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Avoiding Application of the False Claims Act’s First-to-File Bar

By Sherrie R. Savett and Jonathan Z. DeSantis

The False Claims Act’s first-to-file rule provides that “[w]hen a person brings an action under [the False Claims Act], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5).  This blog provides an overview of some of the most important factors courts consider in determining whether the first-to-file rule applies.

Claims Brought Under Different State False Claims Act Statutes

The federal False Claims Act (“FCA”) permits relators to bring claims in connection with fraud committed against the federal government.  Likewise, several states have adopted their own false claims act that permit relators to bring claims in connection with fraud committed against state governments.

Case law supports an argument that the first-to-file rule does not exclude similar claims brought under different states’ false claims acts.  For example, in one case, a relator brought a qui tam suit against Merck for defrauding Medicaid by failing to give it the benefit of the lowest price for a drug as required by law. [1]  Louisiana sought to intervene in its suit to recover damages under its false claims act.  The defendant argued that Louisiana was barred from intervening based on the first to file bar of the federal FCA.  The district court noted that the bar only applies “[w]hen a person brings an action under” the federal FCA, and Louisiana was seeking to bring purely state law claims.  Further, the court found that the bar did not apply because the state was seeking separate damages from the United States.[2]

If, for example, case #1 is only pursuing claims under the federal FCA and the Florida False Claims Act, whereas case #2 pursues similar claims under the federal FCA and the false claims acts of Florida, California, and Nevada, case #2’s federal and Florida claims are precluded under the first-to-file rule, but claims under the California and Nevada false claims act should survive.

Whether First-Filed Complaint Survive Rule 9(b)

Federal Rule of Civil Procedure 9(b) provides that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake,” which is a heightened standard relative to the standard that ordinarily applies to filing complaints.  Lawsuits brought under the FCA are subject to Rule 9(b)’s heightened pleading standard.

Some courts have held that the first-to-file rule does not apply if the earlier-filed complaint was subject to dismissal under Rule 9(b) for failure to plead the underlying fraud with particularity; however, most courts have disagreed with these decisions.

The Sixth Circuit has held that that the first-filed complaint must plead fraud with particularity as required by Rule 9(b) in order to bar a later-filed detailed complaint in reasoning that “[a] complaint that fails to provide adequate notice to a defendant [because it does not satisfy Rule 9(b)] can hardly be said to have given the government notice of the essential facts of a fraudulent scheme, and therefore would not enable the government to uncover related frauds.”[3] The Ninth Circuit has suggested, but not expressly held, that it would also follow this approach.[4]

Most courts that have considered the issue, however, have rejected an argument that there is a Rule 9(b) exception to the first-to-file bar.  For example, the D.C. Circuit expressly rejected the Sixth Circuit’s earlier decision and held that “first-filed complaints need not meet the heightened standard of Rule 9(b) to bar later complaints; they must provide only sufficient notice for the government to initiate an investigation into the allegedly fraudulent practices, should it choose to do so.”[5]  The D.C. Circuit noted that the Sixth Circuit’s approach put courts in the uncomfortable position of determining the sufficiency of a complaint in another jurisdiction and could result in two courts disagreeing over whether a complaint meets Rule 9(b)’s particularity requirement.

The First Circuit later adopted the D.C. Circuit’s position.[6] Likewise, the Fifth, Eighth and Tenth Circuits have suggested that they are likely to side with the D.C. Circuit without expressly adopting or rejecting the Rule 9(b) exception to the first-to-file rule as of yet.[7]

Whether First-Filed Complaints Survive Public Disclosure Bar

The Ninth Circuit has held that the first-to-file rule does not apply when the public disclosure bar applied to the first-filed complaint.  Campbell v. Redding Med. Ctr., 421 F.3d 817, 825 (9th Cir. 2005).

Differences in Substantive Claims

Under the first-to-file rule, “a later case need not rest on precisely the same facts as a previous claim to run afoul of this statutory bar.” [8]  Instead, “if a later allegation states all the essential facts of a previously-filed claim, the two are related and section 3730(b)(5) bars the later claim, even if that claim incorporates somewhat different details.”[9]  Put differently, the analysis for the first-to-file rule focuses on whether the claims alleged in second-filed complaint are based on the same material facts as the claims in the first-filed complaint.

As a result, “where the nature of the fraud alleged in two complaints is different, they are not related for purposes of the FCA” and thus do not implicate the first-to-file rule.[10] Even if there is some overlap between the substantive allegations of the first complaint and later filed complaints, the courts will carefully examine the differences in the substantive claims.[11]  If the later-filed complaint is based on different material facts than the first-filed complaint, then the first-to-file bar will not apply.  The critical question is identifying and evaluating any overlap between the material facts in the complaints.

Conclusion

Courts  analyze many factors before barring a later filed case.  Some of the most important are different statutes under which claims are asserted, whether the first-filed complaint complies with Rule 9(b)’s heightened pleading standard, whether the first-filed complaint is subject to dismissal under the public disclosure bar, and differences in the material facts underlying both lawsuits.

[1] U.S. ex rel. LaCorte v. Merck & Co., 2004 WL 595074 (E.D. La. Mar. 23, 2004).

[2] Id.; see also United States et al. ex rel. Westmoreland v. Amgen, Inc., 707 F. Supp. 2d 123 (D. Mass. 2010) (holding that later-filed action alleging violations of Georgia and New Mexico State False Claims Acts not jurisdictionally barred).

[3] Walburn v. Lockheed Martin Corp., 431 F.3d 966, 973 (6th Cir. 2005).

[4] Campbell v. Redding Med. Ctr., 421 F.3d 817, 824 (9th Cir. 2005).

[5] United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011).

[6] United States ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28, 36 (1st Cir. 2013).

[7] United States ex rel. Wickliffe v. EMC Corp., 473 F. App’x 849, 851 (10th Cir. 2012) (“We admit to being uneasy with the parties’ suggestion that Rule 9(b)’s particularity requirement should be applied to the first-to-file bar. Such an interpretation of § 3730(b)(5) ‘would create a strange judicial dynamic, potentially requiring one district court to determine the sufficiency of a complaint filed in another district court, and possibly creating a situation in which the two district courts disagree on a complaint’s sufficiency.’”) (citing Batiste, 659 F.3d at 1210); Roberts v. Accenture, LLP, 707 F.3d 1011, 1018-19 (8th Cir. 2013) (applying the relevant Batiste reasoning to an analogous situation to hold that Fed. R. Civ. P. 9(b) does not play a role in determining “whether a relator is entitled to share in the settlement proceeds resulting from a qui tam action in which the government elects to intervene”); United States ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371, 378 n. 10 (5th Cir. 2009) (finding that the sufficiency of an earlier-filed complaint is an issue to be addressed only by the court in the earlier-filed action but declining to expressly address whether earlier-filed complaint must satisfy Rule 9(b) to implicate the first-to-file bar).

[8] U.S. ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc., 149 F.3d 227, 232-33 (3d Cir. 1998).

[9] Id.

[10] United States ex rel. Urquilla-Diaz v. Kaplan Univ., 2016 WL 3909521, at *4 (S.D. Fla. Mar. 24, 2016).

[11] E.g. United States v. Garman, 2016 WL 3562062, at *6 (E.D. Tenn. June 24, 2016) (finding certain claims but not others barred by the FCA’s first-to-file rule).

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