PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2299
UNITED STATES ex rel. STEVEN MAY AND ANGELA RADCLIFFE,
Plaintiff - Appellant,
and
STATE OF CALIFORNIA; STATE OF GEORGIA; STATE OF ILLINOIS;
STATE OF NEW YORK; STATE OF TENNESSEE,
Plaintiffs,
v.
PURDUE PHARMA L.P., a limited partnership, and; PURDUE
PHARMA, INC.,
Defendants - Appellees.
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: October 29, 2015 Decided: January 29, 2016
Before TRAXLER, Chief Judge, and AGEE and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Chief Judge Traxler and Judge Agee joined.
ARGUED: Mark Tucker Hurt, THE LAW OFFICES OF MARK T. HURT,
Abingdon, Virginia, for Appellant. Daniel Stephen Volchok,
WILMER CUTLER PICKERING HALE AND DORR LLP, Washington, D.C., for
Appellees. ON BRIEF: Paul W. Roop, II, ROOP LAW OFFICE, LC,
Beckley, West Virginia, for Appellant. Howard M. Shapiro,
Christopher E. Babbitt, Charles C. Speth, Ariel Hopkins, WILMER
CUTLER PICKERING HALE AND DORR LLP, Washington, D.C., for
Appellees.
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DIAZ, Circuit Judge:
Steven May and Angela Radcliffe (the “Relators”) appeal the
district court’s dismissal of their qui tam action under the
False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. They contend
that the district court incorrectly concluded that (1) the pre-
2010 version of the FCA’s “public disclosure bar,” 31 U.S.C.
§ 3730(e)(4) (2009), divested the court of subject matter
jurisdiction; and, alternatively, (2) the Relators failed to
plead fraud in accordance with Federal Rule of Civil Procedure
9(b). We agree that the public disclosure bar left the district
court without jurisdiction over the Relators’ FCA claims;
therefore, we do not reach the court’s alternative ground for
dismissal. Accordingly, we affirm.
I.
The FCA allegations at issue have enjoyed a long though not
particularly fruitful life, having reached this court now for
the third time. Ten years ago, Mark Radcliffe—a former district
sales manager for Purdue Pharma (“Purdue”)—filed a qui tam
action under the FCA against Purdue. United States ex rel.
Radcliffe v. Purdue Pharma L.P., 600 F.3d 319, 321–22 (4th Cir.
2010). He alleged a fraudulent scheme whereby Purdue marketed
the pain medication OxyContin as having a falsely inflated 2:1
equianalgesic ratio—which is a measure of a painkiller’s
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potency—as compared to one of Purdue’s older pain drugs, MS
Contin. Id. at 321. By overstating the ratio, Radcliffe
claimed, Purdue deceived physicians into prescribing—and the
federal government into paying for—OxyContin instead of less
costly MS Contin. Id. at 321–22 & n.3. In 2010, we held that
Radcliffe’s qui tam action must be dismissed based on a release
he executed upon accepting a severance package from Purdue after
it restructured its workforce. Id. at 322 & n.2, 324.
Less than two months after the Supreme Court denied
Radcliffe’s petition for certiorari, United States ex rel.
Radcliffe v. Purdue Pharma, L.P., 562 U.S. 977 (2010), his wife
Angela decided to “take up . . . the baton” and file the qui tam
action against Purdue now before the court. J.A. 434. Joining
her as a relator is Steven May, a former Purdue employee who
worked under Mr. Radcliffe. One of their attorneys is Mark
Hurt, who was Mr. Radcliffe’s counsel throughout his qui tam
action.
The allegations in the Relators’ lawsuit are “nearly
identical to” those pursued by Mr. Radcliffe. United States ex
rel. May v. Purdue Pharma L.P., 737 F.3d 908, 911 (4th Cir.
2013), cert. denied, 135 S. Ct. 2376 (2015). While the district
court found that the Relators did not base their allegations on
a personal review of the documents filed in Mr. Radcliffe’s
suit, the court concluded that their “contribution to the case
4
was essentially to provide plaintiffs’ names not associated with
the release that barred Mr. Radcliffe’s suit.” J.A. 1323–24.
The facts of the fraudulent scheme alleged in this action come
from Mr. Hurt, who “simply used his own knowledge developed
during [Mr. Radcliffe’s suit] and the documents provided by Mr.
Radcliffe . . . to draft the pleadings here.” J.A. 1323.
The district court dismissed the Relators’ suit on res
judicata grounds, giving preclusive effect to Mr. Radcliffe’s
qui tam action. United States ex rel. May v. Purdue Pharma
L.P., No. 10-cv-01423, 2012 WL 4056720, at *4–5 (S.D.W. Va.
Sept. 14, 2012). We vacated that judgment, holding that Mr.
Radcliffe’s release “was personal to him” and “could not serve
as a defense to any claims that the Relators (or other non-
signatories) might assert against Purdue.” May, 737 F.3d at
913–14, 920. And while Purdue argued that we could affirm the
district court’s dismissal on the alternative theory that the
public disclosure bar precluded the Relators’ action, we
explained that ruling on that issue would be premature, as the
district court had not made the requisite jurisdictional
findings of fact. Id. at 919–20.
On remand, the district court dismissed the Relators’
amended complaint, holding that their allegations were based on
the claims from Mr. Radcliffe’s suit and therefore the public
disclosure bar stripped the court of subject matter
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jurisdiction. In the alternative, the court (1) held that the
Relators failed to plead fraud with particularity under Rule
9(b), and (2) denied the Relators leave to further amend their
complaint. 1
This appeal followed.
II.
A.
The FCA provides a cause of action “against anyone who
‘knowingly presents’ to the government ‘a false or fraudulent
claim for payment or approval.’” United States ex rel. Owens v.
First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724, 728
(4th Cir. 2010) (quoting § 3729(a)(1)). “In adopting the FCA,
‘the objective of Congress was broadly to protect the funds and
property of the government.’” Id. (quoting Rainwater v. United
States, 356 U.S. 590, 592 (1958)).
To fulfill this objective, the FCA in certain circumstances
permits qui tam actions, which “provide cash bounties . . . to
private citizens who successfully bring suit against those who
defraud the federal government.” United States ex rel.
1 The Relators also alleged various state law claims. The
district court explained that “[t]o the extent dismissal of the
state law claims is not required by the Court’s previous
findings, the Court declines to exercise supplemental
jurisdiction over those claims.” J.A. 1336.
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Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C.
Cir. 1994). One barrier to bringing a qui tam action under the
FCA, however, is its “public disclosure bar.” While Congress
amended the public disclosure bar in 2010, we held that in the
instant case, which involves allegations between 1996 and 2005,
the pre-2010 version of the bar governs. May, 737 F.3d at 914–
18. It provides:
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 . . . 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) (2009).
We interpret the phrase “based upon” in the pre-2010 public
disclosure bar differently than our sister circuits. United
States ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 57 (1st
Cir. 2009) (discussing the circuit split on this issue and
observing that “[t]his leaves the Fourth Circuit alone among the
courts of appeals in favoring a narrow reading of the [public
disclosure bar’s] ‘based upon’ language”). While other circuits
read the phrase to bar FCA claims that are “substantially
similar to” or “supported by” publicly disclosed information,
see, e.g., id.; United States ex rel. Bledsoe v. Cmty. Health
Sys., Inc., 342 F.3d 634, 646 (6th Cir. 2003), we interpret it
to preclude actions “only where the relator has actually derived
7
from [a public] disclosure the allegations upon which his qui
tam action is based,” United States ex rel. Siller v. Becton
Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir. 1994). This test
is satisfied if a relator’s claim is “even partly” derived from
prior public disclosures. United States ex rel. Vuyyuru v.
Jadhav, 555 F.3d 337, 351 (4th Cir. 2009). 2
A relator bears the burden of proving that the public
disclosure bar does not preclude his FCA action. Id. at 347.
When a relator cannot clear the pre-2010 version of the public
disclosure bar, the court is divested of subject matter
jurisdiction. § 3730(e)(4)(A); see also May, 737 F.3d at 916.
We review the district court’s legal conclusions de novo and its
jurisdictional findings of fact for clear error. United States
ex rel. Wilson v. Graham Cty. Soil & Water Conservation Dist.,
777 F.3d 691, 695 (4th Cir. 2015).
B.
The Relators argue that their allegations are not “actually
derived from” a public disclosure and therefore the district
court had subject matter jurisdiction. In support, they
highlight the district court’s finding that they did not
personally review the filings in Mr. Radcliffe’s lawsuit prior
2 The public disclosure bar contains an exception for
relators who are the “original source” of their allegations.
§ 3730(e)(4)(A). Here, the Relators do not argue that the
original source exception applies.
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to instituting this action. 3 They also point out that although
their attorneys’ knowledge is imputed to them, Appellant’s Br.
at 21; accord Appellee’s Br. at 13, Mr. Hurt and his co-counsel
“had already learned of all of the allegations in [Mr.
Radcliffe’s] complaint previously from nonpublic sources,”
Appellant’s Br. at 22; accord Appellee’s Br. at 5 (explaining
that this is “necessarily so” because the Relators’ counsel
prepared the filings in Mr. Radcliffe’s case).
Accordingly, we must determine whether the Relators can
sidestep the public disclosure bar when their allegations—though
not directly stemming from the docket entries in Mr. Radcliffe’s
lawsuit—are derived from facts their attorney learned while
representing Mr. Radcliffe and preparing the public filings in
his case. We hold that the district court correctly dismissed
the Relators’ suit.
The Relators’ claim of error rises and falls with our
decision in Siller. Accordingly, we turn to that case. In
Siller, the relator worked for a company, Scientific Supply,
that had filed suit against Becton Dickinson alleging that it
had “canceled [Scientific Supply’s] distributorship because it
feared that [Scientific Supply] . . . would disclose that [it]
was overcharging the government.” 21 F.3d at 1340–41.
3
There is no dispute that the filings in Mr. Radcliffe’s
lawsuit are qualifying public disclosures under § 3730(e)(4)(A).
9
Scientific Supply and Becton Dickinson ultimately settled their
lawsuit. Id. at 1341. Over a year after the settlement, the
relator filed his qui tam action against Becton Dickinson. Id.
He claimed that “he originally learned that [Becton Dickinson]
overcharged the government through his employment with
[Scientific Supply], not as a result of [Scientific Supply’s]
suit against [Becton Dickinson].” Id. Indeed, the relator
alleged that he learned of the fraud before Scientific Supply
filed suit and that he had not read Scientific Supply’s
complaint until after he filed his qui tam action. Id.
After parsing the meaning of the term “based upon” in the
public disclosure bar, we held that the bar is triggered when
“the relator has actually derived from [a public] disclosure the
allegations upon which his qui tam action is based.” Id. at
1348. Applying this test, we observed that “[i]t [was]
certainly possible that, as [the relator] contends, [he]
actually learned of [Becton Dickinson’s] alleged fraud entirely
independently of the [Scientific Supply] suit, and derived his
allegations from that independent knowledge.” Id. at 1349.
Thus, we concluded that the district court improperly dismissed
the relator’s action under the public disclosure bar and we
remanded for further fact finding “because the district court
made no finding on whether [the relator] actually derived his
allegations from the [Scientific Supply] suit, a finding
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necessary to the conclusion that [the relator’s] action was
‘based upon’ that suit.” Id.
Here, unlike in Siller, it is clear that the Relators did
not independently discover the facts underpinning their
allegations. Additionally, we know beyond doubt that the
Relators did not learn of the alleged fraud “entirely
independently of” a prior lawsuit, as may have been true for the
relator in Siller. Instead, the Relators’ knowledge in this
case stems from their attorney’s involvement in Mr. Radcliffe’s
qui tam action.
Moreover, Siller anticipated that in factual circumstances
similar to those involved here, application of our “actually
derived from” test would result in dismissal. In reaching our
understanding of the “based upon” language in the public
disclosure bar, we rejected a broader statutory construction set
out in United States ex rel. Doe v. John Doe Corp., 960 F.2d 318
(2d Cir. 1992). See Siller, 21 F.3d at 1347–49.
In Doe, the relator was an attorney who learned of the
facts alleged in his FCA action while representing a John Doe
Corp. employee—who was instrumental in carrying out a fraudulent
scheme for the corporation—during a grand jury proceeding. Doe,
960 F.2d at 320, 324. Prior to that proceeding, however,
government investigators had divulged the fraudulent scheme to
innocent John Doe Corp. employees. Id. at 319–20, 322–24. The
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relator contended that his allegations were not “based upon”
those public disclosures. Id. at 324. The Second Circuit
rejected this argument, explaining that the relator’s
allegations “[were] the same as those that had been publicly
disclosed” and, under the court’s interpretation of the FCA’s
“based upon” language, the “[p]ublic disclosure of the
allegations divests district courts of jurisdiction over qui tam
suits, regardless of where the relator obtained his
information.” Id.
Although the court in Siller disagreed with the Second
Circuit’s statutory construction of the term “based upon,” it
did not reject the Second Circuit’s ultimate resolution of the
case under the public disclosure bar. The court explained:
[In Doe], the qui tam plaintiff was an attorney who
only learned of the pertinent fraud allegations
through his representation of a client whose employer
was being investigated for suspected fraudulent
billing practices in its transactions with the
Government. However, under our reading of section
3730(e)(4), which we believe is more faithful to the
enacted language, the same result might well obtain.
Siller, 21 F.3d at 1348 n.8 (emphasis added). Though this
language is dicta, it guides our application of Siller to the
case before us. Like the relator in Doe, Mrs. Radcliffe and Mr.
May did not learn of their allegations directly from the public
disclosures at issue—in this case, the docket entries from Mr.
Radcliffe’s case. And, much like in Doe, the Relators’ claims
12
here are based on what their attorney learned when representing
another client in a matter involving the same fraud allegations. 4
Finally, as in Doe, the allegations in the Relators’ complaint
were publicly disclosed before suit was filed. In Siller, we
suggested that facts like these would trigger the public
disclosure bar, requiring dismissal. We now so hold.
The result we reach here is also consistent with the
purpose of the public disclosure bar. Section 3730(e)(4) “is
designed to strike a balance between empowering the public to
expose fraud on the one hand, and ‘preventing parasitic actions’
on the other.” Wilson, 777 F.3d at 695 (quoting Siller, 21 F.3d
at 1348). Thus, the FCA encourages whistleblowing by
financially rewarding those who successfully bring qui tam
actions. See § 3730(d); Graham Cty. Soil & Water Conservation
Dist. v. United States ex rel. Wilson, 559 U.S. 280, 294 (2010)
(discussing the public disclosure bar and how it is designed in
part to provide “adequate incentives for whistle-blowing
insiders with genuinely valuable information” (quoting Quinn, 14
F.3d at 649)). “At the same time, however, Congress sought to
prevent ‘parasitic’ qui tam actions in which relators, rather
4
That the relator in Doe was himself the attorney in the
proceeding in which he learned of the facts supporting his fraud
allegations does not distinguish Doe in a meaningful way. As
previously noted, the parties agree that Mr. Hurt’s knowledge is
imputed to Mr. May and Mrs. Radcliffe.
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than bringing to light independently-discovered information of
fraud, simply feed off previous disclosures of government
fraud.” Siller, 21 F.3d at 1347.
Purdue argues that the Relators’ FCA claim is a
quintessential parasitic action because they provide no useful
new information but instead effectively copy the substance of
Mr. Radcliffe’s earlier suit. The Relators respond that the FCA
is meant to encourage actions like the instant one in which the
qui tam plaintiffs learned of fraud second-hand. To support
this contention, the Relators point to the legislative history
of the FCA’s 1986 amendments, 5 which they say shows that Congress
intended to increase the number of FCA qui tam actions to
supplement the government’s efforts to prosecute fraud.
Purdue has the better of the statutory-purpose argument.
While Congress intended the 1986 amendments to increase the
number of qui tam actions under the FCA, Congress did not invite
5
Among other changes, the 1986 amendments to the FCA
eliminated the “government knowledge” jurisdictional bar and
replaced it with the public disclosure bar at issue here.
Compare 31 U.S.C. § 3730(b)(4) (1982), with False Claims
Amendments Act of 1986, Pub. L. No. 99-562, § 3, 100 Stat. 3153,
3154, 3157. The government knowledge bar precluded “qui tam
actions that were ‘based on evidence or information the
government had when the action was brought.’” United States ex
rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential
Ins. Co., 944 F.2d 1149, 1153 (3d Cir. 1991) (quoting 31 U.S.C.
§ 3730(b)(4) (1982)). By eliminating that bar, the 1986
amendments, as the Relators argue, were in part intended to
increase the number of FCA qui tam actions. See id. at 1154.
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a free-for-all for aspiring relators salivating over the FCA’s
qui tam reward provision. See § 3730(d). Instead, Congress
intended only to supplement the government’s ability to
prosecute FCA actions as long as—consistent with the twin aims
of the public disclosure bar—parasitic claims are barred and
whistleblowing is encouraged. Though the FCA surely is meant to
incentivize people like Mr. Radcliffe to come forward, it is not
designed to encourage lawsuits by individuals like the Relators
who (1) know of no useful new information about the scheme they
allege, and (2) learned of the relevant facts through knowledge
their attorney acquired when previously litigating the same
fraud claim.
Accepting the view of the Relators also leads to absurd
results. Imagine the following: an attorney prepares a draft
complaint alleging an FCA violation, makes some insubstantial
edits, and then files it. Under the Relators’ reading of the
FCA, a person who copied the earlier draft would limbo under the
public disclosure bar, while someone who copied the filed
complaint would rightly be labeled a parasitic relator, barred
from pursuing an FCA action. That cannot be the law.
In sum, we decline the Relators’ invitation to read Siller
so as to render it internally inconsistent and at odds with the
public disclosure bar’s purpose. Indeed, by foreshadowing the
court’s conclusion in this case, Siller itself eschews the
15
interpretation the Relators urge. Here, the Relators’ claims
are based on facts their counsel learned in the course of making
the prior public disclosure of Purdue’s allegedly fraudulent
scheme. Accordingly, we hold, consistent with our reasoning in
Siller and the public disclosure bar’s purpose, that the
district court correctly dismissed the Relators’ suit.
III.
For the reasons given, we affirm the judgment of the
district court.
AFFIRMED
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