Before the Court is the motion of Defendants Sanofi-Aventis U.S., LLC; Sanofi US Services, Inc.; Aventis Pharmaceuticals, Inc.; Bristol-Myers Squibb Company; and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership (collectively "Defendants"), to dismiss the Second Amended Complaint of qui tam Plaintiff and relator JKJ Partnership 2011, LLP ("JKJ"), for lack of jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(1), and for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6). Defendants contend (i) that JKJ's claims based on conduct occurring prior to the 2010 amendment to the False Claims Act ("FCA") by the Patient Protection and Affordable Care Act ("PPACA") are barred by the jurisdiction-stripping, pre-PPACA version of the FCA's "public disclosure bar,"
I. FACTUAL BACKGROUND & PROCEDURAL HISTORY
On October 26, 2011, two doctors and a Sanofi sales representative formed JKJ, a Delaware Limited Partnership. JKJ was formed for the purpose of bringing the present litigation. On November 4, 2011-nine days after it was formed-JKJ filed the Original qui tam Complaint, identifying its partners anonymously as "Partner A," "Partner B," and "Partner C." Original Compl., ¶¶ 20-24. In the Original Complaint, JKJ alleged, inter alia , that
the Sanofi Defendants failed to disclose material adverse efficacy data regarding Plavix ®, as required by21 C.F.R. § 314.80 (governing post-marketing reporting of adverse drug experiences),causing physicians to prescribe, and Government Programs to reimburse, Plavix ® for millions of patients who were genetically predisposed to experience diminished or no responsiveness to Plavix ®, rendering it little more than a placebo and placing the patients at significant risk.
On February 22, 2017, JKJ filed a Second Amended Complaint, further developing its claim of Plavix's ineffectiveness for certain patients based on their genetic makeup. In the Second Amended Complaint, JKJ alleges that
Defendants promoted [Plavix ] as the standard of care for all antiplatelet and antithrombotic patients-including patients who received stents-notwithstanding their knowledge that the drug had little or no effect, and was therefore medically contraindicated, for over 30% of patients.... Defendants knew, but concealed the fact that their blockbuster drug Plavix had no demonstrable pharmacodynamics effect for many patients who had been prescribed the drug. They also knew that these "non-responders" or "low responders" were not entirely genetically random. Individuals whose ethnic background was African-American or Asian-American had a much higher risk of non-response to Plavix than other ethnicities.... Defendants referred to this as the Plavix"Variability of Response" (or "VOR") issue.
Second Amended Compl. ("SAC"), ¶¶ 1-2 (emphasis in original).
In that respect, JKJ claims that Defendants made affirmative misrepresentations by "systematically and deliberately promot[ing] Plavix through false and misleading advertising [and other marketing materials] that overstated efficacy, and minimized critical adverse event and risk information. Defendants would brand this their 'Expand and Protect' strategy." SAC, ¶ 249. Indeed, JKJ avers that Defendants created a logo used on Sales and Marketing material to stress and reflect this strategy.
At some point between the filing of the Original Complaint in November 2011, and the filing of the Second Amended Complaint in February 2017, Partner B left the JKJ partnership, and Dr. Paul A. Gurbel joined the JKJ partnership to replace him or her. After the substitution in membership came to light, the Court, at an August 9, 2017 status conference, asked the parties to brief whether JKJ was a proper relator capable of continuing the litigation. In response to the Court's inquiry, on October 11, 2017, Defendants filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(1) and Fed. R. Civ. P. 12(b)(6). In their motion, Defendants argue that, (i) if JKJ is construed as the relator in its own right, the FCA's public disclosure bar precludes JKJ's claims,
II. STANDARD OF REVIEW
A. Federal Rule of Civil Procedure 12(b)(1)
Under Federal Rule of Civil Procedure 12(b)(1), a court must grant a motion to dismiss if it lacks subject matter jurisdiction to hear a claim. See Fed. R. Civ. P. 12(b)(1). "A motion to dismiss for want of standing is also properly brought pursuant to Rule 12(b)(1), because standing is a jurisdictional matter." Ballentine v. United States ,
In evaluating a Rule 12(b)(1) motion to dismiss, the court must first determine whether the motion "presents a 'facial' attack or a 'factual' attack on the claim at issue, because that distinction determines how the pleading must be reviewed." Constitution Party of Pennsylvania v. Aichele ,
"Therefore, a 12(b)(1) factual challenge strips the plaintiff of the protections and factual deference provided under 12(b)(6) review." Hartig Drug Co. ,
B. Federal Rule of Civil Procedure 12(b)(6)
In reviewing a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6), "courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Fowler v. UPMC Shadyside ,
To determine whether a plaintiff has met the facial plausibility standard mandated by Twombly and Iqbal , courts within the Third Circuit engage in a three-step progression. Santiago v. Warminster Twp. ,
III. ANALYSIS
A. Public Disclosure Bar
Defendants argue that JKJ's claims are precluded by the FCA's public disclosure bar, which limits a plaintiff's ability to bring claims based on information previously disclosed in, inter alia , government reports and investigations; public hearings, including court proceedings; and the news media. The FCA was amended in 2010, altering the public disclosure bar's limitation on claims. JKJ's claims cover a period spanning both prior to and after the amendment, requiring the Court to apply both versions of the statute. Before its 2010 amendment, the FCA's "public disclosure bar,"
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, in a congressional, administrative, or Government Accounting Office [sic] report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
Under that version of the statute, an "original source" under
an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.
In 2010, Congress amended the bar as part of the PPACA, such that it now reads as follows:
(4)(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, "original source" means an individual who either (i) prior to a public disclosure under subsection (e)(4)(A), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.
After the amendment, § 3730(e)(4)"does not set forth a jurisdictional bar."
Applying the foregoing, under either version of the statute, to determine whether the claims in JKJ's Second Amended Complaint are barred by the FCA's public disclosure provisions, the Court must first assess whether JKJ's claim is based on publicly disclosed allegations or transactions. "This, in turn, requires a twofold analysis. First, [courts] determine whether the information was disclosed via one of the sources listed in § 3730(e)(4)(A). Second, [courts] decide whether the relator's complaint is based on
To aid our analysis we are guided by an algebraic representation of the nature and extent of disclosure required to raise the jurisdictional bar. U.S. ex rel. Dunleavy v. Cty. of Delaware,, 741 (3d Cir. 1999) (quoting U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 123 F.3d 734 , 654 (D.C. Cir. 1994) ). 14 F.3d 645
[I]f X + Y = Z, Z represents the allegation of fraud and X and Y represent its essential elements. In order to disclose the fraudulent transaction publicly, the combination of X and Y must be revealed, from which readers or listeners may infer Z, i.e., the conclusion that fraud has been committed.
Id. To draw an inference of fraud, both a misrepresented [X] and a true [Y] state of facts must be publicly disclosed.Id. at 741 . So, if either Z (fraud) or both X (misrepresented facts) and Y (true facts) are disclosed by way of a listed source, then a relator is barred from bringing suit under § 3730(e)(4)(A) unless he is an original source.
U.S. ex rel. Atkinson ,
Applied here, Defendants identify four qualifying public disclosure sources under § 3730(e)(4)(A) : (i) a letter order issued following discovery hearings held before the Magistrate Judge in Hall v. Bristol-Meyers Squibb Co. , No. 3:06-CV-5203 (D.N.J. Mar. 24, 2011); (ii) the proposed Amended Complaint in Mills v. Bristol-Myers Squibb Co. , No. 2:11-CV-968 (D. Ariz. Sept. 2, 2011); (iii) news articles discussing the District Judge's denial of leave to file the proposed Amended Complaint in Mills , including Patient Is Not Entitled to File Second Amended Complaint Against Drug Manufacturers , Health Law Week, Oct. 28, 2011 ("Health Week"); and Michael F. Bahler, District Judge Looks to Restatement (Third) of Torts in Throwing Out Plavix Suit , Bloomberg Law, Oct. 13, 2011 ("Bloomberg"); and (iv) a news article concerning a label change for Plavix, Jared A. Favole & Alicia Mundy, FDA Considers Updating Plavix Label , Wall St. J., Dec. 31, 2008, at D6 ("WSJ"). The Court notes that the news articles remain qualifying public disclosures under both the pre and post-amendment versions of the public disclosure bar.
Looking to the transcripts of the oral arguments concerning the Hall plaintiffs' discovery request confirms this view. At the October 26, 2010 hearing on the plaintiffs' discovery request, the issue of patients possessing genetic variations affecting Plavix's effectiveness was extensively discussed. Specifically, the parties in Hall divided the genetic variability issue into cases of "hypo responders," for whom Plavix was ineffective, and "hyper responders" for whom Plavix was too effective, creating heightened risk of bleeding. As relevant to this case, the parties' discussion of hypo responders never raised the specter of fraud by suggesting that the Hall defendants misrepresented Plavix's effectiveness for such patients. Much to the contrary, plaintiffs' counsel in Hall noted that defendants had been discussing the cause of the hypo responder issue since May of 2007, and "had an enormous interplay with the FDA on this, before the FDA forced them to black box it." Hall , ECF No. 98, October 26, 2010 Hearing Tr., 28:7-11. Defense counsel added, of the hypo responder issue, that "[t]his issue about genetic variability of response has been in medical articles and in the press
Plaintiffs' Counsel: "And for some people they're hypo responders. That is to say they don't metabolize it correctly, and the drug doesn't work at all, and they have double the risk of heart attack or-or stroke because they're hypo responders ...
The Court: "But I think what the defendants have said is that none of these plaintiffs are alleging that they're in the category of genetic hype-hypo responders."
Plaintiffs' Counsel:4 "Exactly. We are in the category of variable responders. We are hyper responders. Which we've already found within the documents up through May of 2007, they knew about the hyper responder. The variability of response is the larger issue. And our people are all hyper responders who were never warned about the variability of response."
Id. at 25:8-12; 25:14-22. The hypo-responder issue was mentioned only once at the second, February 22, 2011 hearing, and then only by defense counsel, who noted that such persons, referred to again in those proceedings as "hypo responders," were not alleged to be relevant to the case. Hall , ECF No. 105, February 22, 2011 Hearing Tr., 25:9-13 ("The second point is I think at the last hearing Mr. Miller conceded that all issues relating to hypo-response, that is a lack of efficacy, were not relevant to these particular Plaintiffs and he focused instead on this hyper-response genetic variation.").
Interpreting the Magistrate Judge's summary about a "failure to disclose" in this context, the Hall discovery issue clearly did not raise a question of any actual misrepresentation or fraud concerning Plavix's effectiveness for hypo responders before an alleged public admission of the problem in 2009-presumably the label change. Defense counsel represented, without contradiction by plaintiffs' counsel, that the issue was already public as early as 2008, and plaintiffs' counsel themselves represented that defendants were in discussions with the FDA concerning the issue between 2007 and 2010. Moreover, the Hall plaintiffs limited their additional allegations of fraud to information surrounding hyper responders who are at increased bleeding risk, not hypo responders whose genetic makeup rendered Plavix ineffective. The Order and the transcript therefore firmly establish the existence of Y, the true state of facts, that Defendants were aware that a category of persons existed whose genetic variations reduced or eliminated the efficacy of Plavix. What is missing from the Magistrate Judge's Letter Order, and from the transcripts of the hearings it referenced, is any mention of X, the alleged misrepresentation by defendants, contradicting Y, that would give rise to an inference of fraud. Plaintiffs counsel in Hall did not, for example, as JKJ does in this case, allege that defendants advertised Plavix as being
The Mills Complaint is even weaker evidence of prior public disclosure. There, the Complaint concerns exclusively the risks of excessive bleeding for, in the parlance of Hall , hyper responders. That Complaint does support an inference of fraud concerning hyper responders, but that is not of the kind of fraud alleged in the Second Amended Complaint here. In Mills , the plaintiffs contended that defendants knew of the risk of bleeding and other complications to hyper responders caused by Plavix, but nevertheless failed to disclose those risks and marketed Plavix as safe and not causing the very conditions Plavix was known to cause in hyper responders. Comparable allegations for the hypo responders are nowhere to be found in Mills . They are simply not discussed. The Complaint in Mills alleged:
34. However, in specific patient populations Defendants knew that Plavix would not prevent clotting, and exposure to Plavix would in fact, cause a heightened risk of:
a. Serious excessive and fatal spontaneous bleeding;
b. Increased risk of colectomy (surgical intervention to stem spontaneous bleeding);
c. A decrease in the number of platelets in the blood (thrombocytopenia );
d. Hypotension;
e. Circulatory problems; and,
f. Respiratory distress and cardiovascular problems.
35. Nevertheless, Defendants marketed Plavix to be superior in design and effect than Aspirin and claimed that Plavix, unlike Aspirin, did not cause the adverse side effects listed in paragraphs 34(a) to (f) above .
36. During the period of 1997 to the time of Plaintiff's ingestion of said drug, Plavix was heavily marketed directly to consumers through television, magazine and Internet advertising. It was touted as a "super-aspirin," that would give a person even greater cardiovascular benefits than a much less expensive, daily aspirin while being safer and easier on a person's stomach than aspirin . Those assertions have proven to be false by scientific studies. p. 8
...
42. Additionally, Plavix is a prodrug that requires biotransformation in the human body to an active metabolite by cytochrome P-450 (CYP enzymes). Once in the body the enzymes push the majority of Plavix into an inactive pathway, with the remaining prodrug requiring two separate CYP-dependent oxidative steps. Given this chemical structure, patients carrying a genetic variant of CYP incur a greater risk of adverse events such as death, cardiovascular problems, circulatory problems, and spontaneous excessive and potentially fatal bleeding .
43. Defendants Sanofi and BMS knew or should have known that the genetic variants occurred in 30% of the Caucasian population and suggested to Physicians and the medical community that patients be tested for the genetic variant. However, Defendants failed to disclose the potential risk posed to carriers of the genetic variant .
Mills v. Bristol-Myers Squibb Co. , No. 2:11-CV-968 (D. Ariz. Sept. 2, 2011), ECF No. 30-1, Proposed Am. Compl. at ¶¶ 34-36, 42-43 (emphasis added). Again, reviewing these allegations, it is clear that the fraud alleged in Mills concerned the defendants' alleged misrepresentation of the safety of Plavix for hyper responders , including
Defendants make much, however, of the fact that the Complaint in Mills , in its consideration of misrepresented bleeding risk for hyper responders, relied upon the same study upon which JKJ now relies for its claims based on misrepresented efficacy for hypo responders. Compare Mills Complaint, p. 10 ¶ 42 n.5, with Original Compl., ¶¶ 157-58; SAC, ¶¶ 157-58. Defendants therefore appear to argue that Mills' prior disclosure of the genetic variability of response or "VOR" issue, writ large, is sufficient for the application of the public disclosure bar, regardless of whether the allegations concerned that Plavix worked too well for some persons, such that it was not safe, or did not work well enough for some persons, such that it was not an effective medical treatment. The Court disagrees. Reading this shared reliance on the same study as expansively as possible, again yields only the Y-the true factual circumstance that Plavix was not effective for a substantial portion of the population based on their genetics-not the X-any misrepresentation by Defendants.
The news articles concerning Mills disclose no more than the Complaint. See Health Week ("Mills alleged that the chemical structure of Plavix is defective because it carries a higher risk of adverse events for patients who carry the genetic variant CYP, who are poor metabolizers of the drug."); Bloomberg ("The new complaint specifically alleged that Plavix's chemical structure was more dangerous and less effective for people who carried the CYP generic variant. A medical study had reported that CYP carriers who used Plavix experienced higher rates of death from cardiovascular causes, heart attack, and stroke."). The allegations reproduced therein also do not disclose any allegations of misrepresentations made by Defendants (the X).
Finally, like all other sources discussed above, the news article concerning the 2009 label change also discloses, at best, the existence of the variability of response efficacy issue-the Y. See WSJ ("The three studies last week-two in the New England Journal of Medicine and one in the Lancet-identified a genetic abnormality in some heart patients that could interfere with their liver's ability to completely process Plavix in the bloodstream, but they differed on the number of patients affected. Two of the studies suggested the drug was less effective in about 30% of the population that has the mutated gene from one parent, while one study indicated the drug is less effective in the 5% of the population that has the gene from both parents."). But, the same article did not disclose any alleged misrepresentation by Defendants leading up to or surrounding the change-the X-that could give rise to an inference of fraud. That is, the article did not disclose that Defendants allegedly marketed Plavix by touting that the drug is efficacious for all antiplatelet and antithrombotic patients. In sum, the Court finds that because the allegations in JKJ's Second Amended Complaint are not based on prior public disclosures regarding alleged misrepresentations (the X), the public disclosure bar does not apply to bar JKJ's claims. However, that is not the end of this Court's inquiry. I turn next to the FCA's first-to-file bar.
B. First-to-File Bar
"The first-to-file bar provides that, once a qui tam action has been
This Court finds, and the parties agree, that whether the change in JKJ's membership gave rise to a new legal entity is a question of Delaware State law. See ECF No. 58-1, Def. Mot. Br., p. 13-14; ECF No. 62, Opp. & Cross Mot., p. 19-20. Specifically, JKJ argues that under Del. Code Tit. 6 § 15-103(a), "relations among partners and between partners and the partnership are governed by the partnership agreement." Section 1.03 of JKJ's Partnership Agreement in turn provides that JKJ "shall not be a separate legal entity distinct from its Partners." ECF No. 62-3, August 1, 2011 JKJ Partnership 2011 LLP Partnership Agreement ("Agreement"), p. 2, Section 1.03. The Agreement also states in Section 8.01, that "withdrawal of a Partner shall not cause a dissolution of the Partnership," and, in Section 1.07, that the "term of the Partnership ... shall continue until the final resolution or settlement of the Action without further right of appeal." From these provisions, JKJ argues that the departure of the original Partner B did not dissolve the original partnership and the addition of Dr. Gurbel did not result in the creation of a new partnership under Delaware law.
Defendants, looking to the same body of law, reach the opposite conclusion. Defendants contend that the Delaware Revised Uniform Partnership Act ("DRUPA"), under which JKJ was formed, provides as a default rule that Delaware partnerships are separate entities surviving the addition or subtraction of partners, but that the original members of JKJ exercised their option under § 15-201(a) to opt out of the "entity partnership" structure, when they adopted the language in Section 1.03 of their Partnership Agreement that JKJ "shall not be a separate legal entity distinct from its Partners." Defendants therefore argue that JKJ, as an aggregate, or nonentity partnership, is subject to the pre-DRUPA partnership regime, in which the subtraction of a member dissolves the partnership and the addition of a member gives rise to a new partnership.
As a threshold matter, the Court agrees that under DRUPA, the language of the Partnership Agreement governs the nature of the legal entity created. Del. Code Tit. 6 § 15-103(a) ; Del. Code Tit. 6, § 15-201(a). Under JKJ's partnership agreement, the JKJ partnership does not exist as a legal entity separate and distinct from its three members. Partnership Agreement, Section 1.03. Indeed, this legal artifice was potentially essential to JKJ's claims in this case. Were the Court to have found JKJ's claims in the Second Amended Complaint to be based upon prior public disclosures, JKJ would only have
Looking then to the legal status of the JKJ entity that filed the Original Complaint in this matter, that Court finds that, pursuant to § 15-201(a) of DRUPA and Section 1.03 of the Partnership Agreement, the original JKJ had no separate legal existence from its members, Partners A, B, and C. The Court will also accept JKJ's position that this original JKJ partnership was able to serve as a relator in this case on the basis of its members' knowledge and legal rights, since the partnership was not legally distinct from these members. See Minnesota Ass'n ,
JKJ of course contends that other provisions of its partnership agreement prevent this result. See Partnership Agreement, Section 1.07 (the "term of the Partnership ... shall continue until the final resolution or settlement of the Action without further right of appeal"); Section 8.01 ("withdrawal of a Partner shall not cause a dissolution of the Partnership"). The Court finds these provisions unpersuasive, however, because the benefits of a persistent, separate legal entity for litigation purposes are inextricably intertwined with the entity model of partnership that DRUPA adopted. Once JKJ's original members opted out of the entity model, as permitted by § 15-201(a), they could not retain the benefits of a legally separate JKJ entity for litigation purposes. Any finding to the contrary would lead to the absurd result that JKJ would be permitted to proceed as a relator because it is legally indistinguishable from, and therefore directly possesses the knowledge of, its members, but would also be permitted to change its membership without becoming a different legal entity because it is legally independent and distinguishable from its present membership. Put simply, JKJ cannot have it both ways. As part of a litigation strategy to maintain their anonymity, JKJ's original partners formed a non-entity partnership arguably capable of serving as a source of information concerning events which transpired before its formation on the basis of its partners' personal knowledge. Having obtained these benefits at filing, JKJ cannot now be treated as an entity partnership capable of persisting in the litigation through a change in membership.
This result is compelled by the structure and history of DRUPA itself. "Historically, the common law considered partnerships to be collections of individuals rather than distinct jural entities with their own interests." HB Gen. Corp. v. Manchester Partners, L.P. ,
DRUPA significantly revised many aspects of the UPA, and transformed the law of Delaware partnerships from primarily following the aggregate model to primarily following the entity model as a default. For example, as relevant to this case, under Delaware's version of the UPA, a partnership was defined as "an association of 2 or
RUPA embraces the entity theory of the partnership. In light of the UPA's ambivalence on the nature of partnerships, the explicit statement provided by subsection (a) is deemed appropriate as an expression of the increased emphasis on the entity theory as the dominant model....
Giving clear expression to the entity nature of a partnership is intended to allay previous concerns stemming from the aggregate theory, such as the necessity of a deed to convey title from the 'old' partnership to the 'new' partnership every time there is a change of cast among the partners. Under RUPA, there is no 'new' partnership just because of membership changes.
RUPA § 201, Official Cmt. (2017-2018 ed.). The comments to the RUPA provision concerning the dissolution of partnerships cast the difference in the treatment of partnership membership changes in even starker light.
Under UPA Section 29, a partnership is dissolved every time a partner leaves. That reflects the aggregate nature of the partnership under the UPA. Even if the business of the partnership is continued by some of the partners, it is technically a new partnership. The dissolution of the old partnership and creation of a new partnership causes many unnecessary problems.
...
RUPA's move to the entity theory is driven in part by the need to prevent a technical dissolution or its consequences. Under RUPA, not every partner dissociation causes a dissolution of the partnership.
RUPA § 801 Official Cmt. 1 (2017-2018 ed.).
Delaware's UPA, the pre-DRUPA statute, reflected the same difficulties inherent in aggregate partnerships during membership changes. The subchapter on dissolution provided that "[t]he dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business." 6 Del. C. § 1529. The provision on the continuation of partnership business after a change in membership similarly reinforced the point:
When any new partner is admitted into an existing partnership, or when any partner retires and assigns (or the representative of the deceased partner assigns) the rights in partnership property to 2 or more of the partners, or to 1 or more of the partners and 1 or more third persons, if the business is continued without liquidation of the partnership affairs, creditors of the first or dissolved partnership are also creditors of the partnership so continuing the business.
6 Del. C. § 1541(a). In short, when Delaware followed the more-aggregate dominant model of the UPA, its law reflected that the addition or subtraction of members from the partnership created new partnerships.
DRUPA brought an end to this phenomenon by embracing the entity model of partnership, but, as noted above, DRUPA predominantly sets forth only a series of default rules. The statutory text explicitly
Against that backdrop, JKJ's partners argue that, despite having opted out of the entity model of partnership under § 15-201(a), JKJ may nevertheless retain the benefits of the entity model to persist as a party to litigation while changing membership. Such an argument is plainly contrary to the letter and intent of DRUPA. As I have explained, two distinct models of partnership structure exist-aggregate and entity. No other form of partnership has been recognized by Delaware law in this regard. As such, when JKJ voluntarily made an election to opt out of the entity structure of § 15-201 (a), the partnership necessarily became the aggregate form; that is, the members of the partnership are legally indistinct from the partnership entity itself. In other words, under this approach, each JKJ partner is fully accountable for his/her share of the business' operations, and the business itself exists only to be a vehicle for the members to operate under a single business entity. Such an aggregate partnership, which exists as an association of individuals rather than a separate legal entity, does not survive changes in membership, but becomes a new partnership between the new and remaining members. Consequently, it logically follows that JKJ cannot opt out of an entity partnership-as it is permitted to do under DRUPA-but then chooses to retain the partnership as a separate entity when the membership changed. To adopt Plaintiff's position would eviscerate the very legal difference between an entity and aggregate partnership. Accordingly, I find that the current JKJ partnership of Partner A, Dr. Gurbel, and Partner C, which purports to be the relator plaintiff in the Second Amended Complaint, is not the same relator partnership composed of Partners A, B, and C that filed the Original Complaint in this action.
Having determined that, as a matter of state law, JKJ has attempted to proceed as two, legally distinct partnerships in this action, the Court must proceed to the question of whether this is permitted, as a matter of federal law, under the FCA's first-to-file bar. As noted above, the first-to-file bar provides that "[w]hen a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action."
A "party" to litigation is "[o]ne by or against whom a lawsuit is brought." Black's Law Dictionary 1154 (8th ed.2004). An individual may also becomea "party" to a lawsuit by intervening in the action. See id., at 840 (defining "intervention" as "[t]he legal procedure by which ... a third party is allowed to become a party to the litigation"). As the Court long ago explained, "[w]hen the term [to intervene] is used in reference to legal proceedings, it covers the right of one to interpose in, or become a party to, a proceeding already instituted." Rocca v. Thompson,, 330, 223 U.S. 317 , 32 S.Ct. 207 (1912) (emphasis added). The Court has further indicated that intervention is the requisite method for a nonparty to become a party to a lawsuit. See Marino v. Ortiz, 56 L.Ed. 453 , 304, 484 U.S. 301 , 108 S.Ct. 586 (1988)(per curiam) (holding that "when [a] nonparty has an interest that is affected by the trial court's judgment ... the better practice is for such a nonparty to seek intervention for purposes of appeal" because "only parties to a lawsuit, or those that properly become parties, may appeal an adverse judgment" (internal quotation marks omitted; emphasis added) ). 98 L.Ed.2d 629
U.S. ex rel. Eisenstein v. City of New York, New York ,
C. Amendment
In the event that, as the Court has decided, JKJ cannot proceed as the relator in the Second Amended Complaint, JKJ asks that it be allowed to file a Third Amended Complaint to name its individual members, as well as JKJ, as the plaintiff relators. JKJ contends that such amendment should be permitted as a permissive amendment under Fed. R. Civ. P. 15, or as an amendment to substitute a real part in interest under R. 17. On its face, the first-to-file bar would appear to preclude any such amendment.
The Tenth Circuit's holding however, is in clear tension with the Supreme Court's decision in Eisenstein , discussed supra . Indeed, during the briefing of the present motions, the Tenth Circuit revisited its Precision II holding in United States ex rel. Little v. Triumph Gear Sys., Inc. ,
In the FCA context, the Supreme Court has defined "intervention" as "the requisite method for a nonparty to become a party to a lawsuit." United States ex rel. Eisenstein v. City of New York ,, 933, 556 U.S. 928 , 129 S.Ct. 2230 (2009)... Under that broad formulation, intervention takes place when a non-party becomes a party-regardless of the mechanism by which that occurs.... Rigidly applying that definition here would make for an easy resolution. Before the amended complaint was filed, Little and Motaghed weren't parties. After its filing, they were. Thus, under Eisenstein 's definition, they intervened-and the first-to-file rule would bar their claims. 173 L.Ed.2d 1255
Triumph Gear ,
IV. CONCLUSION
For the foregoing reasons, the public disclosure bar does not apply to JKJ's claims, the first-to-file bar prevents JKJ from proceeding as the plaintiff in this action after its change in membership, and the first-to-file bar prevents the joinder of JKJ's members as additional plaintiffs in this action, rendering JKJ's amendment to add additional parties futile. The Second Amended Complaint is therefore dismissed and JKJ's cross motion for leave to amend is denied.
Notes
As noted, supra , Defendants' motion is brought under both Rule 12(b)(1) and Rule 12(b)(6) because the FCA's public disclosure bar was jurisdictional before 2010, but continues to allow for non-jurisdictional challenges thereafter.
The Court finds Defendants' arguments concerning associational standing inapposite to the facts of this case, where the JKJ partnership is clearly attempting to proceed as the relator in its own right. ECF No. 62, Opp. Br. & Cross Mot., 1-4 (explaining that in the Second Amended Complaint, JKJ, not its individual members, is the relator). The FCA does not limit relator standing to natural persons.
I stress that because on a motion to dismiss I must take all allegations as true, I assume as true JKJ's allegation that Defendants knowingly misrepresented the efficacy of Plavix ; that is "Defendants promoted [Plavix ] as the standard of care for all antiplatelet and antithrombotic patients-including patients who received stents-notwithstanding their knowledge that the drug had little or no effect, and was therefore medically contraindicated, for over 30% of patients." SAC, ¶¶ 1-2 (emphasis in original). Moreover, JKJ alleged that Defendants made material misrepresentations by overstating Plavix's efficacy and minimized critical adverse event and risk information. Id. at ¶ 249. I make no comment as to the merits of JKJ's allegation of Defendants' misrepresentations in this regard.
The transcript contains a typographical error, where the comments of Plaintiffs' counsel are attributed to the Court. The context and content of the exchange, however, make clear that Plaintiffs' counsel is speaking.
The parties extensively briefed the issue of JKJ's status as an original source in anticipation of a finding that JKJ's claims were based on prior public disclosures.