Lawyers handling government subpoenas and investigations often suspect that a sealed FCA qui tam complaint may be lurking in a court file. Good lawyers will often scour court dockets searching for a recently unsealed complaint filed against their client, particularly if the government has indicated overtly or by inaction that it does not intend to pursue the matter. Many times, lawyers will find an FCA complaint that the district court ordered unsealed but did not order be served on defendant, likely by oversight after receiving the government's declination. That omission is significant because Section 3730(b)(2) provides that an unsealed complaint "shall not be served on the defendant until the court so orders." 31 U.S.C. § 3730(b)(2).
If several months or years pass without service of an unsealed complaint, can a defendant rely on Federal Rule of Civil Procedure 4(m)'s requirement to serve a complaint within 90 days to support a motion for dismissal once a relator ultimately serves the complaint? What can lawyers tell their clients about whether they are still subject to suit and have to maintain litigation holds? The answer depends on whether the 90-day clock under Rule 4(m) starts ticking upon the date the complaint is unsealed or is suspended until the district court orders service.
The Second Circuit (the Court) recently confronted this issue head on in United States ex rel. Weiner v. Siemens AG, ___ F.4th ___, No. 22-2656, 2023 WL 8227913 (2d. Cir. Nov. 28, 2023). Relying on the plain language of Section 3730(b)(2), the Court held that a district court must first order service before the 90-day clock of Rule 4(m) begins to run.
The relator in Weiner commenced his FCA action in February 2012. In June 2018, after more than six years, the government finally informed the district court of its intention not to intervene and requested that the complaint be unsealed. The district court did so four days later but did not direct relator to serve the complaint, and the unsealed complaint sat unserved for another two years until September 2020, when the district court asked for a status report and the relator claimed he was ready to "effectuate service immediately after such an order by the district court." The defendant then moved to dismiss for insufficient service of process and failure to prosecute. The district court granted dismissal for insufficient service, given that nine years had passed since the complaint was unsealed. However, the district court held that dismissal for failure to prosecute was too extreme because the relator did not have sufficient notice of dismissal as a consequence for inaction.
The Second Circuit, in a two-judge per curiam opinion,1 reversed and held that Rule 4(m) did not yet apply. According to the Court, Section 3730(b)(2) of the FCA "unambiguously" provides that "a relator may not lawfully serve process without a court order authorizing service." Thus, the 90-day period of Rule 4(m), only begins "when a district court expressly 'orders' a relator to serve a defendant."
Defendants contended that Section 3730(b)(3), which provides that a defendant is not required to respond "until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure," supports the position that the Rule 4(m) clock starts ticking after an unsealing order. The Court rejected this argument, reasoning that the defendants' interpretation would render Section 3730(b)(2)'s directives on service superfluous.
The Court noted that its holding "accords with the statute's purpose" to incentivize qui tam suits, and explained that relators needed clarity on when their authority to serve begins. In response to defendants' contention that an unsealed complaint could sit for decades without action, the Court stated that relators are not "relieved of their duty to prosecute an action," but suggested that the duty only arises after service is authorized. Addressing defendants' Rule 41 failure to prosecute argument, the Court found no abuse of discretion in the district court's denial of that motion, noting that the relator had not been given notice that "his delays could result in dismissal" and that the district court had not spent much time on the case.
The Second Circuit's holding in Weiner leaves many defendants in a state of suspended animation. If a complaint is unsealed but a court does not explicitly order relator to serve, the relator may jumpstart the claim many years or even decades later. A failure to prosecute motion under Rule 41(b) may not help if there is no express warning to the relator. Defendants could urge a district court to issue an order directing service rather than ignore the complaint and hope the relator forgets about it, but that is a risky strategy. As memories fade and employees move on, defendants sadly learn that FCA complaints can last forever.
*Mark Brodt contributed to this blog. Mr. Brodt is a graduate of the Fordham University School of Law, and is employed at Arnold & Porter's New York office. He is not admitted to the practice of law.
Footnote
1. Because Circuit Judge Rosemary S. Pooler, who passed away on August 10, 2023, was on the panel, the two remaining judges decided this case.
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