New Jersey Supreme Court Curtails Attorney General’s Subpoena Power in FCA Action

On June 7, 2017, the New Jersey Supreme Court, in a 3-2 decision affirming the decision of the Appellate Division, found that the Attorney General’s administrative subpoena power under New Jersey’s False Claims Act is limited to the 60 day period (which may be extended by motion) in which the Attorney General must make his or her intervention decision. “[A]fter the Attorney General declines to intervene in a qui tam action and leaves that action in the relator’s control, the Attorney General loses the authority to issue administrative subpoenas.” In the Matter of the Enforcement of New Jersey False Claims Act Subpoenas, A-5-16 (No. 077506).

The qui tam complaint giving rise to this case was filed under seal in August 2011 in the United States District Court for the District of Delaware. The relator subsequently filed an amended complaint, which asserted claims on behalf of New Jersey.  By statute, the New Jersey Attorney General has 60 days to determine whether to intervene in the case.  The Attorney General sought extensions of the intervention deadline from the District Court.  In total, the district judge granted extensions of approximately 600 days, ultimately ordering that the final deadline to intervene would be June 2, 2015.  The final intervention deadline passed and the Attorney General did not intervene.  On July 22, 2015, seven weeks after the intervention deadline, the New Jersey Attorney General served two individuals with subpoenas.  The individuals sought a protective order from the district court and the New Jersey Attorney General filed an action in chancery court to enforce the subpoenas.  The chancery court entered an enforcement order that was subsequently reversed by the Appellate Division.

In finding that the Attorney General’s power to issue subpoenas expired after the intervention deadline, the New Jersey Supreme Court rejected the Attorney General’s argument that because the NJ FCA does not include specific language imposing a time limitation to issue administrative subpoenas, unlike the federal False Claims Act, the New Jersey legislature must have conferred on the Attorney General the power to issue administrative subpoenas after the passage of the intervention deadline.  The Supreme Court reasoned that the language differences between the federal False Claims Act and the NJ FCA were not dispositive because the NJ FCA “tracks neither the structure nor the text of the FCA discovery provision.”  Moreover, the New Jersey Supreme Court noted that if the relator uncovers new facts that warrant the Attorney General’s involvement, “the NJ FCA authorizes the court, on a showing of good cause, to ‘permit the Attorney General to intervene and take over the action on behalf of the State at a later date.’”  The dissent, however, noted its view that the majority had failed “to properly credit the plain language” of the NJ FCA, which the dissent stated conferred on the Attorney General “broad power to issue subpoenas.”

It remains to be seen what effect, if any, the New Jersey Supreme Court’s decision will have on the Attorney General’s conduct in false claims act investigations.  It may have the unintended consequence of causing the Attorney General to seek longer extensions of the seal period, which are subject to Court approval, to preserve its ability to serve subpoenas.  It may also cause the Attorney General to issue subpoenas where it might not have otherwise done so in order to preserve its rights.

The New Jersey Supreme Court decision is available here.