16 April 2012

Tenth Circuit Affirms Dismissal of Qui Tam Over Relator’s Objection

In an unpublished opinion, a panel of the Tenth Circuit has affirmed the dismissal of a qui tam before it was served on the defendant, over the objection of the relators. United States ex rel. Wickliffe v. EMC Corp., Case No. 09-4082 and 10-4174 (Order and Judgment, April 4, 2012). Relators’ complaint alleged that EMC Corporation knowingly sold defective computers to government agencies and fraudulently concealed information regarding the defect. Before the case was unsealed, the government moved to dismiss the complaint on the basis of a prior settlement with EMC. The district court dismissed the complaint pursuant to 31 U.S.C. 3730(c)(2)(A), which permits the government to dismiss a relator’s suit “notwithstanding the objections” of the relator if the relator is given notice and opportunity for a hearing. Alternatively, the district court held that the complaint was barred by the first-to-file provision, 31 U.S.C. 3730(b)(5).

On appeal, relators challenged the first-to-file dismissal on the grounds that the previously-filed complaint did not satisfy Rule 9(b)’s particularity requirement, and therefore could not act to operate subsequent complaints. The Tenth Circuit, noting that there is a circuit split on the issue of whether “first-filed” complaints must satisfy Rule 9(b), declined to take a firm position on the issue because it concluded that the case could be resolved on other grounds. However, the Panel “admit[ted] to being uneasy” with the position that Rule 9(b) applies, as that “would create a strange judicial dynamic, potentially requiring one district court to determine the sufficiency of a complaint filed in another district court.”

With respect to the dismissal under 3730(c)(2)(A), the Tenth Circuit noted that there also is a circuit split on the level of scrutiny that should be applied when the government moves to dismiss a qui tam suit, with the DC Circuit providing the government a virtually unfettered right to dismiss the action, while the Ninth Circuit requires that the government offer reasons for the dismissal that are rationally related to a legitimate government interest. The Tenth Circuit has adopted the latter, more stringent standard in cases in which the defendant has been served, but the panel declined to decide which test should apply when the government seeks dismissal before the defendant has been served because it found dismissal appropriate under either test, given that the government had already settled with the defendant.

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