D.C. Circuit May Decide How To Calculate FCA Offsets In Interlocutory Appeal

• Published date: 29 November 2021
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Government Contracts, Procurement & PPP, Trials & Appeals & Compensation
• Law Firm: Arnold & Porter
• Author: Ms Tirzah S. Lollar, Christian D. Sheehan and Megan Pieper

The authors consider the U.S. District Court for the District of Columbia's certified interlocutory appeal on the question of the appropriate method for calculating damages offsets for False Claims Act defendants.

The U.S. Court of Appeals for the D.C. Circuit soon may determine how to calculate damages offsets for False Claims Act ("FCA") defendants after a recently certified interlocutory appeal. The appeal arises out of a longstanding FCA case involving Zylon body armor shields ("Z Shield"), which were incorporated as part of bulletproof vests. The vests were sold to law enforcement agencies, which were eligible for partial reimbursement from the federal government.

BACKGROUND

In 2008, the United States filed separate FCA suits against several defendants related to the Z Shield vests. Some defendants have settled, but litigation remains ongoing.

One Z Shield manufacturer moved for summary judgment on numerous grounds, including that it was entitled to a pro tanto offset for the government's settlements with other defendants, which would reduce the FCA damages recoverable from the manufacturer to zero. A pro tanto offset would allow a dollar-for-dollar credit for other defendants' settlements. Under this theory, once the government has recovered the full amount it is due for its injury (here, the amounts the government paid or reimbursed for the allegedly defective vests), it cannot recover from additional defendants.¹ One U.S. District Court for the District of Columbia ("DDC") judge previously endorsed this approach: Judge Royce Lamberth held that a pro tanto credit is appropriate when FCA defendants share "common damages."²

JUDGE FRIEDMAN'S VIEW

But Judge Paul Friedman disagreed with Judge Lamberth's reasoning and held that courts should apply a proportionate share approach for offsets.³ Under this approach, prior settlements reduce a defendant's liability based on each defendant's degree of fault. And, since the FCA authorizes treble damages, the government can ultimately recover more than triple its actual loss.

Judge Friedman acknowledged that a proportionate share approach could result in the government being overcompensated for its loss if a jury decides the remaining defendant's share is greater than the total loss minus the prior settlement amounts, but he concluded that other factors, such as promotion of settlement and the importance of making a tortfeasor pay for the damage they caused, outweighed this concern.

Judge Friedman's opinion may...