Nov 262012

First-To-File Bar Applies to Later Suit Filed By The Same Relator

Scott D. Stein and Erik Ives
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Posted by Scott Stein and Erik Ives

The FCA’s first-to-file bar clearly applies when a second relator files a qui tam that makes allegations similar to those previously made by a different relator. But what if the relator who files the second suit is the same person who filed the first suit? A federal district court in the District of Columbia has held that the FCA’s first-to-file rule bars a subsequent related action even when the relator who filed the second action is the same person who filed the “first filed” case.

Shea’s original suit, which we previously wrote about, alleged that Verizon/MCI submitted false claims for improper surcharges on invoices submitted under two telecommunications contracts with certain federal agencies. The United States intervened and settled that case in 2011. But while the first case was pending, Shea filed a second qui tam action, U.S. ex rel. Shea v. Verizon Business Network Services Inc., No. 09-1050(GK) (D.D.C.), alleging that Verizon/MCI had submitted false claims for improper surcharges on invoices submitted under a different set of contracts with different federal agencies. After the Government declined to intervene in the second lawsuit, the district court granted defendants’ motion to dismiss the second case under the FCA’s first-to-file bar.

The court first addressed the threshold issue of whether the first-to-file rule applies to the same relator who later files a second related action, and concluded that it does. The statutory language of the first-to-file rule states that once “a person brings an action under this subsection, 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) (emphasis added). As the court explained, the plain language of this statute “states without ambiguity or qualification that ‘no person’ other than the Government may bring successive related actions. The statute does not say ‘no other person except the Government may bring an action, it simply says ‘no person’ which would apply equally to the original relator as any other person.” Slip Op. at 10 (emphasis in original) (internal quotations omitted).

The court then concluded that the remaining elements of the first-to-file bar were met. The court found that the second action was related to the first, rejecting Shea’s argument that the two actions were not related because they involved different contracts and different federal agencies. Shea’s original complaint “suffices to put the U.S. government on notice as to Verizon’s allegedly fraudulent billing practices with respect to surcharges on government contracts.” Slip Op. at 17 (internal quotations omitted). Accordingly, the court ruled that the second qui tam action “alleges the same material elements of the same fraud … based on the facts underlying his previously filed qui tam action” and is barred under the first-to-file rule. Id. (internal quotations omitted).

Finally, there was no dispute that the first-filed case was “pending” at the time that the relator brought the second lawsuit. The court rejected Shea’s argument that the first-filed bar shouldn’t apply because the original action had settled by the time the relator filed the operative second amended complaint, holding that an action is deemed to be “pending” once the plaintiff initiates the lawsuit. Slip Op. at 12-13.

A copy of the district court’s opinion in U.S. ex rel. Shea v. Verizon Business Network Services Inc., No. 09-1050(GK), Slip Op., Dkt. No. 58 (D.D.C. Nov. 15, 2012) can be accessed here. [hyperlink to attached] While this was an issue of first impression in the D.C. Circuit, the court’s ruling is consistent with similar decisions by district courts in the Second and Eleventh Circuits. See U.S. ex rel. Smith v. Yale-New Haven Hospital, Inc., 411 F. Supp. 2d 64, 74-75 (D. Conn. 2005); U.S. ex rel. Bane v. Lincare Holdings, Inc., No. 8:06-cv-467, Slip Op., Dkt. No. 71 at 7-8 (M.D. Fla. Mar. 14, 2008).

Scott D. Stein

Chicago

sstein@sidley.com

Erik Ives

ErikIves@sidley.com

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