Impact of First Circuit's 2015 Gadbois' Decision on First-to-File Bar Limited by District Court on Remand
In a post
right before the holidays, we noted that the district court in United States ex rel. Estate of Gadbois v.
PharMerica Corp. interpreted the FCA’s government action bar as a
perpetual bar to all claims brought by a relator in a qui tam action in which the government has intervened and settled,
even when the government did not intervene in or settle all of the claims. No.
10-cv-471, 2017 WL 5466659 (D.R.I. Nov. 13, 2017). But there is more to the
district court’s decision than the government action bar. In its government
action bar analysis, the district court made a fairly technical civil procedure
ruling that, if followed by other courts, should limit the ability of relators to
use the First Circuit’s previous Gadbois
decision to evade the FCA’s first-to-file
bar and statute of limitations.
In 2014, the Gadbois relator’s
action was dismissed on first-to-file grounds because it was brought while an
earlier-filed related action was pending. While on appeal to the First Circuit,
DOJ settled and dismissed the earlier-filed action, and Gadbois asked the First
Circuit to allow him to supplement his complaint to note the dismissal of the
earlier-filed action to cure the first-to-file violation. The First
Circuit then remanded to allow the relator to seek the district court’s leave
to supplement his complaint, stating that even though the relator’s action
violated the first-to-file bar when brought, dismissing his action and
requiring him to re-file in a new action would be a “pointless formality.” 809
F.3d 1 (1st Cir. 2015). By “pointless formality,” the First Circuit apparently
meant that the relator’s re-filed case would be timely if re-filed and so dismissal
and re-filing versus supplementing made no practical difference.
Putting aside that we think the First Circuit decision is incorrect for
reasons discussed in a post
last summer, the district court on remand has made a procedural ruling that,
if followed by other courts, should contain the fallout from the First
Circuit’s first-to-file decision. On remand, the relator moved to supplement his
complaint to overcome the first-to-file bar, and the defendant argued the relator’s
supplemental complaint would be futile because it was barred under the
government action bar. The first step in the district court’s government action
bar analysis was to decide whether the relator’s action was brought before or
after the government joined the earlier-filed action. The district court
decided that because the relator sought to allege supplemental facts — i.e.,
the dismissal of the earlier-filed action — the new complaint was in fact a
supplemental complaint under Rule 15(d), and not, as relator belatedly
suggested, an amended complaint.
That the relator’s new complaint was, and had to be, a supplemental
complaint was key to what came next. The Court explained that supplemental
complaints under Rule 15(d), unlike amended complaints under Rule 15(a), cannot
“relate back” to the filing date of the original complaint under the
relation-back rule of Rule 15(c) because Rule 15(c) references “amendment[s],”
not “supplements.” Also, the district court noted that the First Circuit
insisted that supplementation should make no practical difference compared with
dismissal and re-filing. Since a
re-filed action would certainly be barred by the government action bar, the
court concluded that it would look at the date the motion to supplement was
filed as the relevant date for determining, for purposes of the government
action bar, whether Gadbois’ action was brought before the government
intervened in the earlier-filed action. That way, the court would treat the
supplement to the complaint in the same manner as a re-filed action. Thus,
because the supplement was filed after the government intervened in the
earlier-filed action, it was barred by the government action bar.
This ruling reaches far beyond the government action bar into the more
common situation where dismissal and re-filing would be anything but a
“pointless formality,” i.e., cases where the re-filed action would be untimely
under the FCA’s statute of limitations. The district court’s reasoning suggests
that cases like Carter in the Fourth
Circuit and Shea in the D.C. Circuit
(discussed in our summer
post), in which re-filed actions would have been untimely, would have ended
in dismissal without leave to amend or supplement under Gadbois’ reasoning because
dismissal and re-filing would have been anything but a “pointless formality.”
For defendants, that means that even in the First Circuit, relators may not be
able to get away with reviving cases barred by the first-to-file bar using a
supplemental complaint in cases where, by the time the earlier-filed case is
dismissed, the statute of limitations has run. Only cases where dismissal and
re-filing is truly a “pointless formality” could continue in the First Circuit
without dismissal and re-filing.
We do have to end this hopeful discussion with a caveat. The district
courts in U.S. ex rel. Carter v.
Halliburton Co., 315 F.R.D. 56 (E.D. Va. 2016), and U.S. ex rel. Wood v. Allergan Inc., 246 F. Supp. 3d 772 (S.D.N.Y.
2017), have both suggested they might allow relation back in circumstances similar
to those at issue in Gadbois. That
said, the language in Carter is dicta
because the case was dismissed on other grounds and also the document at issue purported
to be an amended complaint rather than a supplemental complaint; in Wood the issue is on appeal to the
Second Circuit, No. 17-2191. We will continue to monitor Wood and other cases raising this issue.
V&E represents defendants in Carter
and amici in Shea and Allergan.]