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Can A Plaintiff Who Voluntarily Dismisses A Qui Tam Complaint Receive An Award From The Settlement Of A Later-Filed Government Action?

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  • Posted on: Feb 27 2017

In a case of first impression for the courts within the Second Circuit, Judge Richard J. Sullivan of the United States District Court for the Southern District of New York answered the foregoing question: no. United States v. L-3 Commc’ns Eotech, Inc., No. 15-cv-9262 (RJS) (S.D.N.Y. Feb. 3, 2017).

An Overview of the False Claims Act and the Whistleblower Reward

The False Claims Act (“FCA” or the “Act”) prohibits businesses and individuals from defrauding the government by knowingly presenting, or causing to be presented, a false claim for payment or approval. Violations of the Act can result in a judgment equal to three times the losses sustained by the government, plus civil penalties for each false claim.

The FCA requires the whistleblower (also known as a “relator”) to serve the government with his/her complaint and a “written disclosure of substantially all material evidence and information [s/he] possesses.” 31 U.S.C. § 3730(b)(2). The complaint must be filed ex parte and remain under seal for at least 60 days, and within 60 days of receiving “both the complaint and the material evidence and information,” the government “may elect to intervene and proceed with the action.” Id. “Before the expiration of the 60-day period or any extensions” of that period for good cause, the government must choose between intervening and proceeding with the qui tam action itself, or declining to intervene, in which case the relator has the right to conduct the action. Id. § 3730(b)(4).

“From its enactment, the FCA has encouraged private citizens to report fraud by promising a percentage of any eventual recovery.” Bishop v. Wells Fargo & Co., 823 F.3d 35, 44 (2d Cir. 2016). A person who brings a successful “qui tam” action can receive between 15% and 30% of the government’s recovery depending upon whether the government intervenes in the action. If the government intervenes, the award generally falls between 15% and 25% of the government’s recovery. If the government declines to intervene and the whistleblower pursues the action alone, the award generally falls between 25% and 30% of the government’s recovery.

In addition to the intervene-or-abstain options set forth above, the FCA permits the government to pursue other available remedies, while preserving the relator’s right to share in the proceeds of those remedies under certain circumstances. Specifically, the FCA provides that, “[n]otwithstanding [31 U.S.C. § 3730(b)], the [g]overnment may elect to pursue its claim through any alternate remedy available to the [g]overnment, including any administrative proceeding to determine a civil money penalty.” Id. § 3730(c)(5). If the government pursues such an “alternate remedy,” the relator retains “the same rights in such proceeding as [s/he] would have had if the action had continued under this section.” Id.

L-3 Communications Eotech, Inc.


The case arose from the motion by Milton DaSilva (“DaSilva”), a relator who voluntarily dismissed his qui tam complaint without prejudice before the government filed its action, for a declaration that he was entitled to a share of the government’s $25.6 million settlement with the defendants under Section 3730(c)(5) of the FCA. The Court denied DaSilva’s motion.

Facts of the Action

DaSilva worked as a quality control engineer at EOTech, Inc. (“EOTech”) from May 14, 2013 until June 25, 2013, when EOTech terminated his employment. On August 13, 2013, DaSilva made pre-filing disclosures to the government regarding EOTech’s production and sale of defective weapon sights in violation of the FCA.

After discussions with the government regarding his allegations broke down, DaSilva filed a qui tam complaint under seal on April 25, 2014, asserting claims under the FCA and various state statutes on behalf of himself, the United States, the State of New York, the State of California, and the City of Los Angeles. On August 19, 2014, with the government’s consent, DaSilva voluntarily dismissed his qui tam action without prejudice. Approximately two weeks later, the court dismissed DaSilva’s qui tam action without prejudice and directed that the case remain under seal.

On November 24, 2015, more than one year after DaSilva’s complaint was dismissed without prejudice, the government filed a complaint against EOTech, L-3 Communications (“L-3”), and Paul Mangano, for violations of the FCA and various state laws. One day later, the parties filed a stipulation of settlement and dismissal settling the government’s claims for $25.6 million.

The Motion for Declaratory Relief

On April 14, 2016, DaSilva filed a motion for declaratory relief, seeking a declaration that he was entitled to a share of the government’s settlement proceeds under Section 3730(c)(5) of the FCA because the settlement was an “alternate remedy” to pursuing the action initiated by DaSilva. The government opposed the motion arguing that because DaSilva voluntarily dismissed his qui tam action, the government’s own action was not an “alternate” to pursuing DaSilva’s action, and thus DaSilva had no right to share in the government’s recovery. The Court agreed with the government.

The Court’s Decision

Noting that the issue before the court had not been decided by the courts within the Second Circuit, Judge Sullivan explained that the framework of the FCA “unambiguously preclude[d] [the] recovery” sought by DaSilva:

By beginning with the phrase “[n]otwithstanding subsection (b),” Section 3730(c)(5) makes clear that the “alternate remedy” described in that section is an “alternate” to the government’s options listed in Section 3730(b). Specifically, Section 3730(c)(5) governs the relator’s rights when the government “elect[s] to pursue its claim through any alternate remedy,” 31 U.S.C. § 3730(c)(5) – that is, an “alternate” to the remedies set forth in Section 3730(b)(4), which are limited to (a) intervening and “proceed[ing] with the [qui tam] action” or (b) “declin[ing] to take over the action” and providing the relator with “the right to conduct the action,” 31 U.S.C. § 3730(b)(4).

Slip op. at 7.

Under this framework, said Judge Sullivan, it was “clear” that “when there is no qui tam action for the government to ‘take over,’ the government’s filing of its own action is not an ‘alternate’ to taking over (or not taking over) a qui tam action.” Id. Thus, “a dismissed qui tam suit does not present the government with the choice between acting under subsection (b)(4) or pursuing an ‘alternate remedy’ authorized by subsection (c)(5).” Id. Because DaSilva had dismissed his action, “the government’s commencement and settlement of this action was not an ‘alternate remedy.’” Id.

The court found support for its statutory interpretation from Webster v. United States, 217 F.3d 843, 2000 WL 962249 (4th Cir. 2000), the only case it could find that was “precisely on point.” In that case, the plaintiff filed a qui tam action alleging, among other things, that a contractor had “fraudulently obtained money from the [Drug Enforcement Administration] by submitting false invoices and vouchers requesting payment for work that had not been performed.” Id. at *1. The government “declined to intervene.” Thereafter, the plaintiff “voluntarily dismissed her qui tam action without prejudice” with the government’s consent. Id. At the time the plaintiff dismissed the case, “criminal charges and a civil forfeiture proceeding were pending against” one of the defendants. Id. The plaintiff believed, therefore, that “there would be nothing left to recover in her qui tam suit once those other actions concluded.” Id. Three months later, the government filed its own civil action against the contractor and several other defendants, “alleging false claims, conspiracy to defraud the government, and several additional common law causes of action.” Id. “The government did not inform [the plaintiff] of its intent to file the suit,” and the plaintiff sought to intervene once she learned of it. Id.

The district court denied the intervention motion, and the Fourth Circuit affirmed, explaining that voluntary dismissal “wipes the slate clean, making any future lawsuit based on the same claim an entirely new lawsuit unrelated to the earlier (dismissed) action.” Id. at *2 (citation and quotation omitted). Thus, the plaintiff’s “assertion that her voluntarily dismissed complaint confer[red] on her a continuing right to participate in the government’s subsequently filed FCA suit [was] simply wrong.” Id. The court reasoned that the plaintiff could not “assert the rights of an original qui tam plaintiff . . . because she abandoned those rights when she voluntarily dismissed her suit.” Id. The court also observed that the plaintiff’s reading of the “alternate remedy” provision would unacceptably “allow a private party to file a qui tam false claims suit with no intention of pursuing it, dismiss the suit without prejudice, and then, when the government chose to investigate and prosecute its own claim, clamber back on board.” Id. at *3.

Judge Sullivan found the “parallels between Webster and [the] case [before him] … obvious” and held that DaSilva had “no basis for claiming a share of the government’s settlement.” Slip op. at 9. “To hold otherwise would contradict the plain language of Section 3705(c)(5) and provide DaSilva with a windfall to which he [wa]s not entitled under the statute,” a result the court said it “[wa]s unwilling to do.”


The alternate remedies provision protects the interests of both the relator and the government. In this regard, the provision expressly contemplates the possibility that the government may use a relator’s information and pending lawsuit to seek a remedy for fraud under other statutes.  31 U.S.C. § 3730(c)(5).  In those circumstances, the FCA permits the relator to share in a recovery under other statutes as if the government had recovered the money under the FCA.

As the L-3 and Webster courts concluded, however, the protections provided by the FCA should not extend to non-pending qui tam actions. Relators should not be allowed to file a qui tam action with the intention of dismissing the complaint without prejudice, so that s/he can bear the fruits of the government’s decision to subsequently prosecute and settle its own claim against the same defendants. Not only does such conduct provide an unfair windfall to the relator, but it corrupts the purpose of the reward provisions of the FCA – to encourage individuals to report fraud and other misconduct on the government.

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