Michael Angelo v. State Farm Mutual Automobile Insurance Company

In a qui tam action brought under the False Claims Act (“FCA”), a relator may not seek dismissal of the action without the Government’s consent. 31 U.S.C. § 3730(b)(1). Such consent is also required when a relator enters into a settlement agreement with a defendant that agrees to dismiss or release the Government’s qui tam claims. However, the applicable standards governing the enforceability of such agreements depends on whether they are executed prior to filing of the qui tam complaint or after the filing of the qui tam complaint. Four circuits have held that, for pre-filing settlement agreements, the Government’s consent is not required if the Government has prior knowledge of the underlying fraud. However, the circuits are divided on the standard for post-filing settlement agreements. The majority, which previously included the Sixth Circuit, have held that, for a post-filing agreement, the Government has the absolute right to veto the agreement, and post-filing agreements unilaterally executed by the relator are unenforceable. In the decision below, which involved a post-filing settlement agreement, the Sixth Circuit departed from the majority position that it previously espoused, thereby further fracturing the circuits. The question presented is: Whether a private release agreement between a relator and a qui tam defendant, executed after the filing of the qui tam action, is enforceable when the Government did not have the opportunity to veto the agreement before its execution and where the Government received none of the consideration given pursuant to the release.