Opinion
No. C-99-4148 WHO
May 15, 2001
MEMORANDUM DECISION AND ORDER
In this False Claims Act case (a qui tam action) brought by relator Roderick MacGregor, Ph.D. ("MacGregor") against defendants the Regents of the University of California ("University") and C. Anthony Hunt, Ph.D. ("Hunt"), MacGregor now moves for an order establishing his share of a settlement between the United States and the University, and requests a hearing on the adequacy of the settlement. For the reasons set forth hereinafter, the motion and request are denied.
I.
MacGregor filed his complaint on September 9, 1999, asserting a cause of action under the False Claims Act (the "Act"), 31 U.S.C. § 3729-3731, against the University and Hunt. The Act provides that a "person" who "knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim" or "knowingly makes [or] uses . . . a false record or statement" to obtain payment of a false claim by the government is liable to the government. 31 U.S.C. § 3729(a)(1)(2) Both MacGregor and Hunt were employed by the University. Hunt was a "Principal Investigator" with the University, and, as such, had the authority to apply for and receive funds from the United States for research projects run by the University. The allegations of impropriety concern the use of a particular grant obtained by Hunt for a project, for which MacGregor was in charge of scientific content. MacGregor claims that Hunt, in his capacity as Principal Investigator, directed the diversion of government funds from government research to private research with commercial applications, and then submitted false statements to the government to conceal the diversion of funds.
The complaint was filed under seal, and remained under seal until October 31, 2000. On October 2, 2000, the United States gave notice to the Court that it did not intend to intervene in this action. Thus, only MacGregor is prosecuting this action.
According to MacGregor's motion, in between the time the action was filed and the United States elected not to intervene, the United States conducted an investigation into the allegations, and the University returned a portion of the overcharges to the United States. MacGregor terms this a "settlement," and asserts that, pursuant to the Act, he is entitled to a share of those proceeds and a hearing to determine the adequacy of the purported settlement.
On February 9, 2001, the University moved to dismiss the action, relying on Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000), in which the Court held that a state agency is not a "person" under the Act for purposes of qui tam actions. MacGregor filed a notice of nonopposition to this motion and then stipulated to the dismissal of the University. The Court dismissed the University, pursuant to the parties stipulation, without prejudice to the United States.
MacGregor then filed a motion contending that, under the Act, he is entitled to a share of the funds returned by the University, and a hearing to determine the adequacy of the purported settlement.
The University argued that, under Vermont Agency of Natural Resources, the University is not and was not a proper party to this action, and the Court may not, therefore, award MacGregor a share of the returned funds and order a hearing to determine the adequacy of the settlement, because to do so would be to act as if MacGregor had a right to bring this action.
II.
The Act provides that if the government intervenes in a qui tam action, the relator shall receive between 15 percent and 25 percent of the proceeds recovered in the action, and that if the government does not intervene in a qui tam action, the relator shall receive between 25 percent and 30 percent of the proceeds recovered in the action. 31 U.S.C. § 3730(d)(1)(2). The Act also provides that the United States may settle the action, over the objections of the relator, if the court determines that the settlement is fair after a hearing. 31 U.S.C. § 3730(c)(2)(B). MacGregor bases his motion on these sections of the Act.
The first issue is whether MacGregor is entitled to a share of the funds returned to the United States by the University. MacGregor faces an insurmountable difficulty in that he was not entitled to bring this action against the University in the first instance. Vermont Agency of Natural Resources, 529 U.S. at 787 (states not subject to liability in qui tam actions brought under the False Claims Act). Because MacGregor was not entitled to proceed with the action, he is not a proper relator with respect to the University and is not entitled to any share of money paid by the University.
MacGregor cites to United States ex rel. Smith v. Gilbert Realty Co., 9 F. Supp.2d 800 (E.D. Mich. 1998), and 34 F. Supp.2d 527 (E.D. Mich. 1998), to support his argument that he is entitled to fees. In that case, the United States settled a qui tam action after judgment for an amount substantially less than the judgment, and failed to give notice to the relator. In two opinions, the district court granted both a relator's share of the judgment and attorneys' fees. Id. at 800, 34 F. Supp.2d at 528. Gilbert Realty, however, is distinguishable because the relator in the case had an unquestionable right to bring the action in the first instance. It, therefore, does not support MacGregor's position.
The second issue is the fairness of the settlement. Here again MacGregor faces difficulty. He had no right to bring the action against the University, and so has no right to dictate the terms on which the University may be dismissed from the case. Requiring a fairness hearing under § 3730(c)(2)(B), however, would accomplish precisely that. As a result, MacGregor's request for a hearing fails.
In sum, MacGregor asks that the Court treat him as if he had a right to bring this action against the University, when in fact he had no such right.
III.
Accordingly,
IT IS HEREBY ORDERED that MacGregor's motion for an order establishing relator's share of settlement and his request for a hearing on the adequacy of the settlement are DENIED.