First Circuit Affirms District Court’s Discretion To Limit The Scope Of Discovery In False Claims Act Case

Last month, the United States Court of Appeals for the First Circuit in United States ex rel. Duxbury v. Ortho Biotech Products, L.P., No. 12-2141, 2013 WL 2501930 (1st Cir. June 12, 2013) ("Duxbury II") affirmed the district court's limitation of discovery concerning publicly disclosed False Claims Act ("FCA") allegations to the time period and geographic region over which relator qualified as an original source. Notably, however, the court deflected the question of whether the pre-amendment[1] original source exception to the public disclosure bar applied and instead chose to rule on the alternate ground that the district court's actions fell well within its broad discretion to manage discovery. By declining to rule on jurisdictional grounds, the court reaffirmed the power of district courts to exercise considerable discretion to limit the scope of discovery in FCA cases, regardless of whether the public disclosure bar applies.

Background and Procedural History

Prior to 2010, the FCA's public disclosure bar stated that "[n]o court shall have jurisdiction over an action . . . based upon the public disclosure of allegations . . . unless the person bringing the action is an original source of the information." 31 U.S.C. 3730 (e)(4)(A) (2006). To qualify as an original source, the relator must have "direct and independent knowledge of the information on which the allegations are based and [have] voluntarily provided the information to the Government before filing an action . . . ." 31 U.S.C. 3730 (e)(4)(B) (2006).

In 1992, Ortho Biotech Products, L.P. ("OBP") hired Mark Duxbury as a sales manager. Duxbury was responsible for marketing OBP's drug Procrit to health care providers in the western United States, particularly in the state of Washington. In July 1998, OBP terminated Duxbury. In 2003, Duxbury filed his original complaint and amended his complaint in 2006 after the government declined to intervene. The amended complaint contained three counts relating to OBP's allegedly improper efforts to market Procrit; only Count I, however, was the subject of this recent appeal to the First Circuit. Count I alleged that, from 1992 to the present, OBP engaged in a nationwide kickback scheme that caused healthcare providers and hospitals to submit false claims to Medicare.

In January 2007, OBP filed a motion to dismiss relator's amended complaint, which the district court granted. With respect to Count I, the district court found that: 1) all of the...