The New Jersey Supreme Court has ruled that once the Attorney General declines to take over a qui tam action, he can no longer use administrative subpoenas to compel testimony and documents from defendants and witnesses. In the Matter of the Enforcement of New Jersey False Claims Act Subpoenas, __ A.3d__, 2017 WL 2458163 (N.J. June 7, 2017).

The background of the case is set out in the Appellate Court’s decision at 134 A.3d 1012 (N.J. Super. App. Div. Mar. 18, 2016). The underlying complaint in federal court is a qui tam action alleging that a pharmacy benefits manager defrauded the state by retaining rebates that were supposed to be passed along to its clients in violation of the federal False Claims Act and the New Jersey False Claims Act (“NJFCA”). Id. at 1013. When a private citizen brings a qui tam action seeking to enforce the NJFCA on behalf of himself and the state, the complaint must be filed under seal and served on the Attorney General. The Attorney General then has 60 days to decide whether to intervene and take over the action. That time can be extended upon the Attorney General’s request and upon a showing of good cause. Id. at 1015.

In this case, that extension provision was liberally and repeatedly applied to afford the Attorney General approximately 600 days to decide whether to intervene, with the “final” intervention deadline set for June 2, 2015. Id. at 1014. The appellate decision mentions in passing that it was both not convinced and need not decide whether defendants engaged in delay tactics as “it neither explains nor excuses the Attorney General’s failure to proceed more expeditiously for such an extraordinary length of time. Id. The final deadline passed and the Attorney General did not exercise his option to take over the case. Id. at 1015. After June 2, however, the Attorney General sought enforcement of a subpoena previously served on the defendant and two subpoenas served after June 2 on additional witnesses. The federal court decided that the issue of the enforceability of the subpoenas was best resolved by the New Jersey state courts. Id.

The Attorney General argued that his right to investigate the claims did not disappear with the passing of the intervention deadline citing his statutorily granted subpoena power. But the court concluded that was not an “additional or separate font of power” once the Attorney General declines to intervene. Id. at 1016. The Attorney General has a duty to investigate possible NJFCA violations and is given tools to do so, but is also given a time period in which to do so. The Attorney General’s broad interpretation would mean that he could investigate “for so long as he cared” and “seek leave to intervene . . . at any time up until the entry of final judgment.” Id. That would render the 60-day deadline meaningless and it is the goal of the court to interpret statutes “in a way that gives meaning to every part.” Id. The court also pointed out that the Attorney General’s repeated requests for extensions of the 60-day deadline contradict his argument that his right to continue his investigation and enforce subpoenas survives that deadline. Id. at 1017. Why else would he need the extensions?

Indeed the landscape changes once the Attorney General decides not to proceed. From that point forward, the person who initiated the action has the right to conduct the action and the Attorney General’s decision to opt out is final and not reviewable. Id.In other words, “there is no turning back.” Id. The Attorney General then becomes a bystander. He can request copies of the pleadings, motions and depositions only at his own cost. And finally, he remains on the sidelines unless he can convince the court that he has “good cause” to intervene at a later date. Id. The Attorney General urged a broad reading of that final provision, but the court said it had to be construed with the other three provisions, all of which heavily favor a legislative intent that the relator be allowed to control the qui tam action uninhibited. Id.

The appellate court also found that the Attorney General should not be allowed to proceed with a separate investigation that might interfere with the federal judge’s management of the qui tam action to which the Attorney General is not a party. Id. at 1018.

The New Jersey Supreme Court adopted the reasoning of the appellate decision, but elaborated on an additional argument advanced by the Attorney General that NJFCA does not contain the same provision as the federal False Claims Act which expressly bars U.S. Attorney Generals from enforcing subpoenas after electing not to intervene. In the Matter of the Enforcement of New Jersey False Claims Act Subpoenas, __ A.3d__, 2017 WL 2458163 at *4. Because the NJFCA does not contain the same provision, the Attorney General argued that the New Jersey legislature must have intended to allow the issuance of administrative subpoenas after opting out.

But the FCA and the NJFCA differ in many ways. The NJFCA was not modeled on the FCA such that deletion of a specific provision would be evidence of a specific legislative intent to diverge from the federal approach. Id. The NJFCA tracks neither the structure nor the text of the FCA. So instead the court must look to the provisions of the NJFCA. As set out above, those provisions all support that the Attorney General’s right to enforce subpoenas ends with the decision not to take over the action. Id. at *5. So defendants don’t have to defend NJFCA violation allegations on competing fronts, thankfully.