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U.S. ex rel. Norman Rille v PricewaterhouseCoopers LLP

Case No. 11-3514 (C.A. 8, Apr. 10, 2014)

Norman Rille and Neal Roberts (the relators) brought several related qui tam actions against certain government contractors alleging the contractors committed fraud against the government by means of kickback and defective pricing schemes in violation of the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, the Anti-Kickback Act, 41 U.S.C. §§ 51-52, and other federal statutes. Cisco Systems, Inc. (Cisco) was one contractor sued by the relators. The government intervened in the action against Cisco, adopted the relators' complaint, and settled the action against both Cisco and its distributor, Comstor, for $48 million. The relators' action was dismissed with prejudice as part of the settlement. Pursuant to 31 U.S.C. § 3730(d)(1), the district court1 awarded the relators $8,081,200.

The government appeals, contending the relators were not entitled to any share of the recovery because the settlement was not "proceeds of the action" under § 3730(d)(1), even though the government's receipt of the settlement was conditioned upon the dismissal of the relators' action with prejudice. We affirm.

I



In September 2004, the relators filed several related complaints on behalf of the United States alleging a number of computer equipment and software manufacturers (hereinafter the contractors) had engaged in fraud in connection with government contracts. More specifically, the relators alleged the contractors paid kickbacks to systems integration consultants (SICs) in exchange for the SICs recommending the contractors' products to the government rather than recommending some other company's products. The relators also alleged, by reason of the kickbacks, the contractors were defectively pricing contracts in violation of the FCA.
 

 

Judge(s): Kermit Bye
Jurisdiction: U.S. Court of Appeals, Eighth Circuit
Related Categories: Contracts , Government / Politics , International , Technology , Torts
 
Circuit Court Judge(s)
Kermit Bye
Steven Colloton
Lavenski Smith

 
Trial Court Judge(s)
Billy Wilson

 

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Click the maroon box above for a formatted PDF of the decision.
case. we disagreed with the government's arguments and affirmed the relators' states and, as a result, contract pricing and orders issued pursuant to the inc., no. 4:04cv00988, 2011 wl 4352309 at *4 (e.d. ark. sept. 19, 2011). the relators, when the government's receipt of the settlement funds required the as we explained in roberts, "[i]f the government is allowed to contend at the states ex rel. heinemen-guta v. guidant corp., 718 f.3d 28, 35 (1st cir. 2013) in addition, the settlement amount paid by comstor arose out of the action the 2011)). this purpose can be served "even if the complaint does not meet the packard (hp). the district court awarded the relators a share of the recovery in the government. even where the settlement is attributable to factually unrelated claims and other government pricing schedules. this resulted in fca cf. united states ex rel. bledsoe v. cmty. health sys., inc., 342 f.3d 634, 650 (6th the government finally intervened in the action against cisco in april 2008, efforts. we affirmed the district court, stating "the government's claim that hp's rejected the relators’ position based on the text and structure of the statute, the court ____________ court apparently relied on its conclusion that the relators “were the catalyst leading against cisco, recovering $48 million, but contends the complaint it adopted never claim’ brought by the relators, and only that claim.” 707 f.3d at 1024 (dissenting manufacturers (hereinafter the contractors) had engaged in fraud in connection with defendants failed to provide to [general services administration] and settlement proceeds," id., in large part because a relator's qui tam complaint serves focused on a kickback scheme that the government asserts did not exist.” r. doc. 237, at 7-8. as discussed in roberts, the notion that a relator is entitled to recover which cisco contracted with the government through comstor and then hid the true same issue in roberts. there we squarely "reject[ed] the contention that rule 9(b) of the relators' substantial efforts. ___________________________ statements, and/or presented or caused to be presented false claims to in a qui tam action in which the government elects to intervene, the fca reviewed de novo. roberts v. accenture, llp, 707 f.3d 1011, 1015 (8th cir. 2013). e.g., batiste, 659 f.3d at 1210 ("[the fca] is designed to allow recovery when a qui claimed the relators' complaint did not state a claim for relief, even though the statute contains two preconditions to an award. first, the government must in many cases the alleged fraudulent activity alleged in a qui tam action will come we affirm the district court. no. 11-3514 without a kickback. into sharper focus after the government elects to intervene. but, as long as the relator particularity standards of rule 9(b)." batiste, 659 f.3d at 1210; see also united -2- b of our previous conclusion is reinforced when applied to the facts of this case. in actionandreceivessettlement proceeds conditioned upon thedismissal of therelator's intervening. the government then successfully settled a defective pricing claim fraudulent practices, and it would defeat such purpose if the relators were not appeal from united states district court iii to the government the best prices provided to non-government purchasers. included an amount paid by cisco's distributor, comstor. the government contends including its distributor, comstor. at the same time, the relators sought government4 (dissenting opinion), the court’s conclusion is inconsistent with the text, structure, government had adopted the same complaint when it intervened. claim[.]" the government also claims its settlement with cisco and comstor was is entitled to a statutory share of a qui tam recovery pursuant to § 3730(d)(1). the court purportedly found as a matter of fact that the claims settled by the government proceeds resulting from a qui tam action in which the government elects to of civil procedure for purposes of determining a relator's right to recover a share of among the many items the relators flagged for the government's attention were the united states alleging a number of computer equipment and software share of the settlement proceeds pursuant to 31 u.s.c. § 3730(d)(1). seven months7 comstor. the relators were not parties to the settlement agreement. significantly, (concluding a qui tam complaint "need not comport with rule 9(b)'s pleading prejudice, we conclude as a matter of law that the settlement funds constitute however, comstor and cisco conditioned the settlement upon the dismissal with see gurley v. hunt, 287 f.3d 728, 731 (8th cir. 2002) ("[a] final judgment on the none of the three exceptions which might permit an additional reduction of8 under such circumstances, the relators are entitled to a statutory share of the award. see roberts v. accenture, llp, 707 f.3d 1011, 1022 (8th cir. 2013). unrelated to the relators' qui tam action, and thus the relators are not entitled to share choosing to intervene, the relator no longer has the opportunity to cure the in the government's recovery. pricing information, submitted or caused to be submitted false or reviewed and analyzed. the relators passed this information on to the government, relators. for the reasons discussed in the roberts dissent, 707 f.3d at 1022-26 -5- government argues this precondition was not satisfied. the government contends the under 31 u.s.c. § 3730(d)(1) to a percentage of any “proceeds” that the government identified by the relators prior to the government's intervention. the government's adding specific allegations against comstor. the government then reached a comstor through the hundreds of thousands of documents they located, stored, fraud against the government by means of kickback and defective pricing schemes $7,507,200, and 15% of the $3.84 million settlement with comstor in the amount settlement with comstor involving the fraudulent practices first identified by the $576,000, for a total award of $8,081,200. united states ex rel. rille v. cisco sys., disclosed to the government. challenge a relator's right of recovery under the fca. the government raised this pending action and assistance in prosecuting the action played no role in uncovering reward them when they do so." roberts, 707 f.3d at 1018 (internal citation omitted). ‘proceeds of the action’ under § 3730(d)(1).” ante, at 9. the court requires no to be further reduced), are applicable here. comstor then passed on discounts to cisco's vendors without the discounts being failure to plead defective pricing with sufficient particularity. the government standard. -4- against cisco.5 cannot compromise a relator's action by having it dismissed with prejudice and then of the recovery because the settlement was not "proceeds of the action" under government typically files its own complaint after intervening in a relator's qui tam machines, inc.; ibm global services company; oracle corporation; boeing submitted: september 26, 2013 "received and considered additional information from the relators." although the -10- were the same as the claims brought by the relators. id. at 1022. the full court then in roberts, the government similarly claimed the information material to its6 of the claim" under § 3730(d)(1). the government also argues the district court erred i would vacate the judgment and remand for application of the correct legal scheme, but also alleged a broader practice of defective pricing in which the up, benefits, credits, value-added, and pricing information to the united kickbacks, the contractors were defectively pricing contracts in violation of the fca. (cisco) was one contractor sued by the relators. the government intervened in the roberts, the government filed its own complaint against the contractors after roberts, however, rule 9(b) pleading standards are not relevant to whether a relator ____________ i finding of factual overlap between the relator’s claim and the claims settled by the focused instead upon the defective pricing scheme between cisco and comstor, in conclusion of a case that a relator's initial allegations were insufficient, even though contract were inflated; (3) as a result of the defective disclosures of kickback act, 41 u.s.c. §§ 51-52, and other federal statutes. cisco systems, inc. settlement of a claim brought by the relator or the proceeds of an action as brought (quoting 132 cong. rec. h9382-03), for doing nothing more than bringing the to the government’s settlement,” while acknowledging that the relators “were more were entitled to a statutory share of the government's recovery under § 3730(d)(1). recovery, because "[a] primary purpose of the fca is to encourage whistleblowers other contractors, but did not intervene in the action against cisco. for the next3 norman rille, united states of america, ex rel.; neal roberts, united states of the court construes the statute to require at least a fifteen-percent recovery for the intervene in the action originally brought by the relators against cisco. second, the in roberts v. accenture, llp, 707 f.3d 1011 (8th cir. 2013), the same two qui § 3730(d)(1), the district court awarded the relators $8,081,200.1 fraudulent claims for payment; and (4) failed to comply with price rewarded accordingly. years, the relators uncovered the defective pricing scheme between cisco and different claims brought by the government is not derived from the statute. “the and the government then chose to intervene in the relators' action and take advantage tina and other laws and regulations, thereby causing defective gsa2 hp case. the government appealed, making arguments similar to those made in this furthermore, the government may undertake its own efforts at uncovering regard is based upon the fact that comstor was not identified by name in the relators' the truth in negotiations act (tina), 10 u.s.c. § 2306a.2 company; cisco systems, inc.; exostar corporation; exostar llc; lockheed the relevant complaint is the relators' third amended complaint.5 "this purpose is advanced when a relator files a complaint which 'provides the relators alleged this type of post hoc use of rule 9(b) to deny a relator the right to a share of the and purposes of the statute. the relator is entitled to a share of proceeds from the distributor, comstor, but made pricing disclosures directly to the government itself. funds the government received from both cisco and comstor. the court in this case abandons any pretense that a relator’s recovery is limited intervene in the relators' action, but simply adopted the relators' complaint upon when it failed to apply the pleading standards under rule 9(b) of the federal rules plays a part in determining whether a relator is entitled to share in the settlement proceeds of the action or the settlement of the claim." 31 u.s.c. § 3730(d)(1). the8 refine its theories of liability. this, again, is the natural process of litigation. thus, constitute "proceeds of the action" under § 3730(d)(1). we find no support in the law tam relator puts the government on notice of potential fraud[.]"). we therefore for the eighth circuit should not have awarded the relators a share of the $3.84 million settlement with requires that a relator shall receive between fifteen and twenty-five percent "of the exceptions set forth in § 3730(d)(3) which permit the relator's guaranteed minimum unrelated to those brought by the relator. in response to a dissenting opinion that in a case such as this, where the government elects to intervene in a relator's based on our decision in roberts, we conclude the district court did not err by that were developed and added by the government after its intervention in the action, settlement proceeds, the government moved to dismiss the relators' complaint for relators' motion for a statutory share of the recovery. the district court awarded the finally, the government contends the relators should not get a share of the america, ex rel. § 3730(d)(1), even though the government's receipt of the settlement was conditioned upon the dismissal of the relators' action with prejudice. we affirm. following the settlement, the relators brought a motion to recover a statutory relator is still entitled to the minimum "finder's fee," see roberts, 707 f.3d at 1016 deficiency." id. at 1018. we found "nothing in the fca's statutory text to support action with prejudice, we conclude as a matter of law that the settlement funds the district court denied the government's motion to dismiss and granted the ____________ proceeds with an action brought by a relator, then the relator is automatically entitled othergovernment agencies current, accurate,and completedisclosure of less importance as the litigation progresses and a plaintiff uncovers more details corresponding recovery. we reject this contention. claims it settled with cisco and comstor were unrelated to the relators' action and relators' claims and the action itself to be dismissed with prejudice. the government the relevant portion of § 3730(d)(1) states: "if the government proceeds with7 merits of an action precludes the parties or their privies from relitigating issues that paying a relator his or her statutory share to the settlement proceeds by excluding the indirect sales through an si, alliance, or technology vendor, with or § 3730(b). id. this precondition was satisfied here when the government elected to for the eastern district of arkansas - little rock before bye, smith, and colloton, circuit judges. denied the government’s petition for rehearing en banc by a vote of four to three, with its purpose when it '"provides the government sufficient information to pursue an by the relators against cisco, and thus the relators are not entitled to share in the an action brought by a [private] person . . . such person shall . . . receive at least 15 ____________ result of the additional information it received from the relators' which led it to -12- settlement with hp was discovered as a result of an internal audit – unrelated to the as relevant to the defective pricing scheme, an amended complaint filed by the as a defendant contractor. the government later intervened in actions against several government sufficient information to pursue an investigation' into the allegedly claim the funds it received as a direct consequence are not "proceeds of the action." united states of america requirements to provide the government with sufficient notice of potential fraud"). for the government's suggestion it did not settle the claims or the action brought by (quoting united states ex rel. batiste v. slm corp., 659 f.3d 1204, 1210 (d.c. cir. information cisco had to disclose about its pricing practices. the government about a defendant's alleged wrongdoing through the process of discovery. as more the government intervened in an action the relators brought against hewlett3 (1) made inaccurate and/or incomplete disclosures and/or false government must receive "proceeds of the action or settlement of the claim." id. the therefore the settlement funds did not constitute "proceeds of the action or settlement ii relators originally brought against cisco. comstor's fraudulent practices were intervention in the cisco action, delivering hundreds of thousands of documents to lllllllllllllllllllll plaintiffs - appellees by the relator. he should not recover proceeds from the settlement of factually recommending thecontractors' products to thegovernment ratherthanrecommending some other company's products. the relators also alleged, by reason of the conclude the district court correctly awarded the relators a share of the settlement colloton, circuit judge, dissenting. 9(b)'s pleading standards with respect to comstor. as we stated above and in statute allows relators to recover a percentage of the proceeds of the settlement of ‘the separate settlement amount paid by comstor. the government's sole argument in this practicesand dismissed therelators' action with prejudice. thegovernment's conduct the government collected $44.16 million from cisco and $3.84 million from government fraud once it decides to intervene in a relator's action, and may further nature of its relationship with comstor from the government in order to limit the ______________________________ were or could have been raised in that action.") (quotation marks omitted). twelve months, the relators continued to investigate cisco and its confederates, unrelated claims that were not brought by the relator. court's factual findings are reviewed for clear error and its legal conclusions are dismissed with prejudice as part of the settlement. pursuant to 31 u.s.c. intervene. the settlement agreement described the conduct covered by the6 the united states; (2) failed to disclose relevant discount, rebate, true- disclosure of its defective pricing . . . was purely 'voluntary,' and that the relators' fraudulent practices." id. (quoting batiste, 659 f.3d at 1210). the fca's purpose receives as a result—even if the government recovers on new claims that are factually when reviewing an award of statutory fees under § 3730(d)(1), the district -7- entities, whether such sells to the government or not, all in violation of to come forward with allegations of fraud perpetrated upon the government, and to intervening in the relators' action. here, the government not only decided to three judges not participating and one vacancy on the court. the government's contention regarding comstor also ignores the dynamic "proceed[] with an action" originally "brought by" a relator under 31 u.s.c. in september 2010, the government settled the cisco action. the settlement c opinion). the government which the relators had located, stored, reviewed, and analyzed. relators. the government ultimatelysettled the claiminvolving comstor's fraudulent contractors – in government contracts "with or without a kickback" – failed to reveal comstor is now known as westcon group north america, inc.4 lllllllllllllllllllll defendants prejudice of the relators' action. contends it discovered the comstor/cisco fraud during a routine audit, and not as a complaint. the government contents the complaint therefore did not satisfy rule both cisco and its distributor, comstor, for $48 million. the relators' action was relators 17% of the $44.16 million settlement with cisco in the amount of the government implicitly acknowledged the legal sufficiency of the pleadings by in september 2004, the relators filed several related complaints on behalf of action against cisco, adopted the relators' complaint, and settled the action against their best pricing (after all discounts, rebates, and other benefits) for any we first address the government's contention that it can rely on rule 9(b) to and found the internal audit was conducted in response to the relators' litigation alleged a legally adequate defective pricing claim. settlement proceeds conditioned upon the dismissal of the relator’s action with proceeds of a settlement because he was a “catalyst” leading to the settlement of the proceeds under § 3730(d)(1). finally, the government contends the district court acknowledging in its motion to intervene it was doing so in part based on having filed: april 10, 2014 lllllllllllllllllllllintervenor plaintiff - appellant government contracts. more specifically, the relators alleged the contractors paid -9- district court correctly awarded the relators a share of the government's recovery. in september 2005, the relators amended one of their complaints to add cisco the relator's "finder's fee," see roberts, 707 f.3d at 1016 (discussing the statutory martin corporation is discovered, a plaintiff's theory of liability becomes more refined. that is exactly cir. 2003) ("[t]he government may not settle a relator's claims and seek to avoid ___________________________ was advanced in this case with respect to the allegations regarding comstor's relator's claims from the terms of the settlement agreement."). we conclude the realities of litigation, where the allegations originally made in a complaint take on kickbacks to systems integration consultants (sics) in exchange for the sics it agreed with cisco that the relators' kickback claims lacked merit. the settlement the district court did not find that the settlement in this case was based on to the proceeds of the claim brought by the relator and settled by the government. information regarding the fraud forward and filing the action in federal court. see, relators' action – the results of which led hp to "voluntarily" disclose its defective claims that were factually related to the claims brought by the relators. instead, the a refusing to applyrule 9(b) pleading standards when determining whether the relators intervene." id. at 1017. -8- -3- norman rille and neal roberts (the relators) brought several related qui tam our decision in roberts applies with equal force here. indeed, the soundness hog: “[w]here the government elects to intervene in a relator’s action and receives -6- district of arkansas. violations, as to both direct sales to the government by a defendant, and thus, the relators alleged defective pricing occurred in relation to the kickback is an original source of the information on which the fraud allegations are based, the the government appeals, contending the relators were not entitled to any share reason alone. action, in this case the government decided to simply adopt the relators' complaint in roberts seemingly asserted that its decision was narrower, because the district pricewaterhousecoopers llp; pwc consulting llc; international business v. united states court of appeals in violation of the false claims act (fca), 31 u.s.c. §§ 3729-3733, the anti- government's argument regarding the separate amount paid by comstor fails for this -13- bye, circuit judge. -11- reduction obligations under the contract and related letters of supply. percent but not more than 25 percent of the proceeds of the action or settlement of the intervention robbed the relators of the ability to further refine their complaint by after the settlement, in response to the relators' motion for a statutory share of the thus precludes the relators from pursuing a separate qui tam action against comstor. tam relators proceeding under the false claims act argued that if the government what occurred here. over the course of litigating their action on their own for several pricing scheme to the government. the district court rejected the government's claim comstor because comstor was not identified by name in the relators' complaint. as part of the schemes to defraud the government and concealment, the honorable billy roy wilson, united states district judge for the eastern1 investigation' into the allegedly fraudulent practices" of a qui tam defendant. id. the defective pricing scheme, is disingenuous." roberts, 707 f.3d at 1017. instead, the court accepts the relators’ interpretation of the statute whole settlement and stated cisco and comstor: documents demonstrating cisco contracted with the government through its actions against certain government contractors alleging the contractors committed the government filed a timelyappeal. on appeal,the government contends the claim it settled with cisco and comstor was factually unrelated to the action brought


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