United States Ex Rel. Lacorte v. Wagner

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES EX REL WILLIAM ST.
JOHN LACORTE AND ANDREW A.
HENDRICKS,
Plaintiffs,

v.

RAMONA WAGNER; JEANINE DEHNER,
Defendants-Appellees,
No. 98-2629
and

ROCHE BIOMEDICAL LABORATORIES,
INCORPORATED,
Defendant,

v.

UNITED STATES OF AMERICA,
Movant-Appellant.

Appeal from the United States District Court
for the Middle District of North Carolina, at Greensboro.
N. Carlton Tilley, Jr., District Judge.
(CA-96-1024-2, CA-96-417-2)

Argued: June 8, 1999

Decided: July 16, 1999

Before WILKINSON, Chief Judge, and NIEMEYER
and KING, Circuit Judges.

_________________________________________________________________

Reversed by published opinion. Chief Judge Wilkinson wrote the
opinion, in which Judge Niemeyer and Judge King joined.

_________________________________________________________________
COUNSEL

ARGUED: Irene Marietta Solet, Appellate Staff, Civil Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellant. Bruce Bingham Whitman, Cincinnati, Ohio, for
Appellees. ON BRIEF: David W. Ogden, Acting Assistant Attorney
General, Walter C. Holton, Jr., United States Attorney, Douglas N.
Letter, Appellate Staff, Civil Division, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellant. Dan Fouts,
ADAMS, KLEEMEIER, HAGAN & FOUTS, Greensboro, North
Carolina, for Appellees.

_________________________________________________________________

OPINION

WILKINSON, Chief Judge:

Ramona Wagner and Jeanine Dehner seek to intervene in a qui tam
action brought by two other individuals under the False Claims Act
(FCA). 31 U.S.C. § 3729(a)(1). Wagner and Dehner are the beneficia-
ries of the settlement of an earlier qui tam action which they brought
against a different defendant. They now claim that the FCA permits
them to intervene in the current suit because they were "but for"
causes of a portion of the settlement that was reached in this action.
We disagree. The statute plainly and absolutely prohibits intervention
by private parties. We therefore reverse the district court's decision
to grant their motion to intervene.

I.

The FCA prescribes civil penalties for knowingly submitting fraud-
ulent claims to the government. 31 U.S.C. § 3729(a)(1). The Act also
permits an individual to bring a qui tam action on the government's
behalf to enforce section 3729. Id. § 3730(b)(1). The government may
intervene in and take over the prosecution of such actions if it
chooses. Id. § 3730(b)(2), (4). But once an action has been filed, "no
person other than the Government may intervene or bring a related
action based on the facts underlying the pending action." Id.
§ 3730(b)(5).

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If the action is successful, the government and the original plaintiff
split the damages and penalties. Id. § 3730(d)(1)-(2). If the govern-
ment settles the action, the original plaintiff is entitled to contest the
fairness of the settlement before receiving his or her portion. Id.
§ 3730(c)(2)(B).

This case involves settlements arising from two separate qui tam
actions against medical laboratories for submitting false claims to var-
ious federal health programs. In the first action, billing clerks Wagner
and Dehner sued their employer -- Allied Clinical Laboratories
(Allied) -- in the Southern District of Ohio. The government inter-
vened in the action and settled it in March 1995 with Wagner and
Dehner's consent. Wagner and Dehner received an $833,458 share of
the settlement proceeds. They also released Allied and the govern-
ment "from any claims arising from or relating to the filing of the
Civil Action, or, pursuant to 31 U.S.C. § 3730(d)(1), for a share of the
proceeds of the settlement under this Agreement." As part of the set-
tlement, the government and Allied entered into a Corporate Integrity
Agreement (CIA) under which Allied agreed to conduct periodic
audits of its operations.

The other action -- and the one directly at issue here -- consists
of four consolidated cases, two of which were filed by William St.
John LaCorte and Andrew Hendricks against Roche Biomedical Lab-
oratories. The United States intervened in this action and prosecuted
it in the Middle District of North Carolina. Wagner and Dehner were
not parties to this action.

While the LaCorte and Hendricks action was ongoing, Roche
merged with Allied and a third company to form Laboratory Corpora-
tion of America (LabCorp). In November 1996 the government
entered into a $182 million settlement (the Global Settlement) with
LabCorp. The Global Settlement encompassed the LaCorte and Hen-
dricks consolidated qui tam action. Also, some of the allegations cov-
ered by the Global Settlement had not arisen in any action. These
allegations include conduct that came to the government's attention
through audits occurring pursuant to the Allied CIA.

In December 1996 Wagner and Dehner filed a motion to intervene
in the LaCorte and Hendricks action. They asserted that their role in

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procuring the settlement that instituted the CIA entitled them to a
share of the Global Settlement. The district court granted Wagner and
Dehner's motion to intervene, and the government filed this interlocu-
tory appeal.

II.

A.

Section 3730(b)(5) of the FCA provides that when a person brings
a qui tam action, "no person other than the Government may inter-
vene or bring a related action based on the facts underlying the pend-
ing action." This provision states without qualification that persons
other than the government may not intervene in qui tam actions. By
drafting the statute in such unequivocal language, Congress made the
strongest possible statement against private party intervention in qui
tam suits.

The application of section 3730(b)(5) to this case is straightfor-
ward. Wagner and Dehner are persons other than the government.
Therefore, the statute on its face precludes them from intervening in
this action.

Wagner and Dehner attempt to sidestep section 3730(b)(5)'s cate-
gorical prohibition by arguing that section 3730(c)(5) somehow man-
dates an exception to this bar. Section 3730(c)(5) provides that "the
Government may elect to pursue its claim through any alternate rem-
edy available to the Government, including any administrative pro-
ceeding to determine a civil money penalty." The section further
states, "If any such alternate remedy is pursued in another proceeding,
the person initiating the action shall have the same rights in such pro-
ceeding as such person would have had if the action had continued
under this section." Wagner and Dehner claim that the Global Settle-
ment constitutes an "alternate remedy" to their original action. Fur-
ther, they contend that they must be able to intervene in the LaCorte
and Hendricks action to assert this claim.

We disagree. Section 3730(c)(5) simply preserves the rights of the
original qui tam plaintiffs when the government resorts to an alternate

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remedy in place of the original action. This provision does not confer
any rights on would-be intervenors.

Indeed, an original qui tam plaintiff need not intervene in another
qui tam action to vindicate his rights when the government pursues
an alternate remedy. Other mechanisms are available for qui tam
plaintiffs to protect their interests. For example, before a settlement
takes effect, a relator has an opportunity to contest the fairness, ade-
quacy, and reasonableness of the settlement at a hearing. 31 U.S.C.
§ 3730(c)(2)(B). If the relator believes that the government acted
improperly in procuring a settlement, then he may return to the court
which had jurisdiction over the settlement and move to reopen the
judgment under Fed. R. Civ. P. 60(b)(6).

Sections 3730(b)(5) and 3730(c)(5) are thus not in tension; instead,
they are perfectly consistent. Section 3730(b)(5) protects the govern-
ment and the original qui tam plaintiffs by preventing other private
parties from intervening. Section 3730(c)(5) protects original qui tam
plaintiffs when the government chooses to pursue an alternate rem-
edy. Nothing in section 3730(c)(5) requires an exception to the cate-
gorical bar on private party intervention. Therefore, no ambiguity or
conflict results from the coexistence of sections 3730(b)(5) and
3730(c)(5) in the statute.

Prohibiting intervention in this case is fully consistent with Con-
gress' purposes in enacting sections 3730(b)(5) and 3730(c)(5). Set-
tlements in qui tam actions can draw intervenors like moths to the
flame. Congress therefore struck a careful balance between encourag-
ing citizens to report fraud and stifling parasitic lawsuits. United
States ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24 F.3d 320,
326 (1st Cir. 1994). The only way to preserve the balance that Con-
gress struck is to apply the unqualified congressional mandate of sec-
tion 3730(b)(5) to bar all would-be intervenors other than the
government.

B.

Even were we to believe that the FCA permits intervention, no part
of the Global Settlement constitutes an "alternate remedy" to Wagner
and Dehner's original qui tam action. Section 3730(c)(5) assumes that

5
the original qui tam action did not continue. The government here did
not pursue an alternate remedy to Wagner and Dehner's action. It
instead intervened in the action, prosecuted it, and settled it with the
plaintiffs' consent. Wagner and Dehner received an $833,458 share
of the settlement of their action -- a settlement that they did not con-
test and expressly stipulated to be fair, adequate, and reasonable. See
§ 3730(c)(2)(B).

The Global Settlement did not include Wagner and Dehner's origi-
nal qui tam action. Instead, the government settled other potential
claims, at least some of which arose from discoveries that were made
pursuant to Allied's CIA. The fact that the CIA was part of the settle-
ment of Wagner and Dehner's original qui tam suit confers on them
no entitlement to proceeds resulting from the later findings. There is
no ground in the statute for recovery based on such attenuated "but
for" causation. Therefore, nothing in the Global Settlement can be
considered an "alternate remedy" to any part of the original action. As
a result, section 3730(c)(5) is no longer relevant to Wagner and Deh-
ner's situation.

Wagner and Dehner have already received their share from every
claim they brought against Allied. They reaped $833,458 from their
participation in the settlement. In fact, they expressly released Allied
and the government "from any claims arising from or relating to the
filing of the Civil Action." Thus to the extent that the claims against
Allied in the Global Settlement "aris[e] from or relat[e] to" their origi-
nal suit, they have released these claims in the settlement agreement.
To the extent that these claims are unrelated to their earlier action,
they have no rights because they are not bona fide relators with
respect to those claims. Their status as mere "but for" causes is not
cognizable under the statute and entitles them to nothing. They have
already received their due.

The prospect of a large payout is likely to give rise to many cries
of "me too." Some of these fortune-seekers may be "but for" causes
of a portion of an FCA recovery. But unless these individuals are
bona fide relators in the qui tam action from which recovery directly
ensues, the statute accords them no share of the bounty.

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III.

Wagner and Dehner ask us to bypass the plain language of the stat-
ute to permit them to intervene. This we refuse to do. "When the
words of a statute are unambiguous, then, this first canon is also the
last: judicial inquiry is complete." Connecticut Nat'l Bank v.
Germain, 503 U.S. 249, 254 (1992) (internal quotation marks omit-
ted). Because the FCA prohibits intervention by any person other than
the government, the judgment of the district court is

REVERSED.

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