United States: An FCA Kerfuffle: First Circuit Reaffirms The Intent Of The "First To File" Rule And Deepens Circuit Split

The First Circuit has added its say on the meaning of the False Claims Act's "first to file" rule (31 U.S.C. § 3730(b)(5)) by holding that a first-filed complaint will preclude a later-filed suit, even when the first complaint is found insufficient under Rule 9(b) particularity requirements. See United States ex rel. Heineman-Guta v. Guidant Corp., 2013 WL 2364172 (1st Cir. May 31, 2013). There is already a circuit split on this issue between the Sixth Circuit and the D.C. Circuit, and the First Circuit's recent decision further deepens this split. Time will tell if the U.S. Supreme Court will ultimately weigh in on the issue.

The case involved allegations brought by two former employees of Boston Scientific Corporation ("BSC"), each of whom alleged that the company paid physicians and hospitals in an effort to induce them to use BSC's cardiac rhythm management devices in violation of the Anti-Kickback Act (41 U.S.C. §§ 8701-8707). Unbeknownst to Plaintiff Heineman-Guta, her action was brought while the first-filed action was under seal. However, after the first-filed action was voluntarily dismissed, the district court decided to dismiss Heineman-Guta's complaint under the first-to-file rule despite arguments that her complaint should not be barred because the first-filed complaint lacked specific details about the kickback scheme as required by Rule 9(b). The Government declined to intervene in either suit.

Following the D.C. Circuit's reasoning in United States ex rel. Batiste v. SLM Corporation, 659 F.3d 1204 (D.C. Cir. 2011), the First Circuit dismissed the relator's complaint for failing to meet the "first-to-file" rule, which bars a later complaint "based on the facts underlying" a pending action, despite relator's arguments that the previously filed complaint failed to plead its FCA allegations with the particularity required under Rule 9(b) of the Federal Rules of Civil Procedure. The First Circuit recognized that while any complaint alleging fraud under the FCA must do so under Rule 9(b)'s pleading requirements, such an inquiry was separate and distinct from the first-to-file question. Contrary to Rule 9(b), first to file focuses only on whether the Government was provided with adequate notice of potential fraud. Upon thorough review of the False Claims Act and its congressional intent, the First Circuit held that arguments that Rule 9(b)'s particularity requirement expressly applies to first-to-file rule are precluded because Congress did not incorporate the heightened pleading standards of Rule 9(b) into the first-to-file rule. What's more, the First Circuit recognized that, unlike Rule 9(b), the purpose of the first-to-file rule is to provide notice of potential fraud, not to protect defendants in fraud cases from frivolous allegations. Accordingly, if the first-filed complaint contained sufficient material information or facts about the potential fraud, "the government would have had the necessary notice needed to launch its investigation. At that point, the purpose of the qui tam action under False Claims Act is satisfied." Because the Heineman-Guta complaint alleged the same essential facts as the first-filed complaint (even if the level of detail as different), the First Circuit held that the first-to-file rule precluded the later-filed suit.

The First Circuit's decision in Heineman-Guta places it on the side of the D.C. Circuit on a circuit split finding that a complaint need not satisfy Rule 9(b) requirements to bar a later-filed complaint pursuant to the first-to-file rule. Opposing these decisions is the Sixth Circuit, ruling in Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005), that Rule 9(b)'s heightened pleading standard applies to first-filed complaints under the first to file rule.

The first to file rule is, of course, of vital import to FCA prosecutions, so it remains to be seen how other circuits will fall on this issue, or if the Supreme Court will ultimately be forced to resolve the split. But, for now, it appears that the weight of authority stand for the proposition that the first to file means, literally, the first to file. Period.

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