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WV-SD

10 October 2014

Court Allows Deposition Of Relator’s Counsel On Facts Relevant To Public Disclosure Bar

Posted by Jonathan F. Cohn and Brian P. Morrissey

A federal magistrate judge in West Virginia has granted an FCA defendant’s request to depose relators’ counsel regarding non-privileged discussions in which relators learned of the conduct they alleged in their complaint, on the grounds that such information is central to defendants’ argument that relators’ claims are foreclosed by the public disclosure bar. United States ex rel. May v. Purdue Pharma L.P., No. 5:10-1423, 2014 WL 4960944 (S.D. W. Va. Oct. 2, 2014).

Relators allege that defendant, Purdue Pharma L.P., violated the FCA in the course of marketing the pain relief drug OxyContin, by falsely representing that the drug was twice as potent as a competing drug, and less expensive.

As the court observed, relators’ complaint “contain[ed] language taken verbatim” from a prior FCA complaint filed against Purdue Pharma, and was “obviously an adaptation” of that prior complaint. Id. Accordingly, Purdue Pharma argued that the public disclosure bar required dismissal of relators’ claims. See 31 U.S.C. § 3730(e)(4)(A) (stating that, “unless opposed by the government,” a court “shall dismiss” an FCA action if “substantially the same allegations . . . were publicly disclosed” in, inter alia, a prior federal FCA case, “unless . . . the person bringing the action is an original source of the information”).

The prior complaint was filed by Mark Radcliffe, a former Purdue Pharma sales representative, and ultimately was dismissed on the grounds that Radcliffe had signed a release of claims upon leaving the company. Radcliffe’s attorneys represented the relators in the new matter, a group that included Radcliffe’s wife. Relators argued that their claims are not barred by the public disclosure bar because they learned of the information giving rise to the claims through “private disclosure[s]” from Radcliffe, not Radcliffe’s public filings. Purdue Pharma, 2014 WL 4960944 *3. (We previously wrote about the Radcliffe case here.)

In its opinion, the court held that Purdue Pharma was entitled to depose relators’ attorneys regarding Radcliffe’s alleged private disclosures. At least some of those disclosures took place at a 2010 meeting between Radcliffe, relators, and the attorneys. Id. The court held that communications among those parties at the meeting were not privileged because Radcliffe was not represented by counsel at the time. Radcliffe’s FCA action terminated prior to the meeting. Thus, the court reasoned that the attorneys participated in the meeting only in their capacity as relators’ counsel, not Radcliffe’s. Id. at *6.

Having determined that the communications were non-privileged, the court held that, although depositions of a party’s counsel are rare, it was appropriate to allow Purdue Pharma to depose the attorneys in this case because the attorneys were “uniquely positioned” to provide information regarding what facts they and Radcliffe conveyed to relators that formed the substantive basis of relator’s complaint. Id. at *4 (relying on Shelton v. Am. Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 2005), which holds that trial counsel may be deposed in the “limited” circumstances in which (1) the deposing party has “no other means” to obtain the information; (2) the information is “relevant and nonprivileged”; and (3) the information is “crucial to the preparation of the case”).

The magistrate judge’s holding may serve as a useful authority to FCA defendants seeking discovery of facts relevant to a public-disclosure defense. As the court’s opinion recognizes, communications in which an attorney or a third party provides a relator with factual information relevant to the relator’s substantive allegations are not privileged and, thus, potentially discoverable. In cases in which it is not possible to obtain information regarding those communications through other means, a deposition of relator’s counsel may be necessary and appropriate.

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28 September 2012

Dismissal of FCA Claims Based on Release Bars Claims By Subsequent Relator

On September 14, 2012, a federal district court in West Virginia dismissed a qui tam complaint against a pharmaceutical manufacturer on the ground that the claims were barred by the doctrine of res judicata (claim preclusion). The complaint, filed by relators Steven May and Angela Radcliffe, alleged that the defendant pharmaceutical manufacturer made false and misleading claims about one of its drugs. Radcliffe’s husband, Mark Radcliffe, had previously filed a separate qui tam complaint against the manufacturer containing similar allegations. The Fourth Circuit upheld the dismissal of the first suit on the ground that Mark Radcliffe’s FCA claims were barred by a Release Agreement he had signed in connection with his severance from the manufacturer.

In the second suit, the manufacturer argued that the Fourth Circuit’s decision barred the subsequent complaint filed by Mark Radcliffe’s wife on the grounds of res judicata because (1) the Fourth Circuit’s decision was a final judgment on the merits, (2) the causes of action in both suits were identical, and (3) the United States, as the real party in interest, and the relators seeking to assert claims on its behalf, are bound by the judgment in the first suit. The relators did not contest the second and third points, and it does not appear from the docket that the United States took any position concerning those issues. Rather, the relators argued that the dismissal of the prior case based on the employment release constituted a release based on lack of Article III standing (which would preclude the application of res judicata), rather than a dismissal on the merits. The district court disagreed, holding that dismissal of the previous case based on a settlement release constituted a dismissal on the merits, and therefore concluded that application of res judicata was appropriate and that the second-filed complaint should be dismissed. A copy of the decision can be found here.

Though the relators in the first and second cases were married, it does not appear that that relationship played a role in the court’s analysis. Indeed, in evaluating whether it was appropriate to bar the later suit based on the dismissal of the first suit, the Court appropriately recognized (as both the defendant and relators agreed) that the fact that the United States was the real party of interest in both suits, rather than any relationship between the relators in the two suits, is the key fact to be considered in determining whether application of claim preclusion is appropriate. Accordingly, this case supports the proposition that when a qui tam is dismissed based on a release agreement, such dismissal may serve to bar subsequent qui tams containing similar allegations, even where the first-to-file bar might not apply.

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