Co-Relator Sharing Agreements in Cases of Multiple Relators

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Close up of books - False Claims Act and whistleblower immunity

A recent Illinois Appeals Court tackled the appropriateness of an agreement to share the proceeds of a qui tam lawsuit between a whistleblower and a silent (non-whistleblower) partner. We’ve never covered this topic here, so I thought it would be a good opportunity to look at how and why relators cooperate.

Multiple relators can become issues in False Claims Act lawsuits in several ways, but generally (1) the parties have discussed filing a False Claims Act lawsuit prior to contacting an attorney, or (2) the parties are unaware of each other and have both filed a qui tam action.

Prior to the Filing of a Lawsuit

The case in Illinois arose from an agreement prior to the filing of the lawsuit. The two individuals knew each other and jointly approached an attorney. One individual (the one named as the relator in the False Claims Act) decided to proceed and pay a portion of any reward to the other person involved. Through this manner, multiple individuals do not need to expose themselves to the potential for retaliation as a whistleblower when only one really needs to bring the information forward to the federal or state government.

The Illinois case arose when the person named in the lawsuit attempted to disavow the contractual agreement to split the proceeds from the successful lawsuit. The court concluded that there was no provision of the Federal False Claims Act which prevented a relator from contracting to give a portion of the recovery to another individual.

This is in accord with a previous case in the District of New Jersey, where the court also held that the sharing of potential qui tam awards was allowed. In that case, both parties filed a False Claims Act lawsuit – first in a New York District Court and later in a California state court. They subsequently agreed to a share the proceeds of their lawsuits. The New York lawsuit was dismissed and the relators were successful in the State of California. Defendants objected to the payment of money to one of the relators. The court nevertheless allowed payment to the relator under the sharing agreement.

Multiple Relator Situations Emerging After A Lawsuit is Filed

As actions under the False Claims Act have become more complex and fraudulent schemes larger, multiple relators may file False Claims Act complaints at different points in time. Under the first to file doctrine, the person who files first is typically in the strongest position to earn a reward. The False Claims Act bars subsequent filed lawsuits on the same matter. As these cases are typically sealed (not available for view to the public) for many years, an individual is usually unaware of other lawsuits when their initial complaint is filed.

There are times when the appropriate resolution of the first to file doctrine is not clear. A relator in a later filed action may allege a fraudulent scheme that is different from the earlier filed matter. The Government also may find that each relator possesses unique and valuable information which has helped their investigation and both should be worthy of some portion of a reward. If one of these situations arises, the relators will often attempt to reach an agreement to share the proceeds of the action and cooperate.

The race to the courtroom puts a clock on whistleblowers who want to come forward, but the key measure of success in a case is whether the U.S. Government recovers the taxpayer dollars lost due to fraud.  Relator sharing agreements that help promote this goal make a lot of sense.