Court Opinion

ID: 4174562
Source: CourtListenerOpinion
Date Created: 2017-06-06 13:12:08.592112+00
Date Added: 2024-06-11T14:39:03.372697
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                                  SUPERIOR COURT OF NEW JERSEY
                                  APPELLATE DIVISION
                                  DOCKET NO. A-0749-15T2
                                              A-0756-15T2

                                       APPROVED FOR PUBLICATION
IN THE MATTER OF THE
ENFORCEMENT OF NEW JERSEY                   March 18, 2016
FALSE CLAIMS ACT SUBPOENAS                APPELLATE DIVISION

________________________________________________________

         Argued February 23, 2016 – Decided March 18, 2016

         Before    Judges    Fisher,       Espinosa      and
         Rothstadt.

         On appeal from the Superior Court of New
         Jersey, Chancery Division, Essex County,
         Docket No. C-208-15.

         Elizabeth J. Hampton argued the cause for
         appellant John Henderson (Fox Rothschild
         LLP,   attorneys;  Alain   Leibman  and Ms.
         Hampton, of counsel and on the brief).

         Kevin H. Marino      argued the cause for
         appellant Arthur Nardin (Marino, Tortorella
         & Boyle, P.C., attorneys; Mr. Marino and
         John A. Boyle, on the brief).

         Janine Matton, Deputy     Attorney General,
         argued the cause for respondent State of New
         Jersey (John J. Hoffman, Acting Attorney
         General, attorney; Andrea M. Silkowitz and
         Brian F. McDonough, Assistant Attorneys
         General, of counsel; Ms. Matton, Joan E.
         Karn and Kent D. Anderson, Deputy Attorneys
         General, on the brief).

         Lawrence S. Lustberg argued the cause for
         intervenors Medco Health Solutions, Inc. and
         Express Scripts Holding Co. (Gibbons P.C.,
              Jennifer G. Wicht (Williams & Connolly) of
              the Washington, D.C. bar, admitted pro hac
              vice, and Holly M. Conley (Williams &
              Connolly) of the Washington, D.C. bar,
              admitted   pro  hac   vice,  attorneys; Mr.
              Lustberg, Amanda B. Protess, Ms. Wicht, and
              Ms. Conley, on the brief).

       The opinion of the court was delivered by

FISHER, P.J.A.D.

       In this appeal, we consider the propriety of an order that

directed      appellants         John   Henderson      and   Arthur     Nardin     and

intervenors Medco Health Solutions, Inc., and Express Scripts

Holding Co. to comply with administrative subpoenas issued by

the Acting Attorney General (the Attorney General) pursuant to

the New Jersey False Claims Act (NJFCA), N.J.S.A. 2A:32C-1 to

-15,   -17    to    -18.    Because     the    NJFCA     precludes     the   Attorney

General's     use    of    administrative       subpoenas     into     the   subject

matter   of    a    qui    tam    action   once,    as    here,   he    declines    to

intervene within the prescribed time period, we reverse.

                                           I

       We start at the beginning. In August 2011, Paul Denis, a

former Medco employee (hereafter "the relator"), commenced a qui

tam action — under seal — in the United States District Court

for the District of Delaware. United States ex rel. Denis v.

Medco Health Sols., Inc., No. 1:11-cv-00684-RGA (D. Del.). Two

years later, the relator amended his complaint to assert claims

on behalf of the State of New Jersey; he alleged that Medco, the

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pharmacy   benefits   manager      for      the    State's     employee     health

benefits programs, perpetrated a massive fraud on the State and

other governmental entities by retaining rebates it was required

to pass through to its clients, in violation of the federal

False Claims Act, 31 U.S.C.A. § 3729 to § 3733, and the NJFCA.1

     Pursuant to N.J.S.A. 2A:32C-5(d), the Attorney General was

required   to   determine,    within       sixty   days   of   service     of   the

amended complaint, whether to intervene and take control of the

State's claims. This sixty-day period may be extended by motion,

N.J.S.A.   2A:32C-5(f),      and   the      record    reveals    the      Attorney

General's office repeatedly took advantage of this opportunity;

extensions granted by the district judge in the qui tam action

totaled approximately 600 days.            When yet another extension was

sought on March 6, 2015, the district judge granted it but also

declared that the "final intervention deadline" would be June 2,

2015.

     In a certification filed in the suit at hand, the Attorney

General asserted that since April 2014 he had been "diligently

investigat[ing] relator's claims . . . to determine whether to

intervene," although the certification suggests only there were

attempts to schedule meetings and the production of documents

that, for the most part, never occurred by the time the district

1 The amended complaint includes claims asserted on behalf of
other states as well.

                                       3                                  A-0749-15T2
judge's deadline came and went. Even if we were to agree that

appellants engaged in delaying tactics — as to which we are not

convinced but need not decide — it neither explains nor excuses

the Attorney General's failure to proceed more expeditiously for

such an extraordinarily lengthy period of time.                         There is no

dispute Medco was timely served with a subpoena and, to the

extent it could       be argued      it did not             comply —    a matter in

dispute — the Attorney General did not seek enforcement within

the   extended     time   period    permitted          by    the   district     judge.

Moreover, there is no dispute                 Henderson and        Nardin     were not

served with subpoenas until July 22, 2015 — seven weeks after

the   deadline's    expiration      and       the    unsealing     of   the   qui    tam

complaint.

      When   the    district       judge's          extended   deadline       expired,

appellants refused to comply with the Attorney General's tardy

subpoenas.    In September 2015, Medco filed — and Henderson and

Nardin joined in — a motion in federal court for a protective

order. The State opposed the motion, which the district judge

denied   because     he   believed    the       parties'       dispute      about    the

enforceability of the administrative subpoenas was a matter to

be resolved by our courts.

      While opposing Medco's motion, the Attorney General also

sought — by way of the civil action at hand — enforcement of his

subpoenas, citing N.J.S.A. 2A:32C-14(a) and Rule 1:9-6(b). The

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application was vigorously opposed. For reasons expressed in an

oral   decision,         the     chancery        judge       entered     an     order,        which

enforced     the     subpoenas       and     directed        Henderson's        and    Nardin's

appearances         on    October         30,    2015,       and     November         2,      2015,

respectively.2

       On October 30, 2015, we granted an emergent stay of the

chancery      judge's          enforcement           order     and     accelerated            these

appeals.

                                                II

       The    purely      legal      question         posed    in    these      consolidated

appeals      concerns      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.               We conclude, for the following reasons,

that   with    the       passing     of    the       intervention        deadline      and       the

unsealing of the qui tam complaint,                           the NJFCA       precluded          the

issuance      and    enforcement           of    subpoenas         for    the    purpose          of

investigating the false claim or claims alleged in the qui tam

action.       The parties' dispute about the scope of the subpoena

power created by the NJFCA turns on the meaning and relationship

of a number of its provisions.

2 We have the added benefit of the chancery judge's submission on
October 23, 2015, pursuant to Rule 2:5-1(b), of a written
amplification of the reasons he previously expressed in granting
relief.

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    Initially,      we   observe   that   the    NJFCA    imposes   on    the

Attorney General an obligation to investigate NJFCA violations

and gives that office the authority to bring a civil action in

state or federal court against violators. See N.J.S.A. 2A:32C-

5(a). The NJFCA, however, also permits "[a] person [to] bring a

civil action for a violation of this act for the person and for

the State," N.J.S.A. 2A:32C-5(b), i.e., a qui tam action.3 Such a

complaint is filed under seal, N.J.S.A. 2A:32C-5(c), and its

service on the Attorney General triggers his right "to intervene

and proceed with the action on behalf of the State within 60

days," N.J.S.A. 2A:32C-5(d). The NJFCA also declares that the

Attorney General may, "for good cause shown," seek from the qui

tam court an extension of "the time during which the complaint

remains under seal." N.J.S.A. 2A:32C-5(f).

    "Before   the    expiration"    of    that   60-day    period   or    any

permitted extension, the Attorney General "shall" either:

         (1) file a pleading with the [qui tam] court
         that he intends to proceed with the action,
         in which case the action is conducted by the
         Attorney General and the seal shall be
         lifted; or

         (2) file a pleading with the [qui tam] court
         that he declines to proceed with the action,
         in which case the seal shall be lifted and

3 "Qui tam" is a shortened title for the Latin expression, "qui
tam pro domino rege quam pro si ipso in hac parte sequitur,"
meaning: "who sues on behalf of the King as well as for
himself." Black's Law Dictionary 1251 (6th ed. 1990).

                                    6                               A-0749-15T2
           the person bringing the action shall have
           the right to conduct the action.

           [N.J.S.A. 2A:32C-5(g).]

The NJFCA provides the Attorney General with no further options.

    Although the Attorney General expressly chose neither of

these two options, he has acknowledged that we may assume he

chose the second option, and that we should consider the issues

presented as if he filed a pleading in federal court declining

to proceed with the qui tam action on behalf of the State.

                                     III

    The      Attorney    General      argues        we     should   affirm      the

enforcement   order,    claiming     his   right     to     investigate   remains

unfettered    despite     the      passing     of        the   federal    court's

intervention deadline and the unsealing of the complaint. The

Attorney General contends his right to investigate is limited

only by the duration of the last vestige of his future potential

involvement — the opportunity to seek intervention upon good

cause   shown.   See    N.J.S.A.    2A:32C-6(f)          (recognizing    when   the

Attorney General opts out and the relator "proceeds with the

action" the Attorney General may later be "permit[ted] . . . to

intervene and take over the action on behalf of the State . . .

upon a showing of good cause"). The Attorney General also relies

on N.J.S.A. 2A:32C-14(a), as if its terms were untethered to his

choice not to intervene as of right; this provision states:

                                      7                                   A-0749-15T2
           If the Attorney General has reason to
           believe that a person has engaged in, or is
           engaging in, an act or practice which
           violates this act, or any other relevant
           statute or regulation, the Attorney General
           or the Attorney General's designee may
           administer   oaths   and   affirmations,  and
           request   or   compel    the   attendance  of
           witnesses or the production of documents.
           The Attorney General may issue, or designate
           another to issue, subpoenas to compel the
           attendance of witnesses and the production
           of books, records, accounts, papers and
           documents.

The   Attorney   General    asserts    that    this    "extensive     authority

granted to [him] over the State's false claims matters" imbues

him with "a broad subpoena power . . . that does not cease upon

the unsealing of a qui tam complaint or a decision to decline

intervention, and is not limited solely to determining whether

to intervene as of right in a qui tam." And the Attorney General

lastly urges that we consider the NJFCA's remedial purposes and

the legislative mandate that the NJFCA be applied liberally,

citing N.J.S.A. 2A:32C-17.

      We   reject   the     Attorney       General's   arguments.      N.J.S.A.

2A:32C-14(a)     broadly,    but    only     generally,      sets    forth   the

administrative      investigatory      powers      granted     the     Attorney

General. It does not provide an additional or separate font of

power once the Attorney General declines the right to intervene

in a qui tam action within the prescribed timeframe.                   In other

words, N.J.S.A. 2A:32C-14(a) only describes the authority of the

                                       8                               A-0749-15T2
Attorney General to investigate a violation of the NJFCA and,

therefore, may only be utilized when the Attorney General acts

pursuant     to     N.J.S.A.       2A:32C-5.     The     triggering           language      of

N.J.S.A. 2A:32C-14(a) — "[i]f the Attorney General has reason to

believe that a person has engaged in, or is engaging in, an act

or practice which violates this act"                     —    merely describes             the

Attorney General's broad obligation to investigate violations of

the   NJFCA,      see    N.J.S.A.     2A:32C-5(a)        (declaring           that    "[t]he

Attorney General shall investigate a violation of this act"),

and   his    specific      right     to    investigate        for     the      purpose      of

deciding whether to intervene in an existing qui tam action,

N.J.S.A. 2A:32C-5(g). Because N.J.S.A. 2A:32C-14(a) is expressed

in general terms, it cannot be construed so as to swallow up the

NJFCA's      careful      and    specific       expression          of    the       Attorney

General's     rights      and   obligations.      See        Wilson      v.    Unsatisfied

Claim & Judgment Fund Bd., 109 N.J. 271, 278 (1988); Maressa v.

N.J. Monthly, 89 N.J. 176, 195, cert. denied, 459 U.S. 907, 103
S. Ct. 211, 74 L. Ed. 2d 169 (1982).

      That        is,     giving      N.J.S.A.         2A:32C-14(a)           the       broad

interpretation          urged   by   the    Attorney         General      would       render

meaningless most of what the Legislature carefully delineated in

the NJFCA's earlier specific sections.                   The Legislature fixed a

sixty-day deadline for the Attorney General to decide whether to

take over the relator's action or opt out. N.J.S.A. 2A:32C-5(g).

                                            9                                        A-0749-15T2
The     argument    that     the      Attorney          General     could        continue     an

investigation       for    so   long       as      he   cared,      notwithstanding          the

passage of the deadline, implies that the Attorney General could

seek leave to intervene in the qui tam action at any time up

until the entry of final judgment.                      There is no support in this

legislative framework for such an absurd result. Our goal in

interpreting the NJFCA, or any other legislative enactment, is

to construe and interpret its terms and provisions in a way that

gives meaning to every part and produces "a harmonious whole."

Bedford    v.    Riello,     195 N.J. 210,    224    (2008).      We    reject     the

contention that the investigative powers delineated in N.J.S.A.

2A:32C-14(a)       provide      the    Attorney         General      with    a     continuing

right to investigate matters that are the subject of an unsealed

qui tam action4; to hold otherwise would render meaningless the

time    frames     set     forth      in     N.J.S.A.         2A:32C-5.      The       Attorney

General's repeated requests for extensions in the qui tam action

belie    his    contention       that        the     right     to   serve        and    enforce

4 We are cognizant of the fact that other states' false claims
acts, as well as the federal False Claims Act, expressly declare
that the passing of the intervention-as-of-right deadline
terminates the subpoena power contained in those acts. See,
e.g., 31 U.S.C.A. § 3733(a)(1); Ga. Code Ann. § 23-3-125(b)(1);
740 Ill. Comp. Stat. 175/6(a)(1); Mass. Gen. Laws, Ch. 12, §
5N(1). This does not mean that by failing to unambiguously
express a limitation on the subpoena power the NJFCA imposes no
limit at all.   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
construction.

                                                10                                     A-0749-15T2
administrative          subpoenas       survives       undisturbed        once       the

opportunity to intervene as of right passes.

      N.J.S.A.        2A:32C-6(f),      which    is    fully     implicated       here,

limits the Attorney General's rights once he has decided "not to

proceed" with the qui tam action and once the seal has been

lifted. First, this provision recognizes that, once the Attorney

General selects a course, "the person who initiated the action

[the relator] shall have the right to conduct the action." Ibid.

Once the relator is placed in control of the litigation, the

NJFCA clearly presupposes that the Attorney General must stand

down.   This     logical       consequence       of    the     Attorney    General's

declination      of    the   right     to    intervene    is    emphasized     in    the

provision's next sentence, which declares that "[t]he decision

of the Attorney General on whether to proceed with an action

shall be deemed final and shall not be subject to review by any

court or agency."            Ibid.     When a choice is made, there is no

turning back.

      N.J.S.A. 2A:32C-6(f)'s next sentence relegates the Attorney

General to mere bystander: "If the Attorney General so requests,

the   Attorney    General      shall    be    served     at    the   expense   of    the

Attorney General with copies of all pleadings and motions filed

in the action and copies of all deposition transcripts." And the

sentence that immediately follows describes the only remaining

avenue for the Attorney General's subsequent participation in

                                            11                                 A-0749-15T2
the qui tam action: "When a person [i.e., the relator] proceeds

with    the    action,       the    [qui    tam]   court,        without    limiting    the

rights    of    the    person       initiating      the    action,     may    permit    the

Attorney General to intervene and take over the action on behalf

of the State at a later date upon a showing of good cause."

Ibid. (emphasis added). The Attorney General naturally favors a

broad reading of this last sentence, urging that the existence

of this right to later seek intervention upon a showing of good

cause    for     not     having       previously       intervened          justifies    his

continuing right to serve and enforce administrative subpoenas.

He is mistaken.

       All four sentences of N.J.S.A. 2A:32C-6(f) clearly favor

the relator's right to control the action, as they concomitantly

limit    the    Attorney       General's         further     interference:        (1)   the

relator has "the right to conduct the action"; (2) the Attorney

General's decision to opt out is final and unreviewable; (3) the

Attorney General is entitled to copies of pleadings, motions and

deposition transcripts but only at                     his expense; and (4) the

Attorney General remains on the outside looking in unless he can

later convince the qui tam court that he has "good cause" for

intervening.           The    fourth       sentence,      upon    which     the   Attorney

General's position turns,                 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

                                              12                                  A-0749-15T2
controlling         his     qui    tam          action.      The        Attorney        General's

opportunity to intervene at a later date is similarly limited,

requiring       a    demonstration          of        good   cause            that    should     be

considered in light of the entire tenor of N.J.S.A. 2A:32C-6(f).

    This        understanding         of    N.J.S.A.         2A:32C-6(f)             compels     our

conclusion       that      the    Legislature           meant      to     bar    the     Attorney

General's separate NJFCA investigations into the same subject

matter.

    In     the      same    spirit,        we    must     also     be     mindful       that     the

control of        the qui tam         discovery proceedings rests with the

federal court. Matters 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. See Sensient Colors, Inc. v. Allstate Ins. Co., 193
N.J. 373, 387 (2008); Continental Ins. Co. v. Honeywell Intern.,

Inc., 406 N.J. Super. 156, 173-74 (App. Div. 2009).

    The     Attorney         General       lastly       contends         that    special        care

should     be       paid    to    N.J.S.A.            2A:32C-17,         which       mandates     a

"liberal[]       constru[ction]"           of     the     NJFCA         "to    effectuate        its

remedial     and       deterrent      purposes."             The        Attorney        General's

reliance     on      N.J.S.A.      2A:32C-17            is   misplaced,              because    the

liberality       the       Attorney      General         would      be        entitled     to     in

generally investigating and prosecuting NJFCA violations, or in

determining whether to intervene as of right, quickly shifts in

                                                 13                                      A-0749-15T2
favor   of    the   relator     once    the   Attorney     General   opts    out.

Consequently, the liberal construction of N.J.S.A. 2A:32C-6(f),

which the Attorney General urges, warrants a cessation of his

administrative subpoena powers, not their expansion.

                                        IV

    We       recognize   that     the    Attorney     General    retains      the

opportunity to seek intervention upon good cause shown in the

qui tam action. But the NJFCA does not give the Attorney General

the right to investigate the allegations of the qui tam action

by way of administrative subpoena or through the conducting of

ex parte interviews of witnesses as otherwise would have been

permitted before he       declined to intervene as of right. This

holding does not preclude any actions that may be taken in aid

or pursuit of a criminal prosecution5 nor does it impinge on the

Attorney     General's   investigation        of   other   violations   of    the

NJFCA or as may otherwise be permitted by law.

    Reversed.

5 Although N.J.S.A. 2A:32C-6(g) recognizes the Attorney General's
right to seek a stay of qui tam discovery proceedings if he can
demonstrate those proceedings would interfere with a pending
civil or criminal investigation, we do not view this provision
as meaning the administrative subpoena powers remain open to him
once the qui tam complaint is unsealed. The provision only
recognizes the possibility that the exercise of the Attorney
General's other broad investigatory powers may at times come in
conflict with qui tam proceedings.

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