Silbersher v. Valeant Pharm. Int'l
| Docket Number | 20-16176 |
| Decision Date | 03 August 2023 |
| Parties | ZACHARY SILBERSHER, Relator, Plaintiff-Appellant, v. VALEANT PHARMACEUTICALS INTERNATIONAL, INC.; VALEANT PHARMACEUTICALS INTERNATIONAL; SALIX PHARMACEUTICALS, LTD.; SALIX PHARMACEUTICALS, INC.; FALK PHARMA GMBH, Defendants-Appellees. and UNITED STATES OF AMERICA, ex rel.; STATE OF CALIFORNIA; STATE OF COLORADO; STATE OF CONNECTICUT; STATE OF DELAWARE; STATE OF FLORIDA; STATE OF GEORGIA; STATE OF HAWAII; STATE OF ILLINOIS; STATE OF INDIANA; STATE OF IOWA; STATE OF LOUISIANA; STATE OF MARYLAND; STATE OF MICHIGAN; STATE OF MINNESOTA; STATE OF MONTANA; STATE OF NEVADA; STATE OF NEW HAMPSHIRE; STATE OF NEW JERSEY; STATE OF NEW MEXICO; STATE OF NEW YORK; STATE OF NORTH CAROLINA; STATE OF OKLAHOMA; STATE OF RHODE ISLAND; STATE OF TENNESSEE; STATE OF TEXAS; STATE OF VERMONT; STATE OF WASHINGTON; COMMONWEALTH OF MASSACHUSETTS; COMMONWEALTH OF VIRGINIA; DISTRICT OF COLUMBIA, Plaintiffs, |
| Court | U.S. Court of Appeals — Ninth Circuit |
Argued and Submitted June 10, 2022 Portland, Oregon
Appeal from the United States District Court for the Northern District of California James Donato, District Judge Presiding D.C. No. 3:18-cv-01496-JD Tejinder Singh (argued), Sparacino PLLC, Washington, D.C Bret D. Hembd, Herrera Kennedy LLP, Burbank, California Nicomedes S. Herrera and Andrew M. Purdy, Herrera Kennedy LLP, Oakland, California; Warren T. Burns, Burns Charest LLP, Dallas, Texas; Christopher J. Cormier, Burns Charest LLP, Washington, D.C.; for Plaintiff-Appellant.
Michelle Lo, Assistant United States Attorney; Office of the United States Attorney; San Francisco, California; for Plaintiffs United States of America, States of California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Vermont, Washington, the Commonwealth of Massachusetts, the Commonwealth of Virginia, and District of Columbia.
Moez M. Kaba (argued), Padraic W. Foran, Daniel C. Sheehan, and Haoxiaohan Cai, Hueston Hennigan LLP, Los Angeles, California; for Defendants-Appellees Valeant Pharmaceuticals International Inc., Valeant Pharmaceuticals International, Salix Pharmaceuticals Ltd., and Salix Pharmaceuticals Inc.
Christian E. Mammen (argued), Womble Bond Dickinson (US) LLP, San Francisco, California; Mary W. Bourke and Kristen Cramer, Womble Bond Dickinson (US) LLP, Wilmington, Delaware; for Defendant-Appellee Dr. Falk Pharma GmbH.
Justin T. Berger, Cotchett Pitre & McCarthy LLP, Burlingame, California; Jacklyn DeMar, Taxpayers Against Fraud Education Fund, Washington, D.C.; for Amicus Curiae Taxpayers Against Fraud Education Fund.
Gordon D. Todd, Kimberly A. Leaman, Christopher S. Ross, and Katy (Yin Yee) Ho, Sidley Austin LLP, Washington, D.C.; Jack E. Pace III and Peter J. Carney, White & Case LLP, New York, New York; for Amici Curiae Johnson & Johnson and BTG International Ltd.
Before: Mary M. Schroeder and Gabriel P. Sanchez, Circuit Judges, and John Antoon II, [*] District Judge.
The panel reversed the district court's dismissal of relator Zachary Silbersher's qui tam action under the False Claims Act against Dr. Falk Pharma GmbH and drugmaker Valeant Pharmaceuticals International, Inc., and remanded for further proceedings.
Silbersher alleged that Valeant fraudulently obtained two sets of patents related to a drug and asserted these patents to stifle competition from generic drugmakers. Silbersher further alleged that defendants defrauded the federal government by charging an artificially inflated price for the drug while falsely certifying that its price was fair and reasonable. Dismissing Silbersher's action under the False Claims Act's public disclosure bar, the district court concluded that his allegations had already been publicly disclosed, including in inter partes patent review ("IPR") before the Patent and Trademark Office.
The False Claims Act's public disclosure bar, as amended in 2010, applies if (1) the disclosure at issue occurred through one of the channels specified in the statute; (2) the disclosure was public; and (3) the relator's action is substantially the same as the allegation or transaction publicly disclosed. Here, it was undisputed that the relevant documents were publicly disclosed.
Under the first prong of the public disclosure bar, the Act provides for the following three channels. Channel (i) applies if a disclosure was made "in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party," and channel (ii) applies if a disclosure was made "in a congressional, Government Accountability Office, or other Federal Report, hearing, audit, or investigation." Channel (iii) applies if a disclosure was made in the news media.
The panel held that an IPR proceeding in which the Patent and Trademark Office invalidated Valeant's "'688" patent was not a channel (i) disclosure because the government was not a party to that proceeding, and it was not a channel (ii) disclosure because its primary function was not investigative. The panel held that, under United States ex rel. Silbersher v. Allergan, 46 F.4th 991 (9th Cir. 2022), the patent prosecution histories of Valeant's patents were qualifying public disclosures under channel (ii). The panel assumed without deciding that a Law360 article and two published medical studies were channel (iii) disclosures.
The panel held that the "substantially the same" prong of the public disclosure bar, as revised by Congress in its 2010 amendments to the False Claims Act, applies when the publicly disclosed facts are substantially similar to the relator's allegations or transactions. None of the qualifying public disclosures made a direct claim that Valeant committed fraud, nor did they disclose a combination of facts sufficient to permit a reasonable inference of fraud. Accordingly, the public disclosure bar was not triggered.
The panel resolved a cross-appeal in a separately-issued memorandum disposition.
This appeal presents the question whether the public disclosure bar to the False Claims Act ("FCA") applies to Zachary Silbersher's claims against Dr. Falk Pharma GmbH and drugmaker Valeant Pharmaceuticals International, Inc. (collectively, "Valeant").[1] Silbersher alleges that Valeant fraudulently obtained two sets of patents related to the anti-inflammatory drug Apriso and asserted these patents to stifle competition from generic drugmakers. Silbersher further alleges that defendants defrauded the government by charging an artificially inflated price for Apriso while falsely certifying that the drug's price was fair and reasonable. The district court dismissed Silbersher's qui tam action under the public disclosure bar. See 31 U.S.C. § 3730(e)(4)(A). This case requires us to examine Congress's 2010 amendments to the FCA's public disclosure bar and to determine whether Silbersher's claims are "substantially the same" as information that was publicly disclosed in one of three enumerated channels under the FCA. See id. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse.[2]
The False Claims Act imposes civil liability on anyone who "knowingly presents" a "fraudulent claim for payment" to the federal government. 31 U.S.C. § 3729(a)(1)(A); accord United States ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir. 2016). Known as "Lincoln's Law," Congress passed the Act at President Lincoln's request to combat fraud by Civil War defense contractors. See United States ex rel. Bennett v. Biotronik, Inc., 876 F.3d 1011, 1013 n.1 (9th Cir. 2017). The Act allows private citizens, referred to as "relators," to bring fraud claims on the government's behalf against those who have violated the Act's prohibitions. United States ex rel. Silbersher v. Allergan, 46 F.4th 991, 994 (9th Cir. 2022); see 31 U.S.C. § 3730(b)(1).[3]If the government declines to proceed, the relator may prosecute the action and, if successful, recover up to thirty percent of the damages. 31 U.S.C. §§ 3730(b)(4), (d)(2).
The promise of bounty has sometimes incentivized relators to bring dubious claims. The Supreme Court's decision in United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943), provides the paradigmatic example of a "parasitic" qui tam suit. Hess brought a qui tam action alleging that electricians colluded to inflate prices by coordinating their bids on government contracts. Id. at 539. Before Hess's qui tam action, the government had already indicted the electricians for the same scheme and the electricians entered a plea bargain requiring them to pay $54,000 in fines. Id. at 545. Spotting an opportunity, Hess copied the government's indictment and brought a qui tam action against the electricians seeking hundreds of thousands of dollars in damages. Id. The Court allowed Hess's suit to stand, reasoning that the action advanced "one of the purposes for which the [FCA] was passed" because it promised "a net recovery to the government of $150,000, three times as much as the fines imposed in the criminal proceedings." Id. at 545.
"Hess inspired public outcry over the liberality of the qui tam provisions that prompted speedy congressional response." United States ex rel. Springfield Terminal Ry. v. Quinn, 14 F.3d 645, 650 (D.C. Cir. 1994). In 1943, President Roosevelt signed amendments to the FCA that barred qui tam claims "based upon evidence or information in the possession" of the federal government. 31 U.S.C. § 232(C) (1945). Congress later determined, however, that this "government knowledge" bar prevented too...
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