The First Circuit Joins the D.C. Circuit in Hampering Relators’ Ability to Bring Duplicative Actions Under the False Claims Act’s First-to-File Rule

Compliance Alert

Client Alert

Author(s) , , ,

The First Circuit has become the fourth federal court of appeals to address whether a first-filed yet insufficient complaint still qualifies as a pending action under the first-to-file rule of the False Claims Act. It has joined the D.C. Circuit in holding that “the earlier-filed complaint need not meet the heightened pleading standard of Rule 9(b) [of the Federal Rules of Civil Procedure] to provide sufficient notice to the government of the alleged fraud and bar a later-filed complaint." U.S. ex rel. Heineman-Guta v. Guidant Corp., 12-1867, 2013 WL 2364172, at *7 (1st Cir. May 31, 2013).

The first-to-file rule bars a “person other than the Government” from “bring[ing] a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5).  The Sixth Circuit and the Ninth Circuit have both held that “jurisdictionally [under the FCA’s jurisdictional requirements] or otherwise barred” complaints do “not properly qualify as a ‘pending action’ brought under the FCA.”  United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 516 (6th Cir. 2009) (internal citations omitted); see also Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005); Campbell v. Redding Med. Ctr., 421 F.3d 817, 825 (9th Cir. 2005).

The D.C. Circuit disagreed in 2011 and rejected the “argument that first-filed qui tam complaints must meet a heightened pleading standard under Rule 9(b) in order to bar later-filed complaints.”  United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1211 (D.C. Cir. 2011).

On Friday, the First Circuit weighed in.

In Guidant Corp., the relator alleged that defendants used kickbacks to promote the sale and use of their medical devices.  The district court dismissed the complaint because it alleged the same essential facts as another relator’s complaint.  Hence, it found, the government already had sufficient notice of a potentially fraudulent scheme from the first complaint.  The relator appealed, arguing that the first complaint was required to meet Rule 9(b)’s particularity requirements but failed to do so.

The First Circuit disagreed with that argument and affirmed the district court.

In affirming, the First Circuit reasoned that:

  1. “Had Congress wanted to incorporate Rule 9(b) particularity requirements into § 3730(b)(5), it could have done so.”  Guidant Corp., 2013 WL 2364172, at *5;

  2. “Unlike the purpose served by § 3730(b)(5), Rule 9(b) is not concerned with providing the government notice sufficient to enable it to launch an investigation into alleged fraudulent practices.”  Id. at *7; and

  3. “A complaint that does not comply with Rule 9(b)’s particularity requirements to protect the defendant’s interests may nonetheless provide the government sufficient notice to begin an investigation of an alleged fraudulent scheme.”  Id.

The court held that the first complaint against the defendants provided sufficient notice because both complaints alleged defendants’ use of the same types of kickbacks—e.g., “payment of honoraria to physicians, lavish meals and dinner programs designed to generate referrals, payment of grants to educational foundations used as a guide to funnel money to physicians”—to promote “the same cardiac rhythm management devices such as pacemakers, defibrillators, among others.”  Id. at *7.  In other words, a government investigation into the first complaint’s allegations would unearth the same scheme alleged in the second complaint.  

Going forward, though the First Circuit’s approach may not yet be the majority approach, it may be the emerging trend.  And this approach is a more defendant-friendly one—as nearly all potential FCA defendants are at risk of multiple whistleblower actions.  Indeed, a quickly filed complaint later dismissed by a court could yet bar ensuing whistleblower actions. 

In short, the First Circuit’s ruling is a welcome one for those facing FCA allegations.