In a July 16, 2015 decision of first impression, Schroeder v. United States ex rel. CH2M Hill, the US Court of Appeals for the Ninth Circuit held that 31 U.S.C. § 3730(d)(3) of the False Claims Act requires dismissal of a qui tam relator convicted of the conduct giving rise to the fraud, even though the relator played only a minor role (No. 13-35479, (9th Cir. July 16, 2015)).

Carl Schroeder, a qui tam plaintiff in this action, worked for defendant CH2M Hill, a contractor to the US Department of Energy. Schroeder, along with many of his colleagues, submitted false time cards inflating the number of overtime hours worked; Schroeder himself collected over $50,000 in falsely claimed overtime pay. In 2008, the Office of the Inspector General learned of the fraud and launched an investigation. During a December 2008 interview with the Inspector General, Schroeder admitted to over-billing. In June 2009, he filed this qui tam action against CH2M, which proceeded at the same time as the government's investigation.

Schroeder subsequently pled guilty to one count of conspiracy to commit fraud and agreed to provide substantial assistance to the government. In August 2012, the US intervened in Schroeder's suit and moved to dismiss Schroeder as a relator based on his felony conviction. The district court obliged. Schroeder appealed, arguing that applying 31 U.S.C. § 3730(d)(3) to minor participants in the fraud would produce an "absurd" result, and that the language of the statute itself supports his argument.

The Ninth Circuit upheld the dismissal. On examining the language of the statute, the court acknowledged that the grammar and structure of the statute could support Schroeder's assertion. Nevertheless, the court found that the plain meaning of the text did not include an exception for minor fraud participants, and that its interpretation of the statute is consistent with its purpose.

This decision puts the Ninth Circuit in line with several other circuits which have decided this issue. Practitioners should realize that courts in the Ninth Circuit will dismiss qui tam actions brought under the FCA by a relator convicted of giving rise to the fraud, even if the relator played only a minor role in that fraud.

For additional information about the FCA, see Practice Note, Understanding the False Claims Act.