The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we continue to take a closer look at recent legal developments involving the FCA. This week, we examine the FCA’s first-to-file rule and its impact on a relator’s right to pursue FCA claims.
The FCA’s first-to-file bar limits the rights of the public to bring an action premised on facts that are already at issue in another pending FCA matter. The parameters of this bar are in dispute amongst the circuits. One such dispute, which was resolved by the Supreme Court last year in Kellogg Brown & Root Servs., Inc. v. U.S. ex rel. Carter, 135 S. Ct. 1970 (2015), involved how a dismissal of a prior suit affects a later-filed action. Some have argued that the bar precludes subsequent litigation even if the previous matter was dismissed. See U.S. ex rel. Shae v. Cellco P’ship, 2014 WL 1394687 (D.C. Cir. April 11, 2014). Others argued, as the Supreme Court in Carter held, that the bar applies only if the prior matter regarding the same facts is currently pending. See U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111 (1st Cir. 2014). Once the matter is dismissed, a subsequent action on the same facts will not be barred under this section of the FCA. See U.S. ex rel. Wilson v. Bristol-Myers Squibb, Inc., 750 F.3d 111 (1st Cir. 2014).
Applying Carter, courts analyzed if and how matters should proceed when the first-related matter is dismissed. For example, the First Circuit, in U.S. ex rel. Kelly v. Novartis Pharmaceuticals Corporation, 827 F. 3d 5 (1st Cir. 2016), barred a relator’s second complaint as the allegations in her first complaint were still pending. Kelly was a co-relator to a 2006 complaint. The First Circuit granted her approval to be dismissed without prejudice as a relator to that complaint. In 2012, while the 2006 complaint was pending solely under the co-relator’s name, Kelly filed another complaint alleging the same facts. Because the 2006 complaint alleged the same facts and was currently pending, the 2012 complaint was dismissed under the first-to-file rule.
This case is distinguished by U.S. ex rel. Blyn v. Triumph Group, Inc., 2016 WL 1664904, at *4 (D. Utah Apr. 26, 2016), which held the first-to-file bar did not prevent the substitution of relators via an amended complaint. Similarly, the district court in United States v. Pfizer, 2016 WL 807363 (E.D. Penn. Mar. 1, 2016), held that the first-to-file rule did not prevent a relator from amending his or her complaint to include allegations that had failed to meet Rule 9(b) pleading standards in a previous action.
Again, relying on Carter, the district court in U.S. v. Unisys Corporation, 178 F. Supp.3d 358 (E.D. Vir. 2016), distinguished the First Circuit’s ruling in U.S. ex rel. Gadbois v. PharMerica Corp, 809 F. 3d 1, 4-5 (1st Cir. 2015), holding that the filing of an amended complaint after the first-filed action was dismissed with prejudice did not preclude the application of the first-to-file bar. The district court reasoned that the relator’s original complaint alleged the same relevant facts and was filed while the first action was still pending, thus precluding the amended complaint.
A district court held in U.S. ex rel. Cunningham v. Millennium Laboratories, Inc., 2016 WL 4717783 (D. Mass. Aug. 19, 2016), that a relator’s cross-claim seeking declaratory judgment that he was entitled to a share of settlement money, did not escape the first-to-file rule.  The district court explained the rule bars “all related action[s],” which included his cross-claim as it was based on the same underlying facts of the first-filed claim. Additionally, the first-filed claim, even though it was ultimately dismissed, was still pending at the time of the filing of the cross-claim as it was on review by the First Circuit.