Res Judicata Cannot Bar Qui Tam Complaint When Government Not a Party to Prior Lawsuit; United States Court of Appeals for the Ninth Circuit No. 18-56532, U.S. ex rel. Hrayr Shahinian M.D. v. Kimberly-Clark Corporation

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The Ninth Circuit vacated and remanded a lower court’s dismissal of a qui tam complaint under the public disclosure bar. The court found the relator’s complaint asserted allegations involving a different product and different timeline than previous litigation, which related to a similar but distinct product. The court also rejected the defendant’s argument that the case was barred by res judicata, explaining that the government was not a party to the plaintiff’s previous individual claim and therefore this claim brought on the government’s behalf could not be barred.

Plaintiff-relator Hrayr Shahinian appealed the district court’s dismissal of his qui tam complaint against Kimberly-Clark Corporation under the public disclosure bar.

Shahinian alleged KC made material misrepresentations regarding certain surgical gowns it sold to state and federal governments. The district court dismissed the action, finding that substantially the same allegations and transactions had been publicly aired in the news media during litigation between KC and Cardinal Health.

On appeal, the plaintiff argued his complaint made allegations about a new fraud, one based on subsequent statements made by KC about a new and different surgical gown. The court noted the allegations involved products made with a different fabric, containing a different film layer, and manufactured in a manner different from the products in the prior litigation.

The court found that the similarity between the claims was not enough to bar the relator’s action, as the allegations in the prior litigation would not have alerted the government to the existence of the fraud alleged here, which concerned different products and a different time period.

KC argued in the alternative that the action was barred by res judicata, as Shahinian had raised his allegations in a personal, individual claim in a prior class action case, which he voluntarily dismissed. Because the government was not a party to that prior action, the court held that res judicata cannot bar a claim brought on the government’s behalf in a qui tam case.

The court vacated and remanded the case back to district court.

FCA - Shahinian v Kimberly Clark