Erik Ives

26 November 2012

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

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).

10 January 2012

District Court Dismisses False Certification Claim For Failure to Adequately Plead “Condition of Payment”

By Scott Stein and Erik Ives

In the first in-depth application of the Third Circuit’s decision in United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, 2011 WL 2573390 (3d Cir. June 30, 2011)adopting the implied certification theory of liability, the United States District Court for the District of New Jersey dismissed at the pleading stage a relator’s claims under the federal False Claims Act (FCA) for failure adequately to plead that the defendant had violated a condition of payment. See Foglia v. Renal Ventures Management, LLC, No. 09-1552, Slip Op. (D.N.J. Nov. 23, 2011).

The Relator alleged that the Defendant (a dialysis care services company) failed to comply with New Jersey regulations concerning quality of patient care and facility staffing, and Center for Disease Control (CDC) standards concerning reuse of vials of the drug Zemplar. The Relator contended that these violations rendered each claim for payment of the drug legally false under a theory of express and/or implied false certification. The United States declined to intervene in the matter, and after the case was unsealed the defendant filed a motion for partial judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c).

The Court began its analysis by describing the false certification theory, as recently outlined by the Third Circuit in United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, 2011 WL 2573390 (3d Cir. June 30, 2011). In doing so, the Court focused on the Third Circuit’s holding that:

‘[T]o plead a claim upon which relief could be granted under a false certification theory, either express or implied, a plaintiff must show that compliance with the regulation which the defendant allegedly violated was a condition of payment from the Government.”

<em&ggt;Foglia, Slip Op. at 24-25 (quoting Wilkins, 2011 WL 2573390 at *11). Applying this condition of payment requirement to Relator’s pleadings under Fed. R. Civ. P. 8(a)(2) (requiring a “short and plain statement” of the claim entitling pleader to relief) and Fed. R. Civ. P. 9(b) (establishing heightened pleading requirements for claims implicating fraud), the Court held that Relator’s “merely conclusory” assertion that compliance with the federal and state regulations in question was a precondition of payment was legally insufficient. The Court explained that Relator’s failure to “cite any rule, regulation, contract, or other facts to demonstrate” this contention required dismissal of Relator’s claim on the pleadings. Foglia, Slip Op. at 25-29.

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