On February 15, 2017, in United States ex rel. Michaels v. Agape Senior Community, Inc., the Fourth Circuit held that the federal government has unreviewable veto authority of proposed settlements of False Claims Act (FCA) qui tam actions even when the government has not intervened. In the case, two relators filed an FCA case on behalf of the federal government alleging that Agape and other operators of elder care facilities fraudulently billed federal health care programs for services to thousands of patients. After the government declined to intervene, the parties mediated and reached a proposed settlement. The government objected to the proposed settlement, although it still did not move to intervene, because the settlement amount was "appreciably less" than the government's estimated total damages. The district court ruled in favor of the government and sustained its objection to the proposed settlement. The Fourth Circuit affirmed the district court's ruling, joining the approach taken by the Fifth and Sixth Circuit Courts of Appeals (and contradicting the position taken by the Ninth Circuit Court of Appeals).
This case highlights how important it is for contractors settling alleged false claims to ensure the government is involved in settlement negotiations early in the process, or at least that the government will not oppose a proposed settlement once it is reached. The failure to engage the government throughout the settlement negotiations could result in the government objecting to proposed settlements or seeking renegotiation of settlement offers that more adequately address the interests of both the relator and government. No litigant wants to incur expenses in continuing litigation or settlement negotiations when the government could have been included early on in the process. Agape highlights the government's authority to block settlement of cases, even cases in which it has chosen not to intervene, if it determines that the settlement is not in the interests of the United States or the relators.