(CN) - One-sixth of the government's $48 million settlement with Cisco Systems will go to the two whistle-blowers whose lawsuit acted as a catalyst to that deal, the 8th Circuit ruled.
Norman Rille and Neal Roberts brought several actions under the False Claims Act on behalf of the United States in 2004 against government contractors.
The contractors, including Cisco Systems, allegedly paid kickbacks to systems integration consultants in exchange for recommending their computer systems and software products to the government.
After intervening in the case against Cisco in 2008, the government adopted the relators' complaint, and settled the lawsuit for $48 million two years later.
One of the conditions of the settlement was the dismissal with prejudice of relators' complaint.
The government rejected Rille and Roberts' claim to a percentage of the settlement, however, because it claimed to have discovered Cisco's fraud on its own, not as a result of relators' information.
The 8th Circuit disagreed, 2-1, last week and awarded the relators $8 million for their efforts.
"We find no support in the law for the government's suggestion it did not settle the claims or the action brought by the relators, when the government's receipt of the settlement funds required the relators' claims and the action itself to be dismissed with prejudice," Judge Kermit Bye wrote for the majority. "The government cannot compromise a relator's action by having it dismissed with prejudice and then claim the funds it received as a direct consequence are not 'proceeds of the action.'"
Judge Steven Colloton dissented, finding no "factual overlap between the relator's claim and the claims settled by the government."
Although the relators' case may have been the "catalyst" for the government's action against Cisco, "the notion that a relator is entitled to recover proceeds of a settlement because he was a 'catalyst' leading to the settlement of different claims brought by the government is not derived from the statute," Colloton said.
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