First Circuit Set to Widen Circuit Split Over First-to-File Rule

Posted by Kristin Graham Koehler and HL Rogers

The False Claims Act (FCA) provides that “no other 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 so-called first-to-file rule “bar[s] a later allegation if it states all the essential facts of a previously-filed claim or the same elements of a fraud described in an earlier suit.” United States ex. Rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 32 (1st Cir. 2009). On this, there is no disagreement among the courts of appeal. However, the question arises as to what form the first filed complaint must take to trigger the rule. The Sixth Circuit has held that in order to qualify as a first filed complaint, the complaint “must not itself be jurisdictionally or otherwise barred.” United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 516-17 (6th Cir. 2009). Considering the same issue, and looking at the Sixth Circuit’s prior holding, the D.C. Circuit held “a complaint may provide the government sufficient information to launch an investigation of a fraudulent scheme even if the complaint” is not jurisdictionally sound, thereby meeting the first-to-file rule. United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011). Judge Stearns, in the U.S. District Court for the District of Massachusetts, ruled on this issue over the summer and sided with the D.C. Circuit, dismissing the plaintiffs’ complaint. United States ex rel. Heineman-Guta v. Guidant Corp., 09-11927 (D.Mass. July 5, 2012). On November 6, 2012, the plaintiff filed an appeal with the First Circuit squarely raising this issue of the first-to-file rule.

In the Guidant case, the plaintiff alleged in the District of Massachusetts that the Company was involved in a scheme to induce doctors to use Guidant pace makers. Because of the product at issue, the allegations largely relate to senior citizens and, therefore, involve Medicare. Guidant argued that plaintiff’s FCA claim was precluded because of two previously filed lawsuits that Guidant argued alleged a similar scheme. The District Court found, and plaintiff conceded, that one of the two complaints did, in fact, allege a scheme nearly identical to that alleged by plaintiff. But the complaint was voluntarily dismissed and plaintiff argued lacked the particularity required by Federal Rule of Civil Procedure 9(b). Plaintiff further argued that, for this reason, the complaint could not serve as a jurisdictional bar to her complaint under the principles espoused by the Sixth Circuit in Poteet. The District Court found this argument unpersuasive.

The District Court began by explaining the reason that underlies the first-to-file rule. “The first-to-file rule is intended to provide incentives to relators to promptly alert the government to the essential facts of a fraudulent scheme.” Guidant Corp., 09-11927 at 5 (quotation omitted). Once the government has been put on notice of a fraudulent scheme, there is little benefit to allowing another relator to come later and allege the same scheme. The District Court examined both the Sixth Circuit’s argument that if a complaint is “jurisdictionally or otherwise barred” it does not qualify as an action that would initiate the first-to-file rule, Medtronic, Inc., 552 F.3d 516-17, and the D.C. Circuit’s argument that as long as the previous filing provides notice, whether the actual action is barred in some way or not, the first-to-file rule is triggered. SLM Corp., 659 F.3d 1210. The District Court sided with the D.C. Circuit’s reasoning arguing that the “purpose of a qui tam action is to provide the government with sufficient notice that it is the potential victim of a fraud worthy of investigation.” Guidant Corp., 09-11927 at 10. The District Court saw no reason why the government would be on notice after a filing that was not jurisdictionally or otherwise barred but not on notice following a filing that included the essential elements of the fraud but was somehow barred. Because the government would be on notice regardless, the District Court could find no reason to bar an action in the first instance and not the second.

The plaintiff recently appealed this ruling to the First Circuit. She places squarely at issue the District Court’s decision to side with the D.C. Circuit and reject the reasoning and holding of the Sixth Circuit. Regardless of the way the First Circuit rules on this issue, it will deepen this circuit split. None of us should be surprised to see this decision make its way to the Supreme Court in the next several years. Stay tuned.