Court Opinion

ID: 3186823
Source: CourtListenerOpinion
Date Created: 2016-03-18 14:36:41.263452+00
Date Added: 2024-06-11T14:35:41.425490
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NOT FOR PUBLICATION WITHOUT THE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

                                           2                                 A-0749-15T2
on behalf of the State of New Jersey; he alleged that Medco, the

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

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

                                       3                                  A-0749-15T2
attempts to schedule meetings and the production of documents

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

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.

                                         4                                   A-0749-15T2
       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

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

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.

                                                 5                                          A-0749-15T2
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.

    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:

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
           (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
           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

                                      7                                  A-0749-15T2
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:

           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

                                       8                              A-0749-15T2
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

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).

                                         9                                     A-0749-15T2
      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).

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

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,
                                                     (continued)

                                               10                                  A-0749-15T2
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

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

(continued)
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.

                                            11                                    A-0749-15T2
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

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

                                           12                                  A-0749-15T2
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

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

                                              13                                    A-0749-15T2
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

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

                                                14                                  A-0749-15T2
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.

                                 15                              A-0749-15T2