Lose Your Case? You Can Still Sue . . . for the Government
A recent False Claims Act case from the District of Utah about a contractor's compliance with the Davis-Bacon Act—which requires employers to pay local prevailing wages to their employees on public-works projects—highlights the difference between a relator's private and public role. United States ex rel. Sorenson v. Wadsworth Brothers Constr. Co., Inc., No. 2:16-CV-875, 2019 WL 2374386, at *1 (D. Utah June 5, 2019) [subscription required]. In Sorenson, relator sued his employer in Utah state court claiming it underpaid his wages under the Davis-Bacon Act. On top of that, he sued defendant in federal court for violating the FCA under a false certification theory—namely that defendant falsely certified compliance with Davis-Bacon because it underpaid its workers.
Relator's state court case went to trial, where he ultimately lost on his individual wage claim, with the court holding that defendant correctly calculated Davis-Bacon wages and paid relator in full. Thereafter, defendant filed a motion to dismiss in the federal FCA case, arguing that relator was collaterally estopped from continuing his FCA claim given the state court outcome. But, in an interesting twist, the District of Utah disagreed with defendant for the simple reason that—technically—relator brought his claim on behalf of both himself and the government. In other words, even though the United States declined to intervene, it remained a "real party in interest" and had a "substantive right in th[e] suit," which could not be ignored for collateral estoppel purposes. The court further noted that the United States' financial interests were not represented by relator in his state court action.
In so holding, the court heavily relied on the Seventh Circuit's decision in United States ex rel. Lusby v. Rolls-Royce Corp, 570 F.3d 849 (7th Cir. 2009). In Lusby, the Seventh Circuit reversed the dismissal of a relator's case on claim preclusion grounds based on a joint stipulation dismissing relator's employment retaliation claim against defendant. While the Seventh Circuit in Lusby noted the distinction between relator's personal employment action and his role in the qui tam as a "representative of the public," the Sorenson court may have overread Lusby. Notably, the employment claim in Lusby was only tangentially related to the qui tam claim, and, most importantly, was not resolved on the merits, but only dismissed voluntarily, presumably as part of a settlement. That is a far cry from Sorenson, where relator lost on the very issue—payment of Davis-Bacon wages—that undergirded his qui tam.
Interestingly, and despite the Sorenson court siding with relator on preclusion, it nevertheless dismissed the qui tam on the ground that relator failed to properly plead that compliance with Davis-Bacon wages was material to the government's payment decisions. As a result, defendant ultimately "won," even if the path to that outcome was somewhat wending. That result will likely preclude any appeal by defendant, leaving the collateral estoppel decision unreviewed. One would think that a properly paid employee would be a poor stand-in for the government when the FCA claim is based on unpaid wages. But, instead, Sorenson reveals the anomaly of qui tam suits—an unworthy relator may still be entitled to a share of the government's interest.
© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.