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United States v. Biotronik, Inc.

United States District Court, E.D. California

June 3, 2014

UNITED STATES OF AMERICA; THE STATES OF ARKANSAS, CALIFORNIA, DELAWARE, DISTRICT OF COLUMBIA, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, LOUISIANA, MICHIGAN, MASSACHUSETTS, MONTANA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NEW YORK, OKLAHOMA, RHODE ISLAND, TENNESSEE, TEXAS, VIRGINIA, AND WISCONSIN, ex rel. JOHN DOE RELATOR, Plaintiffs,
v.
BIOTRONIK, INC. AND, WESTERN MEDICAL, INC., Defendants.

         Unsealed by the Court on August 19, 2014

          BENJAMIN B. WAGNER United States Attorney KELLI L. TAYLOR CATHERINE SWANN Assistant United States Attorney MICHAEL D. GRANSTON JAMIE A. YAVELBERG ADAM J. SCHWARTZ Department of Justice Civil Division Commercial Litigation Branch Attorneys for the United States of America

          UNITED STATES' OPPOSITION TO REQUESTS FOR PERMANENT SEAL

         In December 2009, Relator, a former employee of defendant Biotronik, Inc. ("Biotronik"), filed a complaint alleging Biotronik violated the False Claims Act, 31 U.S.C. § 3729 et seq. Relator and Defendant Biotronik, Inc. separately seek to permanently seal or, in the alternative, redact portions of the complaint in this action to preclude the public from viewing the information contained therein. With the exception of personal health information that is subject to protection under federal law, the United States opposes these attempts to permanently seal some or all of the documents that served as the impetus for the government's investigation. The False Claims Act docs not provide for a permanent seal, and neither Biotronik nor Relator have met their burden to overcome the presumption of public access to the complaint. Accordingly, these requests should be denied. In addition, the United States requests that Relator's actual name be substituted in the caption of all papers filed in this proceeding.

         A. RELATOR'S REQUEST FOR A PERMANENT SEAL SHOULD BE DENIED

         The sole basis put forth by Relator for keeping this matter permanently sealed is the potential for Relator to face difficulties in finding employment within the medical device industry as a result of his identity being revealed. See Relator's Memorandum in Support of Motion to Seal, at pg. 4. While the Relator's concerns about future retaliation are not implausible, Relator fails to provide any evidence to substantiate the claim. Thus, the request for a permanent seal should be denied.

         Under the False Claims Act, relators may bring suits to collect statutory damages and penalties "for the person and for the United States Government." 31 U.S.C. § 3730(b)(1). Upon bringing a qui lam action, a relator must serve the United States with a copy of the complaint and written disclosure of material evidence underlying the allegations. Id. at § 3730(b)(2). The relator's complaint "shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." Id. The government may either take over the action itself or notify the court that it declines to do so, leaving the relator with the right to conduct the action. 31 U.S.C. § 3730(b)(4).

         The initial sealing of a qui tarn complaint is intended to protect only the government's investigation when it is determining whether to intervene in the action. See S. REP. 99-345, 24, 1986 U.S.C.C.A.N. 5266, 5289, 1986 WL 31937 ("Keeping the qui tarn complaint under seal for the initial 60-day time period is intended to allow the Government an adequate opportunity to fully evaluate the private enforcement suit and determine both if that suit involves matters the Government is already investigating and whether it is in the Government's interest to intervene and take over the civil action.") Only the government is allowed to apply for extensions of time during which the complaint remains under seal. See Id. § 3730(b)(3). There is no provision in the False Claims Act for permanently sealing a qui tarn action or concealing a relator's identity. Thus, the fact that a qui tarn action starts out under seal does not relieve Relator of the burden of overcoming the right of public access to judicial proceedings.

         Under the common law, the public has a presumptive right of access to judicial records. See Nixon v. Warner Communications, Inc., 435 U.S. 589, 597-599 (1978). This standard derives from the common law right of citizens "to inspect and copy public records and documents, including judicial records and documents." Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (internal citation omitted). "Courts have also recognized that when cases involve matters of particular public interest, such as misspent government funds, the rationale for public access is even greater." Under Seal v. Under Sea, 1994 U.S. App. LEXIS 11617, at *6-7 (4, h Cir. June 27, 1994) (collecting decisions from numerous courts of appeal).

         Where a party wishes to preclude public access to judicial materials, the party must provide compelling reasons supported by factual findings in order to overcome the presumption of open public records. See Kamakana, 447 F.3d at 1178 (internal citation omitted). Compelling reasons sufficient to justify sealing court records are those where court filings are being used for improper purposes such as: promoting spite or public scandal; libel; or the improper revealing of trade secrets. Id.at 1179. "The mere fact that the production of records may lead to a litigant's embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records." Id. (internal citation omitted).

         A number of courts have rejected attempts by relators to permanently seal qui tarn complaints. See United States ex rel. Herrera v. Bon Secours Cottage Health Services, 665 F.Supp.2d 782, 785-86 (E.D. Mich. 2008) (denying relator's request to seal qui lam following dismissal); United States ex rel. Permison v. Superlative Techs., Inc., 492 F.Supp.2d 561, 563-64 (E.D. Va. 2007) (same). Given the heightened public interest in favor of open access to matters such as this one dealing with the alleged misuse of government funds, the evidentiary basis for maintaining information under seal should be particularly compelling.

         It is also worth noting that relators institute whistleblower actions voluntarily, and they do so with the promise that they will share in any recovery by the United States. See United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360 (11th Cir. 2006) (discussing the "strong financial incentive" of relators who can potentially recover fifteen to thirty percent on any damages award under the statute). This bounty serves not only as an incentive to report fraud against the government, but to compensate relators who may face diminished job prospects in the future as a result of their willingness to serve the public interest. When a relator experiences retaliation by an employer for filing a qui tarn action, the False Claims Act specifically provides a cause of action for relief. See 31 U.S.C. § 3730(h). Having chosen to file a qui lam complaint and accept a relator share of almost $850, 000 from the federal government that would otherwise be returned to the public fisc, Relator gives up the right to remain anonymous. Thus, the United States renews its request for the complaint in this matter to be unsealed, and asks that Relator's actual name be substituted in the papers on file in this matter.

         Finally, fully effectuating Relator's request for anonymity would indeed necessitate permanently sealing or redacting the settlement agreement in this matter since he is a signatory. The settlement agreement, which the parties negotiated and signed, sets forth the bases for the United States' recovery in this matter, the amount of the recovery, and the amount of the recovery shared with Relator. The United States routinely makes its False Claims Act settlements available to the public under the Freedom of Information Act, 5 U.S.C. § 552 et seq., and redaction of the settlement agreement is inconsistent with the goals of that Act. Cf. N.L.R.D. v. Robbins Tire & Rubber Co., 437 U.S. 214, 242 (1978).

         B. BIOTRONIK'S REQUEST FOR A PERMANENT SEAL SHOULD BE DENIED

         Similar to Relator, Biotronik argues that the complaint in this matter should be permanently sealed to protect Biotronik and its business partners from what Biotronik characterizes as "inflammatory claims" and "unfounded allegations." Defendant Biotronik's Memorandum of Points and Authorities in Support of Motion to Maintain the Seal Over the Complaint, at 4-5. Nevertheless, pursuant to the terms of the settlement agreement in this matter, Biotronik is paying $4.9 million to resolve some of these allegations. While Biotronik has offered evidence in the form of a declaration from Jon Brumbaugh, Vice President of Regulatory and Compliance at Biotronik, to support its fear of future reputational harm and alleged disclosure of trade secrets, the information provided docs not constitute a compelling ...


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