Because of a series of mishaps, two deserving whistleblowers recently became victims of an FCA Settlement Gone Wrong. In Dora Figueroa, et al. v. United States of America, two co-relators tried to get relief in a negligence lawsuit alleging that the Government had not properly protected its ability to recover an agreed upon settlement amount that was to be paid over time. The underlying FCA case involved healthcare fraud. There, the defendant ended up defaulting on its obligation to the Government and declaring bankruptcy. Turned out the Government did not properly record a real property deed securing the FCA obligation (it was in the wrong person’s name). After the FCA defendant defaulted on the settlement agreement obligation and declared bankruptcy the Government recovered only part of the agreed upon settlement amount. As a result, the co-relators did not receive their expected relator’s share. In response, they brought the negligence action against the US for not properly securing the FCA debt. On March 27, 2015, United States District Judge Philip S. Gutierrez, in the Central District of California, decided the lawsuit against the relators on summary judgment. The reason: the broad release language in the relator’s share agreement amounted to a waiver.
How could this have been prevented? Relator’s counsel could have taken an active role in ensuring that the deed was properly recorded before signing the relator’s share agreement and/or relator’s counsel could have included language in the release provision saying it did not cover a subsequent action premised on the Government’s negligence in recovering the full settlement amount.
See: Dora Figueroa, et al. v. United States of America, CV 14-2255 PSG (MRWx), United States District Court, Central District Of California.
