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Wednesday, July 24, 2024 | Back issues
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Court Rejects Attempt to Settle Suit After the Fact

(CN) - A whistleblower who lost a fraud case against his former employer cannot enforce an almost $9 million settlement offer that the government rejected to take its chances at trial, the 4th Circuit held.

Thomas Ubl of Virginia sued his former employer IIF Data Solutions and the company's vice president, Charles Patten Sr., under the False Claims action in 2006. IIF provides information-technology services to the National Guard.

Under the False Claims Act, private citizens can sue companies for defrauding the government and receive a tidy percentage of any recovered damages. In Ubl's suit, he claimed IIF had falsely billed the government for contracts. He also accused IIF of lying about its "prior pricing and discounting practices" when applying for General Services Administration contracts.

Among other things, he claimed the company backdated a commercial price list and lied about the nature of discounts it had given nongovernment customers.

The parties reached a settlement agreement for nearly $8.9 million in 2008, but the government refused to approve the offer, which would have set aside 30 percent for Ubl.

If the case did not go to trial, the government argued, Ubl did not deserve 30 percent of the settlement proceeds. The terms of the settlement also provided that Ubl could collect his share first, though the government had doubts that IIF could fund the entire award. It contended that "the settlement is designed to provide [Ubl] with $1.2 million and to provide the United States with an uncollectable debt," as quoted in the court's ruling.

Though the government eventually reached an "in principle" agreement to approve the settlement, IIF was not party to those negotiations. The government rejected the agreement two days later, and a federal judge denied the motion to enforcement the agreement.

At trial, a jury found in favor of IIF on all counts, and a federal judge ordered Ubl to pay $500,000 in attorneys' fees for the "clearly frivolous" suit.

On appeal, Ubl argued that the District Court erred by not enforcing the settlement, that he deserved a new trial and that he should not have to pay attorneys' fees.

The Richmond, Va.-based federal appeals court upheld most of the lower court's decision on Tuesday.

"The [settlement offer] died when the government rejected it, and it was not revived by the subsequent agreement between Ubl and the government," Judge William Traxel wrote for a three-judge panel.

Since Ubl's action was not "clearly frivolous," however, the court reversed the award of attorneys' fees.

"We find it significant that the district court repeatedly rejected IIF's pre-trial efforts to dismiss the case," Traxel wrote.

"Ubl presented evidence that could have supported a verdict in his favor even if the jury did not find [him] to be at all credible," he added.

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