New Jersey High Court Holds State False Claims Act Amendment Applies Retroactively

Quick Hits

• The New Jersey Supreme Court ruled that the 2023 Opposition Amendment, which permitted the state attorney general to more easily effectuate NJFCA lawsuits based on public disclosures, applied retroactively to pending cases.
• The court held that the Opposition Amendment was a procedural change that applied retroactively because it altered only how the state attorney general could overcome the NJFCA’s “public disclosure bar” (a doctrine that precludes actions by private persons based on publicly disclosed “allegations or transactions”) without affecting the defendants’ conduct.
• The decision revived a qui tam relator’s lawsuit regarding interest rates set by financial firms, highlighting an expanded capability for relators to bring claims even with secondhand information.

In a precedential ruling, the New Jersey Supreme Court held that the Opposition Amendment applied retroactively to a pending NJFCA case because it “did not alter any vested rights of the parties or the substance or scope of the NJFCA.” The amendment altered only the procedure by which the state’s attorney general could oppose dismissal of qui tam relator lawsuits that would otherwise have been blocked by the public disclosure bar, the court found.  

The ruling revived a qui tam relator’s lawsuit originally filed eight years before the 2023 NJFCA Opposition Amendment, challenging the setting of interest rates on government bonds by private financial institutions contracted as remarketing agents.

The Public Disclosure Bar and the 2023 Opposition Amendment

Until 2023, the NJFCA had barred relators who were not the original source of the information underlying their claims from bringing suits based on publicly disclosed allegations or transactions—a doctrine known as the “public disclosure bar.” The bar operated as an affirmative defense that defendants could raise to block NJFCA suits.

However, in 2023, the New Jersey Legislature amended the NJFCA to permit New Jersey’s attorney general to file a notice of opposition to the application of the public disclosure bar without needing to intervene in and take over a relator-initiated lawsuit. The legislature specified that the amendment was to “take effect immediately.”

The Opposition Amendment Is Procedural

The New Jersey Supreme Court distinguished between substantive and procedural statutes, finding that courts have “consistently held” that procedural statutes apply to all proceedings, including both pending proceedings and proceedings related to claims not yet filed. Citing the Supreme Court of the United States’ 1994 holding in Landgraf v. USI Film Products, the New Jersey high court stated that “remedial and procedural statutes can have retroactive effect” because they do not retroactively change a party’s substantive rights. They “do not impair rights a party possessed when [the party] acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.”

The 2023 Opposition Amendment was procedural, the court held, because it merely changed the mechanism by which the attorney general could prevent application of the public disclosure bar, requiring only the filing of a simple notice of opposition instead of full intervention. The court noted that the amendment “had no impact on defendants’ alleged underlying conduct and affected only a procedural aspect of the NJFCA,” “did not alter liability for past conduct”; did not “change any defined terms of the statute or requirements for filing a complaint,” and “did not alter any vested rights of the parties or the substance or scope of the NJFCA.”

The Amendment Applies to Pending Cases

The defendants pointed out that, as part of the 2023 amendments to the NJFCA, the legislature amended the definition of an “original source” of information capable of serving as the basis for an underlying NJFCA suit. They argued that since the New Jersey Appellate Division had previously held that the new definition of “original source” did not apply retroactively, courts must apply the pre-amended version of NJFCA to all suits filed prior to the Opposition Amendment’s effective date. Either way, they argued, the Opposition Amendment was actually substantive.

Rejecting this argument, the New Jersey high court stated that “in assessing multiple amendments to a statute, courts must examine each provision separately and should not assume that different provisions were intended to have the same applicability to pending cases.” The “original source” amendment was substantive, the court held, because it lowered the evidentiary standard for NJFCA suits, allowing more suits by relators with secondhand information.

The same could not be said for the Opposition Amendment, the court wrote, which “did not change any defined terms, substantive elements, or attach any new rights or legal consequences to pre-amendment conduct.” The attorney general “always had the ability” to oppose the public disclosure bar, meaning that the parties could not reasonably have expected at the time of the alleged conduct or during the litigation that public disclosure would completely bar NJFCA claims.

Key Takeaways

The New Jersey Supreme Court’s ruling potentially increases businesses’ exposure to qui tam lawsuits. The decision indicates that the public disclosure bar is a less reliable defense against NJFCA liability, as the attorney general now needs only to file a notice of opposition rather than intervene in a false claims suit. This reduces the burden on the State of New Jersey for keeping qui tam actions alive.

Moreover, the case sets a precedent in New Jersey that amendments to state law amending the procedural rights of parties may be applied retroactively to litigation pending at the time of the amendments’ effective dates. That means businesses involved in long-running litigation may need to be aware of mid-case legislative changes that could alter the landscape of their pending cases.

Ogletree Deakins’ Morristown office will continue to monitor developments and will provide updates on the Ethics/Whistleblower, Government Contracting and Compliance, and New Jersey blogs as additional information becomes available.

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