United States ex rel. Bennett v. Biotronik, Inc.

• Decision Date: 01 December 2017
• Docket Number: No. 16-15919,16-15919
• Citation: 876 F.3d 1011
• Parties: UNITED STATES of America et al. EX REL. Max BENNETT, Plaintiff–Appellant, v. BIOTRONIK, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

876 F.3d 1011

UNITED STATES of America et al. EX REL. Max BENNETT, Plaintiff–Appellant,

v.BIOTRONIK, INC., Defendant–Appellee.

No. 16-15919

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 12, 2017 San Francisco, California

Filed December 1, 2017

Jeremy L. Friedman (argued), Oakland, California, for Plaintiff–Appellant.

Megan Jeschke (argued) and Christopher Myers, Holland & Knight LLP, Tysons, Virginia; Cheryl A. Feeley, Holland & Knight LLP, Washington, D.C.; Vince Farhat, Holland & Knight LLP, Los Angeles, California; for Defendant–Appellee.

Edward Himmelfarb (argued) and Michael S. Raab, Attorneys, Appellate Staff; Phillip A. Talbert, United States Attorney; Civil Division, United States Department of Justice, Washington, D.C.; for Amicus Curiae United States of America.

Before: Richard C. Tallman and Carlos T. Bea, Circuit Judges, and Eugene E. Siler,^* Senior Circuit Judge.

Dissent by Judge Siler

BEA, Circuit Judge:

I.

Where an individual has information regarding a fraud perpetrated on the Federal Government, the False Claims Act (FCA), 31 U.S.C. § 3729 et seq. , empowers that person—called a "relator"—to bring a suit on the Federal Government's behalf.¹ These are called qui tam² suits, and have been described as the "primary tool for combatting fraud against the federal government." U.S. ex rel. Kelly v. Boeing Co. , 9 F.3d 743 (9th Cir. 1993).³

But the right to bring qui tam suits is not absolute.

First, there are restrictions to allow the Government to determine whether the relator's claims are worthy enough to engage federal resources. The qui tam complaint is sealed initially for sixty days. § 3730(b)(2). The Government is required to investigate, § 3730(a), but, if unable to complete its investigation within sixty days, can seek to extend the seal period. § 3730(b)(3). After it completes the investigation, the Government must notify the court if it will proceed with the action. This is referred to as "intervening." § 3730(b)(4)(A). If the Government declines to intervene, the relator may proceed. § 3730(b)(4)(B). If the Government does intervene, the Government will control the action. It may prosecute the action, settle it, or dismiss it.⁴

Second, even if the Government does not intervene and take over the action, the FCA still does not allow every relator to bring a suit, but rather contains a series of "bars" to such suit. Section 3730(d)(3) prohibits a suit by a relator convicted of criminal conduct arising from his role in the fraud against the government. Another bar, § 3730(b)(5) —the "first-to-file bar"—prohibits suits from relators when another relator's qui tam action regarding the same conduct is pending. A third bar, § 3730(e)(4)(A) —the "public-disclosure bar"—prohibits a relator from bringing a suit based upon information which has been publicly disclosed in a different proceeding. Finally there is § 3730(e)(3) —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."

In a matter of first impression, we are asked to determine the reach of the government-action bar.

II.

On December 31, 2009, Brian Sant filed an FCA qui tam action against Biotronik, a medical device supplier.

Sant alleged that Biotronik engaged in a series of wrongful acts including, among other things, (1) the promotion of unapproved and unnecessary medical devices, (2) bribes to physicians in the form of paid, but useless, speaking engagements, (3) the creation of "advisory boards" meant to funnel illegal payments to physicians, and (4) the payment of bribes to physicians in the form of sports tickets, gift cards, Broadway plays, extravagant dinners and travel, and opera tickets. Sant also asserted (5) that Biotronik used sham clinical studies to provide kick-backs for physicians who prescribed its pacemakers and implantable cardiac defibrillators

. The "quid" of these benefits to physicians was alleged to procure the "quo" of physicians' use or endorsement of Biotronik's medical devices.

The United States investigated Sant's charges for nearly four years. Finally, on May 14, 2014, the United States intervened in Sant's case and informed the court that it had reached a settlement agreement with Biotronik and Sant on claims related to certain "covered conduct." This conduct included Biotronik's payment for doctors' meals at expensive restaurants and to doctors for membership on a physician advisory board for which proper documentation about specific work performed was not maintained, all in return for the doctors' use of Biotronik devices. The "covered conduct" did not include any of the other allegations, and therefore did not include the alleged sham clinical studies. The case was dismissed in June 2014 with prejudice with respect to Sant. With respect to the United States, the case was dismissed with prejudice as to the "covered conduct," and without prejudice with respect to any other conduct.

On March 31, 2010, three months after Sant's complaint was filed, and more than three years before Sant's case was dismissed, Bennett filed a qui tam complaint in Nevada federal district court that substantially mirrored the complaint filed earlier by Sant. Bennett worked at Biotronik from 2004 until 2010 as a product manager, business development manager, district sales manager, and regional sales manager before being terminated. Upon an ex parte motion by the United States, the Nevada district court transferred Bennett's case to the Eastern District of California because it overlapped significantly with the complaint filed by Sant. The United States did not intervene in Bennett's first complaint, and on April 30, 2014, Bennett's case was dismissed without prejudice upon Bennett's request.⁵

On October 14, 2014, Bennett filed the qui tam complaint at issue in this appeal on behalf of the United States. The action also included twenty-eight state-law claims based upon certain state-law versions of the FCA, and a claim on behalf of the District of Columbia based upon the District of Columbia Procurement Act, D.C. Code § 2-308.13, et seq. In this second complaint, Bennett provided further detail about the "uncovered conduct" described in the Sant v. Biotronik complaint, including the alleged sham clinical studies, but otherwise did not allege new claims against Biotronik. The United States and California both declined to intervene in Bennett's case. California consented to dismissal of the claims brought on behalf of plaintiff state governments and the District of Columbia.

Biotronik filed a motion to dismiss in October 2015. The district court granted the motion on the basis of 31 U.S.C. § 3730(e)(3), which provides that "[i]n no event may a person bring an action under [the FCA] which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party."⁶ The district court noted that there was no question that Bennett raised substantially the same allegations as those alleged by Sant in the settled and dismissed case Sant v. Biotronik , and determined that, because the Government is a party to Sant v. Biotronik , Bennett's case—based as it is upon the same "allegations [and] transactions" as Sant —is barred. Bennett nevertheless made two arguments: (1) that the statutory language of § 3730(e)(3), which is written in the present tense, should not prohibit a subsequent suit, as "Sant v. Biotronik is no longer pending," thus meaning that the Government no longer "is" a party to it; and (2) that the Government had intervened in part, but not all, of Sant v. Biotronik , as "the Sant v. Biotronik case was dismissed without prejudice to allow the Government to pursue claims related to sham clinical studies." The district court ruled against both of Bennett's arguments.

The district court made two rulings regarding Bennett's argument that the use of the present tense in § 3730(e)(3) destroys the government-action bar in cases no longer pending. First, the district court ruled that, because Congress did not include the word "pending" in § 3730(e)(3) —as it does in § 3730(b)(5) ("When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action") (emphasis added)—Congress did not express an intention to limit the prohibition contained in § 3730(e)(3) exclusively to pending cases. The district court also ruled that Bennett's interpretation of the statute would clash with the "widely recognized purpose of § 3730(e)(3) : discouraging follow-on lawsuits that provide the government with little or no benefit."

In addition to its findings regarding § 3730(e)(3)'s statutory purpose, the district court gave two reasons for its ruling against Bennett's argument that the Government had intervened in part, but not in all, of the earlier case. First, the district court ruled that § 3730(e)(3) does not require a claim-by-claim analysis, but refers merely to "civil suit[s]" and "administrative civil money penalty proceeding[s]" when describing the proceedings which are subject to the government-action bar. Second, the court ruled that the Supreme Court's decision in Eisenstein v. City of N.Y. , 556 U.S. 928, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009) implied that no claim-by-claim analysis should take place when deciding whether the Government is a party to a suit, but rather demonstrated that when the United States intervenes in a given case, it becomes "a party to the 'lawsuit,' the 'action,' the 'case,' or the 'litigation,' and not merely to an allegation or charge." (internal citations omitted).

This appeal followed.

III.

The district court's legal conclusions are reviewed de novo . United States v. Forrester , 512 F.3d 500, 506 (9th Cir. 2008). Thus, the district court's...