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Why Do So Many False Claims Cases Settle Before Trial?

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It is widely recognized that many more False Claims Act (FCA) cases settle than go to trial.[1] While it is difficult to determine the exact proportion of cases that settle vs. cases that are tried, comprehensive reports on FCA developments published semi-annually indicate about a 16:1 ratio of notable settlements to verdicts/ judgments.[2]

Settling these cases is often an attractive option for both defendants and whistleblowers. For whistleblowers and their counsel, these cases are risky since there is no compensation for time and resources spent unless they win at trial (a long, costly process) or negotiate a favorable settlement. For the defendant, settling before trial is attractive because allegations are often resolved with no admission of liability. Being absolved of liability is important to the defendant, particularly if they, whether a corporation or an individual, want to salvage their reputation and continue doing business in the market they previously participated in. More obviously, the settlement amount will assuredly be much lower than if the jury finds them in violation of the FCA.

If found liable, violators of the FCA may be liable for treble damages and a penalty of $5,500-$11,000 per claim. This adds up, especially considering that false claims lawsuits often allege that widespread fraud schemes have taken place for many years. Settling before trial provides the defendant an opportunity to potentially pay less than the treble damages and penalties they would have to pay if found liable. This is particularly critical for the defendant if paying treble damages and penalties would put them out of business. In government-intervened FCA cases where the defendant has a demonstrated lack of financial resources, the government may negotiate an "ability to pay" settlement for far less than the alleged damages. In pursuing false claims cases, the government wishes to punish those who submit fraudulent claims for payment and generally deter fraud by making punishments severe – however, the government recognizes that many businesses, particularly hospitals and other health care providers, offer needed services and should not be forced to shut down due to fraud allegations.[3] 

Settling can also be advantageous for the prosecution in FCA cases for financial reasons. The whistleblower only receives a reward if they recover funds for the government, i.e. if they settle or win the verdict. The government doesn't pay them for litigating cases on behalf of the United States; whistleblowers are offered a portion of the recovery only if there is a recovery to speak of. If they win the case or receive a favorable settlement, whistleblowers will receive a certain percentage of the total recovery: 15-30% depending on several factors, including whether or not the government chose to intervene in their case. Whistleblowers and their attorneys most often have a contingency fee agreement – meaning that the attorneys will get a cut of the whistleblower's reward, which again, will only materialize if they win or settle the case.

False Claims cases can take many years to be resolved. This can be a bit of a gamble on the part of whistleblowers and their counsel, who are investing time in the case without compensation in the hopes that they will win and receive part of the recovery. It is important to choose a whistleblower lawyer with the experience and resources necessary to investigate these cases and even take them to trial if necessary. Goldberg Kohn is experienced in litigating False Claims cases and going toe-to-toe with major defense firms on behalf of our whistleblower clients. For example, in our landmark victory, we took a case all the way to trial and won a $334 million jury verdict.

If you are aware of fraud against the government, you may be eligible to blow the whistle in a False Claims Act lawsuit and may be entitled to a portion of the recovery. To find out more, contact us for a confidential consultation.


[1] https://www.mintz.com/insights-center/viewpoints/2146/2015-10-jury-sides-doj-first-phase-fca-statistical-sampling-trial ("...many FCA cases never proceed to trial because of the potential imposition of harsh per-claim penalties of up to $11,000 in addition to treble damages"); https://www.healthlawadvisor.com/2018/01/30/two-recent-department-of-justice-memos-may-signal-a-new-approach-to-false-claims-act-litigation-and-reliance-on-agency-guidance/ (Apart from the substantial costs associated with defending against qui tam allegations, the threatened financial exposure is heart-stopping…  For this reason, even when facing a meritless FCA suit, a defendant often settles to avoid the cost of litigation and the unpredictability of a jury.  Indeed, very few FCA cases ever go to trial."); https://www.modernhealthcare.com/article/20160331/NEWS/160339976 ("...it's unusual for False Claims Act cases to even go to trial in the first place. Most False Claims Act cases settle because of the large amounts of money at stake")

[2] False Claims defense firm Gibson Dunn's FCA report for the first half of 2017 lists 32 settlements, 1 judgment, and 1 verdict, their report for the second half of 2017 lists 30 settlements and 1 judgment, and their report for the first half of 2018 lists 19 settlements and 2 judgments.

[3] See this 1998 Department of Justice memo for more details.

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55 East Monroe Street
Suite 3300
Chicago, Illinois 60603-5792
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