Fourth Circuit Holds That FCA’s Amended Public Disclosure Provision Does Not Apply Retroactively When Case Alleges Pre-Amendment Misconduct

 

In United States ex rel. May v. Perdue Pharma, L.P., 2013 U.S. App. LEXIS 24708 (4th Cir. Dec. 12, 2013), the Fourth Circuit ruled that the version of the FCA’s public disclosure bar in effect prior to a 2010 amendment applies to cases based on pre-amendment misconduct.

In U.S. ex rel. May, supra, a pair of whistleblowers brought an FCA action in the Southern District of West Virginia alleging that Purdue Pharma made false statements while marketing its painkiller drug, OxyContin. The whistleblowers’ case was filed after anotherqui tam action that had alleged similar misconduct by Purdue. Noting that the earlier case had been dismissed with prejudice in light of a release of claims signed by the relator, the district court dismissed United States ex rel. May on the ground that it was barred by res judicata.

The U.S. ex rel. May relators appealed the district court’s decision, and, on appeal, the defendant and the government argued the district court lacked jurisdiction over the case in light of the public disclosure provision. The Fourth Circuit reversed the district court and rejected the parties’ public disclosure challenge. 2013 U.S. App. LEXIS 24708, at *31. After quickly disposing of the district court’s erroneous application of the principle of res judicata to a non-merits-based dismissal, the Court of Appeals turned to the question of whether the post-amendment or pre-amendment version of the public disclosure provision applied to the 2011 case. Id. at *13. The Court interpreted the public disclosure amendment to apply only to those qui tam claims based on alleged misconduct that took place after the effective date of the amendment; accordingly, the Court ruled that the pre-2010 version of the provision applied to the case at hand because the alleged FCA violations occurred before the law’s revision. Id. at *24.

Writing for the panel, Chief Judge Traxler then applied 4^th Circuit precedent to rule that the case was not barred under the earlier public disclosure provision because the relators’ knowledge of the fraud was not derived from the public disclosures in the earlier case. Id.at *25, *28. The panel vacated the District Court’s decision and remanded for further proceedings. Id. at *31.