had “unreviewable veto authority” over a proposed settlement even when it had declined to intervene as a party.

Looking to cases in other circuit courts and the plain language of the FCA statute, the Fourth Circuit ruled that the Government possessed absolute veto power over voluntary settlements in qui tam actions and, as such, the relators were not entitled to settle a case over the Government’s objections.  The court noted that in an FCA case, the Government is the real party in interest.  To rule otherwise would allow private party relators to settle claims for their own benefit while depriving the Government, and the public, of money that was rightfully due.