Two partnerships and infighting between relators recently produced a series of difficult questions addressed by the U.S. Court of Appeals for the Third Circuit in In re Plavix Mktg., Sales Practices & Prod. Liab. Litig. (No. II). Three individuals formed a limited liability partnership, JKJ, to bring a qui tam action against Sanofi-Aventis and Bristol-Myers Squibb, pharmaceutical companies that developed and marketed the anti-clotting drug Plavix.
After JKJ filed its qui tam complaint, however, its members had a falling out. One member left the partnership, and the two remaining members created a new partnership, also named JKJ, with a new third member. The old JKJ partnership was dissolved, and the new JKJ partnership filed an amended qui tam complaint.
The defendants moved to dismiss the amended qui tam complaint based on the False Claims Act’s (FCA) first-to-file bar. The first-to-file bar provides that “[w]hen 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.” The defendants argued that filing the amended complaint violated the first-to-file bar because the new JKJ partnership was a new party to the action.
The defendants also argued that the first-to-file bar was jurisdictional and therefore the partnership carried the burden of demonstrating the bar’s inapplicability. The district court agreed with the defendants, but the Third Circuit reversed the district court’s order granting the defendants’ motion to dismiss. In a decision that could find its way before the Supreme Court, the Third Circuit ruled that the first-to-file bar was not jurisdictional and that adding the new JKJ partnership as the relator in the case did not violate the bar.
FCA’s First-to-File Bar Is Not Jurisdictional
Determining whether a statutory provision is jurisdictional carries significant consequences: the plaintiff bears the burden of demonstrating jurisdiction; evidence may be admissible when challenging jurisdiction; and a jurisdictional challenge cannot be waived. In In re Plavix, the Third Circuit observed that courts of appeals have been divided as to whether the first-to-file bar is jurisdictional, with the Fourth, Fifth, Sixth, Ninth and Tenth Circuits concluding that the bar is jurisdictional while the First, Second, and D.C. Circuits reached the opposite conclusion.
The Third Circuit deepened that circuit split and joined the First, Second, and D.C. Circuits to hold that the first-to-file bar is not jurisdictional. Under the Supreme Court’s “clear statement” rule, a statutory provision is not jurisdictional unless there exists a clear congressional statement that the provision is jurisdictional. The Third Circuit observed that “no language” in the first-to-file bar clearly demonstrated that the bar was jurisdictional.
Also, the Third Circuit cited the first-to-file bar’s location within the FCA as a further indication of the bar’s non-jurisdictional nature: “[i]f Congress had meant to make the first-to-file bar jurisdictional, it would have logically placed the bar in one of two other sections that mention jurisdiction and were added at the same time as it. Instead, Congress put it … alongside other run-of-the-mill procedural rules.” Thus, the Third Circuit concluded that the bar is not jurisdictional.
First-to-File Bar Does Not Preclude the Addition of Non-Parties to an Existing FCA Suit by the Court or the Existing Parties
After a relator files an FCA action, the first-to-file bar prohibits intervention in that action by another person or the filing of another FCA action based on the same underlying facts. In In re Plavix, the Third Circuit addressed whether the new JKJ partnership’s replacement of the old JKJ partnership through filing the amended complaint was an “intervention” in violation of the first-to-file bar. The court held that it was not.
The Third Circuit reasoned that a non-party with interests relevant to an existing suit can become a party to that suit through the following three means:
- Filing a separate action.
- Seeking addition to the suit through the court or existing parties (g., joinder or the substitution of parties).
The Third Circuit held that the first-to-file bar only prohibits the first two categories of joining a suit – intervention and the filing of a separate suit – not the third. The court concluded that the new JKJ partnership’s addition to the FCA action fell into that third category for joining an existing suit and was not an “intervention.”
The Third Circuit reasoned that adding the new JKJ partnership through an amended complaint was not an intervention because “a third party intervenes when he injects himself between two existing sides, not when he is drawn in or becomes one side or another.” Here, the new JKJ partnership did not insert itself between the defendants and the old JKJ partnership but rather became the relator in the amended complaint.
The Third Circuit further observed that, if Congress had wanted to, it could have captured a “broader class of parties entering suits” – such as parties added through an amended complaint – by using words other than, or in addition to, “intervene.”
The Third Circuit’s ruling raises several difficult questions. How could the new JKJ partnership have been “added” through the amended complaint following the dissolution of the old JKJ partnership? As a practical matter, does the first-to-file bar only prohibit adding a new relator where the original relator opposes the addition?
The Third Circuit’s decision also directly conflicts with the Tenth Circuit’s decision in United States ex rel. Little v. Triumph Gear Sys., Inc. In Little, the Tenth Circuit held that intervention under the FCA “takes place when a non-party becomes a party—regardless of the mechanism by which that occurs” and so the first-to-file bar prevents the replacement of a relator through a complaint’s amendment. Given those questions and the newly created split with the Tenth Circuit, the Third Circuit’s decision may ultimately spark interest in the Supreme Court.
For more information about recent developments regarding the first-to-file bar and other updates on the False Claims Act, contact a member of the Bass, Berry & Sims Healthcare Fraud Task Force.