Imagine this: After years of acrimonious litigation, your company has finally defeated a meritless False Claims Act (FCA) lawsuit.

The government took years to investigate the relator's allegations, but ultimately decided not to intervene. The court allowed the relator to file multiple amended complaints but eventually dismissed the action with prejudice.

While this lawsuit was pending, another relator filed a separate qui tam lawsuit raising similar allegations. You swiftly moved to dismiss the later-filed action under the False Claims Act's first-to-file bar, which permits only one relator to proceed on a given set of facts at a time. The court agrees and dismisses the later-filed action.

Finally, some closure. The FCA's six-year statute of limitations has run and your company can finally move on and put this matter in the rear-view mirror, right? Maybe not. . .

Two appeals courts have recently suggested that the second-filing relator—the one whose case was dismissed based on the first-to-file bar—may be entitled to equitable tolling of the statute of limitations, so that relator may now be able to re-file his or her complaint and start the whole process all over again.

Both the D.C. and Second Circuits ruled that a lawsuit filed in violation of the first-to-file bar must be dismissed without prejudice, even if the relevant first-filed lawsuit is no longer pending and the second-filing relator has since amended his or her complaint. Each appellate court acknowledged that its holding may pose statute of limitations problems for relator's whose claims grew stale while the relevant first-filed case was pending. But both appellate courts softened the blow by explicitly suggesting that the relators' re-filed claims may be eligible for equitable tolling. In United States ex rel. Wood v. Allergan Inc., the Second Circuit practically invited the relator— whose claims had grown stale during the nearly six years the government kept his case under seal—to re-file his claims, noting ''[i]t is very well possible that a future court would consider [the relator's] claim equitably tolled.'' Likewise, the D.C. Circuit in United States ex rel. Shea v. Cellco P'ship noted that ''Courts 'have long invoked equitable tolling to ameliorate the inequities that can arise from strict application of a statute of limitations.' ''

These courts' willingness to consider equitably tolling such claims is good news for relators, but bad news for defendants who have already spent years fighting the very same claims that the appellate courts practically invited relators to re-file. But hope for such defendants is not lost. The good news for defendants facing re-filed, time-barred claims is that there are solid arguments against applying equitable tolling in these circumstances. This article discusses the arguments defendants can raise to defeat a request for equitable tolling in such cases.

The False Claims Act

The FCA imposes substantial penalties on persons who knowingly submit false claims for payment to the U.S. government. Instead of solely relying on government enforcement, the FCA allows private whistleblowers (known as ''relators'') to bring actions (known as ''qui tam suits'') on the government's behalf.

When a relator decides to bring a qui tam suit under the FCA, she must file her complaint under seal and provide a copy of her complaint to the government. The suit then remains under seal, often for multiple years, while the government investigates and decides whether it wants to intervene in the action and pursue the case itself or, alternatively, decline to intervene and allow the relator to pursue the claims on her own.

Cases in which the government declines to intervene typically do not result in substantial recoveries. Such cases accounted for approximately 4.8 percent of all FCA recoveries over the period from 2002 to 2017, and only about 6.5 percent of non-intervened cases unsealed between 2004 and 2013 resulted in any recovery. But even meritless qui tam suits can drag on for years and are often extremely expensive to litigate.

The First-to-File Bar

The FCA's ''first-to-file bar'' provides that ''[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.'' Congress recognized ''that, because relators can bring suit without having suffered a personal injury, countless plaintiffs in theory could file a qui tam action based on the same fraud and then share in the proceeds,'' which could result in smaller incentives for relators to bring such claims. The first-to-file bar addresses this problem by ensuring ''that only one relator shares in the Government's recovery.'' It also ''encourages potential relators to file their claims promptly.''

It's not unusual for a relator to file a qui tam suit only to later find out that he wasn't the first to file. In most circuits, when a relator brings a suit based on the same facts that underlie an already pending action, the laterfiled suit must be dismissed without prejudice.

Recently, the Second and D.C. Circuits both rejected arguments that a violation of the first-to-file bar can be cured by amending the complaint in the second-filed suit after the first-filed suit is dismissed. Both courts held that suits violating the bar must be dismissed without prejudice. In such circumstances, some relators will simply re-file their claims as a new action. But what if the statute of limitations has already run?

The Potential Role for Equitable Tolling

Both the Second and D.C. Circuits recognized that, in some cases, the FCA's six-year statute of limitations may bar affected relators from re-filing their claims after dismissal. But both circuits also suggested that equitable tolling may apply to save such claims. The Second Circuit stated that ''[i]t is very well possible that a future court would consider [the relator's] claim equitably tolled,'' and the D.C. Circuit noted that ''Courts 'have long invoked equitable tolling to ameliorate the inequities that can arise from strict application of a statute of limitations.' ''

The equitable tolling doctrine permits courts to extend a statute of limitations in certain extraordinary circumstances to prevent unfairness. Given the express encouragement from the D.C. and Second Circuits, we can expect relators whose claims are dismissed under the first-to-file bar to argue that their claims should be equitably tolled if the FCA's statute of limitations has already run by the time they re-file. But should equitable tolling really apply to such claims?

Arguments Against Applying Equitable Tolling—the Test

Courts have historically been reluctant to apply equitable tolling to save a claim from the applicable statute of limitations. Courts only apply equitable tolling where a litigant establishes two elements:

  1. that he has been pursuing his rights diligently, And
  2. that some extraordinary circumstance stood in his way and prevented timely filing.'' Menominee Indian Tribe of Wis. v. United States, 2016 BL 18585, 3-4 (2016).

The second prong of the test is met only where the circumstances that caused a litigant's delay are ''both extraordinary and beyond its control.''

In addition, in deciding whether to apply equitable tolling, courts also consider whether Congressional intent with respect to the statute at issue would be bestserved by applying equitable tolling and whether defendants would suffer prejudice from equitably tolling the claims at issue. Baldwin Cty. Welcome Ctr. v. Brown, 466 U.S. 147, 152 (1984) (noting that ''absence of prejudice is a factor to be considered in determining whether the doctrine of equitable tolling should apply once a factor that might justify such tolling is identified''); Burnett v. New York Cent. R.R. Co., 380 U.S. 424, 426-32 (1965) (''the basic inquiry is whether congressional purpose is effectuated by tolling the statute of limitations in given circumstances'').

Dismissal Based on the First-to-File Bar Is Not an 'Extraordinary Circumstance'

Dismissal based on the first-to-file bar should not be considered an ''extraordinary circumstance'' within the meaning of the equitable tolling doctrine. In analogous circumstances, courts have held that procedural hurdles that Congress baked into a statute's enforcement scheme should not be considered ''extraordinary circumstances'' for purposes of equitable tolling. Indeed, as one court emphasized, ''[t]he fact that a statute creates procedural requirements that limit some potential claimants' participation in a suit, standing alone, is insufficient to toll the statute of limitations.'' LaFleur v. Dollar Tree Stores Inc., No. 2:12-cv-00363 (E.D. Va. Oct. 2, 2012).

For example, courts have held that equitable tolling generally should not apply to potential class members in Fair Labor Standards Act (FLSA) class actions for the period between the time the named plaintiff files his or her motion for conditional class certification and the time the class members affirmatively opt in to the class, even though a long period may elapse before the court allows the class members to opt in. See, e.g., Garrison v. ConAgra Foods Packaged Food LLC, No. 4:12-cv- 00737 (E.D. Ark. March 27, 2013). Courts addressing the question have reasoned that ''Congress knew when it enacted [the FLSA] that time would lapse between the filing of the collective action complaint by the named plaintiff and the filing of written consents by the opt-in plaintiffs, yet it chose not to provide for tolling of the limitations period'' and that there is, therefore, ''nothing extraordinary about a motion for conditional certification and the delay in notice while that motion is pending,'' and ''[t]o hold otherwise would'' transform the ''extraordinary remedy'' of equitable tolling ''into a routine, automatic one.''

Courts shouldn't consider dismissal based on the first-to-file bar as an ''extraordinary circumstance'' for purposes of equitable tolling. A natural consequence of the first-to-file bar is that some relators will be barred from bringing claims. Likewise, a natural consequence of the FCA's statute of limitations is that some relators will be barred from bringing claims. Congress likely considered that in some cases, the two would interact in such a way to permanently bar some claims. In fact, the Second Circuit acknowledged this in Allergan, noting that ''[p]erhaps some relators may be barred from bringing meritorious claims when their actions are dismissed and then blocked by the statute of limitations. That risk, however, is always present when there is a statute of limitations, and it is weighed against countervailing concerns of Congress.'' The Allergan court further elaborated that

The FCA's scheme is difficult for relators, who may substantially invest in claims, only to find out that a recently unsealed complaint blocks their action, months if not years down the road. This, however, is how Congress designed the statutory scheme, and it is carefully calibrated to strike 'the golden mean between adequate incentives for whistleblowing insiders . . . and discouragement of opportunistic plaintiffs.'

Because a large percentage of FCA relators may find themselves barred from bringing claims due to the interaction between the first-to-file bar and the FCA's statute of limitations—both of which are procedural hurdles Congress baked into the statutory scheme— courts shouldn't find that such relators are entitled to equitable tolling. ''To hold otherwise would'' transform the ''extraordinary remedy'' of equitable tolling ''into a routine, automatic one.''

Relators will argue otherwise, of course, likely pointing to Supreme Court cases that permitted equitable tolling where the claimant had timely filed a defective pleading. But such cases are distinguishable because, in those cases, the Supreme Court found that Congressional intent was best-served through the application of equitable tolling and that defendants would not be unduly prejudiced. The same cannot be said with regard to the first-to-file bar.

For example, in Am. Pipe & Constr. Co. v. Utah, the Supreme Court held that where class action status had been denied for failure to show numerocity, commencement of the original class suit tolled the running of the statute of limitations for all purported members of the class who made timely motions to intervene after denial of class certification. 414 U.S. 538 (1974). The court reasoned that application of equitable tolling was ''necessary to insure effectuation of the purposes of litigative efficiency and economy that [Federal Rule of Civil Procedure 23] was designed to serve,'' and that defendants were not unduly prejudiced because commencement of a purported class action within the limitations period provides defendants with ''the essential information necessary to determine both the subject matter and size of the prospective litigation, whether the actual trial is conducted in the form of a class action, as a joint suit, or as a principal suit with additional intervenors.''

In contrast, nothing in the FCA suggests that Congress intended for equitable tolling to apply to claims dismissed under the first-to-file bar. The first-filed suit gives the government notice of the potential fraud. Little purpose is served by allowing later-filing relators to toll the statute of limitations, and as will be discussed below, defendants would be unduly prejudiced by the application of equitable tolling to such claims.

Later-File Claims Have Not Been Pursued With Diligence

There are two reasons why courts should find that claims dismissed under the first-to-file bar haven't been pursued with the requisite diligence to entitle them to equitable tolling.

First, the fact that the relator was not the first person to file suit should counsel against finding that she acted with diligence. One of the purposes of the first-to-file bar is to encourage relators to quickly bring claims to the government's attention. That purpose wouldn't be served by applying equitable tolling to later-filing relators' claims.

Second, the government's diligence (or lack thereof) in investigating the first-filing relator's claims should also be considered. One of the more common reasons that a relator might find her case dismissed due to the first-to-file bar and then subsequently barred by the statute of limitations is that the government often takes years to investigate claims and decide whether to intervene in first-filed suits. Because the relator is standing in the government's shoes in bringing the action, and the government will get at least 70 percent of any recovery, it wouldn't be unreasonable for courts to take into consideration whether the government acted with diligence in investigating the claims in determining whether to apply equitable tolling.

DefendantsWould Be Unduly Prejudiced by Applying Equitable Tolling to Later-Filed Claims

The prejudice defendants would suffer from tolling claims dismissed based on the first-to-file bar counsels against application of equitable tolling to such claims. Defendants will have already defeated the first-filed suit based on the same claims. Defendants shouldn't be forced to re-litigate second- (or third- or fourth-) filed claims that would otherwise be barred by the statute of limitations.

As the Supreme Court explained in Am. Pipe & Constr. Co., statutes of limitations ''are designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.'' Defendants have a ''right to be free of stale claims [that] in time comes to prevail over the right to prosecute them.''

Defendants will likely not be able to argue that they lacked notice of later-filing relators' claims during the statutory period—both the first-filed suit and the suit dismissed under the first-to-file bar would have alerted the defendant to the facts at issue during the statutory period. But defendants will still suffer prejudice because witnesses' memories will have inevitably faded over the six-year limitation period, and it's possible that no formal discovery will have been conducted in the intervening time to preserve those memories.

Additionally, there is no natural end-point to equitable tolling. If the second-filed case is dismissed after being equitably tolled, why couldn't a third-filed case be equitably tolled too? Finally, the cost to defendants and the court system outweigh the marginal value of allowing such suits to proceed.

Thus, despite the suggestions of the Second and D.C. Circuits that equitable tolling may be appropriate to save claims dismissed under the first-to-file bar, there are good reasons to believe that such claims don't warrant equitable tolling.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.