Relators Can Amend Complaint With Documents Obtained By Government
On July 20, 2010, the District Court of the Southern District of Texas in United States ex. rel. King v. Solvay S.A., Civil Action H-06-2662, held that relators could amend their complaint to add factual allegations based on documents obtained by state governments pursuant to investigative powers while the case was under seal. The relators used these documents to bolster their factual allegations in order to cure pleading deficiencies under Rule 9(b) of the Federal Rules of Civil Procedure.
The relators filed their original complaint in 2003, and the case remained under seal until December 2009. During the seal period, the documents at issue were produced by the defendant to the State of Texas and the Commonwealth of Virginia pursuant to a series of civil investigative demands. Texas and Virginia subsequently shared the documents with the relators. The complaint was unsealed, and the defendants brought a motion to dismiss for failure to plead fraud with particularity under Rule 9(b). The court denied defendant’s motion to dismiss and granted relators leave to amend their complaint in order to plead the alleged fraud with particularity. The relators then sought leave of court to use the documents obtained by Texas and Virginia while the case was under seal in order “to streamline the complaint and ensure that the necessary factual details are provided to survive a Rule 9(b) challenge.” The defendant argued that the use of the subpoenaed documents was not authorized under Virginia or Texas statutes and that the relators offered no other authority permitting the use of the documents.
The court held that relators could amend their complaint using the subpoenaed documents, finding that the respective state statutes govern only the conduct of state attorneys general and not relators. The court further held that Fifth Circuit precedent “almost necessitates that relators be allowed to use the subpoenaed documents that were shared by the states.” This holding has particular significance to False Claims Act cases with prolonged sealed periods, as relators may be allowed to supplement their claims with facts and information obtained by state or federal entities to cure an otherwise defective complaint. While relators are permitted the benefit of discovery taken while the case is under seal, defendants have no reciprocal ability to take discovery of the relators or the government.
