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The Second Circuit vacated and remanded a lower court’s dismissal of a qui tam suit alleging the defendants failed to report to the government discounted pricing for pharmaceutical purchases. The district court found the complaint failed to plead its allegations with particularity and indicated the case might be barred by the public disclosure bar without reaching a conclusion. While the circuit court agreed the pleading had deficiencies, it held that the lower court must resolve the jurisdictional question before weighing in on other matters.

Relator Don Hanks filed a qui tam suit alleging that Florida Cancer Specialists and multiple other defendants—including healthcare providers, physician oncology practices, and group purchasing organizations—conspired with pharmaceutical company Amgen Inc. to purchase Amgen drugs at discounted rates with knowledge that Amgen would fail to report the discounts to government agencies. According to the relator, these unreported discounts resulted in:  increased sales of Amgen products; and inflated reimbursements to healthcare providers who prescribed—and in some cases over-prescribed—those products.

A New York district court dismissed the claims on the grounds that the core allegations had been raised in earlier lawsuits by other plaintiffs. The court also concluded the complaint failed to allege its claims with particularity. The relator appealed.

First, the defendants argued the appeal was untimely, as it was filed 51 days after the district court entered its judgment. While the general appeal deadline is 30 days, the circuit court noted that if one of the parties is the United States, that deadline is extended to 60 days. The court noted the United States intervened in the complaint in December 2012 and negotiated a settlement, while never formally withdrawing as a party.

In their motion to dismiss, the defendants argued the United States intervened in the case for a limited purpose that was accomplished by a settlement agreement, and that the government declined to intervene after the relator filed several amended complaints. While the government continued to monitor the litigation, the defendants argued this was not enough to conclude the government is a party to the litigation.

The court disagreed, explaining that the stated criterion is whether the government is a party to the action, not whether the United States is concerned with the particular order being appealed. The court declined to read additional requirements into the timeliness rule for appeals. While the government did not intervene after the filing of the later amended complaints, it did not withdraw as a plaintiff, continued to monitor proceedings, and continued to file motions relevant to its positions. As both parties were aware of the government’s role, the court declined to find the United States was excluded as a party in the litigation.

Next, the circuit court held the district court had not settled the matter of whether it had jurisdiction to consider the case. The court noted that the earlier version of the public disclosure bar applied to Hanks’ action, as it was filed in 2008, and that version is explicitly jurisdictional.

During the earlier proceedings, several defendants offered evidence that the relator’s core allegations had been previously disclosed in related lawsuits and media reports. The district court placed the burden on Hanks to show that the public disclosure bar did not deprive the court of jurisdiction. The court eventually found that the suit was based in substantial part on publicly disclose information, but failed to decide whether the original source exception applied to Hanks’ claims. According to the district court, because the complaint combined numerous FCA claims into a single cause of action, and failed to plead the distinct claims with particularity, the court could not adjudicate the jurisdictional argument.

The appeals court agreed that the pleading was deficient, but faulted the lower court for not deciding the jurisdictional question before dismissing the complaint for failing to meet the particularity standard. While there are exceptions to the rule that subject matter jurisdiction must be decided first, the court felt no such exception applied here.

However, the court found the jurisdictional question is relatively straightforward: whether Hanks was an original source of the information underlying his claims. According to the appeals panel, if Hanks’ allegations failed to show that he is an original source, that finding could settle the matter. However, the district court first has to make such a finding. Accordingly, the circuit court vacated the judgment dismissing Hanks’ claims and remanded the matter back to the district court to consider the jurisdictional question under the public disclosure bar.