Fourth Circuit affirms loss for whistleblower, reverses attorney's fees win for defendant

by Ben Vernia | April 22nd, 2011

On April 19, the Fourth Circuit Court of Appeals issued its ruling in U.S. ex rel. Ubl v. IIF Data Solutions, a contentious case that swung from a potential $8.9 million settlement for the whistleblower to a $500,000 award against him. When the dust settled, the court left the parties precisely where they began – except for the cost of their own fees.

The relator in the case was a former employee of a small government IT contractor, who alleged that the defendant company had submitted false claims in connection with its claims for IT personnel it provided to the Department of Defense’s National Guard Bureau under a General Services Administration Multiple Award Schedule (MAS) contract, which called for specific qualifications for various categories of IT workers.

After the government declined to intervene in the case, the relator and the defendant reached a settlement in principle: $8.9 million total, with $1.2 million paid up front, and the remainder over ten years; a 30% bounty to the relator, with priority of payment to the relator, and part of the sum paid to the relator for a “personal claim” (although his qui tam complaint had not alleged violation of the Act’s antiretaliation provision, 31 U.S.C. 3730(h)). The agreement was conditioned on the government’s acceptance of it, and the government refused, claiming that it was designed to favor the relator and leave the government with an uncollectible debt. The relator rejected another offer by the defendant (for $2.7 million) several months later, and he worked with the government to obtain a new agreement. When he was unable to get the defendant to return to the earlier sum under the newly worked-out terms, he moved to enforce the prior settlement agreement, and the district court refused.

The Fourth Circuit affirmed, reasoning that although the earlier agreement was a binding contract, it was contingent on the government’s agreement. That contract died when, in the absence of the government’s concurrence, the defendant disavowed any intent to settle, and the subsequent agreement with the government did not revive it, the Fourth Circuit reasoned.

The case proceeded to trial, a jury ruled against the whistleblower on all counts, and the district court granted the company’s motion for attorney’s fees, awarding over $500,000 against the relator. The Fourth Circuit reversed this decision. Applying an objective standard – whether the relator’s claim “clearly had ‘no reasonable chance of success'” – the Court found that the district court was clearly wrong in granting attorney’s fees. First, the court noted that the district court had rejected the defendant’s motions to dismiss; although this factor is not necessarily dispositive, the court noted, the relator’s evidence at trial was not significantly different than that he presented at summary judgment. In addition, although the trial judge clearly disbelieved the relator’s testimony, the court of appeals observed that at least some of the relator’s allegations were supported by evidence (such as company documents) that did not rest on his credibility. Although the jury rejected the whistleblower’s claims, the court reasoned, this did not mean that they were clearly frivolous or that he had no reasonable chance of success.

In other rulings, the court of appeals:

  • Rejected the relator’s objection to the admission of testimony of employees of the National Guard Bureau that they were satisfied with the company’s work, reasoning that this was relevant to the company’s intent and the government-knowledge defense;
  • Upheld the exclusion of the relator’s expert, a former GSA official, agreeing with the district court that his proffered testimony (regarding the qualifications of the defendant’s employees under the GSA contract) intruded on the province of the jury;
  • Upheld the admission of the defendant’s financial planner and tax accountant about how the GSA contract worked and his efforts to help the defendant obtain a MAS contract award.
  • Upheld the exclusion of two former employees of the company, whose proferred trial testimony differed substantially from their statements in depositions;
  • Upheld the admission of evidence that, although the government was aware of the lawsuit, it had not canceled the contracts or requested a return of funds. This evidence was not the same as evidence that the district court had agreed to exclude, that the government had declined to intervene in the suit, the Fourth Circuit reasoned, because the government does not have sufficient resources to intervene in every False Claims Act case, so a decision to decline doing so is not a statement on the merits of the case.

Leave a Reply

Recent Posts

Recent Comments