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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 20, 2020

Relator Not Entitled to Share of Settlement Negotiated by Government When Relator’s Qui Tam Claims Were Dismissed

On September 14, 2020, Justice Friedman of the New York County Commercial Division issued a decision in People ex rel. FX Analytics v. Bank of N.Y. Mellon Corp., 2020 NY Slip Op. 33013(U), holding that a New York False Claims Act relator was not entitled to a share of a settlement negotiated by the government when the relator’s False Claims Act claims had been dismissed.

Justice Friedman’s decision (linked above), which analyzes the issue at length, is worth reading in its entirety.

In People ex rel. FX Analytics, the relator, FX Analytics, brought both New York False Claim Act and other claims “against defendant The Bank of New York Mellon Corporation and its predecessors and subsidiaries.” In 2013, the State filed an amended complaint. “[A]ll of the claims” in the Amended Complaint “were based in substantial part on the allegations of misconduct pleaded in” FX Analytics’ “qui tam complaints.”

FX Analytics objected to the settlement on the ground that it did not provide for FX Analytics to be paid part of the settlement amount. Justice Friedman recognized that FX Analytics’ “qui tam action was a significant catalyst for the . . . $30 million recovery in this action” and for that reason, [t]he fairness of the . . . refusal to offer FX a share consistent with NYFCA § 190 (6) may accordingly be perceived as questionable under these circumstances.” However, Justice Friedman ultimately was swayed by the fact that “courts interpreting the analogous” federal False Claims Act “have overwhelmingly held that a relator must have a valid qui tam action in order to recover a statutory share of a settlement.”

The New York False Claims Act (as well as the federal False Claims Act on which it is modeled) provides a way for private citizens to bring claims against those who defraud the government by making false claims to the government. This decision illustrates one of the many restrictions on false claims act cases. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have non-public information about someone who has been cheating the government.

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