Court reverses Appellate Division, says 2023 amendment allows attorney general to keep certain False Claims Act cases alive without formally intervening

A group of major financial institutions has lost its bid to block the New Jersey Attorney General’s Office from keeping a whistleblower lawsuit alive after the state Supreme Court ruled that a 2023 amendment to the New Jersey False Claims Act applies to pending cases.

The unanimous decision clarifies how the attorney general can participate in whistleblower lawsuits filed on behalf of the state. Before 2023, the attorney general generally had to formally intervene in a case to prevent it from being dismissed under a legal rule known as the public disclosure bar, which barred lawsuits based solely on information already public. The amendment created a simpler option, allowing the attorney general to oppose dismissal without taking over the litigation. The Supreme Court ruled that the change applies to lawsuits that were already pending when the law took effect.

The case stems from a lawsuit filed by Edelweiss Fund LLC, which alleges JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and related companies defrauded New Jersey by improperly setting interest rates on variable-rate municipal bonds. The banks deny the allegations. The Supreme Court did not decide whether the fraud claims are true. Instead, it addressed a procedural question that could affect future whistleblower lawsuits brought under the state’s False Claims Act.

Writing for the court, Justice Fabiana Pierre-Louis said the 2023 amendment changed only how the attorney general exercises an authority the office already had.

“The attorney general always had the ability to prevent application of the public disclosure bar, and the Opposition Amendment altered only the way the attorney general could exercise the discretion to do so,” Pierre-Louis wrote.

The court concluded that the amendment is procedural rather than substantive. Because it changes the litigation process instead of the legal rights or obligations of either side, it took effect immediately and applies to pending cases, the justices said.

Pierre-Louis noted that the amendment did not change the underlying law governing fraud claims.

“The Opposition Amendment had no impact on defendants’ alleged underlying conduct and affected only a procedural aspect” of the False Claims Act, she wrote. It “did not alter liability for past conduct” or change the substance or scope of the law.

The attorney general initially declined to intervene after Edelweiss filed the lawsuit in 2015. After the Legislature amended the law in 2023, however, the attorney general filed a notice opposing dismissal under the new procedure.

A trial court ruled that the notice was valid and allowed the lawsuit to proceed. The Appellate Division reversed that decision, finding the amendment could not be used in a case that was already pending.

The Supreme Court disagreed, holding that the Legislature intended the procedural change to take effect immediately. Because the attorney general properly opposed dismissal, the justices said they did not need to decide whether the lawsuit otherwise would have been barred by the public disclosure rule.

The ruling sends the case back to the trial court, where the whistleblower lawsuit against the financial institutions can move forward.