False Claims Act Settlement Doesn’t Bar Suit Against Third Party, Ninth Circuit Rules

The False Claims Act (“FCA”) was designed to encourage reporting of false or fraudulent claims that are submitted to the federal government for approval or payment. Typically a relator – a whistle-blowing employee, a business partner or competitor – brings suit “for the benefit of the United States.” The government has discretion to intervene in the suit as a plaintiff. But what happens

when a target defendant settles with the government and the relator and then seeks recovery against a third party for contractual indemnity and independent claims? 

Yesterday, in Cell Therapeutics, Inc. v. Lash Group, Inc., the U.S. Court of Appeals for the Ninth Circuit concluded that the FCA does not preclude such claims.
 
The appellate court’s decision means that the action by Cell Therapeutics, which had settled claims under the FCA for $10.5 million, may proceed against a consultant that allegedly provided advice that led to Cell Therapeutics’ FCA problems.
 

Attorneys involved in the case include Daniel J. Dunne and Paul F. Rugani, Orrick, Herrington & Sutcliffe; Raymond A. Cardozo, Reed Smith; and Laurie M. Thornton, Corr Cronin Michelson Baumgardner & Preece.