Court Opinion

ID: 2645762
Source: CourtListenerOpinion
Date Created: 2013-12-13 01:00:44.028153+00
Date Added: 2024-06-11T12:03:54.378633
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 12-2287

UNITED STATES ex rel. STEVEN MAY AND ANGELA RADCLIFFE,

                Plaintiff - Appellant,

           v.

PURDUE PHARMA L.P.,     a   limited   partnership,    and;   PURDUE
PHARMA, INCORPORATED,

                Defendants − Appellees.

−−−−−−−−−−−−−−−−−−−−−−−−−−−−

UNITED STATES OF AMERICA,

                Amicus Curiae.

Appeal from the United States District Court for the Southern
District of West Virginia, at Beckley.      Irene C. Berger,
District Judge. (5:10-cv-01423)

Argued:   September 20, 2013            Decided:     December 12, 2013

Before TRAXLER, Chief Judge, DIAZ, Circuit Judge, and Gina M.
GROH, United States District Judge for the Northern District of
West Virginia, sitting by designation.

Vacated and remanded by published opinion. Chief Judge Traxler
wrote the opinion, in which Judge Diaz and Judge Groh joined.

ARGUED:  Mark Tucker Hurt, Abingdon, Virginia, for Appellant.
Howard Morris Shapiro, WILMERHALE LLP, Washington, D.C., for
Appellees.    Henry C. Whitaker, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Amicus Curiae.    ON BRIEF:  Paul
W. Roop, II, ROOP LAW OFFICE, LC, Beckley, West Virginia, for
Appellant. Jennifer M. O'Connor, Christopher E. Babbitt, Daniel
Winik, WILMER CUTLER PICKERING HALE AND DORR LLP, Washington,
D.C., for Appellees.      Beth S. Brinkmann, Acting Assistant
Attorney General, Michael S. Raab, Civil Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae.

                               2
TRAXLER, Chief Judge:

     Appellants       Steven    May   and       Angela    Radcliffe      brought      this

action under the False Claims Act, 31 U.S.C. §§ 3729-33 (the

“FCA”),     against    Purdue    Pharma        L.P.    and     Purdue    Pharma,      Inc.

(together, “Purdue”).          Giving preclusive effect to this court’s

decision in United States ex rel. Radcliffe v. Purdue Pharma

L.P., 600 F.3d 319 (4th Cir. 2010), the district court dismissed

the action on res judicata grounds.                    Because we agree with the

appellants that this action is not barred by res judicata, we

vacate the decision of the district court and remand for further

proceedings.

                                           I.

     Mark Radcliffe, the husband of appellant Angela Radcliffe,

was a district sales manager for Purdue.                      Radcliffe was laid off

as   part    of   a    reduction      in       force     in    June     2005,   and     he

subsequently executed a general release (the “Release”) of all

claims against Purdue in order to receive an enhanced severance

package.      Radcliffe    thereafter           filed     an    FCA   action    against

Purdue (“Qui Tam I”) 1 in which he alleged that Purdue falsely

marketed its narcotic pain medication OxyContin to physicians as

being twice as potent as MS Contin (a cheaper, off-patent drug

     1
       “A private enforcement action under the FCA is called a
qui tam action, with the private party referred to as the
‘relator.’”   United States ex rel. Eisenstein v. City of New
York, 556 U.S. 928, 932 (2009).

                                           3
also     manufactured     by     Purdue),       thus    making     it    appear      that

OxyContin was cheaper per dose than MS Contin.                        The government

investigated Radcliffe’s allegations and declined to intervene

in his action.

       The   district     court    eventually         dismissed    Qui   Tam    I    with

prejudice, concluding that Radcliffe’s amended complaint did not

satisfy the heightened pleading requirements of Rule 9.                               See

Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party

must   state     with    particularity         the    circumstances      constituting

fraud or mistake. . . .”).                On appeal, we affirmed the with-

prejudice dismissal on alternate grounds, concluding that the

Release barred Radcliffe’s FCA claims.                   See Radcliffe, 600 F.3d

at 333.

       After we issued our opinion in Radcliffe, Steven May and

Angela    Radcliffe      (the     “Relators”)        commenced    this    FCA     action

against Purdue (“Qui Tam II”) setting forth allegations nearly

identical to those advanced by Mark Radcliffe in Qui Tam I.                            As

noted, Angela Radcliffe is Mark Radcliffe’s wife; Steven May was

formerly     a    sales        representative          for   Purdue      under       Mark

Radcliffe’s supervision.

       Purdue    moved    to    dismiss    the       Relators’    complaint     on    res

judicata grounds, arguing that our decision in Radcliffe barred

the Relators from proceeding with Qui Tam II.                     See, e.g., Martin

v. Am. Bancorporation Retirement Plan, 407 F.3d 643, 650 (4th

                                           4
Cir. 2005) (“Res judicata . . . precludes the assertion of a

claim after a judgment on the merits in a prior suit by the

parties or their privies based on the same cause of action.”).

Purdue also argued that the FCA’s public-disclosure bar, see 31

U.S.C. § 3730(e)(4), divested the district court of jurisdiction

over the action and that the complaint did not allege fraud with

the particularity required by Rule 9.

       As    to   the     res   judicata    question,        Purdue    contended   that

Radcliffe was a judgment on the merits because it affirmed a

with-prejudice dismissal; that the claims asserted in Qui Tam I

and    Qui     Tam   II    were      identical;    and   that    the    parties    were

identical because Qui Tam I was “brought on behalf of the United

States as the real party in interest,” such that the government

“and any other relators seeking to allege identical claims are

bound by its judgment.”                 J.A. 83.       The Relators argued that

Radcliffe was not a decision on the merits for res judicata

purposes, but they did not directly dispute Purdue’s contention

that the parties were identical.

       Citing Adkins v. Allstate Insurance Co., 729 F.2d 974 (4th

Cir.    1984),       the     district      court    held      that     Radcliffe   was

necessarily a decision on the merits because it affirmed the

grant of a summary-judgment motion.                 See Adkins, 729 F.2d at 976

n.3    (“For      purposes      of   res   judicata,     a   summary    judgment   has

always been considered a final disposition on the merits.”).

                                             5
And    because    the    Relators   did       not    challenge   the    other     res-

judicata requirements, the district court held without further

analysis that “the instant case is barred by the doctrine of res

judicata.”       J.A. 225.       The district court therefore dismissed

the    action     without    considering       the     other   issues    raised    by

Purdue.    This appeal followed.

                                        II.

       The Relators argue on appeal that the district court erred

by giving preclusive effect to Radcliffe and dismissing their

action on res judicata grounds.                     The preclusive effect of a

judgment issued by a federal court is a legal question governed

by federal common law and subject to de novo review.                     See Taylor

v.    Sturgell,    553 U.S. 880,   891     (2008)     (federal     common     law

determines       preclusive      effect       of      federal-court      judgment);

Clodfelter v. Republic of Sudan, 720 F.3d 199, 210 (4th Cir.

2013) (district court’s application of res judicata reviewed de

novo).

       Generally     speaking,      whether         res   judicata     precludes    a

subsequent action “turns on the existence of three factors: (1)

a final judgment on the merits in a prior suit; (2) an identity

of the cause of action in both the earlier and the later suit;

and (3) an identity of parties or their privies in the two

suits.”    Clodfelter, 720 F.3d at 210 (4th Cir. 2013) (internal

quotation marks omitted).

                                          6
                                               A.

       The Relators contend that Radcliffe was not a “judgment on

the merits” because the decision was premised on a determination

that Mark Radcliffe lacked standing to pursue the FCA claims.

Because      Article     III    standing       requirements        are   jurisdictional,

see, e.g., United States v. Day, 700 F.3d 713, 721 (4th Cir.

2012), cert. denied, 133 S. Ct. 2038 (2013), and jurisdictional

dismissals are not “judgment[s] on the merits for purposes of

res judicata,” Goldsmith v. Mayor of Balt., 987 F.2d 1064, 1069

(4th       Cir.   1993), 2     the   Relators       argue    that    Radcliffe     is   not

entitled to preclusive effect.

       We disagree with the Relators’ reading of our decision in

Radcliffe.          Standing principles require the plaintiff to have

suffered an “injury in fact.”                   Lujan v. Defenders of Wildlife,

504 U.S. 555, 560 (1992) (internal quotation marks omitted).                             In

the context of the FCA, however, it is the government, not the

private-citizen          relator,        that       has     been     injured       by    the

defendant’s fraud.              FCA relators nonetheless have standing to

bring       an    FCA   action       because    the    FCA    “effect[s]       a   partial

assignment         of    the     Government’s         damages       claim”     and      thus

statutorily vests private citizens with standing.                         Vt. Agency of

       2
       “However, a jurisdictional dismissal . . . still operates
to bar relitigation of issues actually decided by that former
judgment.” Goldsmith, 987 F.2d at 1069.

                                               7
Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 773

(2000).

     In Radcliffe, we discussed FCA standing principles in the

course    of      rejecting     one    of       Radcliffe’s     arguments   against

enforcement of the Release.              As we explained, “Radcliffe had a

statutory      [FCA]   claim,    and    the      necessary     legal   standing   as

partial assignee” once the government suffered an injury and

Radcliffe became aware of the fraud.                  Radcliffe, 600 F.3d at 329

(emphasis      added).     We    did    not      conclude     that   Radcliffe   lost

standing when he executed the Release, but instead simply held

that his execution of the Release effected a waiver of his right

to sue Purdue.         See id. at 329 (explaining that Mark Radcliffe

“had the right” to bring an FCA action before he signed the

Release, “a right he waived under the terms of the Release”).

                                            B.

     Although we reject the Relators’ assertion that Radcliffe

was a jurisdictional dismissal, we nonetheless agree with their

bottom-line position that the district court erred by giving

Radcliffe preclusive effect.

     As     the     government        notes      in   its     amicus    brief,    the

traditional res-judicata inquiry is modified in cases where the

earlier action was dismissed in accordance with a release or

other settlement agreement.                 See Keith v. Aldridge, 900 F.2d
736, 740-41 (4th Cir. 1990).             A judgment entered “based upon the

                                            8
parties’ stipulation, unlike a judgment imposed at the end of an

adversarial proceeding, receives its legitimating force from the

fact that the parties consented to it.”                    Norfolk S. Corp. v.

Chevron, U.S.A., Inc., 371 F.3d 1285, 1288 (11th Cir. 2004).

Thus, where a dismissal is “based on a settlement agreement, . .

. the principles of res judicata apply (in a somewhat modified

form)    to      the    matters   specified   in   the    settlement    agreement,

rather than the original complaint.”                Id.       That is, given the

contractual nature of consent decrees and settlement agreements,

the preclusive effect of a judgment based on such an agreement

can be no greater than the preclusive effect of the agreement

itself. 3        See Keith, 900 F.3d at 740 (“When a consent judgment

entered upon settlement by the parties of an earlier suit is

invoked by a defendant as preclusive of a later action, the

preclusive effect of the earlier judgment is determined by the

intent      of    the    parties.”);   18A    Charles    A.   Wright,   Arthur   R.

Miller & Edward H. Cooper, Federal Practice & Procedure § 4427

(“Judgments that rest on stipulations, admissions in pleadings,

     3
       Whether our decision in Radcliffe bars the current action
is a legal issue that the Relators preserved by opposing the
dismissal below and on appeal.   That the Relators do not raise
this particular argument does not preclude our consideration and
application of it.   See Kamen v. Kemper Fin. Servs., Inc., 500
U.S. 90, 99 (1991) (“When an issue or claim is properly before
the court, the court is not limited to the particular legal
theories advanced by the parties, but rather retains the
independent power to identify and apply the proper construction
of governing law.”).

                                          9
or consent to the very judgment itself should be given effect

according to the intention of the parties . . . .”); see also

Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177, 211

(4th       Cir.    2009)    (“Settlement       agreements        operate       on   contract

principles,         and    thus     the    preclusive      effect   of     a     settlement

agreement         should   be     measured    by    the   intent    of     the      parties.”

(internal quotation marks omitted)). 4

       The Release executed by Mark Radcliffe in Qui Tam I was

personal to him and addressed only his rights and the claims

that he might assert against Purdue.                      Neither the Relators nor

the government were parties to or intended beneficiaries of the

Release.          See Restatement (Second) of Contracts § 302; see also

United States ex rel. Ubl v. IIF Data Solutions, 650 F.3d 445,

451 (4th Cir. 2011) (explaining that the effect of an agreement

settling FCA claims is a question of federal common law as to

which the Restatement (Second) of Contracts provides guidance).

The Release itself, therefore, could not serve as a defense to

any claims that the Relators (or other non-signatories) might

assert      against       Purdue.         Indeed,   we    made   this    very       point   in

       4
       While this case involves a release executed before the
commencement of any litigation, many of the cases addressing
this issue involve consent decrees or other settlements reached
after the commencement of litigation.     See, e.g., Keith v.
Aldridge, 900 F.2d 736, 738 (4th Cir. 1990).    As to the res-
judicata question, there is no meaningful difference between a
post-filing settlement agreement and the pre-filing release at
issue here.

                                              10
Radcliffe when we noted that the Release “did not prohibit the

government         or    another       relator         from    pursuing      similar       claims

against Purdue.”              Radcliffe, 600 F.3d at 329 n.8.                      Our decision

in   Radcliffe          enforcing      the    Release         did    not    (and       could   not)

broaden      the    scope       of    the   Release.          Accordingly,         because      the

Release      does       not    bar    non-signatories          from       proceeding      against

Purdue,      the    judgment          enforcing        the    Release       cannot      bar    such

claims.

       Purdue’s arguments to the contrary are not persuasive.                                   Our

dismissal      in        Radcliffe          may     well      have        been     a    dismissal

“on the merits” under Rule 41.                      See Fed. R. Civ. P. 41 (“Unless

the dismissal order states otherwise, a dismissal under this

subdivision (b) and any dismissal not under this rule--except

one for lack of jurisdiction, improper venue, or failure to join

a    party    under       Rule       19--operates        as    an    adjudication         on    the

merits.”); Shoup v. Bell & Howell Co., 872 F.2d 1178, 1181 (4th

Cir. 1989) (“[F]or purposes of res judicata, a summary judgment

has always been considered a final disposition on the merits.”

(internal quotation marks omitted)).                           As the Supreme Court has

explained, however, “it is no longer true that a judgment ‘on

the merits’ [for purposes of Rule 41] is necessarily a judgment

entitled to claim-preclusive effect.”                               Semtek Int’l, Inc. v.

Lockheed      Martin          Corp.,    531 U.S. 497,       503    (2001)       (emphasis

added).      As discussed above, the preclusive effect of a judgment

                                                  11
enforcing a settlement agreement is determined by the intent of

the parties as reflected by the terms of that agreement, and the

Release     did     not    bar    anyone     other    than    Mark   Radcliffe         from

bringing     suit       against    Purdue.        Regardless    of   the     procedural

vehicle through which our decision enforcing the Release was

entered, our decision simply did not broaden the scope of the

Release.      See Am. Cyanamid Co. v. Capuano, 381 F.3d 6, 17 (1st

Cir. 2004) (“[A] dismissal with prejudice contained in a consent

decree is not a ruling on the merits that applies to others

under the law of claim preclusion.” (internal quotation marks

and   alterations          omitted)).        Accordingly,      the   district       court

erred by dismissing Qui Tam II as barred by principles of res

judicata.

                                           III.

      We    turn     now    to    the   contention    urged    by    Purdue      and   the

government that the district court’s dismissal can be affirmed

because the action is prohibited by 31 U.S.C. § 3730(e)(4), the

FCA’s      “public       disclosure”       bar.       Addressing      that       argument

requires     us    to     first   determine       which   version    of    the    statute

applies to this case.

                                             A.

      The complaint focuses on conduct occurring between 1996 and

2005.      At that time, the public-disclosure bar provided:

                                             12
       No court shall have jurisdiction over an action under
       this section based upon the public disclosure of
       allegations or transactions in a criminal, civil, or
       administrative    hearing,    in    a    congressional,
       administrative,   or   Government   Accounting   Office
       report, hearing, audit, or investigation, or from the
       news media, unless the action is brought by the
       Attorney General or the person bringing the action is
       an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2005) (emphasis added).

       Section 3730(e)(4), however, was amended on March 23, 2010

-- after the occurrence of the conduct alleged in the complaint,

but    before       the    commencement      of     this   action.         See   Patient

Protection       &        Affordable   Care       Act,      Pub.    L.     111–148,   §

10104(j)(2),         124    Stat.   119,    901-02.        The   statute    as   amended

provides that:

       The court shall dismiss an action or claim under this
       section,   unless  opposed  by   the  Government,   if
       substantially the same allegations or transactions as
       alleged   in  the  action  or   claim  were   publicly
       disclosed--

            (i)   in    a   Federal  criminal,   civil,   or
       administrative hearing in which the Government or its
       agent is a party;

            (ii)     in     a    congressional,     Government
       Accountability   Office,  or   other  Federal   report,
       hearing, audit, or investigation; or

               (iii) from the news media,

       unless the action is brought by the Attorney General
       or the person bringing the action is an original
       source of the information.

31    U.S.C.    §    3730(e)(4)(A)         (2010)    (emphasis     added).       Purdue

argues that the amended version of the statute applies, while

                                            13
the     Relators       argue   that    the     prior       version    of    the    statute

applies.

      “[T]he principle that the legal effect of conduct should

ordinarily        be   assessed      under    the    law    that     existed      when    the

conduct took place has timeless and universal appeal.”                            Landgraf

v. USI Film Prods., 511 U.S. 244, 265 (1994) (internal quotation

marks omitted).          Accordingly, a “presumption against retroactive

legislation is deeply rooted in our jurisprudence,” id., and

that “time-honored presumption” must apply “unless Congress has

clearly manifested its intent to the contrary,” Hughes Aircraft

Co. v. United States ex rel. Schumer, 520 U.S. 939, 946 (1997).

The presumption against retroactivity, however, is limited to

statutes      “that      would    have       genuinely      ‘retroactive’         effect.”

Landgraf, 511 U.S. at 277.               A statute has retroactive effect if

it “takes away or impairs vested rights acquired under existing

laws,    or   creates      a   new    obligation,        imposes      a    new    duty,    or

attaches      a    new    disability,        in     respect    to     transactions        or

considerations already past.”                  Id. at 269 (internal quotation

marks omitted).

      Applying these principles, the Supreme Court has twice held

that the 2010 FCA amendments may not be applied to cases arising

before the effective date of the amendments.                         See Graham Cnty.

Soil & Water Conservation Dist. v. United States ex rel. Wilson,

559 U.S. 280, 283 n.1 (2010) (“The legislation makes no mention

                                             14
of retroactivity, which would be necessary for its application

to pending cases given that it eliminates petitioners’ claimed

defense to a qui tam suit.”); see also Schindler Elevator Corp.

v. United States ex rel. Kirk, 131 S. Ct. 1885, 1889 n.1 (2011)

(citing Graham County and stating that the 2010 amendments “are

not    applicable      to    pending     cases”).         The       circuit   courts

considering the issue have likewise applied the pre-2010 version

of     the     statute.      See      United    States       ex   rel.    Zizic     v.

Q2Administrators, LLC, 728 F.3d 228, 232 n.3 (3d Cir. 2013);

United States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680 F.3d
933,    934    (7th   Cir.   2012);    United    States      ex   rel.   Jamison    v.

McKesson Corp., 649 F.3d 322, 326 n.6 (5th Cir. 2011); United

States ex rel. Poteet v. Bahler Med., Inc., 619 F.3d 104, 107

n.2 (1st Cir. 2010); United States ex rel. Hixson v. Health

Mgmt. Sys., Inc., 613 F.3d 1186, 1188 n.3 (8th Cir. 2010).

       Purdue suggests the analysis should be different in this

case, however, because Graham County and Schindler, unlike this

case, involved complaints that were filed before the statute was

amended.       We disagree.     The retroactivity inquiry looks to when

the    underlying     conduct   occurred,       not   when    the    complaint     was

filed.        See Landgraf, 511 U.S. at 265 (“[T]he legal effect of

conduct should ordinarily be assessed under the law that existed

when the conduct took place . . . .” (emphasis added)).                        While

changes in jurisdictional and procedural rules are often applied

                                         15
to   pending      cases,       that    is   not    because      the    date     of    filing

controls,      see   Hughes      Aircraft, 520 U.S.    at    946   (refusing      to

apply 1986 FCA amendments to action that was commenced after the

effective date of the amendments), but because application of

those new rules often does not have an impermissible retroactive

effect.        See Landgraf, 511 U.S. at 274 (“Application of a new

jurisdictional rule usually takes away no substantive right but

simply changes the tribunal that is to hear the case.” (internal

quotation       marks    omitted));         id.    at    275    (“Because        rules    of

procedure regulate secondary rather than primary conduct, the

fact that a new procedural rule was instituted after the conduct

giving rise to the suit does not make application of the rule at

trial retroactive.”).

      The Supreme Court determined in Graham County and Schindler

that application of the 2010 amendments would have retroactive

effect    if    applied    in     those     cases,      and    we    conclude    that     the

amendments likewise would have retroactive effect if applied in

this case.       See Baldwin v. City of Greensboro, 714 F.3d 828, 836

(4th Cir. 2013) (retroactivity inquiry looks to “whether the new

statute     would       have     retroactive        effect      as     applied       to   the

particular case” (internal quotation marks omitted)); Gordon v.

Pete’s Auto Serv. of Denbigh, Inc., 637 F.3d 454, 459 (4th Cir.

2011) (“Th[e retroactivity] inquiry is narrow, for it asks not

whether     the      statute          may   possibly      have        an    impermissible

                                             16
retroactive       effect    in        any    case,     but    specifically            whether

applying    the    statute       to    the    person       objecting    would          have   a

retroactive       consequence         in    the   disfavored        sense.”          (internal

quotation marks and citation omitted)).

       Under   the    prior      version       of    the     statute,       §    3730(e)(4)

operated as a jurisdictional limitation -- the public-disclosure

bar,   if   applicable,       divested        the    district       court       of    subject-

matter jurisdiction over the action.                   See 31 U.S.C. § 3730(e)(4)

(2005) (“No court shall have jurisdiction over an action under

this section based upon the public disclosure of allegations . .

. .” (emphasis added)); Rockwell Int’l Corp. v. United States,

549 U.S. 457, 468-69 (2007) (explaining that § 3730(e)(4) is a

“jurisdiction-removing           provision”).          It    is     apparent,         however,

that the public-disclosure bar is no longer jurisdictional.                                 The

amended statute does not mention jurisdiction but instead states

that in cases where the bar is applicable, the court “shall

dismiss”    the    action     “unless        opposed   by     the    Government.”             31

U.S.C. § 3730(e)(4) (2010).                  The 2010 amendments thus deleted

the     unambiguous        jurisdiction-removing               language          previously

contained in § 3730(e)(4) and replaced it with a generic, not-

obviously-jurisdictional phrase (“shall dismiss”), while at the

same    time      retaining      jurisdiction-removing               language          in     §§

                                             17
3730(e)(1) and (e)(2). 5              In our view, these changes make it clear

that       the   public-disclosure           bar    is   no   longer    a     jurisdiction-

removing provision.              See, e.g., Brewster v. Gage, 280 U.S. 327,

337 (1930) (“The deliberate selection of language so differing

from that used in the earlier acts indicates that a change of

law was intended.”); Pirie v. Chi. Title & Trust Co., 182 U.S.
438, 448 (1901) (“When the purpose of a prior law is continued,

usually its words are, and an omission of the words implies an

omission of the purpose.”); Chertkof v. United States, 676 F.2d
984, 987 (4th Cir. 1982) (“[T]he deletion of language, having so

distinct         a    meaning,      almost   compels      the      opposite    result   when

words       of       such   plain    meaning       are   excised.”).     Indeed,     it   is

difficult to understand how the amended public-disclosure bar

could be jurisdictional when the government has the ability to

veto a dismissal under that section.                          See Gonzalez v. Thaler,

132 S. Ct. 641, 648 (2012) (“Subject-matter jurisdiction can

never be waived or forfeited.”); Brickwood Contractors, Inc. v.

Datanet Eng’g, Inc., 369 F.3d 385, 390 (4th Cir. 2004) (en banc)

(“Subject-matter             jurisdiction          cannot     be     conferred     by     the

       5
       See 31 U.S.C. § 3730(e)(1) (2010) (providing that “[n]o
court shall have jurisdiction over” certain FCA actions brought
by present or former members of the armed forces); id.        §
3730(e)(2)(A)   (providing   that  “[n]o   court   shall   have
jurisdiction over” certain FCA actions brought against members
of Congress, senior executive branch officials, or members of
the judiciary).

                                               18
parties,   nor    can    a    defect    in    subject-matter          jurisdiction     be

waived by the parties.”).              And even if the changes somehow did

not establish Congress’ intent to convert the public-disclosure

bar into a non-jurisdictional basis for dismissal, the omission

of the jurisdictional language would nonetheless require us to

treat the amended public-disclosure bar as such.                            See Sebelius

v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013) (Unless

“Congress has clearly stated that the [statutory limitation] is

jurisdictional . . . , courts should treat the restriction as

nonjurisdictional in character.” (internal quotation marks and

alteration omitted)).

      Moreover,    the       2010   amendments         significantly        changed   the

scope of the public-disclosure bar.                    Under the prior version of

the   statute,     disclosures         in    federal      and       state    trials   and

hearings qualify as public disclosures, see, e.g., McElmurray v.

Consol. Gov’t of Augusta–Richmond Cnty., 501 F.3d 1244, 1252

(11th Cir. 2007), and disclosures in federal and state reports,

audits,    or       investigations               likewise       constitute        public

disclosures,     see    Graham      Cnty., 559 U.S.    at    301.     After   the

amendments,      however,      only    disclosures        in    federal      trials   and

hearings and in federal reports and investigations qualify as

public disclosures.           See 31 U.S.C. §§ 3730(e)(4)(A)(i) & (ii)

(2010).    The 2010 amendments thus substantially narrowed the

class of disclosures that can trigger the public-disclosure bar.

                                            19
By the same token, the amendments expand the number of private

plaintiffs    entitled    to    bring        qui    tam    actions   by    including

plaintiffs who learn of the underlying fraud through disclosures

in state proceedings or reports.

      And as we will discuss in more detail in the next section,

the 2010 amendments also changed the required connection between

the   plaintiff’s    claims     and    the      qualifying     public     disclosure.

Under the pre-amendment version of the statute, an action is

barred   if   the    action     is    “based       upon”   a   qualifying        public

disclosure, see 31 U.S.C. § 3730(e)(4)(A) (2009), a standard we

have interpreted to mean that the plaintiff must have “actually

derived” his knowledge of the fraud from the public disclosure.

United States ex rel. Siller v. Becton Dickinson & Co., 21 F.3d
1339, 1348 (4th Cir. 1994).                As amended, however, the public-

disclosure bar no longer requires actual knowledge of the public

disclosure,    but    instead    applies         “if   substantially       the    same

allegations or transactions were publicly disclosed.”                      31 U.S.C.

§ 3730(e)(4)(A) (2010).          Because the Relators allege that they

did not derive their knowledge of Purdue’s fraud from any public

disclosure,   their    claims        are   viable      under   the   pre-amendment

version of the FCA, but not under the amended version, which

focuses on the similarity of the allegations of fraud rather

than the derivation of the knowledge of fraud.

                                           20
       We believe that these significant revisions to the statute

“change[] the substance of the existing cause of action,” Hughes

Aircraft, 520 U.S. at 948, such that the amended statute would

have   retroactive   effect    if   applied    in   this    case.     The   2010

amendments     deprive    Purdue      of      the    previously       available

jurisdictional defense and replace it with a non-jurisdictional

defense that is triggered by a substantially narrower range of

public disclosures and is, even then, subject to veto by the

government.    See id. (1986 FCA amendment had retroactive effect

because it “eliminate[d] a defense to a qui tam suit . . . and

therefore    change[d]   the   substance      of    the    existing   cause    of

action for qui tam defendants” (internal quotation marks and

alteration omitted)); id. at 948-49 (1986 amendment “create[d] a

new cause of action” by “exten[ding] . . . an FCA cause of

action to private parties in circumstances where the action was

previously foreclosed” (internal quotation marks omitted)).                   The

2010 amendments similarly imperil the Relators’ right to assert

their claims against Purdue, a right they possessed and could

have acted upon up until the moment that the amendments took

effect.     See Landgraf, 511 U.S. at 269 (statute has retroactive

effect if it “takes away or impairs vested rights acquired under

existing laws” (internal quotation marks omitted)); cf. Brown v.

Angelone, 150 F.3d 370, 373 (4th Cir. 1998) (“When application

of a new limitation period would wholly eliminate claims for

                                     21
substantive rights or remedial actions considered timely under

the old law, the application is impermissibly retroactive.                    The

legislature cannot extinguish an existing cause of action by

enacting    a     new   limitation     period    without   first     providing   a

reasonable time after the effective date of the new limitation

period in which to initiate the action.” (citations and internal

quotation       marks     omitted)).     Accordingly,      because     the    2010

amendments have retroactive effect and the legislation is silent

as to retroactivity, the 2010 version of the public-disclosure

bar cannot be applied in this case, notwithstanding the fact

that the complaint was filed after the effective date of the

amendments.       See Hughes Aircraft, 520 U.S. at 946 (declining to

apply 1986 FCA amendments to action alleging pre-amendment fraud

that was commenced after the effective date of the amendments).

                                         B.

     Having concluded that the pre-2010 version of § 3730(e)(4)

applies,     we    turn    to   the    question    of   whether    the   public-

disclosure bar requires dismissal of this action.

     As     previously      noted,    the     pre-amendment   version    of   the

public-disclosure bar provides that:

     No court shall have jurisdiction over an action under
     this section based upon the public disclosure of
     allegations or transactions in a criminal, civil, or
     administrative   hearing,    in    a    congressional,
     administrative,  or   Government   Accounting   Office
     report, hearing, audit, or investigation, or from the
     news media, unless the action is brought by the

                                         22
     Attorney General or the person bringing the action is
     an original source of the information.

31 U.S.C. § 3730(e)(4)(A) (2005) (emphasis added).                           Although

most circuits have interpreted the “based upon” language to bar

actions where the allegations of fraud were “supported by” or

“substantially       similar”       to     fraud    that    had     been     publicly

disclosed,    see,    e.g.,      United    States    ex    rel.    Mistick    PBT    v.

Housing    Auth.,    186 F.3d 376,    386    (3d   Cir.    1999)   (collecting

cases), this circuit has interpreted the clause as barring only

those actions where the relator’s knowledge of the fraud alleged

was actually derived from the public disclosure itself.                             See

Siller, 21 F.3d at 1348 (“[A] relator’s action is ‘based upon’ a

public    disclosure       of   allegations       only   where    the    relator    has

actually derived from that disclosure the allegations upon which

his qui tam action is based.” (emphasis added)).                         The public-

disclosure bar applies and requires dismissal if the action is

“even partly” derived from prior public disclosures. See United

States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 351 (4th Cir.

2009).

     Whether a relator derived his knowledge of the fraud from a

public disclosure is a jurisdictional fact to be resolved by the

district court.        See id. at 348, 350; Siller, 21 F.3d at 1349.

Although     the    district       court    dismissed      this    action    on     res

judicata grounds without addressing the public-disclosure bar,

                                           23
Purdue contends that the record nonetheless establishes that the

allegations in this action were at least partly derived from the

publicly     disclosed         allegations       contained     in   the    Qui    Tam    I

complaint.            Purdue    points    out    that   the    allegations       of     the

complaints in Qui Tam I and Qui Tam II are nearly identical, and

that many of the allegations in Qui Tam II are verbatim copies

of Qui Tam I allegations.                 In Purdue’s view, “[t]he verbatim

overlap     of    the       complaints    forecloses     any    argument       that   the

complaint in this action was not at least partly based on the .

. . [c]omplaint in Qui Tam I.”                      Br. of Resp’t at 31.                 We

disagree.

      Under Siller, the question is not whether the allegations

set   out   in        the   relator’s    complaint      are    similar    to    publicly

disclosed    allegations         of     fraud;    the   question    is    whether       the

relator’s knowledge of the fraud was actually derived from the

public disclosure – that is, whether the relator learned about

the fraud from the public disclosure.                    See Siller, 21 F.3d at

1347, 1348 (“[T]he only fair construction” of § 3730(e)(4) is

that “a qui tam action is only ‘based upon’ a public disclosure

where the relator has actually derived from that disclosure the

knowledge        of     the    facts     underlying     his     action.”       (emphasis

added)); see also id. at 1348 (explaining that an FCA action

could “include[] allegations that happen to be similar (even

identical) to those already publicly disclosed, but were not

                                            24
actually derived from those public disclosures”).                                  Indeed, the

standard     urged      by   Purdue     is       the      standard      adopted        by    other

circuits but rejected by Siller.                     See id. (“We are aware . . .

that other circuits have not embraced this interpretation of the

phrase, assuming instead that an action is based upon a public

disclosure of allegations if its allegations are identical or

similar to those already publicly disclosed.”).

       The   Relators        both    submitted         affidavits           to   the     district

court asserting that their knowledge of Purdue’s fraud was not

derived from the Qui Tam I complaint or any other qualifying

public disclosure, but from conversations with Mark Radcliffe

and, in Steven May’s case, from his own experiences as a Purdue

sales representative.             The similarity between the allegations in

each    complaint       could       provide      a     basis     for     disbelieving            the

Relators’ assertions, see Vuyyuru, 555 F.3d at 350-51, but that

is an issue for the district court as fact-finder, not this

court.       Because the district court has not made the factual

findings     necessary       to     determine        whether      the    public-disclosure

bar    precludes     this     action,       we    must     remand       this      case      to   the

district court for discovery and other proceedings as necessary

to    resolve     the   issues       related         to    the    applicability           of     the

public-disclosure        bar.         See    United        States      ex    rel.      Carter     v.

Halliburton Co., 710 F.3d 171, 184 (4th Cir. 2013), petition for

cert.    filed,    82 U.S.L.W. 3010      (June      24,     2013)        (“Because       the

                                              25
district court should have the opportunity in the first instance

to address the facts relevant to public disclosure, we remand

this issue to the district court.”); Siller, 21 F.3d at 1349

(remanding for district court to determine whether allegations

were “actually derived” from prior suit).          If the district court

determines that the Relators’ knowledge of the fraud alleged

here   was   actually   derived,   even   in   part,    from   a   qualifying

public disclosure and that the Relators are not original sources

of the information, then the district court must dismiss this

action for lack of subject-matter jurisdiction.                See Vuyyuru,
555 F.3d at 355.

                                   IV.

       Purdue makes two additional arguments for sustaining the

district court’s dismissal of this action that do not require

extended discussion.

       First, Purdue contends that dismissal was proper because

the    Relators’     complaint   fails    to   allege    fraud     with   the

specificity required by Rule 9 of the Rules of Civil Procedure.

We disagree.       Assuming without deciding that the complaint does

not allege the fraudulent conduct with the specificity required

by Rule 9, see U.S. ex rel. Nathan v. Takeda Pharm. N. Am.,

Inc., 707 F.3d 451, 456-57 (4th Cir. 2013), petition for cert.

                                    26
filed, 81 U.S.L.W. 3650 (May 10, 2013), 6 the Relators have yet to

amend    their   complaint,     and     they      requested       an     opportunity     to

amend if the court believed the allegations deficient.                          Leave to

amend a complaint should generally be freely granted, and there

is at present no basis in the record for this court to conclude

that any efforts to amend would be futile or otherwise improper.

See, e.g., Mayfield v. NASCAR, Inc., 674 F.3d 369, 379 (4th Cir.

2012) (“[A] request to amend should only be denied if one of

three facts is present: the amendment would be prejudicial to

the opposing party, there has been bad faith on the part of the

moving party, or amendment would be futile.” (internal quotation

marks    omitted)).         Because     the       Relators        have    not   had     the

opportunity to amend their complaint, we believe it would be

improper    to   rely   on    any     Rule    9    deficiencies          to   affirm    the

district court’s dismissal of the action with prejudice.                                The

district court on remand is free to consider Purdue’s Rule 9

argument in the first instance.

     Second,       Purdue    argues    that       we   can    affirm      the   district

court’s order because dismissal is required by the FCA’s “first

to file” bar.         See 31 U.S.C. 3730(b)(5).                   Section 3730(b)(5)

provides    that    “[w]hen    a    person        brings     an   action      under    this

     6
        On October 7, 2013, the Supreme Court invited the
Solicitor General to express the views of the United States on
the pending petition.

                                         27
subsection, no person other than the Government may intervene or

bring a related action based on the facts underlying the pending

action.”     Although this action is clearly based on the facts

underlying Qui Tam I, we recently held that the first-to-file

bar applies only if the first-filed action was still pending

when the subsequent action was commenced.              See Carter, 710 F.3d

at 182-83.    By the time this action was commenced, Qui Tam I had

been dismissed by the district court, the dismissal had been

affirmed by this court in Radcliffe, and certiorari had been

denied by the Supreme Court.                Qui Tam I, therefore, was no

longer   pending   at    the    time   this   action   was   commenced,    thus

making the first-to-file bar inapplicable.             See Carter, 710 F.3d

at 183 (“[O]nce a case is no longer pending the first-to-file

bar does not stop a relator from filing a related case.”).

                                       V.

     Accordingly,       for    the   foregoing   reasons,    we   vacate    the

district court’s order dismissing this action on res judicata

grounds and remand for further proceedings consistent with this

opinion.

                                                       VACATED AND REMANDED

                                       28