Attorney General May Not Enforce Subpoenas Related to False Claims Act Case in Which Attorney General Previously Declined to Intervene

In re Enforcement of New Jersey False Claims Act Subpoenas, 444 N.J. Super. 566 (App. Div. 2016).  The New Jersey False Claims Act, N.J.S.A. 2A:32C-1 to -15, -17, and -18 (“NJFCA”), encourages private parties to file, under seal, qui tam actions on behalf of the State of New Jersey for violations of the FCA, and allows the New Jersey Attorney General to intervene in such an action and take over its prosecution.  The NJFCA authorizes the Attorney General to issue subpoenas.  The statute also creates a deadline for the Attorney General to opt to intervene.  If the Attorney General chooses not to intervene, “the person who initiated the action [the relator] shall have the right to conduct the action.”  N.J.S.A. 2A:32C-6(f).

In this case, a former employee of Medco Health Solutions, Inc. filed a qui tam case against Medco in Delaware federal court, under federal law.  The employee later amended that complaint to allege claims on behalf of the State of New Jersey, thus implicating the NJFCA.  The Attorney General opted not to intervene within the time allowed by the NJFCA as extended, multiple times, for a total of approximately 600 days.

Despite that, however, after the intervention deadline had passed, the Attorney General served administrative subpoenas on various parties.  Those parties refused to respond to those subpoenas.  After a trip to federal court, the Attorney General sought to enforce the subpoenas in the Chancery Division, which granted the Attorney General’s request.  The subpoenaed parties sought review in the Appellate Division, and that court reversed the ruling enforcing the subpoenas in an opinion issued today.  Judge Fisher authored that opinion.

Since this appeal involved a “purely legal question … the extent to which the NJFCA permits the Attorney General to continue to utilize the NJFCA’s administrative subpoena power once his right to intervene in the qui tam action expired,” the Appellate Division’s review was de novo.  Analyzing the NJFCA carefully, Judge Fisher concluded that the Attorney General’s power to issue subpoenas was tied directly to his choice whether to intervene in an action.  For example, as noted above, N.J.S.A. 2A:32C-6(f) states that after a decision by the Attorney General not to intervene, the relator “shall have the right to conduct the action.”  Judge Fisher ruled that “[o]nce the relator is placed in control of the litigation, the NJFCA clearly presupposes that the Attorney General must stand down.”

Other parts of section 6(f) confirm that once the Attorney General chooses not to participate, he (Judge Fisher used “he” throughout) becomes a “mere bystander.”  His decision not to proceed is not subject to review by any court or agency.  He can receive copies of deposition transcripts and of filed papers, and he may be allowed to intervene at a later date, “upon a showing of good cause” but “without limiting the rights of the person initiating the action” (emphasis by Judge Fisher).

The Attorney General sought to read that last provision broadly, as a basis for serving subpoenas at any time until the case ends.  Judge Fisher rejected that.  That provision “must be construed in light of its neighboring three sentences, all of which are flooded with a legislative intent that the relator be uninhibited in controlling his qui tam action.”  A contrary view would “render meaningless” the structure and timeframe for intervention that the NJFCA carefully establishes.  Moreover, “[m]atters of comity counsel against authorizing a separate collateral investigation by the Attorney General that might interfere with the federal judge’s management of the qui tam action.”

Judge Fisher also rebuffed two other arguments of the Attorney General had two other arguments.  First, the fact that the federal analog to the NJFCA and comparable statutes of some other states expressly state that the State’s subpoena power ends upon a decision not to intervene, while the NJFCA is silent, did not mean that the NJFCA supported the Attorney General’s position here.  “The absence of such clarity merely renders the NJFCA ambiguous in this regard, leaving us to ascertain the legislative intent through traditional canons of statutory interpretation.”  Second, an NJFCA provision that mandates liberal construction to effectuate its purposes did not help the Attorney General.  Such liberality “quickly shifts in favor of the relator once the Attorney General opts out.”