I recently came across an interesting case that provides some hope to False Claims Act ("FCA") defendants who seek to limit discovery in the event they have not been successful in stopping a FCA complaint at the motion to dismiss stage: U.S. ex rel. Duxbury v. Ortho Biotech Products, L.P., 2013 WL 2501930 (1st Cir., June 12, 2013). Essentially, in Duxbury, the relator alleged that the defendant had engaged in a "nationwide" kickback scheme to encourage healthcare providers "across the United States" to prescribe the drug, Procrit, to patients. In turn, the relator argued that he should be permitted discovery for the six year period after he left the company and that discovery be allowed "nationwide" since his amended complaint alleged a "nationwide" kickback scheme. The District Court refused to permit discovery past the date of the relator's termination from the company and beyond the state where the relator worked for the company. The relator could not substantiate his kickback claim with this limited discovery and summary judgement was granted against him.
On appeal, the First Circuit affirmed the District Court's order and discretion in limiting relator's discovery of the defendant to the time period when the relator worked for the company as well as to the "five accounts" in Washington state about which the relator "had direct and independent knowledge." The First Circuit observed that the "district court was not required to expand the scope of discovery based upon the amended complaint's bald assertions that the purported kickback scheme continued after [the relator's] termination or that it was nationwide in scope." The Court agreed with the district court to limit relator's discovery to only those allegations for which the relator had satisfied Rule 9(b)'s requirement to plead fraud with particularity and rejected the relator's attempt to "undertake a fishing expedition into the amended complaint's purely speculative allegations."
Duxbury is a reminder that just because a relator survived a Rule 9(b) challenge, that does not open the flood gates to all discovery based on the bald allegations of a relator's complaint. Courts can and in many instances should fashion limits on discovery, such that the relator is first allowed a limited though reasonable opportunity to substantiate or support their specific claims before permitting more wide ranging and burdensome discovery, especially on a nationwide basis.
The question, of course, is the basis or principle on which a court should limit discovery or allow it only in stages. In U.S. ex rel Minge v. Tect Aerospace, Inc, 2012 WL 1118948 (April 3, 2012 D. Kan), we saw one solution. In that case, the Court permitted the relator to engage in what it called "litmus test" discovery, whereby the relator obtained discovery of a sample of "exemplar aircraft" in order to prove his claims. In Duxbury, we see another solution: the Court permitted the relator to obtain discovery in that region and time period in which the relator had "direct experience." I would be interested in hearing from readers about other cases where courts have allowed relators only limited discovery and their basis for doing so.
A. Brian Albritton
July 2, 2013