Earlier this year, the U.S. District Court for the Western District of Oklahoma granted Washington state’s motion to intervene to transfer venue to the Western District of Washington in James Siegel, M.D. v. Novo Nordisk, Inc. Relator Dr. Siegel originally filed suit in Oklahoma on February 2, 2015, alleging violations of the Federal False Claims Act (FCA), the Washington Medical Fraud False Claims Act, and the Oklahoma False Claims Act, among other state law infractions. On January 23, 2020, Washington intervened, adding additional claims under Washington’s Fraudulent Practices Act. Oklahoma and the federal government did not. The district court dismissed Oklahoma state law claims, and Washington subsequently moved to transfer the case, limited now to FCA and Washington claims, to the federal court in their own state. The court granted their motion.
State intervention is generally discretionary; in most schemes like the FCA, a relator can maintain the action to adjudicate the alleged fraudulent conduct even if a state declines to intervene. Still, States have several incentives to step in. When a state intervenes, States have greater control over how their law develops through the judiciary because their own attorneys assume the lead on the case. States may also desire to establish appropriate precedent independent of federal concerns. Additionally, state governments receive more of the amount recovered from the suit when they intervene because whistleblowers are generally compensated at a lower percentage of recovery. Finally, the extra resources a state brings to an action can often encourage defendants to settle the claims. In cases implicating multiple states’ laws, home-court advantage, or at least less travel for government witnesses, could add additional incentive.
FCA precedent gives plaintiffs, including intervening governments, wide latitude to select their jurisdictional forum of choice. Generally, an appropriate forum extends to any judicial district in which at least one defendant can be found, resides, transacts business, or in which any act proscribed by the FCA action took place. Federal district courts also inherit jurisdiction over state law claims that arise from the same incident as an action brought under the FCA. In determining appropriate forum where multiple forums could be appropriate, federal courts consider plaintiff preference, accessibility of witnesses and sources of proof, relative docket congestion, whether the transfer court would be adjudicating questions of local law, enforceability of the judgement, and whether transfer would present advantages or obstacles to a fair trial. Counter-veiling concerns for transferring venue include “forum-shopping”, where plaintiffs transfer venues hoping for a more sympathetic ruling.
In deciding to grant Washington’s motion to transfer venue, the Oklahoma court found Washington to be the most appropriate forum due to the intervening plaintiffs’ choice of forum (now the State of Washington), accessibility of Washington witnesses, and the underlying issues of exclusively federal and Washington state law. The court determined that other factors, such as enforceability of the judgement and interest in a fair trial, were neutral in this case. For the defendant, Novo Nordisk, Washington’s decision to intervene precipitated two main developments. First, they will no longer need to defend against Oklahoma state claims. Second, they will appear before a Washington district court judge.
While a fairly straight-forward application of precedent, this case reminds FCA defendants that, depending on how a case evolves, they should be prepared to litigate false claims in any jurisdiction connected to the allegations or their business activities. Initial location of filing for a company operating in multiple states will not necessarily end the story. Indeed, when multiple state laws are implicated in a FCA challenge, the affected states’ decision to intervene—or not—may play a role in the court’s decision to hear state law claims and where. Such venue transfers may happen even without the defendants’ actions.
The authors would to thank McGuireWoods summer associate Kristen M. Bahnson for assistance preparing this legal alert. She is not licensed to practice law.