08 July 2016

District Court Grants Stay to Allow the Tenth Circuit to Resolve Important First-to-File Issue

Although a district judge declined an invitation to reconsider his recent opinion in United States ex rel. Little and Motaghed v. Triumph Group, Inc., et al., the court stayed its judgment and certified to the Tenth Circuit an important FCA first-to-file issue.

The underlying factual allegations concern alleged nonconforming gears manufactured by Triumph Group Services (“TGS”) for use by the United States on its civilian and military aircraft.  This case raises a key question concerning whether the relators complied with the FCA’s first-to-file provision.

This qui tam action began when attorney Donald Little, on behalf of relator Joe Blyn, the sole named relator, filed the original sealed complaint in October 2012, alleging that TGS violated the FCA by falsely certifying that the aircraft gears had been inspected and conformed to government specifications.  Approximately nine months later, and before the complaint was unsealed, a First Amended Complaint was filed removing Blyn as the relator and substituting Mr. Little and Kurosh Motaghed.  After the United States declined intervention and the case was unsealed, Defendants filed their first motion to dismiss.  In response, relators filed a second amended complaint.  The court granted Defendants’ second motion to dismiss without prejudice, finding that relators failed to state a plausible claim under Rule 8(a).  In response, relators filed a third amended complaint.

TGS again filed a motion to dismiss, alleging, among other things, that the relators’ complaint was barred by the FCA’s first-to-file bar, which states that “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) (2012).  TGS argued that the amended complaint’s claims were identical to those included in the original complaint brought by the suit’s original whistleblower, Mr. Blyn, and that because the relators were not “related” parties, they should not be allowed to be added to the FCA case.

The judge denied the motion to dismiss.  Although the judge recognized the “unique aspects” to the amendment that added the new relators, the court ultimately determined the relators were properly added.  The court recognized that the plaintiffs had a right to amend the complaint until “21 days after serving it.”  Fed. R. Civ. P. 15(a)(1)(A).  Because the right to amend included the right to add or substitute parties, and relators exercised their right to amend while the complaint was still sealed, TGS experienced no prejudice from the amendment.  Furthermore, the court held that United States ex rel. Precisions Co. v. Koch Industries, Inc, was inapplicable because that case discussed related parties in the context of Rule 24(b)(2) intervention.  Therefore, the court concluded that the relators here had a right to amend the complaint to substitute plaintiffs once as a matter of course before the complaint was unsealed.

TGS filed a motion for reconsideration of the court’s first-to-file portion of the opinion, or, in the alternative, to certify the issue for immediate interlocutory appeal.  The district court,  recognizing that the first-to-file issue is a controlling issue on which substantial grounds for difference of opinion exists, and that resolution of the issue could potentially terminate the litigation, certified the issue to the Tenth Circuit.  The Tenth Circuit could provide some much needed clarification on the first-to-file-rule.  We will continue to monitor the litigation and the development of the law in this area.

The district court order can be found here and the original opinion can be found here.

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