June 23, 2015 Articles

United States ex rel. Garcia v. Novartis AG

A good primer on adequate allegations of qui tam fraud, the "first-to-file" rule, and the public disclosure bar

by Shain Khoshbin

The False Claims Act (FCA), 31 U.S.C. ยง3729 et seq., makes a party liable for triple damages and various penalties if that party knowingly submitted or caused the submission of a fraudulent claim to the United States. The statute's qui tam provision allows a private person (known as a "relator" and popularly as a "whistleblower") to bring a lawsuit on behalf of the United States, where that person has information that the named defendant violated the FCA. In a qui tam action, the relator will be entitled to a percentage of the recovery as a reward for exposing the wrongdoing and recovering funds for the government. Sometimes, the government will intervene in the suit to be part of the conduct of the case.

The manner in which a qui tam complaint is pled may not only invite a motion to dismiss due to lack of specificity, but also deprive the district court of jurisdiction over the case. Rule 9(b) of the Federal Rules of Civil Procedure requires a relator to plead fraud with specificity. Pursuant to the "first-to-file rule," no person other than the government may intervene or bring a related action based on the facts underlying the pending action. The "public disclosure bar" also provides that no court shall have jurisdiction over qui tam actions based upon the public disclosure of allegations or transactions in a civil hearing, unless the person bringing the action is an original source of the information. The United States District Court for the District of Massachusetts highlighted the interaction between these legal principles in United States ex rel. Garcia v. Novartis AG, No. 06.10565-WGY, 2015 U.S. Dist. LEXIS 32771 (D. Mass. Mar. 17, 2015).

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