Third Circuit Asked To Address Timelines of Claims Dismissed on First to File Grounds

The Third Circuit may become the second court of appeals to weigh in on whether a relator in a qui tam action may amend her complaint under Rule 15 to add claims previously prohibited by the “first-to-file” rule.  Last week, a federal court certified this and two additional questions for interlocutory review.  The district court’s decision follows an April ruling denying Pfizer’s motion to dismiss an amended complaint in a case that is over a decade old, and the question has important implications for the viability of otherwise time-barred claims.

In qui tam suits, the first-to-file rule prevents would-be litigants — other than the federal government — from intervening or bringing a related action on the same facts at issue in an already pending matter.  However, if an earlier-in-time action is dismissed, it is no longer “pending” under the statute.

In Vezeau, et al. v. Pfizer, Inc., Case No. 2:05-cv-06795, the first-to-file rule had initially barred relators from bringing certain claims against Pfizer concerning alleged promotion of off-label use for certain anti-fungal drugs.  But years later, after the earlier-in-time case was later dismissed, the district court granted relators leave to amend their complaint to add these new claims.  Pfizer moved to dismiss the amended complaint, arguing, in part, that to add claims previously foreclosed by the first-to-file rule, relators had to file a separate action.  The district court, relying on the reasoning of a First Circuit decision, held that amendment pursuant to Rule 15 avoided the “pointless formality” of filing a new action and promoted swift and economic disposition of the claims without prejudice to either party.

However, recognizing the “lack of controlling authority from the Supreme Court or Third Circuit, combined with the varying conclusions reached by the First Circuit and district courts,” the district court agreed that there was substantial ground for a difference in opinion on whether a relator can add previously unavailable claims by amending her complaint.  The district court further recognized that should the Third Circuit disagree with its ruling, certain claims would then be barred either by the first-to-file rule or, even if relators were to file a new action, by the statute of limitations, making the question one of controlling law.  Accordingly, the district court has certified the issue to the Third Circuit.

The district court’s certification sets the stage for two possibilities, if the court of appeals agrees to take the case.  The Third Circuit may join the First Circuit in making Rule 15 available for relators to pursue claims initially barred by the first-to-file rule, including those claims beyond the FCA’s statute of limitations.  Alternatively, the Third Circuit could depart from the First Circuit, thereby creating a circuit split and potentially teeing the issue up for resolution by the Supreme Court.

The two additional questions certified for interlocutory review are (1) whether the FCA’s materiality standard may be met when the government is aware of the fraud allegations but continues to pay out the relevant claims, and (2) whether a specific statutory provision applies to the anti-fungal drug at issue.  Whether the Third Circuit will agree to hear appeal on these issues has also not yet been determined.

The district court’s April ruling denying Pfizer’s motion to dismiss can be found here and the district court’s most recent ruling granting Pfizer’s motion for interlocutory review can be found here.