The U.S. Court of Appeals for the First Circuit recently ruled that whistleblower complaints under the False Claims Act (FCA) need not satisfy the particularity requirements for pleading fraud under Federal Rule of Civil Procedure 9(b) in order to bar subsequent complaints based on the same facts. Applying the FCA'a "first-to-file" rule, the court reasoned that the earlier-filed complaint need only provide the essential facts to give the government sufficient notice to initiate an investigation into allegedly fraudulent practices. The case is United States ex rel. Heineman-Guta v. Guidant Corp.
The FCA's qui tam provisions permit citizens to bring fraud
actions on behalf of the United States, but once a complaint is
filed, the "first-to-file" rule bars other individuals
from bringing suit based on similar facts. This requirement is
designed to protect defendants from duplicative claims.
In this case, the plaintiff alleged that Boston Scientific
Corporation ("BSC") had defrauded the federal government
by providing kickbacks to physicians using BSC devices, causing the
physicians to submit false claims for Medicare reimbursement. The
district court dismissed the complaint because a previously filed
complaint had alleged nearly identical facts, putting the
government on notice of potential fraud. On appeal, the plaintiff
argued that because the previously filed complaint lacked
sufficient details of the alleged kickback scheme to satisfy Rule
9(b), the "first-to-file" rule should not apply and her
complaint should not be dismissed.
In determining whether to apply Rule 9(b)'s heightened pleading
standard to the "first-to-file" rule, the First Circuit
construed Congress's omission of a Rule 9(b) requirement from
the FCA as an indication that it did not intend for that rule to
apply under these circumstances. The court further reasoned that
Congress's reference to the Federal Rules of Civil Procedure in
other FCA provisions provided significant support for its
construction. Insofar as the purpose behind the qui tam provision
is to alert the government to potential fraud, the court concluded
that a later-filed complaint that merely elaborates upon the
essential facts set forth in the first-filed complaint is
unnecessarily duplicative.
In its Heineman-Guta decision, the First Circuit
contributed to a growing circuit split. Like the First Circuit, the
D.C. Circuit has also ruled that the FCA's
"first-to-file" rule does not impose upon the first-filed
complaint Rule 9(b)s requirement that plaintiffs plead with
particularity the circumstances that constitute the fraud. The
Sixth and Ninth Circuits, however, have reached the opposite
conclusion, ruling that a first-filed FCA complaint does not bar
later-filed complaints if it fails Rule 9(b)'s heightened
pleading standard. By refusing to apply Rule 9(b) to the
first-to-file rule, the First Circuit protects employers from
repetitive FCA lawsuits. This circuit split is ripe for Supreme
Court guidance on the necessary standard for a first-filed
complaint to have preclusive effect under the FCA.
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