Fourth Circuit affirms dismissal of FCA lawsuit against Purdue Pharma

By Jessica Karmasek | Feb 18, 2016

RICHMOND, Va. (Legal Newsline) - Last month, a federal appeals court upheld the dismissal of a False Claims Act lawsuit that was based on facts learned by the whistleblower’s counsel in a previous qui tam lawsuit.

The U.S. Court of Appeals for the Fourth Circuit, in its Jan. 29 opinion, sided with the maker of the painkiller OxyContin and held that the FCA’s pre-2010 public disclosure bar prohibits a relator’s attorney from bringing the same claims with a new relator, or whistleblower.

“Here, unlike in Siller, it is clear that the Relators did not independently discover the facts underpinning their allegations,” Judge Albert Diaz wrote for a three-judge panel of the Fourth Circuit. “Additionally, we know beyond doubt that the Relators did not learn of the alleged fraud ‘entirely independently of’ a prior lawsuit, as may have been true for the relator in Siller.”

While Congress amended the public disclosure bar in 2010, the Fourth Circuit held that in the instant case, which involves allegations between 1996 and 2005, the pre-2010 version of the bar governs.

It provides: “No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing… unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.”

Steven May and Angela Radcliffe, the relators, appealed a West Virginia federal judge’s dismissal of their qui tam action under the FCA. They argued the district court incorrectly concluded that the pre-2010 version of the law public disclosure bar divested the court of subject matter jurisdiction and, alternatively, that they failed to plead fraud in accordance with Federal Rule of Civil Procedure 9(b).

The Fourth Circuit agreed that the public disclosure bar left the U.S. District Court for the Southern District of West Virginia without jurisdiction over the relators’ FCA claims; therefore, it did not reach the court’s alternative ground for dismissal.

As Diaz explained in the Fourth Circuit’s opinion, the FCA allegations at issue “have enjoyed a long though not particularly fruitful life,” having reached the court for a third time.

Ten years ago, Mark Radcliffe, a former district sales manager for Purdue Pharma, filed a qui tam action under the FCA against Purdue.

He alleged a fraudulent scheme whereby Purdue marketed the pain medication 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, Radcliffe claimed, Purdue deceived physicians into prescribing -- and the federal government into paying for -- OxyContin instead of less costly MS Contin.

In 2010, the Fourth Circuit held that Radcliffe’s qui tam action must be dismissed based on a release he executed upon accepting a severance package from Purdue after it restructured its workforce.

Less than two months after the U.S. Supreme Court denied Radcliffe’s petition for certiorari, his wife Angela decided to “take up... the baton” and file the qui tam action against Purdue before the court. Joining her as a relator was May, a former Purdue employee who worked under Mark Radcliffe.

One of their attorneys is Mark Hurt, an Abingdon, Va., attorney who was Mark Radcliffe’s counsel throughout his qui tam action.

The allegations in the relators’ lawsuit are “nearly identical to” those pursued by Mark Radcliffe, the Fourth Circuit noted in its most recent opinion.

The district court dismissed the relators’ lawsuit on res judicata grounds, giving preclusive effect to Mark Radcliffe’s qui tam action.

The Fourth Circuit vacated that judgment, holding that his release “was personal to him” and “could not serve as a defense to any claims that the Relators (or other non-signatories) might assert against Purdue.”

While Purdue argued that the Fourth Circuit could affirm the district court’s dismissal on the alternative theory that the public disclosure bar precluded the relators’ action, the appeals court explained that ruling on that issue would be premature, as the district court had not made the requisite jurisdictional findings of fact.

On remand, the district court dismissed the relators’ amended complaint, holding that their allegations were based on the claims from Mark Radcliffe’s lawsuit and therefore the public disclosure bar stripped the court of subject matter jurisdiction.

In the alternative, the court held that the relators failed to plead fraud with particularity under Rule 9(b), and denied the relators leave to further amend their complaint.

Their appeal with the Fourth Circuit followed.

“Like the relator in Doe, Mrs. Radcliffe and Mr. May did not learn of their allegations directly from the public disclosures at issue -- in this case, the docket entries from Mr. Radcliffe’s case. And, much like in Doe, the Relators’ claims here are based on what their attorney learned when representing another client in a matter involving the same fraud allegations,” Diaz wrote in the Fourth Circuit’s 16-page ruling.

“Finally, as in Doe, the allegations in the Relators’ complaint were publicly disclosed before suit was filed. In Siller, we suggested that facts like these would trigger the public disclosure bar, requiring dismissal. We now so hold.”

The attorneys for the whistleblowers said in a response filed in the district court in 2014 that they have always been upfront that their knowledge of the alleged scheme was second-hand.

They argued Purdue’s allegations of bad faith and its personal attack on them are a lamentable tactic used to get an advantage in litigation. They said it is a reflection on the decline of civility in the legal profession.

The drug maker called the relators’ lawsuit a “quintessential parasitic action” because it provided no new information, but instead merely copied the substance of Mark Radcliffe’s prior action.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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