APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. No. 96-cv-07768) APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. No. 97-01186) APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. No. 97-03643)
Before: Scirica, Nygaard, and Seitz, Circuit Judges.
The opinion of the court was delivered by: Nygaard, Circuit Judge.
This appeal requires us to interpret for the first time 31 U.S.C. § 3730(b)(5), a provision of the False Claims Act intended to prevent duplicative lawsuits. Jeffrey Clausen, William LaCorte and Donald Miller appeal from an order dismissing their False Claims Act suits under section 3730(b)(5) and denying them a share of the proceeds from a settlement based on similar claims alleged in pre-existent lawsuits. We will affirm.
The False Claims Act prescribes civil penalties for knowingly submitting fraudulent claims to the federal government. Under the Act, the United States may bring a civil suit to recover funds lost through such fraudulent transactions. 31 U.S.C. § 3730(a). Of greater relevance for this appeal, the Act's qui tam provisions also allow private plaintiffs ("relators") to sue on the government's behalf and receive a portion of the recovered funds if successful.*fn1 See, e.g., 31 U.S.C. §§ 3730(b)(1), (c)(3), (d). Before proceeding with the suit, a qui tam plaintiff must disclose to the government the information on which his or her claim is based. The complaint is filed in camera and remains under seal for at least sixty days, during which the United States investigates the claim and decides whether to intervene. 31 U.S.C. § 3730(b)(2). If the government declines to intervene, the qui tam plaintiff may serve the complaint on the defendant and proceed with the action. 31 U.S.C. § 3730(b)(4)(B). However, no qui tam plaintiff may recover for a false claim or share in a government settlement if his or her allegations repeat claims in a previously filed action. 31 U.S.C. § 3730(b)(5).*fn2
This appeal involves six suits under the qui tam provisions of the False Claims Act. Appellee Robert J. Merena filed the first of these qui tam actions against SmithKline on November 12, 1993 in the Eastern District of Pennsylvania. Appellee Glenn Grossenbacher, later joined by Charles Robinson, Jr., ("the Grossenbacher parties") filed suit in the Western District of Texas on December 15, 1993. Appellees Kevin Spear, C. Jack Dowden and Berkley Community Law Center ("the Spear parties") followed on February 13, 1995 with a suit in the Northern District of California. The Texas and California courts transferred the Spear and Grossenbacher actions to the Eastern District of Pennsylvania for consolidation with Merena's case. For the sake of brevity, these three actions will be referred to collectively as the "original" lawsuits and their plaintiffs as the "original" relators.
All three complaints alleged that SmithKline, which operates a nationwide system of clinical laboratories, adopted myriad complicated procedures for the purpose of defrauding state and federal healthcare programs, in particular Medicare and Medicaid. Most of these fraudulent schemes permitted SmithKline to bill the federal government for unauthorized and medically unnecessary laboratory tests. The original relators also alleged that SmithKline used various methods to evade Medicare and Medicaid requirements dictating the maximum level of reimbursement for certain services.
Based on its investigation of claims in the original lawsuits, the United States negotiated a $325,000,000 settlement releasing SmithKline for certain false claims made between January 1, 1989 and September 16, 1996. After the government and SmithKline reached this proposed settlement, but before final execution of the settlement agreement, Jeffrey Clausen, Donald Miller and William LaCorte each filed a separate qui tam action (the "later" lawsuits) against SmithKline. Like the original relators, Clausen, LaCorte and Miller alleged that SmithKline intentionally overcharged several government health benefit plans, including the Medicare and Medicaid programs. Although these later cases originated in different parts of the country, they were transferred to the Eastern District of Pennsylvania and reviewed together with the original lawsuits. The later actions were never consolidated with the original suits, however.
Under the False Claims Act, the government may settle a qui tam relator's claim over the relator's objections only "if the [trial] court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." 31 U.S.C. § 3730(c)(2)(B). In the district court, Clausen, LaCorte and Miller requested a hearing to challenge the settlement agreement. Appendix ("App.") at 875-972. As a threshold matter, they needed to demonstrate (1) that the settlement covered their claims, and (2) that those claims were not barred by 31 U.S.C. § 3730(b)(5)'s prohibition against subsequent actions based on the same facts underlying a pre-existing False Claims Act lawsuit.
After reviewing the parties' submissions, the district court ruled that the settlement agreement included all but one of the later claims, i.e., an allegation in LaCorte's complaint alleging fraudulent billing for urinalysis tests. It also held that this urinalysis claim was the only allegation in the later complaints not barred by section 3730(b)(5). Consequently, the court denied Clausen, Miller and LaCorte a share of the settlement proceeds, but held that LaCorte could pursue a separate suit against SmithKline for damages arising from his urinalysis claim. The trial Judge then severed LaCorte's urinalysis claim under Federal Rule of Civil Procedure 21 so that it could proceed as a separate and independent action.*fn3 However, after Clausen, LaCorte and Miller filed their appeals with this Court, the district court stayed proceedings involving the urinalysis claim pending our decision.*fn4
Clausen and Miller concede that the settlement agreement covers their claims. They maintain, however, that they should share in the settlement because their claims differ from those of the original relators and therefore escape 31 U.S.C. § 3730(b)(5)'s prohibition against qui tam claims based on facts underlying pending actions. LaCorte makes a slightly different argument, stating that in addition to the urinalysis claim, four other claims included in his complaint are neither covered by the settlement agreement nor barred by 31 U.S.C. § 3730(b)(5). He therefore asserts the right to pursue these four additional claims in his separate suit against SmithKline. In the alternative, he argues that if these claims indeed are covered by the settlement agreement, he should receive a portion of the relator's share.
The district court had jurisdiction under 28 U.S.C. § 1331 and the qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-33. We have jurisdiction under 28 U.S.C. § 1291 to review the district court's final judgment as to each of the Appellants.
The original relators challenge appellate jurisdiction over Clausen's claims because Clausen filed a notice of appeal only from the district court's July 23, 1997 order dismissing his suit. They contend that this dismissal was not a reviewable final order, and that Clausen instead should have appealed from a later order certifying his claims for appellate review under Federal Rule of Civil Procedure 54(b). We disagree.
Unlike the cases of the three original relators, Clausen's suit was never consolidated with any of the other qui tam actions. Thus when the district court dismissed Clausen's appeal with prejudice on July 23, 1997, it did not retain jurisdiction over any part of his case. Therefore the dismissal of Clausen's complaint with prejudice was an appealable final judgment, and we have jurisdiction over Clausen's ...