The U.S. Court of Appeals for the District of Columbia in United States ex rel. Batiste v. SLM Corporation, Civil Action No. 10-7140 (D.C. Cir. Nov. 4, 2011) affirmed the dismissal of a relator’s complaint based on an application of the first-filed provision of the FCA. The first-filed rule provides that “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” In so holding, the court also ruled, as a matter of first impression, that first-filed qui tam complaints need not satisfy the heightened pleading requirements for fraud in order to bar subsequent qui tam complaints. The United States did not intervene but supported the relator’s position as amicus curiae.
The relator in this case alleged that SLM (also known as “Sallie Mae”) unlawfully placed student loans into forbearance, which in turn caused the government to pay greater interest and allowances on those loans. The relator was a senior loan advisor at a New Jersey-based subsidiary of SLM. Just two years prior, an employee of a Nevada subsidiary of SLM filed a qui tam complaint that, according to the court, alleged sufficiently similar material elements of fraud against SLM. Even though the relevant time period differed in some respects and allegations arose from activities occurring at different subsidiaries or offices, the court found a sufficient overlap because the alleged fraudulent scheme began at roughly the same time in 2004 and was alleged to be a nationwide scheme. In short, the court found both complaints sufficient to “equip the government to investigate SLM’s allegedly fraudulent forbearance practices nationwide.”
The relator argued that the first-filed qui tam lawsuit was not a “pending action” because the first-filed complaint had been dismissed for failure to satisfy Rule 9(b) particularity requirements. The court rejected this argument and ruled that the first-filed provision is triggered when the complaint provides the government with sufficient information to launch a fraud investigation. To hold otherwise would “create a strange judicial dynamic, potentially requiring one district court to determine the sufficiency of a complaint filed in another district court.” The D.C. Circuit Court’s decision creates a circuit split as the Sixth Circuit Court of Appeals in Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005) held the opposite.