HIGHLIGHTS:

  • A key ruling by the U.S. Court of Appeals for the Ninth Circuit will block qui tam relators from bringing copycat False Claims Act suits.
  • In United States ex rel. Max Bennett v. Biotronik, Inc., the Ninth Circuit held that qui tam relators may not bring False Claims Act cases that are duplicative of past or present cases in which the government is a party, including prior qui tam cases in which the government intervenes.
  • Affirming the U.S. District Court for the Eastern District of California's 2016 dismissal of a False Claims Act qui tam lawsuit against Biotronik, a manufacturer of cardiac rhythm management devices, the Ninth Circuit held that the "government action bar" applies even when the government is no longer an active participant in a lawsuit.

A team of lawyers from Holland & Knight has secured a key ruling that will block qui tam relators from bringing copycat False Claims Act suits. Deciding a matter of first impression in United States ex rel. Max Bennett v. Biotronik, Inc., the U.S. Court of Appeals for the Ninth Circuit held that qui tam relators may not bring False Claims Act cases that are duplicative of past or present cases in which the government is a party, including prior qui tam cases in which the government intervenes. The ruling, issued on Dec. 1, 2017, interprets a relatively unknown provision of the FCA, 31 U.S.C. §3730(e)(3), sometimes referred to as the "government action bar."

The bar precludes a relator from bringing a qui tam suit that is based upon allegations or transactions that "are the subject of a civil suit or an administrative civil money penalty proceeding in which the government is already a party." See 31 U.S.C. §3730(e)(3).

Affirming the U.S. District Court for the Eastern District of California's dismissal of a False Claims Act qui tam lawsuit against Biotronik, a manufacturer of cardiac rhythm management devices, the Ninth Circuit held that the bar applies even when the government is no longer an active participant in a lawsuit. The panel further held that the provision must be interpreted to bar claims that were included in a prior suit in which the government intervened, even where the government did not include those particular claims in the "covered conduct" settled in the case and where those claims were dismissed without prejudice in the prior suit.

Background

recluded by the government's intervention and settlement of a prior qui tam suit filed against the company in December 2009 by Brian Sant, a former Biotronik employee. Bennett, also a former Biotronik employee, had filed a similar suit in 2010. Bennett's 2010 suit mirrored the allegations from the 2009 Sant complaint.

The government investigated the allegations for more than four years. At the conclusion of the investigation, Bennett learned that the government would not be intervening in his case and, because his case was second in time and barred by the first-to-file rule, 31 U.S.C. §3130(b)(5), he voluntarily dismissed his case. The government intervened in the Sant case and entered into a settlement with Biotronik in May 2014 based on certain "covered conduct" included in the allegations. However, by October 2014, before the Sant case was finally unsealed, Bennett filed a second complaint, narrowly crafted to include only allegations that had not been included in the covered conduct settled by the government in Sant. The government again declined to intervene in Bennett's suit.

Biotronik moved to dismiss Bennett's new suit, arguing that his claims, among other bases, were barred by the government action rule.

In April 2016, the District Court dismissed Bennett's case, adopting Holland & Knight's argument that because the Sant action contained the same allegations and the government intervened, Bennett's second suit was barred by the government action rule. The District Court's decision rejected the positions advanced by Bennett that 1) the government action rule could not apply because the government's partial intervention and settlement did not encompass the allegations Bennett raised in his second suit, and 2) the government action rule can be applied only when the "government action" is concurrently pending.

Appeal and Ninth Circuit Decision

Bennett appealed the ruling, arguing that the §3730(e)(3) use of the present tense means it applies only when the government is a party to a suit actively pending at the time the qui tam suit is filed. In other words, the government action rule did not serve as a lingering ban against subsequent duplicative relator suits. The government filed an amicus brief in support of this argument. Bennett further argued that the government's "partial" intervention in Sant did not include the allegations raised by Bennett's second suit; therefore, his case was not based upon allegations that were the subject of any government action. In other words, the government should be considered a party only to those allegations in which it intervenes. The government's amicus brief did not address this second position.

The Ninth Circuit disagreed with both positions. On the first point, the court held that while litigation may have ended in an earlier suit, the government is still a "party" to that suit because "a person remains a party to his suit, even after the suit's conclusion." The court found support in the amended public disclosure bar, §3730(e)(4), which contains nearly identical present tense language, but contextually applies without question to past suits.

Bennett argued that the inclusion of the term "already" in §3730(e)(3) begged for a different interpretation, stating a person wouldn't say that James Madison was "already" a party in Marbury v. Madison, the landmark case from 1803. Yet the panel rejected this, providing a logically irrefutable response:

Bennett is quite right. In 'normal language usage,' we would not say that James Madison is already a party to Marbury v. Madison, because James Madison is dead. The Government, however, never dies.

The court further noted the absence of the term "pending" from the government action rule, a term clearly contained within §3730(b)(5), a separate and more recognized bar under the False Claims Act known as the first to file rule.

The court also rejected Bennett's second argument that the government action rule did not apply to his claims because the government "partially" intervened in Sant, dismissing the allegations Bennett lifted for his second complaint without prejudice and excluding those allegations from the settlement's covered conduct.

The court stated "there is nothing in the FCA which indicates that, upon joining and settling a lawsuit, the government becomes a party to the suit with respect only to those claims which it settles, but is not a party to the suit with respect to those claims which it does not settle." Because the government intervened in Sant, the court stated "[i]t was therefore a party to it, unsettled claims and all." Further commenting on the government's frequent practice of "partial" intervention the court noted the "Government becomes a 'party' to the suit as a whole when it intervenes. It does not become a 'party' to a particular claim or number of claims."

The 2-1 ruling came after a lengthy oral argument that included counsel for both sides and the government. Circuit Judges Richard C. Tallman and Carlos T. Bea voted to affirm the District Court's decision. Circuit Judge Eugene E. Siler Jr., sitting by designation from the U.S. Court of Appeals for the Sixth Circuit, dissented, but noted that Bennett's suit could nonetheless fail under preclusion rules if remanded.