Recent California Court Decision Highlights FCA’s Effective but Underutilized “Government Action” Bar
Thursday, April 28, 2016

On April 20, 2016, the US District Court for the Eastern District of California dismissed a False Claims Act (FCA) case based on 31 U.S.C. § 3730(e)(3), otherwise known as the FCA’s “government action” bar, in US ex rel. Bennett v. Biotronik, Inc. This bar provides: “In 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 monetary penalty proceeding in which the Government is already a party.” Compared with the FCA’s public disclosure bar (§ 3730(e)(4)(a)), which serves a similar goal of preventing claims by parasitic relators where the government is already on notice of alleged fraud, the government action bar is invoked relatively infrequently. However, Bennett is reminder that qui tam defendants who face or have faced multiple suits predicated on the same or similar allegations should always consider the availability of a defense based on the government action bar, in addition to other available defenses.

The relator in Bennett alleged that the defendant, Biotronik, paid doctors to enroll patients in studies that lacked scientific and medical value, as a result of which doctors prescribed Biotronik’s cardiac devices.  A prior FCA case against Biotronik (the Sant case) contained similar allegations about studies, along with other kickback allegations. The government had intervened and immediately settled the Sant case, but the “covered conduct” in that settlement did not include the allegations relating to studies; instead, it focused on other types of purported payments to physicians.

The court dismissed the Bennett complaint based on the government action bar, in light of the prior Sant case. Drawing on the First Circuit’s opinion in US ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24 F.3d 320, 324-26 (1st Cir. 1994), the Bennett court observed that the purpose of the government action bar is to “prevent the prosecution of qui tam FCA claims that [stand] to enrich the relator but not to expose fraud.” The court held that this principle applied squarely to preclude the Bennett case, which contained similar study-related kickback allegations as those previously alleged in Sant.

The court rejected the relator’s assertion that the government action bar only applied to the “covered conduct” in the Sant settlement which, according to the relator, was the only piece of Sant as to which the government intervened. The court held that the statute does not support such a narrow and artificial reading, and that the Sant case had put the government on notice of a range of allegations, including both the “covered conduct” and the allegations concerning the studies. The government  “investigated all of those claims, and after its investigation, negotiated a joint settlement of the case and complaint.” The court observed that applying the government action bar to these facts “fits the purpose of § 3730(e)(3), to dispense with qui tam claims of wrongdoing the government has already discovered thanks to previous suits or proceedings.”

The court also rejected the relator’s assertion that the government action bar only applies while the prior action remains pending, observing that the bar does not contain the word “pending” (unlike, for example, the FCA’s first-to-file bar). And again, the court noted that the relator’s interpretation “would clash with the widely recognized purpose of § 3730(e)(3): discouraging follow-on lawsuits that provide the government with little or no benefit.”

Given that defendants increasingly face multiple FCA actions brought by different relators alleging the same or similar conduct, defense counsel should assess the viability of a motion to dismiss based on the government action bar, in addition to more frequently invoked defenses like the public disclosure bar. Under the court’s reasoning in Bennett, even where one of those actions settles on a narrow basis, the government action bar may preclude a subsequent suit involving allegations similar to those alleged in, but not part of the settlement of, the prior action.

 

NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins

 

Sign Up for e-NewsBulletins