General Release Signed by Qui Tam Relator Does Not Bar Later Suits By Other Relators Alleging the Same Fraud – United States ex rel. May v. Purdue Pharma L.P.

Abstract

General Release Signed by Qui Tam Relator Does Not Bar Later Suits By Other Relators Alleging the Same Fraud - United States ex rel. May v. Purdue Pharma L.P.1 - The Fourth Circuit recently held that a general release signed by an individual bars False Claims Act2 (FCA) suits by that individual, but does not bar later actions brought by other qui tam relators alleging the same fraud ulent acts.3In general, any individual who knowingly submits false claims to the government is liable under the FCA. 4 The statute also allows for private whistleblowers, known as relators, to file qui tam actions on behalf of the government and allows relators to recover a share of any eventual damages. 5 Qui tam relators may be barred from receiving their share, however, if anot her action regarding the same fraud has already been filed -the first to file bar6-or if the action is based on information already publically disclosed -the disclosure bar.7In 2005, Mark Radcliffe, a former Purdue district sales manager, filed a qui tam suit against Purdue claiming that the company falsely marketed the cost per dose of the popular pain medication OxyContin.8 Prior to filing this suit, however, Mark Radcliffe had been laid off by Purdue and had signed a general release of all cla ims in exchange for a more generous Perdue severance package.9 The District Court for the Western District of Virginia originally dismissed this action for failing to satisfy the Federal Rules of Civil Procedure's heightened pleading requirements in cases alleging fraud.10 The Fourth Circuit affirmed this dismissal with prejudice on alternate grounds, holding that the release was enforceable and any right to file a qui tam action had been waived in the release.11 The court noted, however, that [t]he release . . . did not prohibit the government or another relator from pursuing similar claims.12Subsequently, relators Steven May, a former Purdue sales representative, and Angela Radcliffe, Mark Radcliffe's wife, filed a qui tam action against Purdue alleging nearly identical violations of the FCA. 13 Purdue responded, arguing that the action should be barred on res judicata grounds because the Fourth Circuit's previous dismissal with prejudice of Mark Radcliffe's suit was a judgment on the merits.14 The District Court for the Southern District of West Virginia agreed and dismissed the suit.15On appeal, the relators contended that the district court should not have given the previous suit preclusive weight as the decision turned on a standing issue. 16 The Fourth Circuit rejected this argument, but nevertheless held that the district court erred in dismissing the relators' complaint. 17 The court found that, since settlement agreements are contractual in nature, the preclusive effect of a judgment based on such an agreement is limited only to the agreement itself. 18 That is, Mark Radcliffe's release only concerned his personal rights and potential claims against Purdue -not the relators' or the government's potential claims -and therefore the release could not be used against others.19 Further, the court's decision in the previous suit, which enforced the release, could not expand the release's scope, and therefore the judgment could not bar non-signatories from proceeding against Purdue.20 The court's dismissal in Radcliffe may have been a dismissal on the merits under the Federal Rules, but such a judgment does not always have a preclusive effect.21The court also considered whether the 2010 amendments 22 to the FCA's public disclosure bar applied since the alleged fraud occurre d between 1996 and 2005.23 Since the amendments would have to apply retroactively, altering the relators' right to assert their claims against Purdue even if they did not have actual knowledge of the disclosure itself, and the legislation does not specifica lly mention retroactivity, the court decided to apply the earlier version of the statute. 24 As the relators claimed their knowledge of the fraud came from discussions with Mark Radcliffe and not from a public disclosure, the court remanded for discovery to make factual findings on whether the previous action precludes this complaint. …