DC Circuit Adopts Pro Tanto Approach to False Claims Act Settlement Offsets

DC Circuit Adopts Pro Tanto Approach to False Claims Act Settlement Offsets

In an opinion issued on August 30, 2022, the US Court of Appeals for the DC Circuit held in United States v. Honeywell International, Inc., – F.4th –, 2022 WL 3723020 (DC Cir. 2022), that under the federal common law a pro tanto approach to calculating settlement offsets applies in False Claims Act (FCA) cases—rejecting the proportionate share approach advanced by the government and adopted by the district court. Under the pro tanto approach, one defendant’s payment of damages to the government reduces the overall joint and several liability that remains to be paid by other defendants, notwithstanding the other defendants’ proportion of fault.  

The government argued in its brief that this approach would incentivize defendants to stall the litigation and settlement so that other defendants would settle earlier and pay down the joint and several liability amounts, but these concerns may be overstated. Indeed, most defendants are unlikely to delay and forgo a sensible settlement in hopes that another defendant will settle first and reduce the overall damages remaining to be paid. This is especially true if the government threatens to intervene or file an FCA action against the defendant if it does not promptly settle, as most defendants will want to settle before the government files a fraud suit against them, which also presents the risk of civil penalties that may be avoided through settlement. After Honeywell, however, defendants may be more likely to monitor the settlements of other entities involved in the alleged conduct in hopes of arguing that their settlement payment should be reduced based on past settlements in the case.

Third Circuit Holds that Whistleblowing Does Not Insulate an Employee from Termination for Misconduct

On August 26, 2022, in Crosbie v. Highmark Inc., – F.4th –, 2022 WL 3696578 (3d Cir. 2022), the Third Circuit held that it did not constitute retaliation in violation of the False Claims Act’s anti-retaliation provision where an employer terminates a whistleblower for misconduct.

In Crosbie, the plaintiff reported signs of possible fraud to his employer, which investigated but decided not to take action and eventually told him to stand down. More than a year later, a coworker lodged a complaint against the plaintiff, alleging that he harassed her by calling her “Miss Piggy” and that he “oinked” at her. After Human Resources corroborated the complaint, the company fired the plaintiff. The plaintiff sued, alleging that his termination was retaliation based on a sham, pretextual explanation that he had harassed his coworker.

The district court granted summary judgment to the defendant, and the Third Circuit affirmed. Applying a three-step burden-shifting framework typical of retaliation cases, the court held that the plaintiff’s allegation that his termination was pretextual was speculative and unsupported by evidence. The court concluded: “Whistleblowing does not insulate an employee from being fired for misconduct.”

Super PAC President Sentenced for Dark Money Scheme

On August 26, 2022, the Department of Justice (DOJ) announced that the president and treasurer of a Super PAC was sentenced to 14 months in prison for a scheme to lie to the Federal Election Commission (FEC) about the true identity of donors.

According to DOJ, the defendant served as president and treasurer of Salvemos a Puerto Rico, a Super PAC that raised funds to support the election of a campaign official who was then a candidate for office in the executive branch of the government of Puerto Rico. The defendant allegedly established two shell nonprofit companies to funnel donations from donors to the Super PAC while concealing the donors’ identities. The defendant allegedly deprived the people of Puerto Rico and the FEC of information about the true source of hundreds of thousands of dollars flowing into Puerto Rico’s political system. The Super PAC, also sentenced, was ordered to pay a $150,000 fine and serve three years of probation.

The DOJ press release can be found here.