United States ex rel. Davidheiser v. Capital Rail Constructors, 433 F. Supp. 3d. 899 (E.D. Va. Oct. 22, 2019)
In 2016, Nathan Davidheiser (“Nathan”) filed a qui tam complaint against Capital Rail Constructors (“CRC”), its subcontractor, Universal Concrete Products Corporation (“UCPC”), and other defendants. On May 16, 2019, Relator Davidheiser (“Relator”) initiated the present case, renaming CRC. Both qui tam complaints alleged violations of the False Claims Act (“FCA”) and the Virginia Fraud Against Taxpayers Act (“VFATA”) based on falsification of quality control records for concrete sold to CRC. In early 2018, the United States and the Commonwealth of Virginia (collectively, the “Government”) notified Relator that it intended to intervene in the claims against all named co-defendants except CRC. A two-year investigation produced no evidence that CRC
had been complicit in a fraudulent scheme, so the Government suggested CRC be dismissed. Relator voluntarily dismissed CRC without prejudice and the case proceeded against the remaining defendants. In January 2019, the remaining parties reached a settlement. Relator and the Government filed joint notice of voluntary dismissal with prejudice of the substantive FCA and VFATA claims. One year later, Relator filed this action on the same allegations as the previous qui tam action and renamed CRC, arguing that, after CRC was dismissed from the first suit, the Government negotiated a side settlement with CRC. The Government moved to dismiss.
The Court granted the Government’s motion to dismiss. FCA § 3730(c)(2)(A) provides that the government may dismiss an action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion. The VFATA parallels the FCA, indicating that it was drafted to share the same interpretation as the federal statute. Under both statutes, the relator seeks to vindicate injury not to himself, but the Government. As the party in interest, the Government retains ultimate control over the action, including investigating, intervening, or declining to intervene. The Government may seek to stay or dismiss over the relator’s objection. If the Government settles, a court must determine, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Therefore, the Government has an unfettered right to dismiss a qui tam action. Here, the Government’s investigation of CRC’s involvement in the allegedly fraudulent activity revealed no evidence supporting culpability and permitting the qui tam action to proceed would place a significant and unnecessary burden on the Government through discovery.