By Jeffrey H. Brochin, J.D.
The trial court was required to resolve the public disclosure bar defense, and whether the original source exception to that bar applied to the relator, before dismissing on other grounds.
A federal appeals court in New York has reversed and remanded the decision of the district court that dismissed a relator’s fifth amended complaint in a qui tam action. The trial court based the dismissal on the "first to file" rule due to the allegations having been previously raised in other lawsuits, and, alternatively, that the claims were barred by Federal Rule of Civil Procedure 9(b) for failure to allege fraud with sufficient particularity. However, in reaching its decision, the district court omitted the issue of whether the FCA’s public disclosure bar, 31 U.S.C. § 3730(e)(4), deprived the court of jurisdiction (U.S. ex rel. Hanks v. Florida Cancer Specialists, June 3, 2020, Jacobs, D.).
In December 2012, the United States intervened with respect to the relator’s claims against Amgen, Inc., a drug manufacturer that allegedly conspired with oncologists in a False Claims Act (FCA) scheme regarding undisclosed discounts for their cancer drugs, and the U.S. orchestrated the settlement of those claims, which were subsequently formally dismissed by a so-ordered stipulation. However, the U.S. never formally withdrew as a party, and it continued to monitor the case. The appeals court ruled that intervention without withdrawal enabled the government to continue active participation in the ongoing proceedings, and that the 60–day deadline applied if the U.S. was a party to the action at any stage of the litigation. Accordingly, notice of appeal was timely and appellate jurisdiction was upheld.
Public disclosure bar. In the district court, several defendants brought a factual challenge to subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), proffering evidence that the core allegations underlying the relator’s lawsuit had previously been publicly disclosed in related lawsuits and media reports. As the district court stated, this imposed on the relator the burden to show by a preponderance of the evidence that the FCA’s public disclosure bar did not deprive the district court of jurisdiction. Finding that the Relator’s suit was based in substantial part on allegations or transactions that were publicly disclosed, the district court moved on to consider whether he was an "original source" of the information underlying his claims.
However, the district court stopped short of deciding the "original source" question, explaining that, because the complaint lumped all of the FCA claims together in a single cause of action and failed to plead the distinct claims with sufficient particularity, the court could not adjudicate the jurisdictional argument at that juncture.
A fundamental precept. The appeals court re-iterated that it is a "fundamental precept" that federal courts are courts of limited jurisdiction and the limits upon federal jurisdiction, whether imposed by the Constitution or by Congress, must be neither disregarded nor evaded. Article III generally requires a federal court to satisfy itself of its jurisdiction over the subject-matter before it considers the merits of a case, for to do otherwise would be a court act of ultra vires.
A straightforward issue to resolve. The appeals court noted that the jurisdictional question was relatively straightforward: whether the relator was an original source of the information underlying his claims. If, as the district court suggested, the relator’s allegations failed to show that he was an original source with respect to any particular claim that could settle the matter, as it was the relator’s burden to establish subject-matter jurisdiction over his claims by a preponderance of the evidence. However, the appeals court ruled that it was up to the district court to make that determination in the first instance.
For the foregoing reasons, the decision was reversed and the case remanded to the district court.
The case is No.: 18-3376.
Attorneys: Robert Hennig (Hennig Ruiz & Singh, PC) for the United States. Lawrence M. Kraus (Foley & Lardner LLP) for Florida Cancer Specialists and Gulfcoast Oncology Associates. Michael Darren Traub (Davis Wright Tremaine LLP) for Integrated Community Oncology Network, LLC. Carl H. Loewenson, Jr. (Morrison & Foerster LLP) for United States Oncology Specialty, LP. Daniel Tramel Stabile (Shutts & Bowen LLP) for Hematology and Oncology Associates of the Treasure Coast and Mid-Florida Hematology and Oncology Centers.
Companies: Florida Cancer Specialists; Gulfcoast Oncology Associates; Integrated Community Oncology Network, LLC; United States Oncology Specialty, LP; Hematology and Oncology Associates of the Treasure Coast; Mid-Florida Hematology and Oncology Centers
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