IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

1
Opinion Number: _____________ 2
Filing Date : October 24, 2018 3

NO. A

- 1

- CA

- 36906 4

STATE OF NEW MEXICO ex rel. 5 HECTOR BALDERAS, ATTORNEY 6 GENERAL , 7

Plaintiff

- Appellee
, 8

v. 9

BRISTOL

- MYERS SQUIBB C OMPANY , 10 SANOFI

- AVENTIS U.S. LLC, SANOFI US 11 SERVICES, INC. f/k/a SANOFI

- AVENTIS 12 U.S. INC

. , SANOFI

- SYNTHELABO INC., 13 and DOE DEFENDANTS 1 to 100 , 14

Defendant s

- Appellant s

. 15

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY 16 Sarah M. Singleton , District Judge Pro Tem 17

Office of the Attorney General 18 Consumer & Environmental Protection 19 P . Cholla Khoury, Assistant Attorney General 20 Santa Fe, NM 21
Robles, Rael and Anaya, P.C. 22 Marcus J. Rael, Jr. 23 Albuquerque, NM 24Baron & Budd, P.C.

1 Daniel Alberstone 2 Jonas P. Mann 3 Peter KlausnerEncino, CA 4 Russell Budd 5 Dallas, TX 6 Jules Burton LeBlanc IV 7 Baton Rouge, LA 8
for Appellee 9
Arnold & Porter Kaye Scholer LLP 10 Kirk Ogrosky 11 Murad Hussain 12 Washington, DC 13 Anand Agneshwar 14 New York, NY 15
Modrall, Sperling, Roehl, Harris & Sisk, P.A. 16 Earl E. DeBrine, Jr. 17 Timothy C. Holm 18 Albuquerque, NM 19
for Appellant s 20OPINION

1

VANZI , Chief Judge. 2

{ 1 } In this interlocutory appeal, we consider whether a federal district court’s 3
dismissal of qui tam claims for failure to state a claim bars the State from pursuing 4
different claims arising from similar facts, where the State had not intervened in 5
the qui ta m action. We conclude that it does not and, therefore, affirm the denial of 6

Defendants’ motion to dismiss. 7

BACKGROUND 8

Qui Tam Actions 9

{ 2 } In order to situate the facts leading to this appeal, we begin with an overview 10
of qui tam actions generally and the relevant statutes that establish and govern 11
them. “In a ‘qui tam actio n,’ a private plaintiff, . . . known as a ‘relator,’ brings suit 12
on behalf of the government to recover a remedy for a harm done to the 13
government.” 36 Am. Jur. 2d Forfeitures and Penal ties § 83 (2018) (footnotes 14
omitted). “He or she pursues the government’s claim against the defendant and 15
asserts the injury in fact suffered by the government, which confers standing on the 16
relator to bring the action as a representative of the [s] tate an d as a partial assignee 17
of the government’s claim.” Id. (footnotes omitted). A qui tam action arises only 18
by statute
, specifically authorizing a private party to sue on behalf of the 19

government. Id. The federal False Claims Act (FCA) and state laws similar to it are 202

typical qui tam statutes. See United Seniors Ass’n v. Philip Morris USA , 500 F.3d 1
19, 24 (1st Cir. 2007) (stating that the FCA is a “typical and commonly

- invoked 2
qui tam action”). 3

The F CA and the New Mexico Medicaid False Claims Act 4

{ 3 } “The [FCA] prohibits false or fraudulent claims for payment to the United 5
States, and authorizes civil actions to remedy such fraud to be brought by the 6
Attorney General or by private individuals in the government’s name.” 32 Am. Jur. 7

2d False Pretenses § 85 (2018) ; 31 U.S.C. §§ 3729

- 3733 (2012). Under the FCA, 8
“[t]he Attorney General diligently must investigate a violation of the false claims 9

statute [,] ” and “[i]f the Attorney General finds that a person has violated or is 10
violating such statute, the Attorney General may bring a civil action against the 11
person.” 32 Am. Jur. 2d False Pretenses § 85; 31 U.S.C. § 3730(a). In addition, the 12
FCA permits relato rs to “file qui tam civil actions on behalf of the United States 13
for the making of a false claim against government funds.” 32 Am. Jur. 2d False 14

Pretenses § 85; 3 1 U.S.C. § 3730(b). 15

{ 4 } Similarly, the New Mexico Medicaid False Claims Act (MFCA), NMSA 16

1978 , §§ 27

- 14

- 1 to

- 15 (2004), provides for liability where a person presents “a 17
claim for payment under the medicaid program knowing that such claim is false” 18
or otherwise defrauds the state through the state medicaid program. 19

Section 27

- 14

- 4. Like the FCA, the MFCA requires the Human Services 203

Department (HSD) to investigate suspected violations and permits HSD to bring a 1

civil action. Section 27

- 14

- 7(A). In addition, the MFCA contains a qui tam 2
provision that permits “[a] private civil action [to] be brought by an affected person 3
for a violation of the [MFCA] on behalf of the person bringing suit and for the 4

state.” Section 27

- 14

- 7(B). 5

{ 5 } Both the FCA and MFCA require a relator to provide a copy of the 6
complaint and written disclosure of material evidence p ossessed by the relator to 7
the government so that the government may determine whether there is substantial 8

evidence that a violation has occurred. 31 U.S.C. § 3730(b)(2); § 27

- 14

- 7(C). The 9
complaint is sealed for at least sixty days to allow the governmen t to undertake 10
such an investigation. 31 U.S.C. § 3730(b)(2); § 27

- 14

- 7(C). Upon completion of 11
the investigation, the government may either “proceed with the action, in which 12
case the action shall be conducted by the [ g ] overnment [
, ]” or decline to take ove r 13

the action. 31 U.S.C. § 3730(b)(4); § 27

- 14

- 7(E). If the government declines to 14
pursue the claims in the relator’s complaint, “the person who initiated the action 15
shall have the right to conduct the action.” 31 U.S.C. § 3730(c)(3); § 27

- 14

- 8(D). 16
Regardle ss of whether the government intervenes in the action, the relator may 17
receive a portion of any ensuing recovery. 31 U.S.C. § 3730(d); § 27

- 14

- 9. 18

{ 6 } The FCA and MFCA differ in that, under the MFCA, the relator may 19
continue the action only “ [ i ] f the depar tment determined that there is substantial 204

evidence that a violation of the [MFCA] has occurred” and that “[i]f the 1
department determines that there is not substantial evidence that a violation has 2
occurred, the complaint shall be dismissed.” Section 27

- 14

- 7(C), (E)(2). 3

The First Suit: In re Plavix Marketing, Sales Practice & Products Liability 4 Litigation 5

{ 7 } The first suit at issue was initiated in March 2011 by relator Eli s a Dickson 6
(Relator), who filed a complaint alleging that Bristol

- Myers Squibb Company, 7

Sanofi

- Aventis U.S., LLC ; Sanofi

- Aventis U.S., Inc. ; and Sanofi

- Synthelabo, Inc., 8
(Defendants), manufacturers and marketers of the prescription drug Plavix, 9
promoted Plavix in violation of the FCA and various states’ similar fraud statutes, 10

includ ing New Mexico’s MFCA. See In re Plavix Mktg., Sales Practice & Prod s. 11
Liab. Litig. (No. II) v. Bristol

- Myers Squibb Co.
, ___ F. Supp. 3d ___, 2017 WL 12

2780744, at *1

- 4 (D.N.J. 2017). 1 Pursuant to the provisions of the MFCA, Relator 13
served New Mexico with “a copy of the complaint and written disclosure of 14
substantially all material evidence and information [Relator] possesses.” Section 15

27

- 14

- 7(C). New Mexico declined to intervene in Rela tor’s suit and, therefore, 16
declined to take over litigation of the MFCA claim. In re Plavix Mktg. , 2017 WL 17

2780744, at *2. 18

1 Relator filed the initial complaint in Illinois, but the suit was transferred to the United States District Court for the District of New Jersey to be part of the Pl avix Multi

- District Litigation. Id. at *2.5

{ 8 } Relator filed several amended complaints. Id. In August 2015, the federal 1

district court dismissed the New Mexico MFCA claim, amo ng others, for failure to 2

state a claim for relief. Id

. A year later, in August 2016, Relator filed a fourth 3
amended complaint reasserting the MFCA claim, among others. Id. at *3. On 4

Defendants’ motion, the federal district court dismissed Relator’s fourth amended 5
complaint in June 2017. Id. at *1, * 3. R elator did not appeal the dismissal or 6
request permission to amend the complaint again. This final dismissal is central to 7
Defendants’ claim preclusion argument. 8

The Second Suit: State of New Mexico ex r el. Hector Balderas, Attorney 9 General v. Bristol

- Myers Squibb, et al

. 10

{ 9 } Shortly after Relator filed the fourth amended complaint in In re Plavix 11
Marketing , but before its final dismissal, the New Mexico Attorney General (the 12
State) brought the present acti on in the First Judicial District Court. The complaint 13
alleges that “Defendants’ false, deceptive, and unfair labeling and promotion of 14
their prescription antiplatelet drug Plavix” violated the New Mexico Unfair 15

Practices Act (UPA), NMSA 1978, §§ 57

- 12

- 1 t o

- 26 (1967, as amended through 16

2009); the New Mexico Medicaid Fraud Act (MFA), NMSA 1978, §§ 30

- 44

- 1 to

- 17

8 (19 89 , as amended through 2004); and the New Mexico Fraud Against 18
Taxpayers Act (FATA), NMSA 1978, §§ 44

- 9

- 1 to

- 14 (2007, as amended through 19

2015), as well as common law and equitable causes of action. T he complaint did 20

not allege violations of the MFCA. 216

{ 10 } Defendants moved to dismiss the State’s complaint, arguing that the State 1

had failed to state its claims. They also maintained that the suit should be 2
dismissed without prejudice or stayed pending resolution of the In re Plavix 3
Marketing action and that the State was inappropriately splitting its claims. 4
Without ruling on the substantive arguments in the motio n, the state district court 5
stayed the action pending the outcome of Defendants’ motion to dismiss in In re 6

Plavix Marketing . Once the federal district court dismissed Relator’s fourth 7
amended complaint, the state district court lifted the stay and ordered supplemental 8
briefing on the impact of the dismissal of Relator’s claims on the State’s complaint 9
and Defendants’ motion to dismiss. In supplemental briefing, Defendants argued 10
that the doctrine of claim preclus ion bars the State’s complaint. They also ar gued 11
that, even if claim preclusion did not bar the State’s claims in their entirety, the 12

claims based on the MFA and FATA should be dismissed for failure to state a 13

claim for the same reasons relied on by the federal district court. 14

{ 11 } The state distric t court granted in part and denied in part Defendants’ motion 15

to dismiss for failure to state a claim. It found that the State’s MFA claim failed as 16
a matter of law and that the economic loss doctrine barred the State’s negligence 17

claim. It therefore dismi ssed those claims with prejudice. It found that the State 18
had inadequately pleaded the UPA and equitable tolling claims but dismissed those 19
claims without prejudice and ordered the State to file an amended complaint if it 207

chose to rectify the deficiencies in the first complaint. The court found the 1
remaining claims adequately pleaded. The State then fi led its first amended 2
complaint , which includes claims for violations of the UPA and FATA, as well as 3

common law claims f

or fraud and unjust enrichment. 4

{ 12 } In a separate order, the state district court denied Defendants’ motion to 5
dismiss the State’s complaint on claim preclusion grounds. Although it stated that 6
Relator’s claims had been dismissed “with prejudice,” it found that “[claim 7
preclusion] does not a pply here because the causes of action are not the same in the 8
two suits” and that “[R]elator in [ In re Plavix Marketing ] did not assert any of the 9
claims the State asserts in this case, but rather only a single New Mexico [MFCA] 10

claim.” It also stated that “while [R]elator .

. . stood in the shoes of the State of 11
New Mexico for purposes of the New Mexico [MFCA] claim, [R]elator did not 12
stand in the State’s shoes for purposes of the claims asserted by the State here.” 13
Finally, the state district court co ncluded that “in a case such as this, where 14
[R]elator’s claims were dismissed based on a failure to comply with the heightened 15
pleading requirements of [Federal Rule of Civil Procedure] 9(b), and not based on 16
the merits of the claim, it would be inappropri ate to bar the State’s claims.” 17

{ 13 } However, the state district court also found that “[r]egarding the application 18

of [claim preclusion] only,” its order “(1) does not practically dispose of the merits 19
of the action, (2) involves a controlling question o f law as to which there is 208

substantial ground for difference of opinion, and (3) an immediate appeal from this 1
order or decision may materially advance the ultimate termination of the 2
litigation.” See NMSA 1978, § 39

- 3

- 4(A), (B) (19 99 ) (providing for inter locutory 3
appeal of district court orders pursuant to this Court’s appellate jurisdiction). It 4
therefore certified for interlocutory appeal the portion of the order pertaining to 5

a pplication of claim preclusion. This Court granted Defendants’ applic ation fo r 6
interlocutory appeal. See Rule 12

- 203 NMRA (governing interlocutory appeals). 7

DISCUSSION 8

{ 14 } The issue before the Court is whether the federal court’s dismissal of 9
Relator’s MFCA claim precludes the State’s claims for violations of the UPA and 10
FATA, as well as common law fraud and unjust enrichment. We review such 11
questions of law de novo. Bank of N

. Y

. v. Romero , 2016

- NMCA

- 091, ¶ 15, 382 12
P.3d 991. In addition, “[b]ecause the prior action was in federal court, federal law 13
determines the preclusive effect of a federal judgment.” Moffat v. Branch , 2005

- 14

NMCA

- 103, ¶ 11, 138 N.M. 224, 118 P.3d 732 ; see Restatement (Second) of 15
Judgments § 87 (1982) ( “ F ederal law determines the effects under the rules of 16
[claim preclusion] of a judgment of a federal court

. ”). However, this Court may 17
rely on both federal and New Mexico law on claim preclusion because “[f]ed eral 18
law and New Mexico law are not divergent on claim preclusion doctrine, and both 199

find the Restatement (Second) of Judgments . . . persuasive.” Moffat , 2005

- 1

NMCA

- 103, ¶ 11. 2

General Claim Preclusion Law 3

{ 15 } “[Claim preclusion] prevents a party or its privies from repeatedly suing 4

another party for the same cause of action when the first suit involving the parties 5
resulted in a final judgment on the merits.” Rosette, Inc. v. U.S. Dep’t of the 6

Interior , 2007

- NM CA

- 136, ¶ 33, 142 N.M. 717, 169 P.3d 704. Generally, the 7
doctrine applies where “three elements are met: (1) a final judgment on the merits 8
in an earlier action, (2) identity of parties or privies in the two suits, and (3) 9
identity of the cause of action i n both suits.” Id. When these elements are satisfied, 10
the defense of claim preclusion bars relitigation not only of claims actually brought 11
by the plaintiff and its privies, but also claims that could have been brought in the 12

first action. Kirby v. Guardia n Life Ins. Co. of Am. , 2010

- NMSC

- 014, ¶ 61, 148 13

N.M. 106, 231 P.3d 87. 14

{ 16 } For claim preclusion to apply, the first suit must have ended in a “judgment 15

on the merits.” Rosette, Inc. , 2007

- NMCA

- 136, ¶ 33. Generally, a dismissal for 16

failure to state a cla im under Federal Rule of Civil Procedure 12(b)(6) is a 17
“judgment on the merits” for purposes of claim preclusion. Federated Dep ’ t 1810

Stores, Inc. v. Moitie , 452 U.S. 394, 399 n.3 (1981)

. 2 Although this general rule is 1
often stated broadly, it is not without nuance. Because “[a] motion to dismiss for 2

failure to state a claim under Rule 1

- 012(B)(6) . . . tests the legal sufficiency of the 3
complaint, not the facts that support it [
, ] ” Wallis v . Smith , 2001

- NMCA

- 017, ¶ 6, 4
130 N.M. 214, 22 P.3d 682, the designation of such a dismissal as “on the merits” 5
is something of a misnomer. In Kirby , the New Mexico Supreme Court explained 6

that “ [ a ] dismissal with prejudice is an adjudication on the merits only to the extent 7

that when a claim has been dismissed with prejudice, the [final judgment on the 8
merits] element of [claim preclusion] . . . will be presumed so as to bar a 9
subsequent suit.” 2010

- NMSC

- 014, ¶ 66 (emphasis added). This is so because “[i]f 10
this were otherwise, plaintiffs could simply ignore dismissals and file the same 11
claim as many times as they wished, so long as the claim never progressed to a 12

determination of the substantive issues.” Id. Thus, the intent behind considering a 13

Rule 12(b)(6 ) dismissal as “on the merits” is practical: to limit repetitive filings. 14
See Kirby , 2010

- NMSC

- 014, ¶ 66. Such a dismissal obviously does not involve “a 15
judicial determination of” the actual merits. See i d. ¶ 67. Conversely, “[t]he words 16
‘without prejudice ’ when used in an order or decree generally indicate that there 17

2 “ Because the language of Rule 1

- 012 [ NMRA ] closely parallels that of its federal counterpart, Rule 12 of the Fede ral Rules of Civil Procedure, we find federal authority interpreting Rule 12 . . . instructive.” Doe v. Roman Catholic Diocese of Boise, Inc. , 1996

- NMCA

- 057, ¶ 5, 121 N.M. 738, 918 P.2d 17. We also cite to Rule 1

- 012(B)(6) NMRA and Federal Rule of Civil Pr ocedure 12(b)(6) interchangeably.11

has been no resolution of the controversy on its merits and leave the issues in 1
litigation open to another suit as if no action had ever been brought.” Bralley v. 2
City of Albuquerque , 1985

- NMC A

- 043, ¶ 18, 102 N.M. 715, 699 P.2d 646. 3
Defendants’ Arguments 4

{ 17 } Defendants contend that the elements of claim preclusion are met here. 5
Defendants argue that the In re Plavix Marketing dismissal was “on the merits” 6
because Relator either failed to plead the requisite materiality under Universal 7

Health Services, Inc. v. U nited S tates ex rel. Escobar
, ___ U.S.___, ___, 136 S. Ct. 8

1989 , 2001

- 03 (2016), or failed to allege conduct recognize d as violative of the 9

FCA. See United States ex rel. Petratos v. Genentech Inc. , 855 F.3d 481, 487 (3d 10
Cir. 2017) (“A [FCA] violation includes four elements: falsity, causation, 11
knowledge, and materiality.”); In re Plavix Mktg. , 2017 WL 2780744, * 8 (same)

. 12
They also claim that the State was in privity with Relator because Relator 13
represented the State’s interests in the In re Plavix Marketing action. Finally, they 14
argue that the State’s claims “arise out of a common nucleus of operative facts” 15

related to De fendants’ marketing practices and, therefore, constitute the “same 16

cause of action” as in In re Plavix Marketing . In sum, Defendants maintain that, as 17
a privy to Relator, the State was required to bring all of its claims in In re Plavix 18
Marketing
, and having failed to do so, the State must be barred from bri nging them 19

in a different suit. 2012

Claim Preclusion in the Context of Qui Tam Actions 1

{ 18 } We first observe that, as a general proposition, “[i]f [the relator] had litigated 2

a qui tam action to the gil ls and lost, neither another relator nor the [government] 3

could start afresh.” U

nited S tates ex rel. Lusby v. Rolls

- Royce Corp. , 570 F.3d 849, 4

853 (7th Cir. 2009). This is true because the relator sues on behalf of the 5
government to vindicate the government’s interests, and, although the government 6
is not a named party to the relator’s suit, it is a real party in interest. U nited S tates 7
ex rel. Eisenstein v. City of New York , 556 U.S. 928, 934 (2009) (stating that the 8
government, although a real party in interest, is not a “party” to a qui tam action). 9

{ 19 } However, courts have also recognized that, under certain circumstances, th e 10
government’s role in vindicating public interests militates against preclusion of its 11

claims. Cf. Nathan D. Sturycz, The King and I?: An Examination of the Interest 12
Qui Tam Relators Represent and the Implications for Future False Claims Act 13

Litigation , 2 8 St. Louis U. Pub. L. Rev. 459, 462

- 63 (2009) (noting that even 14
though “[i]n the non

- FCA context, the concepts of preclusion would normally 15
prevent duplicative litigation [, a]pplication of preclusion [in FCA cases] is 16
muddled . . . by the distinction betw een the interests represented in a prior private 17
cause of action and those represented in FCA litigation”). Thus, courts have 18
repeatedly found that suits by or on behalf of the government should not be 19
precluded by certain actions of a private party, even when that party acts as a qui 2013

tam relator. This is especially true when the first suit is dismissed for reasons 1

unrelated to the merits of the claims. 2

{ 20 } For example, federal courts have relied on the fact that a Rule 12(b)(6) 3
dismissal is based only on the relator’s complaint, not the factual bases underlying 4
the allegations, to hold that such a dismissal does not preclude the government’s 5
claims when the government has not intervened. See, e.g.
, U nited S tates ex rel

. 6
Williams v. Bell Helicopter Textron , Inc. , 417 F.3d 450 , 455

- 56 (5th Cir. 2005). 7

{ 21 } In Williams , the district court dismissed the relator’s FCA claims because 8
the relator failed to plead them with sufficient particularity under Rules 12(b)(6) 9

and (9)(b). Williams
, 417 F.3d at 455. The district court dismissed the complaint 10
with prejudice as to both the relator and the government, stating that it was 11
“dismissing the claims against the government with prejudice because it believed 12
‘the United States has had ample opportunity to participat e in the prosecution of 13
those claims if [it] had any notion that any of them has the slightest merit,’ ” 14
suggesting that the government’s failure to intervene indicated that it found the 15

claims meritless. Id. 16

{ 22 } The United States Court of Appeals for th e Fifth Circuit reversed and 17
modified the dismissal to be without prejudice as to the government. Id. at 456. 18
First, the court dismissed as “unreasonable” any speculation about the 19
government’s reasons for not intervening and the district court’s inference that the 2014

government would have intervened if it found the relator’s FCA claims 1

“meritorious.” Id. at 455. It observed that the FCA requires the Attorney General to 2
conduct an investigation of the relator’s allegations
, but the FCA “does not require 3
the go vernment to proceed if its investigation yields a meritorious claim.” Id. 4
“Indeed, absent any obligation to the contrary, it may opt out for any number of 5
reasons. For example, a decision not to intervene may ‘not necessarily be an 6
admission by the [govern ment] that it has suffered no injury in fact, but rather the 7

result of a cost

- benefit analysis.’ ” Id. (alterations omitted) (quoting United States 8
ex rel. Berge v. Bd. of Trs. of the Univ. of Ala.
, 104 F.3d 1453, 1458 (4th Cir. 9
1997)). The court concluded, “[G]iven the Rule 9(b) deficiencies, the government 10
may have determined that the costs associated with proceeding based on a poorly 11
drafted complaint outweighed any anticipated benefits.” Williams , 417 F.3d at 455. 12

{ 23 } The Wi lliams court then noted that a dismissal with prejudice as to the 13
government would give private parties “perverse incentives” to file poorly drafted 14
or improperly pleaded qui tam actions. Id. “By essentially requiring the 15
government to intervene in order t o avoid forfeiting any future claims against the 16
defendant, private parties would have the added incentive to file FCA suits lacking 17
in the required particularity, knowing full well that the government would be 18
obligated to intervene and ultimately ‘fill i n the blanks’ of the deficient complaint.” 19

Id. It went on to state that the district court’s approach would allow “a relator, in 2015

the most egregious of circumstances, to make sweeping allegations that, while true, 1
he is unable to effectively litigate, but w hich nonetheless bind the government, 2

via [claim preclusion]
, and prevent it from suing over those concerns at a later date 3

when more information is available.” Id. (internal quotation marks and citation 4

omitted). It therefore concluded that the district c ourt had abused its discretion by 5
dismissing the complaint with prejudice as to the government. Id. at 456. 6

{ 24 } Without deciding the preclusive effect of a Rule 12(b)(6) dismissal on future 7
related actions, but relying on Williams , the Eleventh Circuit a lso modified a 8
district court’s dismissal for failure to state a claim to be without prejudice to the 9

government. Urquilla

- Diaz v. Kaplan Univ. , 780 F.3d 1039, 1057 (11th Cir. 2015). 10

A number of federal district courts have also followed Williams and held that a 11
dismissal of a relator’s complaint for insufficient pleading should be without 12
prejudice to the government. In each of these cases, the government had declined 13

to intervene in the relators’ actions. See, e.g.
, United States v. KForce Gov’t Sols., 14

Inc.
, N o. 8:13

- cv

- 1517

- T

- 36TBM, 2014 WL 5823460, at *6 n.2, * 9 (M.D. Fla. 15
Nov. 10, 2014) (dismissing an FCA complaint for failure to satisfy the Rule 9 16
pleading requirements and stating that dismissal is without prejudice to the 17
government); United States ex rel. Boros v. Health Mgmt. Assoc s. ( Health Mgmt. 18

I )
, No. 4:10

- cv

- 10013

- KMM, 2013 WL 12077816, at *1

- 2 (S.D. Fla. July 26, 19
2013) (clarifying that dismissal was without prejudice to the government after the 2016

relator’s FCA complaint was dismissed fo r failure to state a claim); United States 1
ex rel. Banigan v. Organon USA, Inc.
, Civil Action H

- 08

- 3314, 2013 WL 2
12142351, at *34 (S.D. Tex. Feb. 1, 2013) (agreeing that “the dismissal [for 3
inadequate pleadings] should be without prejudice to the [governme nt] because it 4
has no involvement in preparing the complaint” and stating that “if the [c]ourt 5
dismisses [the r]elators’ complaint on insufficient pleading grounds, the dismissal 6
would not preclude the government from bringing or continuing an action 7
involving the same or similar claims”); United S tates ex rel. Rostholder v. 8

Omnicare, Inc.
, No. CCB

- 07

- 1283, 2012 WL 3399789, at *15 (D. Md. Aug. 14, 9
2012) (stating that “[t]he government’s decision not to intervene

. . . does not 10
suggest that the governme nt necessarily believed that no FCA case was viable . . . 11

[ and a]ccordingly, it would be inappropriate to dismiss with prejudice as to the 12

[government] or as to the states or localities on whose behalf relator brought this 13
claim” (emphasis added)), aff’d
, 745 F.3d 694 (4th Cir. 2014). But see Lusby , 570 14
F.3d at 853 (stating that the district court erred in ordering a qui tam complaint 15
dismissed with prejudice to the plaintiff and without prejudice to the government, 16
but holding that judgment in a private su it did not bar a later qui tam action). 17

{ 25 } Similarly, courts have dismissed a complaint with prejudice to the relator, 18
but without prejudice to the government, where the relator failed to prosecute or 19
acted improperly in litigation. See, e.g.
, U nited S tates ex. rel. Prince v. V a. Res. 2017

Auth. , 2014 WL 3405657, at *3 (W.D. Va. July 10, 2014) (failure to 1
prosecute), aff’d
, 593 Fed. App ’ x 230 (4th Cir. 2015); U nited S tates ex rel. King v. 2

DSE, Inc.
, No. 8:08

- CV

- 2416

- T

- 23EAJ, 2013 WL 610531, at *11 (M.D. Fla. Jan. 3

17, 2013) (litigation misconduct); cf

. United States ex rel. Vaughn v. United 4
Biologics, L.L.C.
, ___ F.3d.
___, 2018 WL 5000074, at *5 (5th Cir. 2018) (stating 5

that “ when the case’s outcome is decided by the relator’s voluntary decision to 6
quit, courts tend not to bind the [g] overnment to that decision automatically” and 7
collecting cases). 8

{ 26 } Although distinguishable on its facts, State ex rel. Peterson v. Aramark 9

Co rrectional Services, LLC
, 2014

- NMCA

- 036, 321 P.3d 128, echoes the reasoning 10

in Williams . In Peterson , this Court considered whether a summary judgment in 11
the plaintiff’s personal injury suit barred the same plaintiff’s later qui tam action 12
against the same defendant. 2014

- NMCA

- 036
, ¶¶ 1

- 2. Holding that it did not, th is 13
Court noted that, as a qui tam relator, the plaintiff represented the s tate, rather than 14
himself, and therefore, his capacity in the two suits was not the same and the “same 15
parties or their privies” element of claim preclusion was not met. Id. ¶ ¶ 24, 33. In 16
its analysis, th is Court, like Williams , recognized that claim preclusion in the qui 17
tam context could operate adverse to the public interest. Peterson , 2014

- NMCA

18
036, ¶ 30. It stated that “ ‘it would be inappropriate to snuff out the government’s 19
interest [in the qui tam action] just because a potential relator thoughtlessly omitted 2018

a qui tam claim from a[n earlier] personal suit.’ ” Id. (alterations omitted) (quoting 1
Lusby , 570 F.3d at 85 2). “[W]ere a personal lawsuit held to preclude a qui tam suit 2
on claim preclusion grounds, the government would be incapable of vindicating its 3
interest by bringing a new qui tam suit, either on its own or through another 4

relator ” because the government w ould be bound by the judgment in the personal 5

lawsuit. Id. 3 6

{ 27 } Defendants argue that the Williams holding i s inapposite for three reasons. 7
Defendants first argue that the United States Supreme Court’s decision in 8

Eisenstein supersedes Williams . Defendants rely on the statement in Eisenstein that 9

“the [government] is bound by the judgment in all FCA actions regardless of its 10
participation in the case.” 556 U.S. at 936. But the Eisenstein C ourt was not 11
considering the issue here; rather, the issu e there was whether the government was 12
a “party” to a privately initiated FCA action such that the private party could 13
benefit from the longer period in which to appeal provided to the government 14

under Federal Rule of Appellate Procedure 4(a)(1)(B). Eisens tein , 556 U.S. at 931. 15
“The general rule is that cases are not authority for propositions not considered.” 16

3 Notably, although it was unnecessary for the Peterson Court to discuss this fact under the circumstances of that case, “the district court granted [the defendant’s] motion for summary judgment, and dismissed, with prejudice, all claims brought on behalf of [the qui tam p]laintiff, stating, however, that its order did not prejudice the [s] tate’s ability to bring a related action based on the same facts.” Id. ¶ 20.19

Sangre de Cristo Dev. Corp. v. City of Santa Fe , 1972

- NMSC

- 076, ¶ 23, 84 N.M. 1

343, 503 P.2d 323. 2

{ 28 } In addition, the statement relied on by Defendants was a statement of the 3
appellant’s argument, not a statement of law by the Court. See Eisenstein , 556 U.S. 4

at 93 6 (“[ P ] etitioner relies on the fact that the [government] is bound by the 5
judgment in all FCA actions regardless of its participation in the case.” (emphasis 6
added)). “[I]n light of Eisenstein ’s narrow holding

— that the [g] overnment was not 7
a ‘party’ for the purposes of [Rule] 4(a)(1)(B)

— it would be inappropriate to 8
interpret this passing observati on so broadly.” Vaughn
, 2018 WL 5000074, at *6 9
(rejecting an argument that Eisenstein abrogated Williams ); accord USA ex rel. 10

Mastej v. Health Mgmt. Assocs

. ( Health Mgmt. II )
, No. 2:11

- cv

- 89

- FtM

- 29DNF, 11

2014 WL 12616929, at *2 (M.D. Fla. June 10, 2014); Health Mgmt. I , 2013 WL 12
12077816, at *1. Finally, as shown above, a number of federal courts have relied 13

on Williams after Eisenstein was decided in 2009. But see Lusby , 570 F.3d at 853 14
(stating that Eisenstein foreclosed dismissal without prejudice as to the 15
government). 16

{ 29 } Defendants next argue that the policy considerations in Williams are 17
inapposite because the MFCA “required New Mexico to determine whether there 18

was substantial evidence of a violation . . . and to dism iss the claim if none 19

existed.” They argue that this “obligation means that no qui tam complaint brought 2020

under the [MFCA] should ever receive the State’s approval to proceed if, like the 1

[ Williams ] complaint, it is so facially deficient that it lacks substantial evidentiary 2
support.” It is true that Section 27

- 14

- 7 requires that, when a claim is supported by 3

substantial evidence, the s tate must either pursue the claim or permit the relator to 4
pursue it. See § 27

- 14

- 7(E) (providing that if there is substantial evidence, the s tate 5

“ shall : (1) proceed with the action, in which case the action shall be conducted by 6
the department; or (2) notify the court and the person who brought the action that it 7
declines to take over the action” (emphasis added)). However, Defendants’ 8
argument conflates a determination of evidence supporting a claim with a 9
determination of the adequacy of the relator’s complaint. The s tate is required to 10
determine only whether “there is substantial evidence that a violation has 11
occurred,” not whether the relator’s compla int adequately alleges a violation. 12

Section 27

- 14

- 7(C); see Wallis , 2001

- NMCA

- 017, ¶ 6 (stating that “[a] motion to 13

dismiss for failure to state a claim under Rule 1

- 0 12( B )(6)

. . . tests the legal 14
sufficiency of the complaint, not the facts that support i t”). To hold that the s tate is 15
required to involve itself in the articulation of the relator’s claims in the complaint 16
is tantamount to requiring the s tate to intervene in the action. Such a result is 17
contrary to the clear intent of the MFCA to deputize pr ivate parties to seek 18
recovery on the s tate’s behalf. See Berge , 104 F.3d at 1458 (stating that “the plain 19
language of the [FCA] clearly anticipates that even after the [ government ] has 2021

‘diligently’ investigated a violation . . . , the [g]overnment will no t necessarily 1
pursue all meritorious claims; otherwise there is little purpose to the qui tam 2
provision permitting private attorneys general” ) ; see Vaughn
, 2018 WL 5000074, 3

at *5 (citing Williams for the proposition that “the non

- intervening [g]overnment 4
should not be bound by the fate of an incompetent relator, lest it be forced to 5
intervene in every action”); see also § 27

- 14

- 8(D) (“If the state elects not to 6
proceed with the action, the person bringing the action shall have the right to 7
conduct the action.”); cf. Williams , 417 F.3d at 455 (stating that the government 8
might decline to intervene, even if there is evidence of a violation, because “ the 9
costs associated with proceeding based on a poo rly drafted complaint [by the 10
relator] outweighed any anticipated benefits”). 11

{ 30 } Finally, Defendants contend that Williams is factually distinguishable from 12
the circumstances here. They argue that in Williams , the qui tam complaint was 13

dismissed because it was “so deficient [under Rule 9(b)] that the court never 14

reached the merits of the claim [
, ] ” Williams , 417 F.3d at 456, whereas here 15
Relator’s claim was instead dismissed based on the “heightened pleading standard 16
for materiality under the FCA,” rather than the pleading requirements for fraud 17

under Rule 9(b). In re Plavix Mktg. , 2017 WL 2780744, *10. They point out that 18
the federal district court found that Relator had “pleaded herself out of court” by 19
alleging facts that negated an essential element of an FC A claim. Thus, because 2022

Relator “could not plead the required element of ‘materiality’ as a matter o f law [
, ] ” 1

the dismissal was on the merits. 2

{ 31 } We do not read Williams as narrowly as Defendants. The Williams holding 3
was not limited to the Rule 9(b) pleading standard. Instead, the core of the 4

Williams holding is the failure to adequately plead an FCA claim under Rule 5
12(b)(6), regardless of the standard applied. See Williams , 417 F.3d at 453 (stating 6

that the defendant “moved to dismiss under Rule 12(b)(6) for failure to state a 7
claim because the complaint did not comply with the requirements of Rule 9(b)”). 8
The reasoning for the holding was that the government should not be bound by the 9
relator’s weaknesses in pleading what might be a valid claim, whatever those 10
weaknesses are. In other words, “[w]hy would Congress want [a poorly plead but 11

meritorious ] earlier suit to bar a later potentially successful suit that might result in 12
a large recovery for the [g]overnment?” Kellogg Brown & Root Servs

. , Inc. v. 13

U nited S tates ex rel. Carter , 135 S. Ct. 1970, 1979 (2015) ; see id. (rejecting an 14
argument that “a first

- filed suit would bar all subsequent related suits even if that 15
earlier suit was dismissed for a reason having nothing to do with the merits”). 16

Hence, even if the In re Plavix Marketing dismissal was not based on Rule 9 (b), an 17

issue we need not decide, Williams would still apply here. See KForce Gov’t Sols.
, 18
2014 WL 5823460, at *9 (dismissing the relator’s complaint where “the facts . . . 1923

plead . . . preclude a claim under the FCA” with prejudice, but without prejudice a s 1
to the government). 2

Dismissal of Relator’s Qui Tam Action Does N ot Bar the State’s Claims 3

{ 32 } The dismissal order in In re Plavix Marketing does not specify whether it is 4
with or without prejudice to Relator or the government. In re Plavix Mktg.
, 2017 5

WL 2780744, at *1, * 23. Nevertheless, because the order did not provide for a fifth 6
amendment and disposed of all of Relator’s claims, we construe it as an 7
adjudication on the merits as to Relator, consistent with the general rule that a 8

dismissal und er Rule 12(b)(6) is an adjudication on the merits for claim preclusion 9

purposes. Moitie , 452 U.S. at 399 n.3 (stating that “[t]he dismissal for failure to 10

state a claim under Federal Rule of Civil Procedure 12(b)(6) is a judgment on the 11

merits” (internal q uotation marks and citation omitted) ); see Kirby , 2010

- NMSC

12
014, ¶ 66 (stating that this approach prevents repetitive suits); Bralley , 1985

- 13

NMCA

- 043, ¶ 14 (“ A n order dismissing a party’s entire complaint without 14
authorizing or specifying a definite time fo r leave to file an amended complaint, is 15
a final order for purposes of appeal

. ”). 16

{ 33 } However, for the reasons stated in Williams and its progeny, we construe the 17
order as without prejudice to the government. Cf. Bralley , 1985

- NMCA

- 043, ¶ 18 18
(stating tha t “[t]he words ‘without prejudice’ when used in an order or decree 19
generally indicate that there has been no resolution of the controversy on its merits 2024

and leave the issues in litigation open to another suit as if no action had ever been 1
brought”). Thus, as to the State, the federal district court’s dismissal of Relator’s 2
fourth amended complaint is not a “final judgment on the merits” for claim 3
preclusion purposes. “Because the claim preclusion doctrine does not bar a 4
subsequent lawsuit unless all [of the claim preclusion] elements are met, we do not 5
consider the parties’ remaining claim preclusion arguments.” Peterson , 2014

- 6

NMCA

- 036, ¶ 33. 7

CONC LUSION 8

{ 34 } Consistent with federal FCA and claim preclusion law, we construe the In re 9

Plavix Marketing dismissal as without prejudice to the State’s claims, and, 10
therefore, hold that the dismissal does not bar the State’s present claims under the 11

UPA an d FATA, as well as common law claims for fraud and unjust enrichment. 12
Accordingly, we affirm the state district court’s denial of Defendants’ motion to 13

dismiss. 14

{ 35 } IT IS SO ORDERED. 15

_________________________________ 16 LINDA M. VANZI , Chief Judge 17

WE CONCUR: 18

_________________________________ 1925

J. MILES HANISEE , Judge 1

_________________________________ 2 JULIE J. VARGAS , Judge 3