U.S. District Court
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Where a defendant under the False Claims Act has moved for leave to amend its answer in order to assert counterclaims for recoupment, offset and unjust enrichment, the motion should be allowed in part and denied in part, as the state plaintiffs have waived their sovereign immunity but the United States did not.
“This litigation raises complex issues regarding sovereign immunity. It stems from three separate complaints under the False Claims Act (‘FCA’), 31 U.S.C. §3729 et seq., and state analogs of the FCA: one filed by the United States; one filed by Colorado, Georgia, Michigan, North Carolina, Texas, and Washington (the ‘Qui Tam States’); and one filed by Maine, Nebraska, Ohio, Oregon, and Wyoming (the ‘Non-Qui Tam States’). Plaintiffs seek to recover a portion of the reimbursements they made to physicians for sales of Eylea, a prescription drug manufactured by Defendant Regeneron Pharmaceuticals, Inc. (‘Regeneron’). The United States seeks recovery of alleged overpayments from Medicare Part B, while the Qui Tam States and Non-Qui Tam States (together, the ‘State Plaintiffs’) seek recovery of alleged overpayments from their Medicaid programs.
“The present dispute centers on Regeneron’s attempt to assert contingent counterclaims for recoupment, offset, and unjust enrichment related to its own alleged overpayments of rebates to state Medicaid programs. Regeneron has raised these counterclaims in its answer to the Non-Qui Tam States’ complaint and has moved to amend its answer to the Qui Tam States’ complaint to do the same. Regeneron has also moved to amend its answer to the United States’ complaint to add similar counterclaims based on the assertion that the federal government paid a lower portion of Medicaid costs to states due to Regeneron’s alleged actions. Now before the Court are Regeneron’s motion to amend its answers to the United States’ and the Qui Tam States’ complaints and the Non-Qui Tam States’ motion to dismiss Regeneron’s counterclaims.
“The United States and the State Plaintiffs have invoked sovereign immunity with respect to the counterclaims asserted by Regeneron. Regeneron argues that Plaintiffs impliedly waived their immunity by bringing their complaints in federal court. After hearing, the Court concludes that the State Plaintiffs have waived their sovereign immunity but the United States has not. The Court therefore denies the Non-Qui Tam States’ motion to dismiss (Dkt. 230) and allows Regeneron’s motion for leave to amend (Dkt. 227) with respect to the Qui Tam States but not the United States. …
“The parties agree that the United States and the State Plaintiffs enjoy sovereign immunity in federal court. At issue is whether Plaintiffs have impliedly waived that immunity through their ‘invocation of the jurisdiction’ of this Court. Arecibo Cmty. Health Care, Inc. v. Puerto Rico, 270 F.3d 17, 27 (1st Cir. 2001). The Court concludes, as explained below, that the relevant legal standard differs with respect to the federal government and the states, and that the United States has not waived its sovereign immunity but the State Plaintiffs have. …
“The question for the Court thus is whether Regeneron’s proposed counterclaims against the United States are recoupment claims. They are not. Although Regeneron styles some of them as such, the proposed counterclaims in fact arise out of a separate transaction than the claims asserted by the United States. …
“In any event, neither setoff counterclaims nor unjust enrichment counterclaims are permissible where the United States has impliedly waived its immunity only to recoupment claims. … The Court thus will deny Regeneron’s motion to amend with respect to the United States because amendment would be futile. …
“A state may waive its Eleventh Amendment immunity when it ‘“voluntarily invoke[s]” the jurisdiction of the federal courts.’ … The scope of that waiver is broader than a waiver by the United States, in part because ‘Rule 13(d)’s provision regarding sovereign immunity and counterclaims against the United States is not applicable to counterclaims brought against states.’ …
“The question for the Court thus is not whether Regeneron’s counterclaims against the State Plaintiffs are recoupment claims, but rather whether they are compulsory counterclaims under Rule 13(a). That is a less stringent standard. …
“The Court concludes that Regeneron’s counterclaims against the State Plaintiffs fall within this broad umbrella and that ‘the interests of both economy and fairness will be served by requiring the counterclaim[s] to be brought in the same suit’ as the State Plaintiffs’ claims. …
“Considerations of ‘fairness’ also favor Regeneron. …
“The Court thus concludes that the State Plaintiffs have impliedly waived their sovereign immunity to Regeneron’s counterclaims. For that reason, the Court will deny the Non-Qui Tam States’ motion to dismiss Regeneron’s counterclaims. The Court will also allow Regeneron’s motion to amend with respect to Qui Tam States, as further explained below. …
“For the foregoing reasons, Regeneron’s motion for leave to amend (Dkt. 227) is allowed with respect to its answer to the Qui Tam States’ complaint but denied with respect to its answer to the United States’ complaint; the Non-Qui Tam States’ motion to dismiss (Dkt. 230) is denied; and the discovery stay previously imposed by the Court (see Dkt. 273) is lifted.”
United States ex rel. Nunnelly, et al. v. Regeneron Pharmaceuticals, Inc. (Lawyers Weekly No. 02-109-26) (21 pages) (Saris, J.) (Civil Action No. 20-cv-11401-PBS) (March 2, 2026).
