Judge Gabriel Sanchez, nominated by President Biden to the US Court of Appeals for the Ninth Circuit, wrote a unanimous opinion that reversed a lower court and allowed an investigator to go forward with a False Claims Act lawsuit that charged a large pharmaceutical company with defrauding the federal  government. The August 2023 decision was in Silbersher v Valeant Pharmaceuticals International. Inc.

 

What is this Case About?

 Zachary Silbersher, an investigator and a lawyer, filed a lawsuit under the False Claims Act (FCA) contending that Valeant Pharmaceuticals had defrauded and cost the federal government millions of dollars. Under the Act, private individuals can sue corporations or others for fraud on behalf of the government and can sometimes share in the damages awarded. SIlbersher maintained that Valeant had fraudulently obtained patents on an important anti-inflammatory drug and used the patents to “stifle competition” from generic drug makers. He also contended that Valeant defrauded the federal government by charging an “artificially inflated” price for the drug while falsely certifying that the price was fair and reasonable.

Under the FCA, however, claims generally cannot be brought based on public disclosures in court or administrative proceedings, in congressional or administrative hearings or reports, or in the news media. The district court ruled that this “public disclosure bar” applied in this case, and dismissed the lawsuit. Silbersher appealed to the Ninth Circuit.

 

How did Judge Sanchez and the Ninth Circuit Rule and Why is it Important?

 Judge Sanchez wrote a unanimous opinion that reversed the lower court ruling and sent the case back so it can proceed.  The panel noted that a 2010 amendment to the FCA, which the court had not previously interpreted, requires that in order for the public disclosure bar to apply, the information publicly disclosed must be “substantially the same” as alleged in the complaint. Under this standard, the court concluded, the bar did not apply to Silbersher’s lawsuit. Although the controversy involving Valeant had been public, the majority explained, “none of the public disclosures make a direct claim that Valeant committed fraud” or reveal “facts sufficient to permit a reasonable inference of fraud” that would have precluded the lawsuit.

 The Ninth Circuit decision is obviously important to trying to hold the Valeant drug corporation responsible for its alleged fraud. It also sets an important precedent, particularly in the Ninth Circuit (including California, Washington, Oregon and other western states) that will help people use the FCA to combat fraud by corporations. The holding is also yet another illustration of the importance of promptly confirming fair-minded Biden nominees like Judge Sanchez to our federal courts.