The little-used government action bar has recently surfaced in two cases where relators had attempted to revive declined and unsettled allegations from earlier qui tam actions in which the government had intervened in part to settle other allegations. United States ex rel. Bennett v. Biotronik, Inc., No. 16-15919, 2017 WL 5907900 (9th Cir. Dec. 1, 2017), and United States ex rel. Estate of Gadbois v. PharMerica Corp., No. 10-cv-471, 2017 WL 5466659 (D.R.I. Nov. 13, 2017). These decisions show that a partial intervention and settlement by the government of some, but not all, claims in one relator’s complaint can protect defendants from future claims by later relators based on even unresolved allegations from the earlier complaint.
Bennett and Gadbois have remarkably similar fact patterns. In both, an original relator filed an action against a pharmaceutical defendant, the government intervened and settled some but not all claims, and the cases were dismissed. Then a second relator attempted to revive the unsettled claims in another suit against the defendant. In Bennett, that second case was brought after the first case was settled. In Gadbois, the second case was brought before the first case settled, but the Court’s analysis assumed that what mattered was when a proposed supplemental complaint was filed, which was after the first case settled. (We will discuss why Gadbois focused on the supplemental complaint in another post.) The government declined to intervene in both of these cases.
Both defendants moved to dismiss the relators’ cases as barred by the government action bar, which prohibits a relator from bringing a qui tam suit “based upon allegations or transactions which are the subject of a civil suit … in which the Government is already a party.” See 31 U.S.C. § 3730(e)(3). Generally, this has been interpreted as a jurisdictional bar designed to prevent relators from bringing parasitic qui tam suits after the government has already had an opportunity to redress its harm.
Relators raised two arguments against dismissal: (1) the government action bar is written in the present tense, barring only suits in which “the Government is already a party,” rather than suits in which the government was a party; and (2) the bar should only apply to claims the government settled, not the entirety of the case. Both arguments were rejected. As to the first, the courts reasoned that the language of other FCA bars supported the notion that the government remains a party to a case even after its conclusion. As the Ninth Circuit aptly put it, the government forever remains a party to a suit because “[t]he government . . . never dies.” Bennett, 2017 WL 5907900, at *5. As to the second argument, the courts held that when the government intervenes, it becomes a party to the entire suit, not just parts of it in which it chooses to intervene. Over a dissent and contrary to the government’s arguments in an amicus brief, the Ninth Circuit in Bennett appears to have established a categorical rule that “the Government becomes a ‘party’ to the suit as a whole when it intervenes.” Id. at *8. Gadbois leaves open the possibility that a subsequent relator may be able to distinguish their claims from the initial suit, but found that none of the proposed amendments to the complaint would “work to differentiate it from the scheme that … was ‘based upon’ the same essential facts as [the initial relator’s action].” Gadbois, 2017 WL 5466659, at *6.
These cases are good news for the defense bar as the rulings curtail a relator’s ability to bring copycat claims once the government has intervened in an earlier action that raises the same allegations, even if the government did not intervene with respect to the particular allegations raised in the later complaint. At least for cases where the government intervenes, these rulings may partially fill a gap left in the first-to-file bar by the Supreme Court in Kellogg Brown & Root Servs., Inc. v. U.S. ex rel. Carter, 135 S. Ct. 1970 (2015) which, as reported in LLB, held that the first-to-file bar does not prohibit relators’ filing new lawsuits after earlier filed cases have been dismissed. Expect relators to argue that Bennett and Gadbois are inconsistent with the reasoning in Carter in that respect, but we will await future decisions to see how the arguments are fleshed out. Indeed, the relator in Bennett likely will seek rehearing, and particularly given the dissent, it is possible the court may review the issue en banc. We will keep you apprised of course of any developments.