On April 11, 2014, the U.S. Court of Appeals for the District of Columbia Circuit held in U.S. ex rel. Shea v. Cellco Partnership d/b/a Verizon Wireless that the “first-to-file” bar of the False Claims Act (FCA)1 has no temporal limitation.2 Under Shea, the filing of a qui tam action permanently bars any later related qui tam action, even if the earlier action is
dismissed before the later action is filed.
When a relator files a qui tam complaint under the FCA, he or she must file under seal and
disclose all material evidence to the U.S. Department of Justice, so that the government
can investigate the allegations before deciding whether to intervene and take over the
litigation.3 If the government declines to intervene, the matter is unsealed and the relator
is responsible for litigating the case.4 At that time, the complaint becomes potentially
vulnerable to dismissal under the FCA’s first-to-file rule, which is codified at 31 U.S.C. §
3730(b)(5). That provision states: “When a person brings an action under [the FCA’s qui
tam provisions], no person other than the Government may intervene or bring a related
action based on the facts underlying the pending action.”5 As the D.C. Circuit previously
explained in U.S. ex rel. Batiste v. SLM Corp., the first-to-file rule “bars actions alleging
the same material elements of fraud as an earlier suit, even if the allegations incorporate
somewhat different details.”6
In Shea, all three judges on the D.C. Circuit panel agreed that the district court correctly
dismissed a qui tam suit under the first-to-file bar, because an earlier qui tam gave the
government notice of the fraud alleged in the later suit. But the two-judge majority opinion
also affirmed the district court’s dismissal of the action with prejudice, concluding that the
relator could not re-file his FCA claims even though the first-filed action had since been
dismissed upon settlement. The Court thus held “that the first-to-file bar applies even if
the initial action is no longer pending, because we read the term ‘pending’ in the statutory
phrase ‘pending action’ to distinguish the earlier-filed action from the later-filed action.”7
1 31 U.S.C. §§ 3721-3733.
2 No. 12-7133, 2014 WL 1394687 (D.C. Cir. Apr. 11, 2014).
3 See 31 U.S.C. § 3730(b)(2).
4 See id. § 3730(b)(2), (b)(4).
5 Id. § 3730(b)(5).
6 659 F.3d 1204, 1208 (D.C. Cir. 2011) (quotation marks and brackets omitted).
7 Shea, 2014 WL 1394687, at *4.
U.S. ex rel. Shea v. Verizon Wireless: False Claims Act’s First-to-File Bar Applies Even After First Complaint’s Dismissal | 2
A. The First-Filed Action: Verizon I
In 2007, relator Stephen M. Shea filed a qui tam complaint in
the U.S. District Court for the District of Columbia, claiming
that Verizon Communications, Inc. and its predecessor MCI
had violated the FCA (the Verizon I suit).8 The case was
assigned to Judge Gladys Kessler.
Verizon I alleged that the defendants had t wo
telecommunication contracts with the General Services
Administration (GSA), and that they knowingly overbilled the
government by adding improper surcharges to GSA’s bills.9
Ultimately, in February 2011, the United States intervened
in the litigation, settled the case for a large sum without any
admission of liability, and dismissed the suit.10 For his role
in bringing the action, the district court awarded the relator
20 percent of the settlement.11
B. The Later-Filed Action: Verizon II
1. The district court proceedings
In 2009, after Verizon I had been filed but before it was
dismissed, the same relator filed another qui tam complaint
against Verizon and its related entities (the Verizon II
suit).12 In November 2011, several months after Verizon
I was dismissed, the United States informed the district
court that it would not intervene in Verizon II.13 In June
and September 2012, the relator filed a First and Second
Like the complaint in Verizon I, the Second Amended
Complaint in Verizon II alleged that the defendants had
knowingly overbilled the government by adding improper
surcharges to certain telecommunication contracts. But
these allegations related to twenty contracts between
8 See U.S. ex rel. Shea v. Verizon Comm'ns, Inc., 844 F. Supp. 2d 78
(D.D.C. 2012) (awarding relator percentage of FCA settlement).
9 Id. at 80.
12 See U.S. ex rel. Shea v. Verizon Bus. Network Servs., Inc., 904 F.
Supp. 2d 28 (D.D.C. 2012) (dismissing qui tam under FCA’s first-tofile
13 Id. at 31.
the defendants and several government agencies not
referenced in the Verizon I complaint.
Soon after the relator filed the Second Amended Complaint,
the defendants moved to dismiss Verizon II. Among other
things, they argued that the action was jurisdictionally barred
under the FCA’s first-to-file rule, because it was “based
on the facts underlying” Verizon I, and therefore Verizon I
and Verizon II were “related” actions within the meaning
of § 3730(b)(5).15 The relator responded, in part, that the
first-to-file rule should not apply where, as in this case, the
same relator brings both the first-filed and later actions.
He also contended that Verizon I and Verizon II were not
“related” because Verizon II addressed different contracts
and government agencies.16
The district court rejected the relator’s arguments and
granted the motion to dismiss under the first-to-file bar. The
district court emphasized that the crucial question under
the first-to-file bar is whether the first-filed action gives the
government notice of the fraud alleged in the later action.17
Relying heavily on the D.C. Circuit’s Batiste decision, the
district court concluded that Verizon II was barred because
its allegations described “a fraudulent scheme [that] the
government already would be equipped to investigate,”
based on the notice provided by the Verizon I allegations.18
Importantly, the district court dismissed the relator’s FCA
claims “with prejudice,” meaning that he could not file
another amended complaint or even a separate lawsuit
based on the same facts.19
2. The D.C. Circuit appeal
On appeal, the relator repeated his arguments about why the
first-to-file bar should not apply to Verizon II. However, he
also urged reversal on the alternative ground that even if the
first-to-file bar required dismissal of the Second Amended
15 See id. at 33.
16 See id.
17 See id. at 33-37; id. at 36 (“[C]omplaints are related where the earlierfiled
complaint gives the government sufficient notice to discover
the fraud in the later-filed complaint.”).
18 Id. at 36 (quoting Batiste, 659 F.3d at 1209).
19 See id. at 37 (dismissing “without prejudice” as to United States,
but including no such qualifier as to relator).
U.S. ex rel. Shea v. Verizon Wireless: False Claims Act’s First-to-File Bar Applies Even After First Complaint’s Dismissal | 3
affect the two actions’ “relatedness.”25 Relying on Batiste,
the majority opinion further noted that “the first-to-file rule
serves two purposes: ‘rejecting suits which the government
is capable of pursuing itself,’ and ‘promoting those which
the government is not equipped to bring on its own.’”26 The
two actions were “related” because “the allegations and
legal theory of Verizon I would alert the government to the
possibility of a fraudulent scheme that went beyond the
specifics of Verizon I,” and because “Verizon I would suffice
to equip the government to investigate Shea’s expanded
allegations in Verizon II.”27
Second, all three judges declined to create an exception to
the first-to-file rule simply because the same relator filed
both actions. The majority opinion explained that § 3730(b)
(5) “clearly directs that ‘no person’ is allowed to bring a
related suit,” and that where, as here, the relator’s first suit
gives the government notice of the fraud alleged in the
second, the first-to-file rule properly “‘reject[s] suits which
the government is capable of pursuing itself.’”28
Third, the two-judge majority rejected the relator’s proposal
to construe the first-to-file bar “as a temporal limit on related
suits.”29 In other words, the Court flatly rejected the idea that
“[s]o long as the first action is no longer pending, … the
second action is not barred.”30 Instead, it read the statutory
phrase “‘pending action’ … as shorthand for ‘first-filed
action,’” such that “a related action is barred regardless of
the posture of the first-filed action.”31 The Court explained
that the statutory text “makes clear that the bar commences
‘when a person brings an action under this subsection,’ and
thence forth bars any action ‘based on the facts underlying
the pending action.’ The simplest reading of ‘pending’ is
the referential one; it serves to identify which action bars
26 Id. (quoting Batiste, 659 F.3d at 1208).
28 Id. at *4 (quoting Batiste, 659 F.3d at 1208).
32 Id. at *5 (quoting 31 U.S.C. § 3730(b)(5)).
Complaint, the district court nonetheless erred in dismissing
with prejudice. Specifically, he argued that because Verizon I
had been settled and dismissed by the time that Verizon II
was dismissed, Verizon I was no longer a “pending action”
as that phrase was used in § 3730(b)(5), and thus could not
bar him from filing a new, third qui tam action.
II. THE D.C. CIRCUIT’S DECISION
The D.C. Circuit soundly rejected all of the relator’s
arguments against dismissal of the Second Amended
Complaint. Both the majority opinion by Judge Sentelle
(joined by Judge Edwards) and the partial dissent by Judge
Srinivasan agreed that the first-to-file rule required dismissal
of Verizon II because it was “related” to Verizon I within the
meaning of § 3730(b)(5), regardless of the fact that the same
relator filed both actions.20 The panel divided, however, as to
whether Verizon II was properly dismissed with prejudice.21
The majority affirmed the dismissal with prejudice, holding
that the first-to-file bar “remains in effect even after the
first action is no longer pending,”22 while the partial dissent
opined that the bar should not “persist even after the initial
action concludes,” and that the relator should have been
allowed to re-file a new complaint at a later date.23
A. The Court’s Holding
First, all three judges on the panel agreed that Verizon I and
Verizon II were “related.” The majority opinion explained
that the two actions alleged the same fraudulent scheme:
the defendants supposedly employed the same billing
practices for their federal contracts they used for their private
corporate clients, and they supposedly billed prohibited
surcharges to their federal and corporate clients alike.24 Even
though the two actions concerned different contracts and
agencies, the different “scope” of the alleged frauds did not
20 See Shea, 2014 WL 1394687, at *2-*4 (majority op.); id. at *6
(Srinivasan, J., concurring in part and dissenting in part).
21 Compare id. at *4-*6 (majority op.), with id. at *6 (Srinivasan, J.,
concurring in part and dissenting in part) (“The proper disposition
thus should be to dismiss the complaint without prejudice rather
than with prejudice.”).
22 Id. at *1 (majority op.).
23 See id. at *6 (Srinivasan, J., concurring in part and dissenting in part).
24 See id. at *3 (majority op.).
U.S. ex rel. Shea v. Verizon Wireless: False Claims Act’s First-to-File Bar Applies Even After First Complaint’s Dismissal | 4
via the first-to-file bar. By contrast, if the first-to-file bar is
understood to apply only while the initial action is ‘pending,’
[a relator] could thereafter bring an original-source action, as
Congress presumably intended she be free to do.”38
Shea has created a circuit split. The D.C. Circuit is the
first federal appeals court to interpret the statutory phrase
“pending action” so that the first-to-file bar applies in
perpetuity.39 Prior decisions by the Fourth, Seventh, and
Tenth Circuits have concluded, with varying degrees of
analysis, that “pending action” instead means that the bar
applies only while the first-filed action remains an active
matter on a court’s docket.40 The D.C. Circuit declined
to follow those decisions, observing that none directly
considered the two possible constructions of § 3730(b)(5).41
The D.C. Circuit’s reading of the first-to-file bar would help
bring a measure of certainty to companies that operate in
heavily regulated industries where qui tam suits are common.
Prior to Shea, various cases had already established that
when multiple qui tam actions arise in different parts of the
country, the first-filed action can bar later related actions
if it alleged that the billing fraud was a company-wide
problem or was directed from company headquarters.42
39 One Eleventh Circuit district court previously adopted the same
interpretation of “pending action” as the D.C. Circuit did in Shea.
See U.S. ex rel. Powell v. Am. InterContinental Univ., Inc., No. 1:08-
CV-2277, 2012 WL 2885356, at *4-*6 (N.D. Ga. July 12, 2012).
40 See In re Natural Gas Royalties Qui Tam Litig., 566 F.3d 956, 963
(10th Cir. 2009); U.S. ex rel. Chovanec v. Apria Healthcare Grp., Inc.,
606 F.3d 361, 365 (7th Cir. 2010); U.S. ex rel. Carter v. Halliburton
Co., 710 F.3d 171, 182-83 (4th Cir. 2013).
41 See Shea, 2014 WL 1394687, at *5-*6 (majority op.).
42 See, e.g., Batiste, 659 F.3d at 1209 (“If the government investigated
the facts alleged in [the first-filed] complaint on a nationwide basis, it
would discover continuing fraud in the New Jersey offices [referenced
in the later complaint], as well as the completed fraud in the Nevada
offices [referenced in the earlier complaint], if such fraud existed.”);
Carter, 710 F.3d at 182 (“The government would likely investigate
billing practices across the company, because [the earlier complaint]
notes that the official national policy was to bill correctly but that the
employees were consistently instructed not to do so.”); Chovanec,
606 F.3d at 365 (qui tam alleging Medicare billing fraud in Illinois was
barred by earlier suits alleging that similar fraud in other states was
“orchestrated by [the same company’s] national staff”); U.S. ex rel.
Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 218 (D.C.
Cir. 2003) (earlier complaint alleging Medicare fraud at company’s
subsidiaries outside Georgia barred later complaint alleging fraud
only at company’s Georgia subsidiary, because earlier complaint also
included broader allegations of “a corporate-wide problem”).
The Court emphasized that its construction of § 3730(b)(5)
best reinforced the first-to-file bar’s underlying policy goal: to
provide strong incentives to relators to give the government
notice as early as possible of potential billing fraud that the
government could not have discovered on its own. The Court
reasoned that “[t]he resolution of a first-filed action does not
somehow put the government off notice of its contents.”33 It
would poorly serve the government-notice policy to “read
the bar temporally,” because this “would allow related qui tam
suits indefinitely—no matter to what extent the government
could have already pursued those claims based on earlier
actions. Such duplicative suits would contribute nothing to
the government’s knowledge of fraud.”34
B. The Partial Dissent
Judge Srinivasan agreed that the dismissal was appropriate, but
concluded that it should have been without prejudice to re-filing.
In his view, “the first-to-file bar operates while the first action is
‘pending,’ but not thereafter. … Any later action might be subject
to dismissal for reasons yet to be examined, including the publicdisclosure
bar. But the first-to-file bar should impose no ongoing
prohibition against the filing of a subsequent complaint.”35
His partial dissent relied heavily on a contrast between the
first-to-file bar and the FCA’s separate “public disclosure”
bar, codified at 31 U.S.C. § 3730(e)(4). Under the public
disclosure bar, a qui tam action is precluded if based on
information that was already “publicly disclosed” in several
ways—including federal litigation where the government or its
agent is a party—unless the relator is an “original source of
the information.”36 Because a “public disclosure” can include
an earlier qui tam complaint, Judge Srinivasan concluded that
even when a relator’s qui tam action overlaps with an earlierfiled
qui tam, Congress “specifically sought to allow” the later
qui tam to proceed if its relator was “an original source with
independent information about the fraud.”37 Judge Srinivasan
concluded that “[t]here is no reason to think that Congress
carefully and specifically opened the door to [a relator’s] action
via the original-source exception, only to slam the door shut
35 Id. at *12 (Srinivasan, J., concurring in part and dissenting in part).
36 31 U.S.C. § 3730(e)(4)(A)(i); see Shea, 2014 WL 1394687, at *11-
*12 (Srinivasan, J., concurring in part and dissenting in part).
37 Id. at *12 (Srinivasan, J., concurring in part and dissenting in part).
© 2014 Arnold & Porter LLP. This Advisory is intended to be a
general summary of the law and does not constitute legal advice.
You should consult with counsel to determine applicable legal
requirements in a specific fact situation.
U.S. ex rel. Shea v. Verizon Wireless: False Claims Act’s First-to-File Bar Applies Even After First Complaint’s Dismissal | 5
Shea’s interpretation of the first-to-file rule helps extend this
principle: if a defendant obtains dismissal of a qui tam that
alleges a company-wide scheme, the defendant can argue
that the first-to-file bar precludes any later-filed qui tam that
alleges it committed a similar type of fraud, regardless of
when the first-filed action was resolved.
Of course, Shea does not prevent the government from
acting on new developments that have occurred since the
dismissal of an earlier qui tam. For example, suppose that
a newly filed qui tam makes allegations about a defendant
that are similar to those made in a qui tam that was settled
and dismissed several years earlier. The FCA gives the
government ample opportunity to investigate these new
qui tam allegations while the action remains under seal.43
If the government believes that the new allegations are
meritorious, perhaps because it thinks the defendant has
recently resumed the alleged misconduct, it can choose
to intervene in the litigation, thus preventing the first-tofile
rule from working to dismiss the complaint.44 But if the
government does not intervene, the complaint is unsealed
and becomes subject to dismissal under the first-to-file bar,
because of the previously dismissed qui tam.
Despite the difference of opinion among courts about the
meaning of “pending action,” Shea remains consistent with
an emerging consensus that the first-to-file bar should
generally be interpreted by assessing whether the first-filed
qui tam gave the government enough notice to investigate
the fraudulent practices alleged in the later-filed qui tam.45
Such an interpretation of the first-to-file bar reflects the
reality of civil FCA investigations. The government has
powerful tools to investigate alleged fraud and abuse in
43 See 31 U.S.C. § 3730(b)(2)-(3).
44 See id. § 3730(b)(5).
45 See, e.g., U.S. ex rel. Heineman-Guta v. Guidant Corp., 718 F.3d 28,
36-37 (1st Cir. 2013) (“[E]arlier-filed complaints must provide only
the essential facts to give the government sufficient notice to initiate
an investigation into allegedly fraudulent practices.”); Chovanec,
606 F. 3d at 364 (interpreting § 3730(b)(5) as barring allegations
of conduct that “investigations launched in direct consequence of
[the first-filed] complaint would have revealed”); Carter, 710 F.3d
at 181-82 (adopting Batiste’s “material elements” test for “related
actions,” which “prevents the less vigilant whistle-blower from
using insignificant factual variations to allege what is essentially the
same fraudulent scheme already made known to the government”
(quotation marks omitted)).
federal programs, such as civil investigative demands
and administrative subpoenas,46 and it often uses them to
probe far beyond the four corners of the particular qui tam
complaint that inspired the investigation. Accordingly, Shea
merely acknowledges what the FCA bar has long known:
even a qui tam complaint that is dismissed can give the
government enough information to spark an investigation
that needs no other relators to fuel the fire.
46 See, e.g., 31 U.S.C. § 3733 (civil investigative demands); 5 U.S.C.
app’x 3 § 6 (Inspector General administrative subpoenas).