Third Circuit’s Gift to Qui Tam Defendants

It’s so brief—just eleven words in a 23-page, single-spaced opinion—that you could easily overlook it, but the Third Circuit’s recent opinion cites the government’s nonintervention in a qui tam case as evidence supporting dismissal of the case for failure to state a claim. Since the government declines to intervene in the vast majority of cases, this should be welcome news to qui tam defendants.

The relator filed a qui tam action alleging that Genentech’s wrongful suppression of data on the side effects of Avastin caused doctors to incorrectly certify the drug as “reasonable and necessary” for thousands of patients, at a yearly cost to Medicare of $1.13 billion. The district court dismissed for failure to state a claim. The Third Circuit disagreed with the lower court’s rationale but affirmed the dismissal for failure to meet the False Claims Act’s requirement that an alleged falsehood be material to the government’s decision to pay a claim.

That’s where the significance of the government’s nonintervention came in. The court noted that the relator had disclosed his allegations to the FDA and Department of Justice, and yet “the Department of Justice has taken no action against Genentech and declined to intervene in this suit [emphasis added].” As the court saw it, declining to intervene was an indication that the alleged wrong wasn’t material to the government’s decision to pay the claims.

By law every qui tam case is disclosed to the government before it is unsealed or served on the defendant. Yet the intervention rate is below 25 percent. Is that an acknowledgment that in the other 75-plus percent of cases the alleged falsehood wasn’t material to the government’s decision to pay the claim? No authority has ever suggested that before.

The court’s statement is all the more curious because the government wasn’t silent in the case. It filed a 43-page Brief for the United States of America as Amicus Curiae in Support of Neither Party containing the statement, “The government takes no position on whether the allegations in the relator’s complaint are sufficient to survive dismissal.”

 

The case is United States ex rel. Petratos v. Genentech, No. 15-3805 (3d Cir. 2017).

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