Contract – Later FCA Suit Derived From First Suit

U.S. ex rel. Steven May v. Purdue Pharma LP (Lawyers Weekly No. 001-022-16, 16 pp.) (Diaz, J.) No. 14-2299, Jan. 29, 2016; USDC at Beckley, W.Va. (Berger, J.) 4th Cir.

Holding: In a False Claims Act suit alleging Purdue Pharma marketed OxyContin by fraudulently inflating its analgesic properties, the public disclosure bar precludes this suit because of its relation to an earlier FCA suit filed by the husband of a plaintiff in the current suit, the 4th Circuit says; the earlier suit, filed by a former Purdue Pharma employee, was barred based on a release he signed as part of a severance package.

Relators alleged Purdue Pharma marketed OxyContin as having a falsely inflated 2:1 equianalgesic ratio – which is a measure of a painkiller’s potency – as compared to one of Purdue’s older pain drugs, MS Contin. By overstating the ratio, husband claimed in the first FCA suit, Purdue deceived physicians into prescribing – and the federal government into paying for – OxyContin instead of less costly MS Contin. In 2010, we held that husband’s qui tam action must be dismissed based on a release he executed accepting a severance package from Purdue after it restructured its workforce.

After the U.S. Supreme Court denied cert in husband’s case, his wife filed the qui tam case presently before the court. Joining her as relator is Steven May, a former Purdue employee who worked under husband. The district court dismissed the suit on res judicata grounds, giving preclusive effect to husband’s qui tam action. We vacated that judgment, holding that husband’s release was personal to him.

On remand, the district court again dismissed, holding that the allegations in the amended complaint were based on claims from husband’s suit and the public disclosure bar stripped the court of subject matter jurisdiction. In the alternative, the court held that relators failed to plead fraud with particularity under Fed. R. Civ. P. 9(b), and denied leave to amend.

‘Based Upon’

We interpret the phrase “based upon” in the pre-2010 public disclosure bar differently than our sister circuits. While other circuits read the phrase to bar FCA claims that are “substantially similar to” or “supported by” publicly disclosed information, we interpret it to preclude actions only where the relator has actually derived from a public disclosure the allegations upon which his qui tam action is based.

We must determine whether current relators can sidestep the public disclosure bar when their allegations – though not directly stemming from the docket entries in husband’s earlier lawsuit – are derived from facts their attorney learned while representing husband and preparing the public filings in his case. We hold the district court correctly dismissed the relators’ suit.

Relators’ claim of error rises and falls with our decision in U.S. ex rel. Siller v. Becton Dickinson & Co., 21 F.3d 1339 (4th Cir. 1994). Here, unlike in Siller, it is clear relators did not independently discover the facts underpinning their allegations. We know beyond doubt that relators did not learn of the alleged fraud entirely independently of a prior lawsuit, as may have been true for the relator in Siller. Instead, relators’ knowledge in this case stems from their attorney’s involvement in husband’s qui tam action.

We decline relators’ invitation to read Siller so as to render it internally inconsistent and at odds with the public disclosure bar’s purpose.

Dismissal of the suit affirmed.