On August 30, the U.S. Court of Appeals for the D.C. Circuit held, as a matter of first impression, that damages in False Claims Act cases are subject to pro tanto (dollar-for-dollar) settlement offsets in cases involving multiple jointly and severally liable defendants.
The government alleged in United States v. Honeywell International, Inc. that three defendants were jointly and severally liable for a fraud scheme in which the defendants allegedly sold faulty bulletproof vests to the government, allegedly resulting in $11.5 million in single damages and approximately $35 million in treble damages. The government settled with two defendants for a total of $36 million, but Honeywell held out. Honeywell then moved for summary judgment on damages, arguing that under the pro tanto rule, the government’s potential damages must be reduced dollar-for-dollar by the previous settlements—meaning Honeywell would pay no damages even if the government’s allegations were true. The government argued that regardless of the prior settlements, Honeywell was liable for its proportionate share (to be determined at trial) of the $35 million treble damages amount.
The D.C. Circuit sided with Honeywell and held that the pro tanto rule applies in FCA cases. The D.C. Circuit “recognize[d] that in cases such as this where the government has already recouped its full damages from settling parties, a non-settling party like Honeywell will escape paying damages under the pro tanto rule.” Yet it...
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