U.S. SC decision in False Claims Act case will influence whistleblower suit against Purdue Pharma

By Kyla Asbury | Jul 21, 2014

BECKLEY, W.Va. (Legal Newsline) - The U.S. Supreme Court has agreed to address two False Claims Act issues that will affect FCA lawsuits in the future.

The Supreme Court granted certiorari in Kellogg Brown & Root v. United States ex rel. Carter on July 2, raising questions about wartime suspension of the False Claim's Act's statute of limitations and about its first-to-file bar.

How the Supreme Court rules will impact how long after an FCA violation the government - or a whistleblower, or relator - can bring suit, and whether multiple relators can bring related actions against a defendant so long as the related actions are not simultaneously pending, according to the motion to stay proceedings.

The Wartime Suspension of Limitations Act extends the statute of limitations for offenses involving fraud against the government to five years after the termination of hostilities as determined by the president or Congress.

If the Supreme Court affirms the U.S. Court of Appeals for the Fourth Circuit's decision that the WSLA applies to both criminal and civil fraud claims, including those brought by a private relator under the FCA, FCA defendants could be liable for violations more than 10 years ago.

The first-to-file bar provides that once a relator brings an FCA action, "no person other than the government may intervene or bring a related action based on the facts underlying the pending action."

The Supreme Court is scheduled to review the case beginning in the fall.

On July 11, Purdue Pharma filed a motion to stay proceedings in an FCA suit against it while it waits for the Supreme Court's decision.

"Last week the U.S. Supreme Court granted certiorari in Kellogg Brown & Root Services v. United States ex rel. Carter, No. 12-1497 (U.S.), a case that challenges two Fourth Circuit holdings regarding the False Claims Act," the motion states. "Those same holdings were applied by the Fourth Circuit in this case - and defendants here have likewise challenged the holdings in their own petition for certiorari."

Recognizing this overlap, the Supreme Court, at roughly the same time that it voted to grant review in Carter, also directed relators in this case to file a response to Purdue's petition, according to the decision to stay.

"Denying a stay would require the parties and the court to engage in burdensome jurisdictional fact-finding, discovery, and motions practice-all of which might prove largely if not entirely unnecessary," the motion states. "Such needless litigation would be quite costly to the parties, and would also obviously tax this Court's resources. There is no reason to impose those costs."

In the Purdue case, an appeal to the Fourth Circuit was filed Oct. 12, 2012, and a decision from the appeals court was filed Dec. 12.

Circuit Judge William Byrd Traxler Jr. authored the Dec. 12 opinion.

"Appellants...brought this action under the False Claims Act...against Purdue Pharma L.P. and Purdue Pharma, Inc.," the decision states. "Giving preclusive effect to this court's decision... the district court dismissed the action on res judicata grounds. Because we agree with the appellants that this action is not barred by res judicata, we vacate the decision of the district court and remand for further proceedings."

A motion to dismiss was filed on Feb. 9, 2012, by Purdue. It was granted on Sept. 14, 2012.

"Given the disposition of the Relators' FCA claim and the procedural posture of this litigation, where the parties have not engaged in any discovery and a trial date has not been established, the court does hereby exercise its discretion to decline supplemental jurisdiction over the Relators' state claims," District Judge Irene C. Berger's opinion states. "The Court will, therefore, dismiss these claims without prejudice to the Relators' seeking prosecution of the claims in the respective state courts."

"The complaint fails to satisfy either the heightened pleading standards of Fed. R. Civ. P. 9(b) or the more basic pleading requirements of Fed. R. Civ. P. 8," the motion to dismiss stated. "The allegations of the complaint are entirely conclusory and fail to allege facts supporting either the materiality or causation elements of an FCA violation."

The plaintiffs, Steven May and Angela Radcliff, are suing Purdue Pharma on behalf of the United States, California, Georgia, Illinois, New York and Tennessee.

May, who was a previous employee of Purdue, and Radcliffe, whose husband was a previous employee, claimed since 1995, Purdue has engaged in face-to-face marketing to physicians and other institutional decision makers who could buy or authorize the purchase of OxyContin, according to a complaint filed Dec. 30, 2010, in the U.S. District Court for the Southern District of West Virginia.

The plaintiffs claim Purdue represented that one milligram of OxyContin would give the same pain relief as two milligrams of the benchmark, MS Contin and represented that, despite OxyContin's higher milligram cost, it was cheaper than MS Contin when it measured based on the pain relief that was provided.

At Purdue's direction, May and Mark Radcliffe, as well as others, marketed OxyContin with the 2:1 lies to federal healthcare institutions in West Virginia, Virginia, California, Illinois and Georgia, according to the suit, and, as a result of Purdue's fraudulent marketing efforts, sales of the drug skyrocketed.

The plaintiffs claim Purdue knowingly made false and fraudulent cost savings and potency representations to physicians and other decision makers that were material, and had a natural tendency to influence and/or were capable of influencing their decision to prescribe OxyContin and to purchase and pay for it.

The plaintiffs are being represented by Paul W. Roop II of Roop Law Office and Mark T. Hurt of the Law Offices of Mark T. Hurt.

Purdue is being represented by John D. Hoblitzell III and Rebecca A. Betts of Kay Casto & Chaney PLLC; and Howard M. Shapiro, Christopher E. Babbitt and Charles C. Speth of Wilmer Cutler Pickering Hale & Dorr LLP.

U.S. District Court for the Southern District of West Virginia case number: 5:10-cv-1423

From Legal Newsline: Kyla Asbury can be reached at classactions@legalnewsline.com.

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