Two Years Too Late? Southern District of New York Weighs in on When a Relator Must Serve a Complaint After it is Unsealed

Sometimes a client will learn that it is a named defendant in an unsealed qui tam complaint with which it has not yet been served. A court may have ordered the complaint unsealed months ago after a government declination. The client may wonder how long the relator has to serve the complaint before the case is dismissible.

That question was addressed to some extent in a decision earlier this month by Judge Andrew Carter in the Southern District of New York in United States ex rel. Weiner v. Siemens AG et al., No. 1:12-CV-01466-ALC, 2021 WL 3544718 (S.D.N.Y. Aug. 10, 2021). In Siemens, defendants moved to dismiss a qui tam for insufficient service of process and failure to prosecute a complaint that relator had not served for years after it was unsealed. Only after the court scheduled a status hearing almost two years after the unsealing did relator seek an order authorizing service. Contending that the 90-day service deadline pursuant to Rule 4(m) of the Federal Rules of Civil Procedure should apply upon a complaint’s unsealing, defendants moved to dismiss for insufficient service.

Judge Carter had an interesting take on the issue, focusing on whether the court directed the relator to serve the complaint when issuing the unsealing order. If so, he held that the 90-day period of Rule 4(m) would apply but not if there was no direction to serve. As Judge Carter stated, “[d]efendants have not cited, nor is the Court aware of, any binding precedent that holds that an order lifting the seal in a case, absent direct instruction to serve, immediately triggers the service period under Rule 4(m).” Id. at *3 (emphasis added). The court distinguished FCA cases dismissing complaints for insufficient service finding that the courts in those cases had instructed relators to serve the complaints, and even added a footnote citing numerous S.D.N.Y. cases in which judges “issued unsealing orders that expressly authorize plaintiff-relators to serve defendants in qui tam suits.” Id. at *4 & n3.

In Siemens, however, Judge Carter had partially lifted the seal “for limited disclosures” of the complaint on three occasions, ultimately lifting the seal on June 26, 2018 “as to all matters occurring in the action” but not directing service of the complaint. The court found that given the lack of that direction and the possibility of sanctions for seal violations, Rule 4(m)’s 90-day service period was not triggered by the June 2018 order.

Further complicating the facts of the case, relator still had not served the defendants despite all the briefing about insufficient service. The court therefore examined if there was good cause for relator’s failure or whether it should grant a “discretionary extension” to allow for future service. The court rejected both, finding that the relator offered no explanation for his lack of diligence for not requesting service for 23 months after the unsealing order, and consequently dismissed the complaint without prejudice. In addition, the court declined to dismiss with prejudice for failure to prosecute.

The takeaway from Siemens is that Rule 4(m)’s 90-day service period applies if the court directs service of the complaint, but may not otherwise. Of course, FCA defendants have little control over the terms of unsealing orders as they usually will not be aware of a complaint until after unsealing. But if service is ordered as part of the unsealing, defendants served after the 90-day period could have viable dismissal motions.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.