The Ninth Circuit last week held that pursuant to 31 U.S.C. 3730(d)(3) of the False Claims Act (“FCA”), a qui tam relator who is convicted of conduct giving rise to the fraud that is the subject of the FCA lawsuit must be dismissed from the lawsuit and is not entitled to a share in any recovery, even if the relator played only a minor role in the fraud.  Schroeder ex rel. United States v. United States, No. 13-35479 (9th Cir. July 16, 2015).

In Schroeder, the relator was a former employee of government contractor for the Department of Energy (“DOE”), CH2M Hill, who served as a radiological control technician at the Hanford DOE Site.  During the relator’s time of employment, CH2M Hill was allegedly engaged in widespread fraudulent billing of hourly work.  The relator, like many of his colleagues, submitted false time cards, and received at least $50,000 for falsely claimed overtime hours.  Following the discovery of the fraud by the DOE, the relator pleaded guilty to one felony count of conspiracy to commit fraud.  Prior to his guilty plea, he filed an FCA qui tam suit against CH2M Hill, and alleged that originally he had voluntarily come forward to the DOE—not realizing he was under investigation at the time.  The Government subsequently intervened in the case and moved to have the relator dismissed based on his felony conviction pursuant to 31 U.S.C. 3730(d)(3), which states in pertinent part:  “If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of [the FCA], that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action.”  The federal district court dismissed, and the relator appealed.

As a matter of first impression, the Ninth Circuit interpreted the plain meaning of the statute to require dismissal of a relator that has been convicted of criminal conduct arising from their role in the fraud that is the basis of the qui tam action, regardless of whether the relator’s role in the fraud was minor.  The court refused to read into the statute an exception for minor participants.  Accordingly, the Ninth Circuit affirmed the dismissal.

The Ninth Circuit’s ruling bars the relator from recovering any portion of the $19 million that CH2M Hill agreed to pay to settle the subject FCA claims.  Absent the dismissal, he could have been entitled to approximately $2.85 million to $4.75 million.