315 F. Supp. 3d 817
D.N.J.2018Background
- JKJ Partnership 2011 LLP (a Delaware limited partnership formed by two doctors and a Sanofi sales rep) filed a qui tam complaint in 2011 alleging Sanofi/BMS concealed that Plavix is ineffective for a substantial subset of patients due to genetic variability and affirmatively misrepresented its efficacy.
- JKJ filed a Second Amended Complaint in 2017 developing allegations that defendants promoted Plavix as effective for all antiplatelet patients despite knowing ~30% (disproportionately African- and Asian-American) were ‘hypo-responders.’
- Between the original complaint (2011) and the Second Amended Complaint (2017), one original partner (Partner B) left and Dr. Paul Gurbel joined the partnership.
- Defendants moved to dismiss under Rule 12(b)(1) and 12(b)(6), arguing the FCA public-disclosure bar (pre- and post-PPACA versions) bars JKJ’s claims and that the FCA first-to-file bar prohibits the new partnership/changed relator from proceeding; they also challenged any joinder/amendment.
- The Court held that prior public disclosures cited by defendants (two private civil actions’ filings/hearings and news articles) disclosed the underlying facts (the Y) but did not disclose the alleged misrepresentations (the X) necessary to trigger the public-disclosure bar; thus the bar did not apply.
- The Court nevertheless dismissed because under Delaware law the partnership, having opted out of DRUPA’s entity model, is an aggregate association that ceased to be the same legal party when membership changed; the FCA first-to-file bar therefore precluded the successor partnership (and any newly joined partners) from intervening or being added as relators, so amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of FCA public-disclosure bar (pre- and post-2010 amendments) | JKJ: its claims are not "based upon" prior public disclosures; JKJ is an original source (or its members supply the knowledge) | Defendants: prior court filings, hearings, and press disclosed the variability-of-response and thus bar JKJ unless it is an original source | Court: Public disclosures showed the underlying facts (Y) but not the alleged misrepresentations (X); public-disclosure bar does not apply |
| Original-source status / standing of a partnership relator formed after the alleged fraud | JKJ: as a non-entity partnership its members' knowledge imputes to JKJ, permitting it to be relator | Defendants: an entity formed post-fraud cannot be original source; if JKJ is a separate entity it lacks pre-formation knowledge | Court: Accepts that the original JKJ (A,B,C) could proceed via members' knowledge because it was an aggregate partnership at formation; but membership change alters entity status (see below) |
| Effect of membership change under Delaware law and the FCA first-to-file bar | JKJ: partnership agreement preserves continuity (no dissolution on withdrawal; term persists until case resolution), so JKJ may continue despite substitution | Defendants: under DRUPA (or by effect of opting out), the change created a new partnership/party, thus new party intervention is barred by §3730(b)(5) | Court: Partnership opted out of DRUPA entity default; as an aggregate partnership it became a new legal partnership when a member left/was replaced; the new partnership is a nonparty who cannot intervene—first-to-file bar precludes it |
| Motion to amend to add individual members / joinder of relators | JKJ: permit Third Amended Complaint joining current members (Rule 15 and/or Rule 17 substitution) | Defendants: joinder would be intervention by new parties and is barred by the first-to-file rule; Precision Co. (10th Cir.) is not controlling | Court: Joinder/amendment would effectuate intervention by nonparties and is barred by Eisenstein and §3730(b)(5); amendment denied as futile |
Key Cases Cited
- Ballentine v. United States, 486 F.3d 806 (3d Cir.) (standing is jurisdictional and governed by Rule 12(b)(1) principles)
- Hartig Drug Co. v. Senju Pharm. Co., 836 F.3d 261 (3d Cir.) (distinguishing facial v. factual 12(b)(1) attacks)
- U.S. ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506 (3d Cir.) (explaining the FCA public-disclosure bar and the X+Y model for disclosure)
- U.S. ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294 (3d Cir.) (post-PPACA public-disclosure scope and that disclosures in private civil cases do not qualify unless government was a party)
- U.S. ex rel. Eisenstein v. City of New York, 556 U.S. 928 (Sup. Ct.) (intervention is the requisite method for a nonparty to become a party to litigation)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Sup. Ct.) (pleading standard: plausible claim required)
- Ashcroft v. Iqbal, 556 U.S. 662 (Sup. Ct.) (pleading standard and plausibility framework)
- U.S. ex rel. Zizic v. Q2Administrators, LLC, 728 F.3d 228 (3d Cir.) (public-disclosure doctrine application)
- U.S. ex rel. Dunleavy v. County of Delaware, 123 F.3d 734 (3d Cir.) (algebraic X+Y formulation for public disclosure)
- United States ex rel. Precision Co. v. Koch Industries, Inc., 31 F.3d 1015 (10th Cir.) (discussed re: whether Rule 15 joinder circumvents first-to-file bar; treated as not controlling here)
- United States ex rel. Little v. Triumph Gear Systems, Inc., 870 F.3d 1242 (10th Cir.) (revisiting Precision in light of Eisenstein and discussing intervention/joinder tension)