State Ex Rel. Balderas v. Bristol-Myers

436 P.3d 724

STATE of New Mexico EX REL. Hector BALDERAS, Attorney General, Plaintiff-Appellee,

v.BRISTOL-MYERS SQUIBB COMPANY, Sanofi-Aventis U.S. LLC, Sanofi US Services, Inc. f/k/a Sanofi-Aventis U.S. Inc., Sanofi-Synthelabo Inc., and Doe Defendants 1 to 100, Defendants-Appellants.

NO. A-1-CA-36906

Court of Appeals of New Mexico.

Filing Date: October 24, 2018

Certiorari Granted, March 11, 2019, S-1-SC-37430

Office of the Attorney General, Consumer & Environmental Protection, P. Cholla Khoury, Assistant Attorney General, Santa Fe, NM, Robles, Rael and Anaya, P.C., Marcus J. Rael, Jr., Albuquerque, NM, Baron & Budd, P.C., Daniel Alberstone, Jonas P. Mann, Peter KlausnerEncino, CA, Russell Budd, Dallas, TX, Jules Burton LeBlanc IV, Baton Rouge, LA for Appellee.

Arnold & Porter Kaye Scholer LLP, Kirk Ogrosky, Murad Hussain, Washington, DC, Anand Agneshwar, New York, NY, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Earl E. DeBrine, Jr., Timothy C. Holm, Albuquerque, NM, for Appellants.

VANZI, Chief Judge.

{1} In this interlocutory appeal, we consider whether a federal district court's dismissal of qui tam claims for failure to state a claim bars the State from pursuing different claims arising from similar facts, where the State had not intervened in the qui tam action. We conclude that it does not and, therefore, affirm the denial of Defendants' motion to dismiss.

BACKGROUND

Qui Tam Actions

{2} In order to situate the facts leading to this appeal, we begin with an overview of qui tam actions generally and the relevant statutes that establish and govern them. "In a ‘qui tam action,’ a private plaintiff, ... known as a ‘relator,’ brings suit on behalf of the government to recover a remedy for a harm done to the government." 36 Am. Jur. 2d Forfeitures and Penalties § 83 (2018) (footnotes omitted). "He or she pursues the government's claim against the defendant and asserts the injury in fact suffered by the government, which confers standing on the relator to bring the action as a representative of the [s]tate and as a partial assignee of the government's claim." Id. (footnotes omitted). A qui tam action arises only by statute, specifically authorizing a private party to sue on behalf of the government. Id. The federal False Claims Act (FCA) and state laws similar to it are typical qui tam statutes. See United Seniors Ass'n v. Philip Morris USA , 500 F.3d 19, 24 (1st Cir. 2007) (stating that the FCA is a "typical and commonly-invoked qui tam action").

The FCA and the New Mexico Medicaid False Claims Act

{3} "The [FCA] prohibits false or fraudulent claims for payment to the United States, and authorizes civil actions to remedy such fraud to be brought by the Attorney General or by private individuals in the government's name." 32 Am. Jur. 2d False Pretenses § 85 (2018) ; 31 U.S.C. §§ 3729 - 3733 (2012). Under the FCA, "[t]he Attorney General diligently must investigate a violation of the false claims statute[,]" and "[i]f the Attorney General finds that a person has violated or is violating such statute, the Attorney General may bring a civil action against the person." 32 Am. Jur. 2d False Pretenses § 85 ; 31 U.S.C. § 3730(a). In addition, the FCA permits relators to "file qui tam civil actions on behalf of the United States for the making of a false claim against government funds." 32 Am. Jur. 2d False Pretenses § 85 ; 31 U.S.C. § 3730(b).

{4} Similarly, the New Mexico Medicaid False Claims Act (MFCA), NMSA 1978, §§ 27-14-1 to -15 (2004), provides for liability where a person presents "a claim for payment under the medicaid program knowing that such claim is false" or otherwise defrauds the state through the state medicaid program. Section 27-14-4. Like the FCA, the MFCA requires the Human Services Department (HSD) to investigate suspected violations and permits HSD to bring a civil action. Section 27-14-7(A). In addition, the MFCA contains a qui tam provision that permits "[a] private civil action [to] be brought by an affected person for a violation of the [MFCA] on behalf of the person bringing suit and for the state." Section 27-14-7(B).

{5} Both the FCA and MFCA require a relator to provide a copy of the complaint and written disclosure of material evidence possessed by the relator to the government so that the government may determine whether there is substantial evidence that a violation has occurred. 31 U.S.C. § 3730(b)(2) ; § 27-14-7(C). The complaint is sealed for at least sixty days to allow the government to undertake such an investigation. 31 U.S.C. § 3730(b)(2) ; § 27-14-7(C). Upon completion of the investigation, the government may either "proceed with the action, in which case the action shall be conducted by the [g]overnment[,]" or decline to take over the action. 31 U.S.C. § 3730(b)(4) ; § 27-14-7(E). If the government declines to pursue the claims in the relator's complaint, "the person who initiated the action shall have the right to conduct the action." 31 U.S.C. § 3730(c)(3) ; § 27-14-8(D). Regardless of whether the government intervenes in the action, the relator may receive a portion of any ensuing recovery. 31 U.S.C. § 3730(d) ; § 27-14-9.

{6} The FCA and MFCA differ in that, under the MFCA, the relator may continue the action only "[i]f the department determined that there is substantial evidence that a violation of the [MFCA] has occurred" and that "[i]f the department determines that there is not substantial evidence that a violation has occurred, the complaint shall be dismissed." Section 27-14-7(C), (E)(2).

The First Suit: In re Plavix Marketing, Sales Practice & Products Liability Litigation

{7} The first suit at issue was initiated in March 2011 by relator Elisa Dickson (Relator), who filed a complaint alleging that Bristol-Myers Squibb Company, Sanofi-Aventis U.S., LLC; Sanofi-Aventis U.S., Inc.; and Sanofi-Synthelabo, Inc., (Defendants), manufacturers and marketers of the prescription drug Plavix, promoted Plavix in violation of the FCA and various states' similar fraud statutes, including New Mexico's MFCA. See In re Plavix Mktg., Sales Practice & Prods. Liab. Litig. (No. II) v. Bristol-Myers Squibb Co. , 332 F.Supp.3d 927, 932–37, 2017 WL 2780744, at *1-4 (D.N.J. 2017).¹ Pursuant to the provisions of the MFCA, Relator served New Mexico with "a copy of the complaint and written disclosure of substantially all material evidence and information [Relator] possesses." Section 27-14-7(C). New Mexico declined to intervene in Relator's suit and, therefore, declined to take over litigation of the MFCA claim. In re Plavix Mktg. , 332 F.Supp.3d at 933–35, 2017 WL 2780744, at *2.

{8} Relator filed several amended complaints. Id. In August 2015, the federal district court dismissed the New Mexico MFCA claim, among others, for failure to state a claim for relief. Id. A year later, in August 2016, Relator filed a fourth amended complaint reasserting the MFCA claim, among others. Id. at 935–36, 2017 WL 2780744, at *3. On Defendants' motion, the federal district court dismissed Relator's fourth amended complaint in June 2017. Id. at 932–33, 935–36, 2017 WL 2780744, at *1, *3. Relator did not appeal the dismissal or request permission to amend the complaint again. This final dismissal is central to Defendants' claim preclusion argument.

The Second Suit: State of New Mexico ex rel. Hector Balderas, Attorney General v. Bristol-Myers Squibb, et al .

{9} Shortly after Relator filed the fourth amended complaint in In re Plavix Marketing , but before its final dismissal, the New Mexico Attorney General (the State) brought the present action in the First Judicial District Court. The complaint alleges that "Defendants' false, deceptive, and unfair labeling and promotion of their prescription antiplatelet drug Plavix" violated the New Mexico Unfair Practices Act (UPA), NMSA 1978, §§ 57-12-1 to -26 (1967, as amended through 2009); the New Mexico Medicaid Fraud Act (MFA), NMSA 1978, §§ 30-44-1 to - 8 (1989, as amended through 2004); and the New Mexico Fraud Against Taxpayers Act (FATA), NMSA 1978, §§ 44-9-1 to -14 (2007, as amended through 2015), as well as common law and equitable causes of action. The complaint did not allege violations of the MFCA.

{10} Defendants moved to dismiss the State's complaint, arguing that the State had failed to state its claims. They also maintained that the suit should be dismissed without prejudice or stayed pending resolution of the In re Plavix Marketing action and that the State was inappropriately splitting its claims. Without ruling on the substantive arguments in the motion, the state district court stayed the action pending the outcome of Defendants' motion to dismiss in In re Plavix Marketing . Once the federal district court dismissed Relator's fourth amended complaint, the state district court lifted the stay and ordered supplemental briefing on the impact of the dismissal of Relator's claims on the State's complaint and Defendants' motion to dismiss. In supplemental briefing, Defendants argued that the doctrine of claim preclusion bars the State's complaint. They also argued that, even if claim preclusion did not bar the State's claims in their entirety, the claims based on the MFA and FATA should be dismissed for failure to state a claim for the same reasons relied on by the federal district court.

{11} The state district court granted in part and denied in part Defendants' motion to dismiss for failure to state a claim. It found that the State's MFA claim failed as a matter of law and that the economic loss doctrine barred the State's negligence claim. It therefore dismissed those claims with prejudice. It found that the State had inadequately pleaded the UPA and equitable tolling claims but dismissed those claims without prejudice and ordered the State to file an amended complaint if it chose to rectify the deficiencies in the first complaint. The court found the remaining claims adequately pleaded. The State then filed its first amended complaint, which includes claims...