Summary
The Third Circuit held that the False Claims Act's first-to-file bar (31 U.S.C. § 3730(b)(5)) is not jurisdictional but a merits defense under Rule 12(b)(6), and that it only prohibits intervention under Rule 24 or the filing of a separate related action—not the substitution of a new relator via amended complaint. The court rejected an overbroad reading of *Eisenstein v. City of New York*, concluding that the plain text of "intervene" does not bar a new partnership from replacing an old one as qui tam relator. Additionally, the Anti-Assignment Act does not prohibit transferring a relator's interest in a qui tam suit. The case was vacated and remanded for further proceedings on partnership law and procedural issues.
Topics
Practice areas
Questions Presented
- Whether the first-to-file bar under 31 U.S.C. § 3730(b)(5) is jurisdictional.
- Whether the first-to-file bar bars a new relator from entering a qui tam suit via amendment of the complaint when the relator is added as a party, rather than by intervening or bringing a related action.
- Whether the Anti-Assignment Act, 31 U.S.C. § 3727, bars a qui tam relator from transferring its interest in the suit.
Holdings
- The first-to-file bar is not jurisdictional; it is a non-jurisdictional procedural rule that does not divest the court of subject-matter jurisdiction.
- The first-to-file bar does not bar a new relator from entering a qui tam suit when the relator is added via amendment of the complaint; it only bars intervention under Rule 24 or the bringing of a related action based on the same facts.
- The Anti-Assignment Act does not bar a qui tam relator from assigning its interest in a suit because the claim is against the defendant, not against the United States government.
Key quotations
“To intervene is to butt in, not to be dragged in or to replace an existing party to a lawsuit.” (at 10)
“Given that distinction, Congress would not have chosen the specific verb 'intervene' to express the general concept of entry into a suit, no matter who initiated it or how.” (at 12)
“We must read Eisenstein, like any opinion, in context. Judicial opinions are not statutes, from which we squeeze all we can out of every last word.” (at 14)
Factual background
In 2011, Jeffrey Stahl, Kelly Evans, and John Venditto formed JKJ Partnership (Old JKJ) to pursue a qui tam False Claims Act suit against Sanofi-Aventis and Bristol-Myers Squibb for marketing the drug Plavix. The suit alleged that the companies promoted Plavix for a broad range of patients despite knowing that many would not benefit, causing false claims for healthcare reimbursement. The United States declined to intervene. By 2016, Venditto left and was replaced by Dr. Paul Gurbel, forming New JKJ. The second amended complaint named New JKJ as the relator. The defendants moved to dismiss based on the first-to-file bar.
Procedural history
The District Court dismissed the relator's second amended complaint, holding that the new partnership (New JKJ) was a different entity from the original partnership (Old JKJ) and thus its participation violated the first-to-file bar. The court relied on Eisenstein and a Tenth Circuit decision. The Third Circuit certified questions to the Delaware Supreme Court regarding partnership law, which answered them. This appeal followed.
Remand instructions
The case is remanded to the District Court for further proceedings consistent with the opinion, including consideration of whether New JKJ is a proper relator under partnership law and civil procedure, and whether the second amended complaint exceeds the bounds of Rule 15, among other issues.