False Claims Counsel

On November 16th, the US District Court for the WD of Oklahoma issued an opinion addressing the factors under which a qui tam defendant can be dismissed from an action due to lack of personal jurisdiction.

The relator had filed a qui tam action against multiple defendants, alleging that the defendants violated the FCA by falsely approving and certifying airplane engine parts as being serviced according to specifications. One defendant, The Carlyle Group, moved to dismiss the suit for lack of personal jurisdiction and joined in a motion by all defendants to dismiss for failure to state a claim and failure to plead fraud with particularity under FRCP 9(b).

The court denied The Carlyle Group’s motion to dismiss for lack of personal jurisdiction, concluding that long-arm jurisdictional analysis does not apply in FCA cases because the statute authorizes nationwide service of process. In order to defeat jurisdiction, a qui tam defendant must demonstrate “constitutionally significant inconvenience,” or that the jurisdiction in the chosen forum will “make litigation so gravely difficult and inconvenient” that the defendant is at a “severe disadvantage” to the opposition.

Courts must look at multiple factors to determine whether the qui tam defendant has established constitutionally significant inconvenience, including:

• The extent of the defendant’s contacts with the forum where the action was filed;
• The inconvenience of having to defend in a jurisdiction other than a residence or place of business (which includes examining the nature and extent of the defendant’s business, access to counsel, and the distance of the defendant from the forum where the action was brought)
• Judicial economy;
• The probably situs of the discovery proceedings; and
• The nature of the regulated activity in question.

The court found that The Carlyle Group failed to establish constitutionally significant inconvenience due to multiple factors, including the fact that the defendant had already retained Oklahoma counsel, that the location of the action was in Oklahoma, and that although The Carlyle Group’s contacts with Oklahoma were limited, this was not sufficient to defeat jurisdiction under the False Claims Act. Most notably, though, the court noted that it would not be inconvenient for the defendant to litigate in Oklahoma because “[g]iven modern technology, including almost instantaneous access to documents filed in this case, any inconvenience would be slight.” This suggests that it may be very difficult for any qui tam defendant to prove inconvenience, since technology has ensured that a lot of discovery can be completed through electronic means.

The court, however, did grant the motion to dismiss for failure to state a claim and failure to plead fraud with particularity, stating that the relator’s complaint was deficient under Rule 9(b) of the Federal Rules of Civil Procedure. In particular, the relator had failed to allege that the specifications at issue were required by statute or regulation and had only provided generalized, not particular, allegations against the defendants, resulting in the defendants not having fair notice of the claims against them or the factual basis for the claims. The relator was given 20 days to amend the complaint.