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False Claims Act Statistics, News & Analysis

A Bad Week for Copycat Relators: Fourth and D.C. Circuits Say First-to-File Bars Cases Brought While Earlier-Filed Cases Were Pending Even After Earlier Case Is Dismissed

Defendants facing serial, related qui tam cases should breathe a collective sigh of relief because the Fourth Circuit and the D.C. Circuit have just rejected relators’ efforts to undermine the first-to-file bar. In decisions issued less than a week apart, the D.C. Circuit in U.S. ex rel. Shea v. Cellco Partnership, Nos. 15-7135 & 15-7136, and the Fourth Circuit in U.S. ex rel. Carter v. Halliburton Co., No. 16-1262, both held that the first-to-file bar compels dismissal of actions brought while earlier-filed actions were pending, even if those earlier-filed actions have since been dismissed. Both courts also put the kibosh on those relators’ efforts to evade the first-to-file bar by amending their complaints after dismissal of the earlier-filed action. We’re proud to say that the attorneys of Vinson & Elkins, the same people who bring you LLB, represented the defendants in Carter and an amicus supporting the defendants in Shea.

First-to-File Bar History Lesson

These cases have storied procedural backgrounds that are intertwined with the recent history of the first-to-file bar. The first-to-file bar provides: “When a person brings an action under this subsection, 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). Relators in both Carter and Shea brought cases related to earlier-filed, then-pending cases, running afoul of this bar. In Carter, the earlier-filed related cases were brought by two different relators. In Shea, the earlier-filed case was brought by the very same relator. The earlier-filed cases were later dismissed.

The district courts in Carter and Shea dismissed the relators’ later-filed cases on first-to-file grounds. On appeal, in Carter, the Fourth Circuit agreed that Carter’s case was barred by first-to-file, but held that the first-to-file bar did not require dismissal with prejudice because Carter could file a new action since the earlier-filed cases were dismissed. 710 F.3d 171 (4th Cir. 2013). In Shea, the D.C. Circuit went the other way, affirming dismissal with prejudice because first-filed cases were perpetual bars to filing new cases even after they were dismissed. 748 F.3d 338 (D.C. Cir. 2014). On cert. in Carter, the Supreme Court affirmed that relators could file new lawsuits after earlier-filed cases were dismissed. Kellogg Brown & Root Servs., Inc. v. U.S. ex rel. Carter, 135 S. Ct. 1970 (2015). The Supreme Court granted, vacated, and remanded the petition in Shea in light of Carter.

After remands to the district courts, the defendants again moved to dismiss because relators brought their actions while earlier-filed actions were pending. Defendants also again sought dismissal with prejudice, in Carter because any re-filed case would be untimely and in Shea on other grounds unrelated to first-to-file. Relators argued first-to-file should be assessed based on the facts at the time they filed amended complaints, i.e., after earlier-filed cases had been dismissed. Carter also argued that he became the “automatic first filer,” even without amendment, when the earlier-filed cases were dismissed. The district courts in both cases disagreed, dismissing without prejudice. Both relators appealed.

A Bad Week for Copycat Relators

The Fourth Circuit and the D.C. Circuit backhanded relators’ attempts to avoid the first-to-file bar. They emphasized that the plain text of the first-to-file bar turns on whether an earlier-filed related action is pending at the time the later suit is filed, no matter what happens later. The D.C. Circuit explained that the first-to-file bar “manifests . . . a statutory command” that “expressly forbids any person from ‘bring[ing]’ (as opposed to ‘continuing’) an ‘action’ while the first suit is pending,” and that “[w]hen a statute specifies that an ‘action shall not be instituted’ . . . it must be dismissed.” Likewise, the Fourth Circuit recognized that “the text . . . restricts the ‘bring[ing]’ of an FCA action while a related action is pending.” The courts found relators’ policy arguments in favor of broad FCA application unpersuasive in the face of the plain text, and the Fourth Circuit agreed with defendants that relator’s reading of first-to-file could undermine the FCA’s statute of limitations. Both courts also rejected relators’ contentions that the Supreme Court’s decision in Carter was relevant. With this, Carter’s “automatic first-filer” position was DOA, and both relators’ amendment arguments were on the ropes.

The two courts addressed relators’ amendment arguments slightly differently, however. The D.C. Circuit outright rejected the argument that an amendment could fix a first-to-file bar problem as “difficult to square with the statutory terms.” The court explained, “the filing of an amended complaint . . . cannot alter when Shea brought his action — i.e., at a time when a related suit was pending,” and thus “Shea’s action was incurably flawed from the moment he filed it.” Further, the D.C. Circuit decried “anomalous outcomes” that the relator’s rule would cause — e.g., dismissal would turn on “the pure happenstance of whether the district court reached [a motion to dismiss the relator’s] case while the first-filed suit remained pending.” The court also distinguished cases in which pro se plaintiffs had been allowed to remedy administrative exhaustion requirements before filing. Lastly, unlike the First Circuit in U.S. ex rel. Gadbois v. Pharmerica Corp., 809 F.3d 1 (1st Cir. 2015), the D.C. Circuit gave no weight to the fact that the relator’s action might be untimely if re-filed, explaining that “[i]nsofar as the statute of limitations can inhibit” relators’ untimely claims, “that is by congressional design.”

The Fourth Circuit also rejected the relator’s attempt to amend his complaint. However, possibly seeking to avoid even the appearance of a disagreement with Gadbois, the Fourth Circuit narrowly ruled that Carter’s proposed amended complaint failed to allege the dismissal of the earlier-filed actions, and thus could not have “cured the first-to-file defect.” Instead, it simply expanded on the allegations in an earlier complaint. A concurrence by Judge Wynn emphasizes his view that the Fourth Circuit’s decision does not address the broader question of whether amendment can ever remedy first-to-file. Judge Wynn’s attempts to narrowly read the decision notwithstanding, the Fourth Circuit’s reasoning undercuts any argument that amendment could remedy first-to-file. In rejecting Carter’s automatic first-filer argument, the Fourth Circuit explained that first-to-file is a bar on “bring[ing]” an “action,” and that courts should look to the existence of related cases at the time the FCA is brought, and if another case was pending at the time, dismissal of the action is the remedy. To our eyes, that reasoning, nearly identical to the D.C. Circuit’s in Shea,leaves no room for an argument that courts should look to the time an already-brought case is continued by an amendment.

The Future of First-to-File

These decisions are huge wins for defendants facing serial qui tam lawsuits addressing overlapping allegations, and will discourage swarms of relators queuing up duplicative actions so as to have their go at a defendant. By carefully following the plain text of the FCA, and in the Fourth Circuit by narrowly tailoring its decision, the courts have immunized themselves somewhat from petitions for en banc review and certiorari. We also believe their strong, textual reasoning will be highly influential in future district court cases addressing first-to-file. Further, we hope they might persuade the Second Circuit when it decides an interlocutory appeal presenting similar first-to-file issues in U.S. ex rel. Wood v. Allergan, Inc., No. 17-02191.

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