Eighth Circuit affirms $8 million whistleblowers' award over government's objection

by Ben Vernia | April 22nd, 2014

On April 10, the Eighth Circuit Court of Appeals, in U.S. ex rel. Rille v. PricewaterhouseCoopers LLP rejected the government’s appeal of an Arkansas District Judge’s decision to award whistleblowers a share of two settlements in a multi-defendant case alleging kickbacks and defective pricing for government computer contracts. The relators had alleged that Cisco had paid technology consultants kickbacks to recommend Cisco’s products to government agencies, and had provided incomplete pricing data in violation of the Truth in Negotations Act.

The Department of Justice ultimately intervened in the Cisco complaint, adopting the relators’ complaint as its own, and reached settlements with Cisco and its distributor, Comstor. The government claimed, however, that it agreed with Cisco that the kickback allegation was unfounded, and, arguing that the settlement was for conduct discovered during a routine audit, it refused to agree to award the relators a share of the settlements’ proceeds. The settlement with Cisco had, however, been expressly conditioned on DOJ dismissing the qui tam against Cisco with prejudice. The district court awarded the relators 17% of the Cisco settlement, and 15% of the Comstor settlement (combined, a total of approximately $8.1 million), and the government appealed.

The Eighth Circuit affirmed the relators’ award, concluding:

  • The relators’ complaint need not satisfy Fed. R. Civ. P. 9(b) to entitle the relators to a share of the proceeds of the case (the Court noted that not only had DOJ intervened in the case, it had adopted the relators’ complaint);
  • The settlement constituted proceeds of the relators’ action (“where the government elects to intervene in a relator’s action and receives settlement proceeds conditioned upon the dismissal of the relator’s action with prejudice, we conclude as a matter of law that the settlement funds constitute ‘proceeds of the action’ under [section] 3730(d);
  • The relators were entitled to share in the Comstor settlement, notwithstanding their failure to name that company in the original qui tam, because the relators identified the company’s fraudulent practices prior to DOJ’s intervention.

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