Court Ducks Ruling On The Enforceability Of Agreement To Arbitrate False Claims Claims, Saying It Is Only Ruling "On A Rather Unremarkable Textual Analysis."
An interesting issue exists as to whether qui tam claims, brought by a private party (the "relator" or "private attorney general") are arbitrable. The argument against arbitrability is that the qui tam claim (in our next case, a False Claims Act claim) is really brought on behalf of the government, which is not a signatory to the arbitration agreement. The argument in favor of enforcing the arbitration agreement is that the claim is brought and prosecuted by a private party that is a party to the arbitration agreement, and that frequently the government has de minimis involvement in pressing a qui tam claim, leaving the hard lifting to the private party.
As explained by Judge Fisher in United States Ex Rel. Welch v. MLF, No. 16-16070 (9th Cir. Sept. 11, 2017) (Fisher, Schroeder, Smith), the District Court held that, "because FCA claims belong to the government and neither the United States nor Nevada agreed to arbitrate their claims, sending this dispute to arbitration would improperly bind them to an agreement they never signed." The Ninth Circuit panel agreed with the result, but reached it through the route of contract interpretation.
Basically, the Court held that the arbitration provisions covered claims relating to the employment relationship. However, the employee's qui tam claim that her employer was making false Medicaid claims did not arise from the employment relationship, and in fact, could have been brought by a non-employee.
The broadest arbitration provision covered a claim, dispute, or controversy that the employee "may have against [the employer]." As to this broad clause, the Court explained:
Indeed, though the FCA grants the relator the right to bring a FCA claim on the government's behalf, an interest in the outcome of the lawsuit, and the right to conduct the action when the government declines to intervene, our precedent compels the conclusion that the underlying fraud claims asserted in a FCA case belong to the government and not the relator.
The Ninth Circuit affirmed the District Court's denial of the employer's motion to compel arbitration on the alternate ground that the employee's FCA claims did not fall within the scope of the arbitration agreement.
COMMENT: While the Court claims that it is simply engaging in "rather unremarkable textual analysis", is it also setting forth its substantive interpretation of the FCA, namely, that the qui tam claims permitted under the FCA are not claims of the relator, but rather claims of the government? Has the Court through the backdoor of "contract interpretation" admitted the District Court's conclusion that the FCA claim is not arbitrable, because the government holds the claim, but unlike the relator, the government never signed the arbitration agreement? Perhaps the Court's reluctance to take a deep dive into the weeds with a searching discussion of the respective roles played by the relator and the government in pressing the FSA claim in this case explains the Court's choosing the easy way out by following the route of "contract interpretation."
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