United States ex rel. Wood v. Allergan, Inc.

Decision Date09 August 2018
Docket NumberDocket No. 17-2191-cv,August Term 2017
Citation899 F.3d 163
Parties UNITED STATES of America EX REL. John A. WOOD, Plaintiff-Appellee, Commonwealth of Massachusetts, State of Montana, District of Columbia, State of Indiana, State of New York, Commonwealth of Virginia, State of Louisiana, State of Delaware, State of Minnesota, State of Oklahoma, State of Michigan, State of Hawaii, State of North Carolina, State of California, State of Georgia, State of Tennessee, State of Florida, State of Wisconsin, State of New Mexico, State of Illinois, State of Nevada, State of Connecticut, State of New Jersey, State of Texas, State of Colorado, State of Rhode Island, Plaintiffs, v. ALLERGAN, INC., Defendant-Appellant, Allergan PLC, Defendant.
CourtU.S. Court of Appeals — Second Circuit

899 F.3d 163

UNITED STATES of America EX REL. John A. WOOD, Plaintiff-Appellee,

Commonwealth of Massachusetts, State of Montana, District of Columbia, State of Indiana, State of New York, Commonwealth of Virginia, State of Louisiana, State of Delaware, State of Minnesota, State of Oklahoma, State of Michigan, State of Hawaii, State of North Carolina, State of California, State of Georgia, State of Tennessee, State of Florida, State of Wisconsin, State of New Mexico, State of Illinois, State of Nevada, State of Connecticut, State of New Jersey, State of Texas, State of Colorado, State of Rhode Island, Plaintiffs,
v.
ALLERGAN, INC., Defendant-Appellant,

Allergan PLC, Defendant.
*

Docket No. 17-2191-cv
August Term 2017

United States Court of Appeals, Second Circuit.

Argued: February 7, 2018
Decided: August 9, 2018


Derek T. Ho, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C, Washington, D.C. (Sherrie R. Savett, Berger & Montague, P.C., Philadelphia, Pennsylvania, W. Scott Simmer, Thomas J. Poulin, Simmer Law Group P.L.L.C., Washington, D.C., on the brief ), for Plaintiff-Appellee.

Jeffrey S. Bucholtz (Paul Alessio Mezzina, Christopher R. Healy, on the brief ), King & Spalding L.L.P., Washington, D.C., for Defendant-Appellant.

Sarah Carroll (Douglas N. Letter, Michael S. Raab, Charles W. Scarborough, on the brief ), for Chad A. Readler, Acting Assistant Attorney General, United States Department of Justice, Civil Division, Washington, D.C., for Amicus Curiae the United States, in support of Allergan, Inc.

Steven P. Lehotsky, Warren Postman, U.S. Chamber Litigation Center, Inc., Washington D.C.; John P. Elwood, Ralph C. Mayrell, Vinson & Elkins LLP, Washington, D.C., for Amicus Curiae the Chamber of Commerce of the United States, in support of Allergan, Inc.

Jacklyn N. DeMar, Taxpayers Against Fraud Education Fund, Washington, D.C.; Jennifer M. Verkamp, Maxwell S. Smith, Morgan Verkamp LLC, Cincinnati, Ohio, for Amicus Curiae Taxpayers Against Fraud Education Fund, in support of John A. Wood.

Before: Walker, Lynch, and Chin, Circuit Judges.

Chin, Circuit Judge:

In this qui tam action, the relator, plaintiff-appellee John A. Wood, contends that defendant-appellant Allergan, Inc. ("Allergan"), a pharmaceutical company, violated the False Claims Act (the "FCA"), 31 U.S.C. § 3729 et seq. , through a kickback scheme that caused the United States (the "Government"), state governments, and the District of Columbia to make overpayments

899 F.3d 166

of Medicare, Medicaid, and other benefits.

Wood, however, was not the first relator to sue Allergan under the FCA based on this alleged scheme. Consequently, the district court (Furman, J. ) found that Wood's complaint violated the FCA's "first-to-file bar," which prohibits a person from bringing a "related action" when an FCA suit is "pending." 31 U.S.C. § 3730(b)(5).

In this interlocutory appeal, the issue presented -- a question of first impression for this Court -- is whether a violation of the FCA's first-to-file bar can be cured by the filing of an amended or supplemented complaint after the first-filed related action is no longer pending. We hold that a violation of the first-to-file bar cannot be remedied by amending or supplementing the complaint. Accordingly, we reverse and remand with instructions for the district court to dismiss the Third Amended Complaint -- the operative complaint -- without prejudice.

BACKGROUND

1. Statutory Background

The FCA imposes significant penalties on any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the Government or any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B).

Rather than rely solely on federal enforcement of these provisions, Congress decided to deputize private individuals, encouraging them to come forward with claims on behalf of the Government in the form of qui tam suits. Qui tam provisions are not new to federal law, appearing as early as the first Congress. J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam Legislation , 78 N.C. L. REV. 539, 554 n.54 (2000). In fact, the FCA and its qui tam provisions emerged "midway through the Civil War, in response to frauds perpetrated in connection with Union military procurement." Id. at 555.

Under the FCA's qui tam provisions, "a private party, called the relator, challenges fraudulent claims against the [G]overnment on the [G]overnment's behalf, ultimately sharing in any recovery." United States ex rel. Shea v. Cellco P'ship , 863 F.3d 923, 926 (D.C. Cir. 2017) ; see 31 U.S.C. § 3730(b). The relator may be awarded up to thirty percent of the proceeds ultimately recovered. 31 U.S.C. § 3730(d). Relators need not allege personal injury but instead sue "to remedy an injury in fact suffered by the United States." Vt. Agency of Nat. Res. v. United States ex rel. Stevens , 529 U.S. 765, 771, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). The Government may intervene in any qui tam action, taking over from the relator, and, in that event, limiting the relator's share of the recovery to at most twenty-five percent. 31 U.S.C. § 3730(b)(2), (d)(1).

The FCA provides that a "copy of the complaint ... shall be served on the Government." Id. § 3730(b)(2). "The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information." Id. Moreover, the "Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal." Id. § 3730(b)(3). "Before the expiration of the 60-day period or any extensions," however, the Government shall "(A) proceed with the action, in which case the action shall be

899 F.3d 167

conducted by the Government; or (B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action." Id. § 3730(b)(4).

The FCA includes several other limiting provisions, in part a response to the possibility that the large profits available to qui tam relators created "the danger of parasitic exploitation of the public coffers." United Statesex rel. Springfield Terminal Ry. Co. v. Quinn , 14 F.3d 645, 649 (D.C. Cir. 1994). To limit such abuses, Congress established several restrictions on FCA qui tam actions. State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, ––– U.S. ––––, 137 S.Ct. 436, 440, 196 L.Ed.2d 340 (2016). One of these provisions, known as the "first-to-file bar," provides that "[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5) (emphasis added). "The command is simple: as long as a first-filed complaint remains pending, no related complaint may be filed." United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011). The first-to-file bar ensures that only one relator shares in the Government's recovery and encourages potential relators to file their claims promptly. See United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 234 (3d Cir. 1998).

2. Factual Background

Allergan is a pharmaceutical company that develops, manufactures, and markets health care products, including products relevant to cataract surgeries. Wood, a former Allergan employee, alleges that in the course of his employment he became aware that, from at least 2003 through 2011, Allergan provided large quantities of free medical products to physicians to entice them to prescribe Allergan drugs, specifically to cataract patients, many of whom were beneficiaries of government-funded health programs (e.g., Medicaid and Medicare). Wood contends that certain products were given to physicians who promised to begin prescribing or to increase their orders of Allergan products. Wood claims, inter alia, that these acts caused Medicare and Medicaid providers to present false claims for payment for Allergan drugs to the Government in violation of the FCA.

Wood filed this action, on behalf of the Government, twenty-five states, and the District of Columbia, on July 26, 2010. At the time, two other actions alleging similar FCA violations were pending. First, in October 2008, a relator filed an action in the United States District Court for the District of New Jersey alleging that Allergan induced physicians to prescribe Allergan-brand cataract products by sending them, inter alia , free surgical kits. See United States ex rel. Lampkin v. Johnson & Johnson, Inc., No. 08-CV-5362 (D.N.J.). Second, in January 2010, a second relator filed a similar lawsuit against Allergan, in the United States District Court for the District of Columbia, concerning the distribution of free patient kits.1 See United States and District of Columbia ex rel. Caryatid, LLC v. Allergan, Inc., No...

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