Second Circuit Puts Kibosh on Allergan Whistleblower

MANHATTAN (CN) – A former Allergan employee should not have been allowed to advance a whistleblower suit by amending a complaint that was considered untimely, the Second Circuit ruled Thursday.

In the case at hand, ex-Allergan employee John Wood had been too late to sue because, when Wood filed his complaint in New York, Allergan already faced two other suits alleging similar conduct.

The “first-to-file bar” of the False Claims Act prohibits the filing of related actions while an original suit is pending, but U.S. District Judge Jesse Furman said Wood dodged this bullet by amending his suit once the previous two lawsuits had been dismissed.

Allergan appealed this finding, however, and a three-judge panel of the Second Circuit reversed on Thursday.

Though the issue of amending the suit to overcome the first-to-file bar is new to the Second Circuit, it created a circuit split between the First and D.C. Circuits.

Thursday’s ruling says the D.C. Circuit got it right.

“The statutory command is not ambiguous: a claim is barred by the first‐to‐file bar if at the time the lawsuit was brought a related action was pending,” U.S. Circuit Judge Denny Chin wrote for the panel (emphasis in original). “Accordingly, even after Wood filed the Third Amended Complaint, his action still violated the first‐to‐file bar because he instituted legal proceedings, by filing the initial complaint, while a related action was pending.”

Dismissing Wood’s suit is the only course of action, the 27-page opinion emphasizes, because it was “incurably flawed” the moment it was first filed.

“Under the terms of the statute, dismissal is the obvious response to an improperly filed action — to permit the action to continue would be to ignore the violation,” Wood wrote.

Attorneys for the parties have not returned requests for comment. Wood was represented by Derek Ho of Kellogg Hansen, and Allergan was represented by Jeffrey Bucholtz of King & Spalding.

In the underlying case Wood described a pharmaceutical kickback scheme in which Allergan provided free medical products to doctors who promised to prescribe its drugs to their patients, especially people with cataracts.

False Claims Act suits seek liability against people or entities for defrauding the federal government. In Allergan’s case, Wood said the improper prescriptions squeezed undue Medicare, Medicaid and other benefit dollars.

A successful claim under the False Claims Act can involve treble damages, and the whistleblowers behind the case, known in court lingo as relators, are eligible to take up to 15 percent of the total recovery.

Chin explained in the ruling that the first-to-file bar is one of many safeguards appended to the law to limit “the danger of parasitic exploitation of the public coffers.”

U.S. Circuit Judges John Walker and Gerard Lynch concurred.

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