United States Ex Rel. May v. Purdue Pharma L.P.

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-2287

UNITED STATES ex rel. STEVEN MAY AND ANGELA RADCLIFFE,

Plaintiff - Appellant,

v.

PURDUE PHARMA L.P., a limited partnership, and; PURDUE
PHARMA, INCORPORATED,

Defendants − Appellees.

−−−−−−−−−−−−−−−−−−−−−−−−−−−−

UNITED STATES OF AMERICA,

Amicus Curiae.

Appeal from the United States District Court for the Southern
District of West Virginia, at Beckley. Irene C. Berger,
District Judge. (5:10-cv-01423)

Argued: September 20, 2013 Decided: December 12, 2013

Before TRAXLER, Chief Judge, DIAZ, Circuit Judge, and Gina M.
GROH, United States District Judge for the Northern District of
West Virginia, sitting by designation.

Vacated and remanded by published opinion. Chief Judge Traxler
wrote the opinion, in which Judge Diaz and Judge Groh joined.

ARGUED: Mark Tucker Hurt, Abingdon, Virginia, for Appellant.
Howard Morris Shapiro, WILMERHALE LLP, Washington, D.C., for
Appellees. Henry C. Whitaker, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Amicus Curiae. ON BRIEF: Paul
W. Roop, II, ROOP LAW OFFICE, LC, Beckley, West Virginia, for
Appellant. Jennifer M. O'Connor, Christopher E. Babbitt, Daniel
Winik, WILMER CUTLER PICKERING HALE AND DORR LLP, Washington,
D.C., for Appellees. Beth S. Brinkmann, Acting Assistant
Attorney General, Michael S. Raab, Civil Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae.

2
TRAXLER, Chief Judge:

Appellants Steven May and Angela Radcliffe brought this

action under the False Claims Act, 31 U.S.C. §§ 3729-33 (the

“FCA”), against Purdue Pharma L.P. and Purdue Pharma, Inc.

(together, “Purdue”). Giving preclusive effect to this court’s

decision in United States ex rel. Radcliffe v. Purdue Pharma

L.P., 600 F.3d 319 (4th Cir. 2010), the district court dismissed

the action on res judicata grounds. Because we agree with the

appellants that this action is not barred by res judicata, we

vacate the decision of the district court and remand for further

proceedings.

I.

Mark Radcliffe, the husband of appellant Angela Radcliffe,

was a district sales manager for Purdue. Radcliffe was laid off

as part of a reduction in force in June 2005, and he

subsequently executed a general release (the “Release”) of all

claims against Purdue in order to receive an enhanced severance

package. Radcliffe thereafter filed an FCA action against

Purdue (“Qui Tam I”) 1 in which he alleged that Purdue falsely

marketed its narcotic pain medication OxyContin to physicians as

being twice as potent as MS Contin (a cheaper, off-patent drug

1
“A private enforcement action under the FCA is called a
qui tam action, with the private party referred to as the
‘relator.’” United States ex rel. Eisenstein v. City of New
York, 556 U.S. 928, 932 (2009).

3
also manufactured by Purdue), thus making it appear that

OxyContin was cheaper per dose than MS Contin. The government

investigated Radcliffe’s allegations and declined to intervene

in his action.

The district court eventually dismissed Qui Tam I with

prejudice, concluding that Radcliffe’s amended complaint did not

satisfy the heightened pleading requirements of Rule 9. See

Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party

must state with particularity the circumstances constituting

fraud or mistake. . . .”). On appeal, we affirmed the with-

prejudice dismissal on alternate grounds, concluding that the

Release barred Radcliffe’s FCA claims. See Radcliffe, 600 F.3d

at 333.

After we issued our opinion in Radcliffe, Steven May and

Angela Radcliffe (the “Relators”) commenced this FCA action

against Purdue (“Qui Tam II”) setting forth allegations nearly

identical to those advanced by Mark Radcliffe in Qui Tam I. As

noted, Angela Radcliffe is Mark Radcliffe’s wife; Steven May was

formerly a sales representative for Purdue under Mark

Radcliffe’s supervision.

Purdue moved to dismiss the Relators’ complaint on res

judicata grounds, arguing that our decision in Radcliffe barred

the Relators from proceeding with Qui Tam II. See, e.g., Martin

v. Am. Bancorporation Retirement Plan, 407 F.3d 643, 650 (4th

4
Cir. 2005) (“Res judicata . . . precludes the assertion of a

claim after a judgment on the merits in a prior suit by the

parties or their privies based on the same cause of action.”).

Purdue also argued that the FCA’s public-disclosure bar, see 31

U.S.C. § 3730(e)(4), divested the district court of jurisdiction

over the action and that the complaint did not allege fraud with

the particularity required by Rule 9.

As to the res judicata question, Purdue contended that

Radcliffe was a judgment on the merits because it affirmed a

with-prejudice dismissal; that the claims asserted in Qui Tam I

and Qui Tam II were identical; and that the parties were

identical because Qui Tam I was “brought on behalf of the United

States as the real party in interest,” such that the government

“and any other relators seeking to allege identical claims are

bound by its judgment.” J.A. 83. The Relators argued that

Radcliffe was not a decision on the merits for res judicata

purposes, but they did not directly dispute Purdue’s contention

that the parties were identical.

Citing Adkins v. Allstate Insurance Co., 729 F.2d 974 (4th

Cir. 1984), the district court held that Radcliffe was

necessarily a decision on the merits because it affirmed the

grant of a summary-judgment motion. See Adkins, 729 F.2d at 976

n.3 (“For purposes of res judicata, a summary judgment has

always been considered a final disposition on the merits.”).

5
And because the Relators did not challenge the other res-

judicata requirements, the district court held without further

analysis that “the instant case is barred by the doctrine of res

judicata.” J.A. 225. The district court therefore dismissed

the action without considering the other issues raised by

Purdue. This appeal followed.

II.

The Relators argue on appeal that the district court erred

by giving preclusive effect to Radcliffe and dismissing their

action on res judicata grounds. The preclusive effect of a

judgment issued by a federal court is a legal question governed

by federal common law and subject to de novo review. See Taylor

v. Sturgell, 553 U.S. 880, 891 (2008) (federal common law

determines preclusive effect of federal-court judgment);

Clodfelter v. Republic of Sudan, 720 F.3d 199, 210 (4th Cir.

2013) (district court’s application of res judicata reviewed de

novo).

Generally speaking, whether res judicata precludes a

subsequent action “turns on the existence of three factors: (1)

a final judgment on the merits in a prior suit; (2) an identity

of the cause of action in both the earlier and the later suit;

and (3) an identity of parties or their privies in the two

suits.” Clodfelter, 720 F.3d at 210 (4th Cir. 2013) (internal

quotation marks omitted).

6
 A.

The Relators contend that Radcliffe was not a “judgment on

the merits” because the decision was premised on a determination

that Mark Radcliffe lacked standing to pursue the FCA claims.

Because Article III standing requirements are jurisdictional,

see, e.g., United States v. Day, 700 F.3d 713, 721 (4th Cir.

2012), cert. denied, 133 S. Ct. 2038 (2013), and jurisdictional

dismissals are not “judgment[s] on the merits for purposes of

res judicata,” Goldsmith v. Mayor of Balt., 987 F.2d 1064, 1069

(4th Cir. 1993), 2 the Relators argue that Radcliffe is not

entitled to preclusive effect.

We disagree with the Relators’ reading of our decision in

Radcliffe. Standing principles require the plaintiff to have

suffered an “injury in fact.” Lujan v. Defenders of Wildlife,

504 U.S. 555, 560 (1992) (internal quotation marks omitted). In

the context of the FCA, however, it is the government, not the

private-citizen relator, that has been injured by the

defendant’s fraud. FCA relators nonetheless have standing to

bring an FCA action because the FCA “effect[s] a partial

assignment of the Government’s damages claim” and thus

statutorily vests private citizens with standing. Vt. Agency of

2
“However, a jurisdictional dismissal . . . still operates
to bar relitigation of issues actually decided by that former
judgment.” Goldsmith, 987 F.2d at 1069.

7
Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 773

(2000).

In Radcliffe, we discussed FCA standing principles in the

course of rejecting one of Radcliffe’s arguments against

enforcement of the Release. As we explained, “Radcliffe had a

statutory [FCA] claim, and the necessary legal standing as

partial assignee” once the government suffered an injury and

Radcliffe became aware of the fraud. Radcliffe, 600 F.3d at 329

(emphasis added). We did not conclude that Radcliffe lost

standing when he executed the Release, but instead simply held

that his execution of the Release effected a waiver of his right

to sue Purdue. See id. at 329 (explaining that Mark Radcliffe

“had the right” to bring an FCA action before he signed the

Release, “a right he waived under the terms of the Release”).

B.

Although we reject the Relators’ assertion that Radcliffe

was a jurisdictional dismissal, we nonetheless agree with their

bottom-line position that the district court erred by giving

Radcliffe preclusive effect.

As the government notes in its amicus brief, the

traditional res-judicata inquiry is modified in cases where the

earlier action was dismissed in accordance with a release or

other settlement agreement. See Keith v. Aldridge, 900 F.2d

736, 740-41 (4th Cir. 1990). A judgment entered “based upon the

8
parties’ stipulation, unlike a judgment imposed at the end of an

adversarial proceeding, receives its legitimating force from the

fact that the parties consented to it.” Norfolk S. Corp. v.

Chevron, U.S.A., Inc., 371 F.3d 1285, 1288 (11th Cir. 2004).

Thus, where a dismissal is “based on a settlement agreement, . .

. the principles of res judicata apply (in a somewhat modified

form) to the matters specified in the settlement agreement,

rather than the original complaint.” Id. That is, given the

contractual nature of consent decrees and settlement agreements,

the preclusive effect of a judgment based on such an agreement

can be no greater than the preclusive effect of the agreement

itself. 3 See Keith, 900 F.3d at 740 (“When a consent judgment

entered upon settlement by the parties of an earlier suit is

invoked by a defendant as preclusive of a later action, the

preclusive effect of the earlier judgment is determined by the

intent of the parties.”); 18A Charles A. Wright, Arthur R.

Miller & Edward H. Cooper, Federal Practice & Procedure § 4427

(“Judgments that rest on stipulations, admissions in pleadings,

3
Whether our decision in Radcliffe bars the current action
is a legal issue that the Relators preserved by opposing the
dismissal below and on appeal. That the Relators do not raise
this particular argument does not preclude our consideration and
application of it. See Kamen v. Kemper Fin. Servs., Inc., 500
U.S. 90, 99 (1991) (“When an issue or claim is properly before
the court, the court is not limited to the particular legal
theories advanced by the parties, but rather retains the
independent power to identify and apply the proper construction
of governing law.”).

9
or consent to the very judgment itself should be given effect

according to the intention of the parties . . . .”); see also

Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 211

(4th Cir. 2009) (“Settlement agreements operate on contract

principles, and thus the preclusive effect of a settlement

agreement should be measured by the intent of the parties.”

(internal quotation marks omitted)). 4

The Release executed by Mark Radcliffe in Qui Tam I was

personal to him and addressed only his rights and the claims

that he might assert against Purdue. Neither the Relators nor

the government were parties to or intended beneficiaries of the

Release. See Restatement (Second) of Contracts § 302; see also

United States ex rel. Ubl v. IIF Data Solutions, 650 F.3d 445,

451 (4th Cir. 2011) (explaining that the effect of an agreement

settling FCA claims is a question of federal common law as to

which the Restatement (Second) of Contracts provides guidance).

The Release itself, therefore, could not serve as a defense to

any claims that the Relators (or other non-signatories) might

assert against Purdue. Indeed, we made this very point in

4
While this case involves a release executed before the
commencement of any litigation, many of the cases addressing
this issue involve consent decrees or other settlements reached
after the commencement of litigation. See, e.g., Keith v.
Aldridge, 900 F.2d 736, 738 (4th Cir. 1990). As to the res-
judicata question, there is no meaningful difference between a
post-filing settlement agreement and the pre-filing release at
issue here.

10
Radcliffe when we noted that the Release “did not prohibit the

government or another relator from pursuing similar claims

against Purdue.” Radcliffe, 600 F.3d at 329 n.8. Our decision

in Radcliffe enforcing the Release did not (and could not)

broaden the scope of the Release. Accordingly, because the

Release does not bar non-signatories from proceeding against

Purdue, the judgment enforcing the Release cannot bar such

claims.

Purdue’s arguments to the contrary are not persuasive. Our

dismissal in Radcliffe may well have been a dismissal

“on the merits” under Rule 41. See Fed. R. Civ. P. 41 (“Unless

the dismissal order states otherwise, a dismissal under this

subdivision (b) and any dismissal not under this rule--except

one for lack of jurisdiction, improper venue, or failure to join

a party under Rule 19--operates as an adjudication on the

merits.”); Shoup v. Bell & Howell Co., 872 F.2d 1178, 1181 (4th

Cir. 1989) (“[F]or purposes of res judicata, a summary judgment

has always been considered a final disposition on the merits.”

(internal quotation marks omitted)). As the Supreme Court has

explained, however, “it is no longer true that a judgment ‘on

the merits’ [for purposes of Rule 41] is necessarily a judgment

entitled to claim-preclusive effect.” Semtek Int’l, Inc. v.

Lockheed Martin Corp., 531 U.S. 497, 503 (2001) (emphasis

added). As discussed above, the preclusive effect of a judgment

11
enforcing a settlement agreement is determined by the intent of

the parties as reflected by the terms of that agreement, and the

Release did not bar anyone other than Mark Radcliffe from

bringing suit against Purdue. Regardless of the procedural

vehicle through which our decision enforcing the Release was

entered, our decision simply did not broaden the scope of the

Release. See Am. Cyanamid Co. v. Capuano, 381 F.3d 6, 17 (1st

Cir. 2004) (“[A] dismissal with prejudice contained in a consent

decree is not a ruling on the merits that applies to others

under the law of claim preclusion.” (internal quotation marks

and alterations omitted)). Accordingly, the district court

erred by dismissing Qui Tam II as barred by principles of res

judicata.

III.

We turn now to the contention urged by Purdue and the

government that the district court’s dismissal can be affirmed

because the action is prohibited by 31 U.S.C. § 3730(e)(4), the

FCA’s “public disclosure” bar. Addressing that argument

requires us to first determine which version of the statute

applies to this case.

A.

The complaint focuses on conduct occurring between 1996 and

2005. At that time, the public-disclosure bar provided:

12
 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
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.

31 U.S.C. § 3730(e)(4)(A) (2005) (emphasis added).

Section 3730(e)(4), however, was amended on March 23, 2010

-- after the occurrence of the conduct alleged in the complaint,

but before the commencement of this action. See Patient

Protection & Affordable Care Act, Pub. L. 111–148, §

10104(j)(2), 124 Stat. 119, 901-02. The statute as amended

provides that:

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.

31 U.S.C. § 3730(e)(4)(A) (2010) (emphasis added). Purdue

argues that the amended version of the statute applies, while

13
the Relators argue that the prior version of the statute

applies.

“[T]he principle that the legal effect of conduct should

ordinarily be assessed under the law that existed when the

conduct took place has timeless and universal appeal.” Landgraf

v. USI Film Prods., 511 U.S. 244, 265 (1994) (internal quotation

marks omitted). Accordingly, a “presumption against retroactive

legislation is deeply rooted in our jurisprudence,” id., and

that “time-honored presumption” must apply “unless Congress has

clearly manifested its intent to the contrary,” Hughes Aircraft

Co. v. United States ex rel. Schumer, 520 U.S. 939, 946 (1997).

The presumption against retroactivity, however, is limited to

statutes “that would have genuinely ‘retroactive’ effect.”

Landgraf, 511 U.S. at 277. A statute has retroactive effect if

it “takes away or impairs vested rights acquired under existing

laws, or creates a new obligation, imposes a new duty, or

attaches a new disability, in respect to transactions or

considerations already past.” Id. at 269 (internal quotation

marks omitted).

Applying these principles, the Supreme Court has twice held

that the 2010 FCA amendments may not be applied to cases arising

before the effective date of the amendments. See Graham Cnty.

Soil & Water Conservation Dist. v. United States ex rel. Wilson,

559 U.S. 280, 283 n.1 (2010) (“The legislation makes no mention

14
of retroactivity, which would be necessary for its application

to pending cases given that it eliminates petitioners’ claimed

defense to a qui tam suit.”); see also Schindler Elevator Corp.

v. United States ex rel. Kirk, 131 S. Ct. 1885, 1889 n.1 (2011)

(citing Graham County and stating that the 2010 amendments “are

not applicable to pending cases”). The circuit courts

considering the issue have likewise applied the pre-2010 version

of the statute. See United States ex rel. Zizic v.

Q2Administrators, LLC, 728 F.3d 228, 232 n.3 (3d Cir. 2013);

United States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680 F.3d

933, 934 (7th Cir. 2012); United States ex rel. Jamison v.

McKesson Corp., 649 F.3d 322, 326 n.6 (5th Cir. 2011); United

States ex rel. Poteet v. Bahler Med., Inc., 619 F.3d 104, 107

n.2 (1st Cir. 2010); United States ex rel. Hixson v. Health

Mgmt. Sys., Inc., 613 F.3d 1186, 1188 n.3 (8th Cir. 2010).

Purdue suggests the analysis should be different in this

case, however, because Graham County and Schindler, unlike this

case, involved complaints that were filed before the statute was

amended. We disagree. The retroactivity inquiry looks to when

the underlying conduct occurred, not when the complaint was

filed. See Landgraf, 511 U.S. at 265 (“[T]he legal effect of

conduct should ordinarily be assessed under the law that existed

when the conduct took place . . . .” (emphasis added)). While

changes in jurisdictional and procedural rules are often applied

15
to pending cases, that is not because the date of filing

controls, see Hughes Aircraft, 520 U.S. at 946 (refusing to

apply 1986 FCA amendments to action that was commenced after the

effective date of the amendments), but because application of

those new rules often does not have an impermissible retroactive

effect. See Landgraf, 511 U.S. at 274 (“Application of a new

jurisdictional rule usually takes away no substantive right but

simply changes the tribunal that is to hear the case.” (internal

quotation marks omitted)); id. at 275 (“Because rules of

procedure regulate secondary rather than primary conduct, the

fact that a new procedural rule was instituted after the conduct

giving rise to the suit does not make application of the rule at

trial retroactive.”).

The Supreme Court determined in Graham County and Schindler

that application of the 2010 amendments would have retroactive

effect if applied in those cases, and we conclude that the

amendments likewise would have retroactive effect if applied in

this case. See Baldwin v. City of Greensboro, 714 F.3d 828, 836

(4th Cir. 2013) (retroactivity inquiry looks to “whether the new

statute would have retroactive effect as applied to the

particular case” (internal quotation marks omitted)); Gordon v.

Pete’s Auto Serv. of Denbigh, Inc., 637 F.3d 454, 459 (4th Cir.

2011) (“Th[e retroactivity] inquiry is narrow, for it asks not

whether the statute may possibly have an impermissible

16
retroactive effect in any case, but specifically whether

applying the statute to the person objecting would have a

retroactive consequence in the disfavored sense.” (internal

quotation marks and citation omitted)).

Under the prior version of the statute, § 3730(e)(4)

operated as a jurisdictional limitation -- the public-disclosure

bar, if applicable, divested the district court of subject-

matter jurisdiction over the action. See 31 U.S.C. § 3730(e)(4)

(2005) (“No court shall have jurisdiction over an action under

this section based upon the public disclosure of allegations . .

. .” (emphasis added)); Rockwell Int’l Corp. v. United States,

549 U.S. 457, 468-69 (2007) (explaining that § 3730(e)(4) is a

“jurisdiction-removing provision”). It is apparent, however,

that the public-disclosure bar is no longer jurisdictional. The

amended statute does not mention jurisdiction but instead states

that in cases where the bar is applicable, the court “shall

dismiss” the action “unless opposed by the Government.” 31

U.S.C. § 3730(e)(4) (2010). The 2010 amendments thus deleted

the unambiguous jurisdiction-removing language previously

contained in § 3730(e)(4) and replaced it with a generic, not-

obviously-jurisdictional phrase (“shall dismiss”), while at the

same time retaining jurisdiction-removing language in §§

17
3730(e)(1) and (e)(2). 5 In our view, these changes make it clear

that the public-disclosure bar is no longer a jurisdiction-

removing provision. See, e.g., Brewster v. Gage, 280 U.S. 327,

337 (1930) (“The deliberate selection of language so differing

from that used in the earlier acts indicates that a change of

law was intended.”); Pirie v. Chi. Title & Trust Co., 182 U.S.

438, 448 (1901) (“When the purpose of a prior law is continued,

usually its words are, and an omission of the words implies an

omission of the purpose.”); Chertkof v. United States, 676 F.2d

984, 987 (4th Cir. 1982) (“[T]he deletion of language, having so

distinct a meaning, almost compels the opposite result when

words of such plain meaning are excised.”). Indeed, it is

difficult to understand how the amended public-disclosure bar

could be jurisdictional when the government has the ability to

veto a dismissal under that section. See Gonzalez v. Thaler,

132 S. Ct. 641, 648 (2012) (“Subject-matter jurisdiction can

never be waived or forfeited.”); Brickwood Contractors, Inc. v.

Datanet Eng’g, Inc., 369 F.3d 385, 390 (4th Cir. 2004) (en banc)

(“Subject-matter jurisdiction cannot be conferred by the

5
See 31 U.S.C. § 3730(e)(1) (2010) (providing that “[n]o
court shall have jurisdiction over” certain FCA actions brought
by present or former members of the armed forces); id. §
3730(e)(2)(A) (providing that “[n]o court shall have
jurisdiction over” certain FCA actions brought against members
of Congress, senior executive branch officials, or members of
the judiciary).

18
parties, nor can a defect in subject-matter jurisdiction be

waived by the parties.”). And even if the changes somehow did

not establish Congress’ intent to convert the public-disclosure

bar into a non-jurisdictional basis for dismissal, the omission

of the jurisdictional language would nonetheless require us to

treat the amended public-disclosure bar as such. See Sebelius

v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013) (Unless

“Congress has clearly stated that the [statutory limitation] is

jurisdictional . . . , courts should treat the restriction as

nonjurisdictional in character.” (internal quotation marks and

alteration omitted)).

Moreover, the 2010 amendments significantly changed the

scope of the public-disclosure bar. Under the prior version of

the statute, disclosures in federal and state trials and

hearings qualify as public disclosures, see, e.g., McElmurray v.

Consol. Gov’t of Augusta–Richmond Cnty., 501 F.3d 1244, 1252

(11th Cir. 2007), and disclosures in federal and state reports,

audits, or investigations likewise constitute public

disclosures, see Graham Cnty., 559 U.S. at 301. After the

amendments, however, only disclosures in federal trials and

hearings and in federal reports and investigations qualify as

public disclosures. See 31 U.S.C. §§ 3730(e)(4)(A)(i) & (ii)

(2010). The 2010 amendments thus substantially narrowed the

class of disclosures that can trigger the public-disclosure bar.

19
By the same token, the amendments expand the number of private

plaintiffs entitled to bring qui tam actions by including

plaintiffs who learn of the underlying fraud through disclosures

in state proceedings or reports.

And as we will discuss in more detail in the next section,

the 2010 amendments also changed the required connection between

the plaintiff’s claims and the qualifying public disclosure.

Under the pre-amendment version of the statute, an action is

barred if the action is “based upon” a qualifying public

disclosure, see 31 U.S.C. § 3730(e)(4)(A) (2009), a standard we

have interpreted to mean that the plaintiff must have “actually

derived” his knowledge of the fraud from the public disclosure.

United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d

1339, 1348 (4th Cir. 1994). As amended, however, the public-

disclosure bar no longer requires actual knowledge of the public

disclosure, but instead applies “if substantially the same

allegations or transactions were publicly disclosed.” 31 U.S.C.

§ 3730(e)(4)(A) (2010). Because the Relators allege that they

did not derive their knowledge of Purdue’s fraud from any public

disclosure, their claims are viable under the pre-amendment

version of the FCA, but not under the amended version, which

focuses on the similarity of the allegations of fraud rather

than the derivation of the knowledge of fraud.

20
 We believe that these significant revisions to the statute

“change[] the substance of the existing cause of action,” Hughes

Aircraft, 520 U.S. at 948, such that the amended statute would

have retroactive effect if applied in this case. The 2010

amendments deprive Purdue of the previously available

jurisdictional defense and replace it with a non-jurisdictional

defense that is triggered by a substantially narrower range of

public disclosures and is, even then, subject to veto by the

government. See id. (1986 FCA amendment had retroactive effect

because it “eliminate[d] a defense to a qui tam suit . . . and

therefore change[d] the substance of the existing cause of

action for qui tam defendants” (internal quotation marks and

alteration omitted)); id. at 948-49 (1986 amendment “create[d] a

new cause of action” by “exten[ding] . . . an FCA cause of

action to private parties in circumstances where the action was

previously foreclosed” (internal quotation marks omitted)). The

2010 amendments similarly imperil the Relators’ right to assert

their claims against Purdue, a right they possessed and could

have acted upon up until the moment that the amendments took

effect. See Landgraf, 511 U.S. at 269 (statute has retroactive

effect if it “takes away or impairs vested rights acquired under

existing laws” (internal quotation marks omitted)); cf. Brown v.

Angelone, 150 F.3d 370, 373 (4th Cir. 1998) (“When application

of a new limitation period would wholly eliminate claims for

21
substantive rights or remedial actions considered timely under

the old law, the application is impermissibly retroactive. The

legislature cannot extinguish an existing cause of action by

enacting a new limitation period without first providing a

reasonable time after the effective date of the new limitation

period in which to initiate the action.” (citations and internal

quotation marks omitted)). Accordingly, because the 2010

amendments have retroactive effect and the legislation is silent

as to retroactivity, the 2010 version of the public-disclosure

bar cannot be applied in this case, notwithstanding the fact

that the complaint was filed after the effective date of the

amendments. See Hughes Aircraft, 520 U.S. at 946 (declining to

apply 1986 FCA amendments to action alleging pre-amendment fraud

that was commenced after the effective date of the amendments).

B.

Having concluded that the pre-2010 version of § 3730(e)(4)

applies, we turn to the question of whether the public-

disclosure bar requires dismissal of this action.

As previously noted, the pre-amendment version of the

public-disclosure bar provides that:

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
report, hearing, audit, or investigation, or from the
news media, unless the action is brought by the

22
 Attorney General or the person bringing the action is
an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2005) (emphasis added). Although

most circuits have interpreted the “based upon” language to bar

actions where the allegations of fraud were “supported by” or

“substantially similar” to fraud that had been publicly

disclosed, see, e.g., United States ex rel. Mistick PBT v.

Housing Auth., 186 F.3d 376, 386 (3d Cir. 1999) (collecting

cases), this circuit has interpreted the clause as barring only

those actions where the relator’s knowledge of the fraud alleged

was actually derived from the public disclosure itself. See

Siller, 21 F.3d at 1348 (“[A] relator’s action is ‘based upon’ a

public disclosure of allegations only where the relator has

actually derived from that disclosure the allegations upon which

his qui tam action is based.” (emphasis added)). The public-

disclosure bar applies and requires dismissal if the action is

“even partly” derived from prior public disclosures. See United

States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 351 (4th Cir.

2009).

Whether a relator derived his knowledge of the fraud from a

public disclosure is a jurisdictional fact to be resolved by the

district court. See id. at 348, 350; Siller, 21 F.3d at 1349.

Although the district court dismissed this action on res

judicata grounds without addressing the public-disclosure bar,

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Purdue contends that the record nonetheless establishes that the

allegations in this action were at least partly derived from the

publicly disclosed allegations contained in the Qui Tam I

complaint. Purdue points out that the allegations of the

complaints in Qui Tam I and Qui Tam II are nearly identical, and

that many of the allegations in Qui Tam II are verbatim copies

of Qui Tam I allegations. In Purdue’s view, “[t]he verbatim

overlap of the complaints forecloses any argument that the

complaint in this action was not at least partly based on the .

. . [c]omplaint in Qui Tam I.” Br. of Resp’t at 31. We

disagree.

Under Siller, the question is not whether the allegations

set out in the relator’s complaint are similar to publicly

disclosed allegations of fraud; the question is whether the

relator’s knowledge of the fraud was actually derived from the

public disclosure – that is, whether the relator learned about

the fraud from the public disclosure. See Siller, 21 F.3d at

1347, 1348 (“[T]he only fair construction” of § 3730(e)(4) is

that “a qui tam action is only ‘based upon’ a public disclosure

where the relator has actually derived from that disclosure the

knowledge of the facts underlying his action.” (emphasis

added)); see also id. at 1348 (explaining that an FCA action

could “include[] allegations that happen to be similar (even

identical) to those already publicly disclosed, but were not

24
actually derived from those public disclosures”). Indeed, the

standard urged by Purdue is the standard adopted by other

circuits but rejected by Siller. See id. (“We are aware . . .

that other circuits have not embraced this interpretation of the

phrase, assuming instead that an action is based upon a public

disclosure of allegations if its allegations are identical or

similar to those already publicly disclosed.”).

The Relators both submitted affidavits to the district

court asserting that their knowledge of Purdue’s fraud was not

derived from the Qui Tam I complaint or any other qualifying

public disclosure, but from conversations with Mark Radcliffe

and, in Steven May’s case, from his own experiences as a Purdue

sales representative. The similarity between the allegations in

each complaint could provide a basis for disbelieving the

Relators’ assertions, see Vuyyuru, 555 F.3d at 350-51, but that

is an issue for the district court as fact-finder, not this

court. Because the district court has not made the factual

findings necessary to determine whether the public-disclosure

bar precludes this action, we must remand this case to the

district court for discovery and other proceedings as necessary

to resolve the issues related to the applicability of the

public-disclosure bar. See United States ex rel. Carter v.

Halliburton Co., 710 F.3d 171, 184 (4th Cir. 2013), petition for

cert. filed, 82 U.S.L.W. 3010 (June 24, 2013) (“Because the

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district court should have the opportunity in the first instance

to address the facts relevant to public disclosure, we remand

this issue to the district court.”); Siller, 21 F.3d at 1349

(remanding for district court to determine whether allegations

were “actually derived” from prior suit). If the district court

determines that the Relators’ knowledge of the fraud alleged

here was actually derived, even in part, from a qualifying

public disclosure and that the Relators are not original sources

of the information, then the district court must dismiss this

action for lack of subject-matter jurisdiction. See Vuyyuru,

555 F.3d at 355.

IV.

Purdue makes two additional arguments for sustaining the

district court’s dismissal of this action that do not require

extended discussion.

First, Purdue contends that dismissal was proper because

the Relators’ complaint fails to allege fraud with the

specificity required by Rule 9 of the Rules of Civil Procedure.

We disagree. Assuming without deciding that the complaint does

not allege the fraudulent conduct with the specificity required

by Rule 9, see U.S. ex rel. Nathan v. Takeda Pharm. N. Am.,

Inc., 707 F.3d 451, 456-57 (4th Cir. 2013), petition for cert.

26
filed, 81 U.S.L.W. 3650 (May 10, 2013), 6 the Relators have yet to

amend their complaint, and they requested an opportunity to

amend if the court believed the allegations deficient. Leave to

amend a complaint should generally be freely granted, and there

is at present no basis in the record for this court to conclude

that any efforts to amend would be futile or otherwise improper.

See, e.g., Mayfield v. NASCAR, Inc., 674 F.3d 369, 379 (4th Cir.

2012) (“[A] request to amend should only be denied if one of

three facts is present: the amendment would be prejudicial to

the opposing party, there has been bad faith on the part of the

moving party, or amendment would be futile.” (internal quotation

marks omitted)). Because the Relators have not had the

opportunity to amend their complaint, we believe it would be

improper to rely on any Rule 9 deficiencies to affirm the

district court’s dismissal of the action with prejudice. The

district court on remand is free to consider Purdue’s Rule 9

argument in the first instance.

Second, Purdue argues that we can affirm the district

court’s order because dismissal is required by the FCA’s “first

to file” bar. See 31 U.S.C. 3730(b)(5). Section 3730(b)(5)

provides that “[w]hen a person brings an action under this

6
On October 7, 2013, the Supreme Court invited the
Solicitor General to express the views of the United States on
the pending petition.

27
subsection, no person other than the Government may intervene or

bring a related action based on the facts underlying the pending

action.” Although this action is clearly based on the facts

underlying Qui Tam I, we recently held that the first-to-file

bar applies only if the first-filed action was still pending

when the subsequent action was commenced. See Carter, 710 F.3d

at 182-83. By the time this action was commenced, Qui Tam I had

been dismissed by the district court, the dismissal had been

affirmed by this court in Radcliffe, and certiorari had been

denied by the Supreme Court. Qui Tam I, therefore, was no

longer pending at the time this action was commenced, thus

making the first-to-file bar inapplicable. See Carter, 710 F.3d

at 183 (“[O]nce a case is no longer pending the first-to-file

bar does not stop a relator from filing a related case.”).

V.

Accordingly, for the foregoing reasons, we vacate the

district court’s order dismissing this action on res judicata

grounds and remand for further proceedings consistent with this

opinion.

VACATED AND REMANDED

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