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Qui Tam

: Virginia Qui Tam Law

Considerations for Settlement in Virginia Fraud Against Taxpayers Act cases

By Zachary A. Kitts

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The issue of settling claims in a non-intervened qui tam case under the Virginia Fraud Against Taxpayer's Act presents the same sort of thorny issues as settlement in a Federal False Claims Act case. Most of the differences between settling a false claims case and a typical civil case arise out of the fact that the Commonwealth (or the Department of Justice in a federal case) must approve the settlement in all respects.

In reviewing and approving settlement agreements, the Commonwealth will and should act to protect its interests in a number of ways, many of which might not be apparent on the face of the statute.

An excellent memo from the Department of Justice's Commercial Litigation Branch is a must-read for anyone interested in the VFATA. The memo was prepared by Commercial Litigation Branch Director Michael F. Hertz in 1997, and was formerly available from the DOJ's on-line Civil Fraud Monograph.

The single biggest difference is the scope of the release. Civil litigators are accustomed to granting--and receiving--the broadest possible releases to defendants in exchange for money or other consideration. Phrases like "plaintiff hereby releases all claims, known or unknown, from the beginning of the world, up through the date of this agreement" are fairly common, and are in most civil litigation appropriate. False Claims litigation, however, such broad releases are inappropriate, and the Commonwealth should be unwilling to grant them.

Another difference is confidentiality. Again, confidentiality of terms is normal in most civil settlements. The government, however, puts a premium on public repentance and the deterrent effect of publicity, and thus section 11 of this memo clearly states that "We do not agree to refrain issuing press releases, nor do we negotiate the contents of press releases or agree to allow the defendant to review the press release prior to its issuance."

Under the VFATA, has arisen only once, in Commonwealth of Virginia ex rel Virginia Turf Management v. Mary Resolute, et al. It appears, in that case, that the Hertz memo was not followed. As the Commonwealth gains more experience with the statute, that should change.

Zachary Kitts
Cook & Kitts, PLLC

Full post as published by Virginia Qui Tam Law on June 25, 2008 (boomark / email).