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May 4, 2000 Charles R. Fulbruge, III, Clerk
Re: No. 99-11308, Robert C. Ballew v. United States Department of Justice and United States Coast Guard, in the United States Court of Appeals for the Fifth Circuit. Dear Mr. Fulbruge: Pursuant to Fed. R. App. P. 28(j) and Local Rule 28.5, Plaintiff-Appellant Robert C. Ballew ("Ballew") files this Supplemental Brief to alert the Panel assigned to this case to this Court's recent decision in U.S. ex rel. Thornton v. Science Applications International Corp., No. 98-11483, 2000 WL 320518 (5th Cir. March 28, 2000). Thornton arose out of the installation of a security system by the defendants. The Government intervened and settled the action in exchange for a cash payment and the release of certain administrative claims asserted by the defendants against the Government. The district court included the released administrative claims in its determination of the value of the settlement for purposes of calculating the relator's share. The Government appealed, challenging, among other things, the inclusion of the released administrative claims in the overall settlement value and the relator's right to object to the value of the released claims after the settlement was approved. Thornton is pertinent to the present case for the following three reasons: 1. Released administrative claims may be "proceeds" for purposes of computing a relator's share of a False Claims Act ("FCA") settlement. In Thornton, the Court noted certain principles governing whether released administrative claims qualify as settlement proceeds. Id., 2000 WL 320518 at *2. First, it must be clear that the administrative claims are released in return for the Government's release of its asserted FCA claims. Id. Second, the released administrative claims should not "be so intertwined with the government's FCA claims that the FCA suit triggers them as counterclaims." Id. In such instances, the released administrative claims are not included as proceeds because the Government might not have been exposed to liability if the FCA suit had not been brought. Id. In Thornton, the Court found that the released administrative claims were not counterclaims because the defendants had filed them prior to the qui tam action being filed. Id. As such, the Court held that the value of the defendants' dismissed administrative claims should be included in the overall valuation of the settlement for purposes of determining the relator's share. Id. In the present case, the administrative claims asserted by Aerospatiale Helicopter Corporation ("AHC") against the Government were filed separate and apart from the Underlying Qui Tam. More important, the Gerson Memorandum clearly demonstrates that the administrative claims were dismissed as part of the consideration given by AHC as part of the Underlying Qui Tam settlement: In addition, authority is granted to accept Textron's [AVCO's] offer to pay the Government $17 million (with interest from November 2, 1989) and other valuable consideration, and to accept Aerospatiale's offer to dismiss administrative claims against and to grant other valuable consideration to the Government, in settlement of the above-referenced suit [the Underlying Qui Tam], and to move to dismiss that suit with prejudice. Appellant's Rec. Ex. At Tab F (emphasis added). Based on this Court's analysis in Thornton, therefore, AHC's dismissed administrative claims should be included in the Underlying Qui Tam settlement for purposes of computing Ballew's statutory share of the settlement. 2. The Government agrees that released administrative claims may be "proceeds" for purposes of computing a relator's share of an FCA settlement. In Thornton, "[t]he parties [including the Government] agree[d] that the 'proceeds' of an FCA settlement may include non-cash value, such as the value of certain released claims." Thornton, 2000 WL 320518 at *2. This position appears to be directly opposite to the position taken by the Government in this case. The Government should not be allowed to have it both ways; this point clearly is conceded. 3. The Government has a duty to advise the relator of the value of all non-cash proceeds included in an FCA settlement. In Thornton, the Court unequivocally stated that: The Government has a duty to advise the relator of the value of the settlement at the time it notifies him that it intends to settle the case, and this representation should include the Government's estimate of the value of non-cash proceeds. Id. In the present case, the Government violated its duty to Ballew by failing to disclose to Ballew (i) that the released administrative claims were part of the Underlying Qui Tam settlement, (ii) the value of the released administrative claims, and (iii) that he had to object to the value of the released administrative claims at the fairness hearing. Id., 2000 WL 320518 at *2-*3. Ballew, therefore, should be free to litigate the fact that both the existence and value of the dismissed administrative claims were not disclosed to him at the time the Government announced the Underlying Qui Tam settlement. Id. On a different note, in his Appellate Brief, Ballew cited United States ex rel. Merena v. SmithKline Beecham Corp., 52 F.Supp.2d 420 (E.D. Pa. 1998). See Brief of Appellant at 17, n.6. Ballew advises the Court that the Third Circuit recently reversed the decision of the trial court in United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97 (3d Cir. 2000). Ballew further notes, however, that the Third Circuit reversed the trial court for reasons unrelated to the proposition for which Merena was cited in his Appellate Brief. Respectfully submitted, By:________________________________
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of Appellant's Supplemental Brief has been served on counsel for the Defendant-Appellees, as set forth below, via United States mail, on May 4, 2000. ______________________________
Paul E. Coggins, Esq.
David W. Ogden, Esq.
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