May 52016

Cert Petition Asks Supreme Court to Address First-to-File Rule

Ellen Robbins
,

This past January, we wrote about the First Circuit decision’s in United States ex rel. Gadbois v. PharMerica Corp., No. 14-2164 (1st Cir. Dec. 16, 2015), which addressed the applicability of the first-to-file bar once the first-filed case is dismissed (see here). The first-to-file bar provides that “[w]hen a person brings an action under [the FCA], 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).  Although the relator, Gadbois, filed his complaint during the pendency of a related action, the unanimous panel held that settlement of the related action subsequent to the district court’s ruling cured the jurisdictional defect in Gadbois’s complaint.  Accordingly, the First Circuit remanded the case and permitted Gadbois to file a motion for leave to supplement his complaint.

After unsuccessfully seeking a rehearing and a rehearing en banc, PharMerica sought review by the U.S. Supreme Court on April 22.  PharMerica’s petition for a writ of certiorari focuses on three reasons why review is necessary.

First, PharMerica argues that the First Circuit ignored the plain meaning of the statute by holding that events subsequent to the relator’s filing (e.g. dismissal or settlement of the first-filed complaint) could “cure” the original threshold defect in Gadbois’s complaint.  Instead, a district court’s power to entertain the suit should be determined by the facts as they existed as of the date Gadbois’s complaint was filed.  Doing so would be the natural outgrowth of Kellogg Brown & Root Services v. U.S. ex rel. Carter, 575 U.S. __, 135 S. Ct. 1970 (2015), which held that follow-on actions must be kept out of court while the related action is pending.

Second, PharMerica argues, there is a circuit split.  The Fourth, Seventh, and Tenth Circuits each came to the opposite conclusion from the First Circuit.  Those three circuit decisions, as well as two more recent district court decisions, recognized the important distinction between dismissing without prejudice and remanding.  The former approach would make the relator re-file the action and abide by the applicable statute of limitations as of the time of re-filing, while the latter approach—taken by the First Circuit—would allow relators to benefit from their original filing date falling with the limitation period, even though their original filing was jurisdictionally barred.

Third, PharMerica’s petition warns that the First Circuit’s decision is incompatible “with the policies that animate the first-to-file bar.”  More specifically, it would create inefficient incentives for both relators and defendants.  For example, relators would file opportunistic suits and use delay tactics to make their suit outlast the first-filed action.  Meanwhile, defendants would postpone resolving meritorious cases knowing that settlement would allow a follow-on action to proceed.

In short, just as Carter restored the meaning of “pending” in the first-to-file rule, PharMerica’s petition asks the Supreme Court to restore the meaning of what it means to “bring” an FCA action.

A copy of PharMerica’s writ petition can be found here. A response to the petition is due May 26, 2016.

Ellen Robbins

erobbins@sidley.com

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