On August 30, 2022, the U.S. Court of Appeals for the DC Circuit issued its opinion in United States v. Honeywell International, Inc. —F. 4th—, 2022 WL 3723020 (DC Cir. 2022). The DC Circuit held that the pro tanto rule is the appropriate approach to calculating settlement credits under the False Claims Act (“FCA”).
The DC Circuit concluded that pro tanto is the settlement offset rule that best coheres with the FCA and the precedents interpreting it, and applying this rule will generally promote judicial economy. As a matter of federal common law, we find it is the appropriate method to apply when offsetting settlement credits in FCA cases.
In the FCA, Congress created a vital mechanism for the federal government to protect itself against fraudulent claims. The FCA, however, provides no rule for allocating settlement credits among joint fraudsters. Because the FCA guards the federal government’s vital pecuniary interests, and because state courts widely diverge over the correct rule for settlement offsets, we find it appropriate to establish a federal common law rule. The pro tanto rule best fits with the FCA and the joint and several liability applied to FCA claims. Honeywell is entitled to offset its common damages in the amount of the government’s settlements from the other parties.
In establishing this federal common law rule, the DC Circuit recognized that in cases such as this, where the government already recouped its full damages from other settling parties, a non-settling party like Honeywell would escape paying damages under the pro tanto rule.