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United States ex rel. Lusby v. Rolls-Royce Corp. - 570 F.3d 849 (7th Cir. 2009)

Rule:

The resolution of personal employment litigation does not preclude a qui tam action under 31 U.S.C.S. § 3729 of the False Claims Act, in which the relator acts as a representative of the public. The special status of the United States counsels against reflexive transfer of rules of preclusion from private to public litigation.

Facts:

Curtis Lusby was an engineer for Rolls-Royce from 1992 through 2001. Lusby worked on the T56 turboprop engine, which Rolls-Royce has sold to both military and civilian customers since 1954. Lusby came to believe that Rolls-Royce was not making the parts properly and was falsely telling the United States that the engines conformed to the government's specifications. The Air Force rejected some T56 turbine blades in 1991 as substandard; Lusby concluded that Rolls-Royce had not fixed the problem. He raised this subject within the corporate hierarchy, which responded by firing him. Lusby filed suit in 2002, contending that his discharge violated 31 U.S.C.S. § 3730(h), part of the False Claims Act, because Rolls-Royce had penalized him for preparing to bring or support litigation under that statute. The next year Lusby and Rolls-Royce filed a joint stipulation for dismissal. In May 2003, two months before dismissing the first suit, Lusby filed another suit, a qui tam action on behalf of the United States. As 31 U.S.C.S. § 3730(b)(2) required, that filing was under seal. After considering its options for 27 months, the United States declined to intervene in the qui tam action, which was unsealed and served on Rolls-Royce in December 2006, over three years after the parties had dismissed the original suit.  Rolls-Royce moved to dismiss the qui tam action, which th district court granted on the ground that the complaint did not plead fraud with the particularity required by Fed. R. Civ. P. 9(b). Lusby’s lawyer drafted a new complaint in an attempt to supply the information that the judge thought necessary; however, the court declined to allow the complaint’s amendment, ruling that the qui tam action was barred by the claim preclusion (res judicata) effect of Lusby's employment suit. Lusby appealed.

Issue:

Was the qui tam action barred by the claim preclusion effect of Lusby’s employment suit?

Answer:

No.

Conclusion:

The Court of Appeals for the Seventh Circuit held that personal employment litigation did not preclude a qui tam action, in which the relator acted as a representative of the public. According to the Court, although the United States was not a “party” to a qui tam suit unless it intervenes, it is nonetheless a real party in interest since its financial interests were at stake. The United States was entitled to at least 70% of any recovery, even when it does not intervene. Moreover, the Court averred that qui tam litigation was subject to requirements that make combining it with a personal damages suit awkward. According to the Court, the procedural differences between personal and qui tam litigation under the False Claims Act, 31 U.S.C.S. §§ 3729 et seq., were so great that it is often impractical to pursue both claims in one suit--and sometimes impossible, as when the United States takes more than 120 days to decide whether to intervene, or the plaintiff wants to proceed pro se. A conclusion that the personal and representative actions ought to be conducted separately meant that a voluntary decision to file separate suits should be respected.

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